10.1 This chapter considers three sets of rules that between them regulate the rights and liabilities of parties to the majority of bill of lading contracts. All are embodied in international conventions. They are:
- (1) the Hague Rules, as agreed in their final form in 1924;
- (2) the Hague-Visby Rules, as agreed in 1968; and
- (3) the Hamburg Rules, as agreed in 1978.
10.2 Typically these sets of rules apply either by contractual agreement or compulsorily by force of law. In most bill of lading contracts their terms have to be considered alongside and in conjunction with other express or implied terms. The very widespread application of the Hague Rules, or the updated version known as the Hague-Visby Rules, makes these Rules of immense practical importance. In this chapter, unless the context indicates otherwise, “the Rules” refers to the Hague and Hague-Visby Rules generically, whereas “the Hague Rules” and “the Hague-Visby Rules” refer respectively to the 1924 and 1968 versions of the Rules.
10.3 The Hamburg Rules, although the most recent of the three, are much less commonly applied and the discussion of them in this chapter is correspondingly brief.
10.4 In addition to these sets of Rules, on 11 December 2008 the UN adopted the inelegantly titled UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (“the Rotterdam Rules”) for which a signing ceremony opened on 23 September 2009. These rules are of potentially very major importance, being very different from their predecessors in both scope and substantive content. If and when they come into force, this will effect a fundamental change in the nature of the standard cargo liability regime, based for the last 80 years on the Hague Rules. They are not however a part of English law, and it is most unlikely that they will become part of it during the shelf life of this edition of this book. They are accordingly dealt with only briefly, and the reader wishing for more details should refer to the numerous specialist commentaries on them or aspects of them.
10.5 The basic scheme of this chapter is to consider the provisions of the individual Rules in their form after the Visby amendment, as enacted by the Carriage of Goods by Sea Act 1971 (COGSA 1971), in conjunction with the relevant common law and also the wording of the original Rules as enacted by COGSA 1924,1 where different.
The Hague Rules
10.6 Just as a camel has been described as a horse designed by committee, so the Rules, the product of an international convention, have their oddities in form, content and structure, but are now a familiar and prominent feature of maritime law.
10.7 The historical background to the Hague Rules is covered in Chapter 1.2 The overall scheme of the Rules was to impose an irreducible minimum set of obligations on shipowners in exchange for right to limit their liability and, in some cases, exclude it.3 It should be noted that the Rules are intended to apply specifically to bills of lading. It was considered particularly unsatisfactory that freedom of contract should prevail for the terms of bills of lading, because their peculiar “transferable” nature meant that third parties could be profoundly affected by terms of contracts that they had no practical means of ascertaining. The Rules are also often incorporated contractually into other contracts, such as charterparties, although the fact that they were not primarily intended to be used for this purpose can lead to difficulty in incorporation or application. In addition, and as discussed in Chapter 12, problems arise in combined transport operations in working out how the Rules interrelate with other conventions, such as the CMR.
The Hague-Visby Rules
10.8 The Hague Rules were generally considered to have been a success, but after 40 years’ practical experience of their use a broad consensus had emerged that some revision was desirable.4 This was ultimately reflected in the Visby5 Protocol signed in Brussels on 23 February 1968.6
10.9 The changes effected by the Hague-Visby Rules are limited in number but significant. The main changes were in relation to:
- their application, with the introduction of a new Article X;
- the package limitation under Article IV rule 5;
- a strengthening of the evidential significance of the bill of lading under Article III rule 4;
- the terms of the time-bar in Article III rule 6; and
- the insertion of new Articles IVbis and VIbis dealing with claims in tort and time-limits in indemnity claims, respectively.
10.10 Problems7 with the use of the gold standard “Poincaré Franc” as specified in the Visby Protocol led to a further Protocol in 1979 providing for the use of “Special Drawing Rights” as the reference point for monetary limits. This has been adopted in England.8
The Hamburg Rules
10.11 The Hamburg Rules were intended to improve upon the Hague and Hague-Visby Rules, and to achieve uniformity of regime across much of the world. It is doubtful if the first objective has been achieved. The second certainly has not been. The Rules were drafted in 1978 and came into force (in the sense of the relevant convention being ratified by the requisite number of states) in 1992. Few states have enacted them as part of their domestic law, the most important in commercial terms being Chile and Egypt. The English lawyer is likely to encounter them only in a case where the contract provides for the law of one of those states to be applicable, or where jurisdiction can be founded there.
10.12 The Hague Rules were negotiated in English but the official version is in French,9 in accordance with the current practice for international treaties and conventions. However, the version enacted by COGSA 1924 was an English-language version.10
10.13 The Hague-Visby Rules in their official form exist in both in English and in French, although it is the English version that has the force of law under COGSA 1971.
10.14 As discussed below, in construing the Hague Rules, the proper or “applicable” law of the contract should be applied to the version of the Rules in question. However, even as a matter of English law, the construction of the Rules is affected by the fact they are the product of an international convention. In Stag Line v Foscolo Mango11 Lord Wright said:
It is important to remember that the Act of 1924 was the outcome of an International Conference and that the rules in the Schedule have an international currency. As these rules must come under the consideration of foreign Courts it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation.12
10.15 So, for example, the “presumption against surplusage”, an English rule applicable to the construction of documents, is of little, if any, application to the Hague Rules.13
10.16 The records of the discussion and debates that took place in various locations in the period leading up to the final draft of the Rules are known as the “travaux préparatoire”. These may be used as an aid to the construction of the Rules,14 although as Rix L.J. has observed “in this area ‘only a bull’s eye counts’”.15
10.17 Contracts governed by English law may provide for the incorporation of foreign law enactments of the Hague Rules.16 The question that may arise thus is whether, in those circumstances it is the English law or foreign law on a provision in question that applies.17 In Dobell v Rossmore it was held that the US Harter Act, as incorporated in a bill of lading, must be construed not as an Act but “simply as words occurring in the bill of lading”.18 It remains the basic principle that words of a foreign statute, incorporated into a contract governed by English law, must be construed as a matter of English law, but a more subtle analysis may be required.
10.18 In The Stolt Sydness19 there was an English law and London arbitration clause in a voyage charter which incorporated US COGSA 1936. The charterers sought to argue that the meaning of “suit” in section 3(6), equivalent to Article III rule 6 of the Rules, should be that under United States law, whereby “suit” did not include arbitration, with the effect that section 3(6) did not apply to arbitration proceedings. Rix J. reviewed the authorities and concluded that a simple choice between one law and another was a false choice. The correct approach was to ascertain, using the applicable law of the contract, the parties’ intentions, which might involve recourse to foreign law. In the circumstances he held it was the English law meaning of the time-bar provision in Article III rule 6 that was relevant rather than the different American meaning.
10.19 Thus, the basic rule cannot be applied rigidly, and the position may also be less straightforward in other situations. For example, in a dispute over liability for damage in a contract governed by English law but incorporating US COGSA, could one party invoke US law on the relationship between Article III rule 2 and Article IV rule 2? The case for so doing might be more compelling than in The Stolt Sydness because of the differences not only in law but in the wording of Article III and section 3 of the US Act.20
10.20 Whether the Hague Rules, the Hague-Visby Rules or neither are applicable may be a question of some importance and difficulty. It is suggested that this question is best considered by asking a series of questions, in the following order:
- (a) Do the Hague-Visby Rules apply compulsorily by virtue of COGSA 1971?
- (i) Are the requirements of Article X fulfilled?
- (ii) Is there anything in COGSA, section 1 that would affect Article X’s applicability?
- (i) Are the requirements of Article X fulfilled?
- (b) If Article X does not apply, are the Hague-Visby Rules otherwise applicable?
- (i) by an applicable foreign law, or
- (ii) by contract?
- (i) by an applicable foreign law, or
- (c) If not, are the Hague-Visby Rules applicable by contract?
10.21 COGSA 1971 came into force on 23 June 197721 and repealed COGSA 1924.22 COGSA 1924 had provided that the Hague Rules were “to have effect” in relation to the types of carriage that were identified. But in COGSA 1971, the terminology used was changed, so that section 1(2) provides that “The provision of the Rules, as set out in the Schedule to this Act, shall have the force of law.”23 That sub-section suggests that the circumstances in which the Hague-Visby Rules will apply are to be found within the Rules themselves. However, although the primary rules for their application are to be found in Article X of the Rules, that is not the only basis on which the Rules will apply and have the force of law. Thus, section 1(3) of COGSA 1971 provides that, without prejudice to section 1(2), the Rules will have effect “and have the force of law” in relation to and in connection with “the carriage of goods by sea” in ships where the port of shipment is a port in the UK, whether or not the carriage is between ports in two different states within the meaning of Article X of the Rules.24 There are two further bases on which the Rules might apply, which are referred to in section 1(6) and 1(7) of COGSA 1971.25 Further, section 1(4) of COGSA contains limitations on the applicability of the Rules. It stipulates that nothing in section 1 is to be taken as applying anything in the Rules to “any contract for the carriage of goods by sea” unless the contract expressly or by implication provides for the issue of a bill of lading or similar document of title.26 The consequence of this approach to statutory drafting is that any quest to decide whether the Hague-Visby Rules apply in a particular case will involve a consideration of both section 1 of COGSA and Article X of the Rules, whilst also bearing in mind the definitions set out in Article I of the Rules. However, it is suggested that (keeping in mind the definitions in Article I of the Rules), the starting point for any analysis of the scope and applicability of the Hague-Visby Rules is always Article X of the Rules themselves.
10.22 Article X is much expanded from the version in the original Hague Rules and is in the following terms:
The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if:
(a) the bill of lading is issued in a contracting State, or
(b) the carriage is from a port in a contracting State, or
(c) the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State giving effect to them are to govern the contract,
whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person.
10.23 Some preliminary points arise on the wording of the opening phrase of Article X. Whilst the Rules are specified to apply to any bill of lading, whether they are incorporated by agreement or by legislation, they apply to contracts rather than to carriage itself.27 The reference to carriage between ports in two different States excludes application of the Rules to coastal trade. However, the different states do not have to be “contracting” states. Further, whilst Article X refers only to a bill of lading, the authors agree with Scrutton28 that it must also be read so that the provisions of the Rules will apply not only to bills of lading relating to the carriage of goods between ports in two different states, but also to contracts of carriage covered by “similar document of title”, as referred to in Article I(b) of the Rules.
10.24 Because section 1(2) of COGSA 1971 states that the Rules will “have the force of law” in the UK, this means that Article X itself has the force of law. The basic scheme of Article X is that the Hague-Visby Rules will apply to every bill of lading “relating to the carriage of goods” between ports of different states, where the bill of lading has a connection with a contracting state or the bill contains or evidences a contract that imports the Rules or legislation giving effect to them. Article X provides that this connection can be one of two kinds. First, if the bill is issued in a contracting state, and secondly, if the bill relates to carriage from a contracting state. A full list of these “contracting states” can be found in Appendix 5.29 They include the United Kingdom, most western European states and Singapore. Other states, such as China, have enacted into their domestic law all or part of the Hague-Visby Rules or equivalent provisions, but are not “contracting states”.
10.25 The provisions of the Rules will apply to a bill of lading relating to the carriage of goods between ports in two different states if the bill of lading is “issued” in a contracting state. For the purpose of Article X(a) the place of issue of the bill of lading will normally be easily ascertained. “Issued” is not defined, but it is suggested that it refers to the place where the signature or authentication of the carrier occurs. As discussed in Chapter 2 electronic bills are probably not bills of lading at all for the purposes of COGSA 1971, so the question as to where they are issued does not arise. If that is too strict a view, then it is suggested that as a matter of first principle, the place of issue of an electronic bill would be the place where the message from the carrier that provided the electronic signature or authentication originated.
10.26 The Rules will apply to bills of lading relating to the carriage of goods between ports in two different states if the carriage is from a port in a contacting state. For the purposes of the requirement that the carriage be between ports of two different states, what is relevant is the contractual carriage rather than what actually occurs. Thus, if a vessel sails from Le Havre and is contractually bound for Bilbao, the fact that it has to terminate the voyage (for example, because it springs a leak) in Bordeaux will not prevent Article X(b) applying.30
“Carriage from a port”
10.27 The position where there is transhipment is discussed below in the context of section 1(3) of COGSA 1971. By analogy with the approach to “port of shipment” as used in section 1(3) it would appear that “carriage from a port” in Article X(b) refers to carriage from the port where the goods were initially shipped under the relevant contract of carriage, and not to carriage from a port where they were transhipped onto a different vessel.
10.28 Article X(c) extends the application of the Rules to two further situations, both of which relate to the terms of the contract contained in or evidenced by the bill of lading concerned. First, the Rules will apply (provided that the carriage of the goods is between ports in two different states) when the contract contained in or evidenced by the bill of lading provides that the Hague-Visby Rules are to govern the contract. Secondly, the Rules will apply (subject to the same proviso as above) if a contract contained in or evidenced by a bill of lading provides that the legislation of any state that gives effect to the Hague-Visby Rules is to govern that contract. In both cases, the Rules will apply whatever may be the nationality of the ship, the carrier, the shipper, the consignee or any other interested person. So, in either situation, it is a question whether the terms of the contract have effectively incorporated the Rules so that they will apply. However, if they are incorporated, because by virtue of section 1(2) of COGSA 1971 the Hague-Visby Rules have the force of law, their contractual application will, subject to the matters discussed below, lead to a statutory application,31 so far as an English court is concerned. This has the further effect that any inconsistent contractual provision will be of no effect.
10.29 Since the introduction of the Hague Rules, there have been attempts to incorporate them into the terms of bills of lading. Various different forms of words of incorporation have been used. In order to see when the requirements of Article X(c) are satisfied in particular cases, it may be helpful to consider some of the forms of contractual incorporation adopted in relation to the earlier Hague Rules. Throughout the following discussion it is necessary to bear in mind a general point, that Article X(c) provides that the Rules will apply if incorporated into a bill of lading contract, and also that “the legislation of any State giving effect to them” will be applicable.32
10.30 A simple clause in a bill of lading stating that “the contract contained in this bill of lading is governed by the Hague-Visby Rules” will bring Article X(c) into operation. However, for historical reasons, it remains common to have much more complex clauses, including “clauses paramount”, whose origins lie in the attempts to incorporate the original Hague Rules. Section 1 of COGSA 1924 provided that the Hague Rules (which were scheduled to the 1924 Act) would have effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from ports in Great Britain and Northern Ireland. This restrictive statutory application of the Hague Rules led to problems.
“The Vita gap”
10.31 The most notorious problem thrown up by the wording of section 1 of the 1924 Act was identified in the famous case of Vita Food Products v Unus Shipping.33 Goods were shipped from Newfoundland under a bill of lading stated to be governed by English law. Although the equivalent Newfoundland COGSA applied the Hague Rules compulsorily to outward shipments, and required bills of lading to provide expressly to this effect, the bills of lading in question did not so provide. Suit was brought in a Nova Scotia court. On appeal to the Privy Council, it was held that the failure to state in the bills of lading that they were subject to the Hague Rules did not make the contracts of carriage illegal according to their proper law (English law). It was also held that, applying the proper law of the contracts, English law, the shipowner was entitled to rely on the exception clauses in the bills of lading, even if those clauses would have been struck down if the Hague Rules had applied. It was accepted by both sides that the Hague Rules were not incorporated into the bills of lading by virtue of COGSA 1924 as a matter of English law, because COGSA 1924 only applied the Rules to shipments from the UK. This decision, although logical, attracted criticism on commercial grounds34 and judicially35 because of the width of the dicta employed by Lord Wright, who said:36
The construction of a contract by English law involves the application to its terms of the relevant English statutes, whatever they may be, and the rules and implications of the English common law for its construction, including the rules of the conflict of laws.
10.32 This result gave rise to the so-called “Vita gap”, whereby the Hague Rules, which were intended to apply in relation to shipments between contracting states did not, as a matter of English law, necessarily apply to such shipments. There have been various attempts to close this “gap” by the adoption of different forms of “clause paramount” both before and after the Hague-Visby Rules came into force in the UK.
10.33 A commonly used clause for contractual incorporation of the Hague or Hague-Visby Rules remains the “clause paramount”,37 so called because the intention was that the Rules as incorporated by it were to be “paramount” and take precedence over any inconsistent clauses to the contrary.38 Clauses paramount come in various shapes and sizes, with a number of forms in common use.39 In the bill of lading there may simply be a reference to a “clause paramount”, without further elaboration.
10.34 The classic definition of a clause paramount appears in Lord Denning’s judgment in The Agios Lazaros,40 where he said:
The parties have expressly stated that “Paramount clause” is deemed to be incorporated into this charterparty. We should strive to give effect to this incorporation, rather than render it meaningless. We should make all reasonable implications to this end, just as the House of Lords did in W. N. Hillas & Co. Ltd. v Arcos Ltd. (1932) 38 Com. Cas. 23, 37 and 38. What does “Paramount clause” or “clause paramount” mean to shipping men? Primarily it applies to bills of lading. In that context its meaning is, I think, clear beyond question. It means a clause by which the Hague Rules are incorporated into the contract evidenced by the bill of lading and which overrides any express exemption or condition that is inconsistent with it. As I said in Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum Co. Ltd.  2 Q.B. 233, 266: “When a paramount clause is incorporated into a contract, the purpose is to give the Hague Rules contractual force: so that, although the bill of lading may contain very wide exceptions, the rules are paramount and make the shipowners liable for want of due diligence to make the ship seaworthy and so forth.”
10.35 The meaning of “clause paramount” was considered in Seabridge Shipping A.B. v A.C. Orsleff’s EFTF’S A.S.,41 where Thomas J. held that the clause paramount in question incorporated the Hague rather than the Hague-Visby Rules. He rejected a submission that the position had changed since 1976 because of the coming into force in 1977 of the Carriage of Goods by Sea Act 1971. This result is unsurprising,42 but Thomas J. founded his reasoning in part on the understanding that the parties to the contract would have had on the meaning of the term “clause paramount”. This leaves open the unwelcome possibility that, in order to construe such a clause, factual or even expert evidence might be necessary. A clause that incorporates UK COGSA 1924 “and subsequent amendments” will not incorporate the Hague-Visby Rules.43
Proper or applicable law
10.36 As Reginald Goff L.J. emphasised in The Agios Lazaros the courts must apply the proper or “applicable” law of the contract.44 Difficult problems may arise where the parties purport to incorporate the Rules where they “apply” or “apply compulsorily” or “are applicable”. The question that arises is: by which law is it to be decided whether the Rules “apply” or “apply compulsorily”? This problem is exacerbated where “multiple choice” standard form clauses seek to apply different versions of the Rules to different situations. If the question of applicability of the Rules is to be judged by the applicable law of the contract, then the fact that, for example, United States or Canadian law might compulsorily apply the Hague Rules to shipments from the United States or Canada is likely to be irrelevant if the applicable law of the contract is English, although as discussed below the appropriate form of wording can incorporate the Rules in circumstances where a foreign law would have applied them.
Different versions of the Rules
10.37 References to the Rules in clauses paramount are frequently not to the Rules themselves, but to the version as enacted by a particular domestic statute. Reference has already been made to the relevant English statutes, and other domestic legislation often referred to includes the US Carriage of Goods by Sea Act 1936, the Australian Carriage of Goods by Sea Act 1991 and the Canadian Water Carriage of Goods Acts 1936 and 1993. Because COGSA 1924 was repealed totally by COGSA 1971, the only way that the Hague Rules, as opposed to the Hague-Visby Rules, can be applied is by contractual incorporation. But the terms of those Rules, in so far as they are contradicted by the Hague-Visby Rules, will be ineffective if the latter Rules apply by “force of law”.
10.38 In The Superior Pescadores45 Males J. had to consider a clause in bills of lading almost identical to that of the common standard Congenbill form stating that:
The Hague Rules…as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.
The case concerned damage to packages shipped in Belgium where, because of differences in the weight of the packages, the Hague-Visby Rules gave higher limits for some of the packages and the Hague Rules for others. Cargo owners sought to claim the highest amount for each package on the basis that although it was common ground that the Hague-Visby Rules applied compulsorily under COGSA 1971, there was also contractual incorporation of the Hague Rules that applied if and to the extent that in a particular case it gave a higher limit.
10.39 A key issue was which of the two sets of Rules was incorporated by the clause, when shipment was from a country that had enacted the Hague-Visby Rules. The judge would have been inclined to hold that such wording was intended in such circumstances to incorporate the Hague-Visby Rules, but considered himself constrained by authority46 from doing so. Thus the parties’ intention47 was held to be to incorporate the Hague Rules. However he went on to hold that the parties would have regarded such a clause as surplusage in the circumstances, such that the only relevant limit was the Hague-Visby one. The case is subject to appeal so any significant comment by the authors is likely to be surplusage and/or not in accordance with the views of higher authority. However it seems to us that whilst both the overall result and the judge’s analysis of the authorities are to be commended, there is some irony in the situation where the same facts led, at one and the same time, to both the incorporation of the Hague Rules and their inapplicability as surplusage. One might think that in reality the intentions of the parties were in line with the judge’s instincts, to be taken to be to incorporate the Hague-Visby Rules.
10.40 In The Golden Endurance48 it was argued, on the same standard clause, that the reference to “the corresponding legislation in the country of destination” could (and did on the facts) refer to the Hamburg Rules. The judge did not find it necessary to decide the issue but concluded provisionally that the argument was incorrect, a view with which the authors respectfully and firmly concur, given the substantial differences between the Hague and Hamburg Rules.
“Where applicable” or “compulsorily applicable”
A problem may still occur in effecting what was presumably the intention of the parties where a bill of lading provides expressly that a foreign version of the Hague Rules shall govern “where applicable” or “where compulsorily applicable”. This problem arises because foreign legislation will never be applicable as such under English law. However, the particular wording of the clause may make it plain that the parties did intend the relevant Rules to apply, in which case effect will be given to this intention.49 An example of such an intention apparently being manifested is in the widely used Congenbill 1994 form.
10.41 In the first edition of this work we suggested that the words “compulsorily applicable” in this context should mean compulsorily applicable by the law of the country of shipment, not the applicable law of the contract50 and Aikens J., as one of the authors then was, so found at first instance in The MSC Amsterdam,51 a case concerning a shipment from South Africa and a clause referring to the Hague-Visby Rules being compulsorily applicable. However the Court of Appeal reversed this decision, holding that “compulsorily applicable” meant, and was limited to, compulsory application under the applicable law of the contract or the law of the forum where the cargo owners chose to bring suit. Because South Africa was not a contracting state, the Hague-Visby Rules were not compulsorily applicable under English law even though they were under South African law. 52
10.42 In The Happy Ranger,53 the Court of Appeal had to consider a complex clause paramount54 within an unusual contract of carriage. The relevant part of the clause, which purported to apply different regimes to different shipments, provided as follows:
Trades where Hague-Visby Rules apply. In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on 23 February 1968 – the Hague-Visby Rules – apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading.
The case concerned a heavy piece of equipment that was dropped whilst being shipped in Italy (a contracting state) for carriage to Saudi Arabia, and the issue was whether the Hague or Hague-Visby Rules applied. The majority of the court found that the Hague-Visby Rules applied by virtue of the Carriage of Goods by Sea Act 1971 in conjunction with Article X(a) and (b) of the Hague-Visby Rules, but rejected an alternative argument that the wording of the clause was itself sufficient to incorporate the Hague-Visby Rules contractually for carriage from a contracting state.55 Rix L.J., however, found for the cargo owners on the additional basis that on the overall wording of the clause any construction other than that the parties intended the Hague-Visby Rules to apply made no commercial sense. 5657
10.43 Another case with an Italian flavour was The BBC Greenland,58 concerning shipment from Italy to the United States (which by COGSA 1936 applies the Hague Rules to inward as well as outward shipments), and bills of lading that read, so far as is material for the present discussion, as follows
[on the front, variants on]
all cargo carried on deck at shipper’s/charterer’s/receiver’s risk as to perils inherent in such carriage,….. and in all other respects subject to the provisions of the United States Carriage of Goods by Sea Act 1936
[on the reverse]
3. Liability under the contract (a) Unless otherwise provided herein, the Hague Rules…shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply. In respect of shipments to which there are no such enactments compulsorily applicable, the terms of Articles I-VIII inclusive of said Convention shall apply. In trades where the…Hague-Visby Rules apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading…. Unless otherwise provided herein, the Carrier shall in no case be responsible for loss of or damage to deck cargo….
4. Law and Jurisdiction: Except as provided elsewhere herein, any dispute arising under or in connection with this Bill of lading shall be referred to arbitration in London. English law to apply.
SPECIAL CLAUSES…B. US Trade. Period of Responsibility (i) In case the Contract evidenced by this Bill of Lading is subject to…US COGSA, then the provisions stated in said Act shall govern before loading, and after discharge and throughout the entire time the cargo is in the Carrier’s custody…. In the event that US COGSA applies, then the Carrier may, at the Carrier’s election, commence suit in a court of proper jurisdiction in the United States in which case this court shall have exclusive jurisdiction. (ii) If the US COGSA applies…the Carrier shall in no event be or become liable for any loss or damage to the cargo in any amount exceeding USD500 per package or customary freight unit…
10.44 The clause came before the English court in the context of an anti-suit injunction application by the claimant cargo interests to restrain US proceedings by the defendant owners. Having found59 that the cargo was deck cargo within the meaning of Article 1(c) of the Rules, the judge held that the Hague-Visby Rules were not compulsorily applicable and that the parties had also not agreed that they should be applicable. Accordingly US COGSA applied (even though it contains a similar exclusion of deck cargo), and the English court had no jurisdiction because of the US jurisdiction clause. The claimant’s alternative argument that they applied anyway by contract was also rejected. As the judge explained, words purporting to apply the Rules in trades where they apply compulsorily will not do so unless they would have applied anyway.60 Of most interest for present purposes is the judge’s rejection of the owners’ alternative argument that even if the goods were not deck cargo, special clause B constituted a valid exclusive jurisdiction clause. The judge concluded that the parties had intended COGSA 1936 to apply only if the Hague-Visby Rules did not apply, and that clause B did not “provide elsewhere” for purposes of clause 4.
10.45 From these decisions we would suggest the following must obtain: if, for example, the law of state A provides for the Hague-Visby Rules to apply to an outward shipment from A, then the Hague-Visby Rules (in the form adopted by the law of state A) should apply to a bill covering a shipment from A and governed by English law, even though A is not a contracting state, if the bill provides that (1) they shall apply “where applicable by the law of the country of shipment”,61 or (2) they shall apply “in accordance with any national law making them applicable”. They would also apply if the bill were governed by the law of state A: the mandatory nature of COGSA section 1 does not invalidate a foreign choice of law clause that brings the Hague-Visby Rules into play, but only (as discussed below) one that purports to take them out of play.62 The Hague-Visby Rules will also apply if the cargo owners63 bring suit in state A or another state whose law makes them compulsorily applicable However they will not apply simply because the bill provides that the Hague-Visby Rules “shall apply to trades where they are ‘compulsorily applicable’”.
10.46 Where the contract is evidenced only in part by the bill of lading, with a provision that the Hague-Visby Rules shall apply being in a document other than the bill, it is suggested that the wording of Article X(c) requires that the Rules should apply. For example, where a booking note states “Carriage Arica to Ravenna, Congenbill form and Hague-Visby Rules to apply”, this would suffice, even though Arica is in Chile, which is not a contracting state and whose law does not provide for the application of the Hague-Visby Rules.64
10.47 Where it can properly be inferred that the parties intended that the Rules should apply to a contract, a certain degree of manipulation may be permitted to give effect to that intention, either in the incorporating words or the Hague-Visby Rules themselves. For example, in The Adamastos65 the House of Lords gave effect to a clause purporting to incorporate the Hague-Visby Rules into a charterparty for a series of consecutive voyages. The words “this bill of lading” were read as “this charterparty” and the provisions of Article V of the Rules (which makes them inapplicable to charterparties) were disregarded. The need for such manipulation occurs principally where the Rules are sought to be incorporated into a contract other than a bill of lading contract, such as a charterparty.66 But, for example, a contract that provides for carriage between two ports in Spain and states “Hague-Visby Rules to apply” will, at least if governed by English law, be subject to those Rules notwithstanding that the criteria in Article X67 are not fulfilled, on the basis that the Rules have been incorporated as a matter of contract, not by “force of law”. Similarly, where a bill provides that a particular enactment (enacting the Rules or a version of them) is to “apply” to a shipment, then it is generally to be assumed that the parties intended the Rules to govern the contract even if the enactment applied the Rules only to outward shipments from the state in question and the shipment is to, rather than from, the state in question.68
Partial or qualified contractual incorporation
10.48 The bill may provide that only part of the Rules are to govern the contract, or that they are to govern the contract subject to qualifications. It is suggested that the parties’ freedom to contract in this way should be upheld, so that Article X will not be engaged; provided, of course, that the entire Rules are not otherwise applicable by force of law.
10.49 Article X has to be read in conjunction with section 1 of COGSA,69 which defines the circumstances in which the Rules will be applicable under the statute. By section 1(4), and subject to section 1(6), the Rules are not to apply to a contract for the carriage of goods by sea “unless the contract expressly or by implication provides for the issue of a bill of lading or any similar document of title”. This wording ties in with Articles I(b) and II of the Rules themselves. Article I(b) states that the term “contract of carriage” as used in the Rules applies only to contracts of carriage “covered by a bill of lading or similar document of title”. The question of what documents are embraced by this phrase is discussed in Chapter 2, but it includes, for this purpose, not only conventional “classic” shipped order bills of lading but received for shipments bills70 and straight consigned bills,71 but not waybills.72
The “force of law”
10.50 Section 1(2) of the Act provides that the Rules “shall have the force of law”. However, the mere fact that English law is the applicable law of the bill of lading contract is not in itself sufficient to apply the Rules. Thus, in The Komninos S73 the Rules did not apply because although the applicable law was English law, the port of shipment was in Greece, not a contracting state, and the conditions of Article X(a), (b) or (c) were not fulfilled.
10.51 Where the court has jurisdiction to apply it, section 1 has an overreaching effect in the sense that its provisions override general conflict of laws principles that would otherwise give effect to a choice of law or jurisdiction clause. This was illustrated by the case of The Hollandia.74 That was a case, in fact, under section 1(3), which provides that without prejudice to section 1(2), the Rules shall have effect and the force of law in relation to carriage of goods by sea where the port of shipment is in the UK. The cargo in question was shipped in Scotland under a bill of lading providing for Dutch law and jurisdiction. The cargo was subsequently damaged. It was common ground that the Dutch courts would have applied a limit of liability under the Hague Rules that was less than that applicable by the Hague-Visby Rules. The House of Lords refused an application by the carrier for a stay of an English action, in which the cargo owners claimed damages, in favour of the Dutch courts. The rationale of the decision was that the Hague-Visby Rules, including Article III rule 8, are given force of law, and because the shipment was from a port in the UK the Dutch jurisdiction clause was null and void as it would have had the effect of lessening the carrier’s liability within the meaning of Article III rule 8.75
10.52 Lord Diplock, who gave the only substantive speech in the House of Lords, had been the leader of the British delegation to the 1968 conference76 and was presumably well placed to divine the Parliamentary intention behind COGSA. He said:
My Lords, the provisions in section 1 of the Act that I have quoted appear to me to be free from any ambiguity perceptible to even the most ingenious of legal minds. The Hague-Visby Rules, or rather all those of them that are included in the Schedule, are to have the force of law in the United Kingdom: they are to be treated as if they were part of directly enacted statute law.77
He dismissed the argument78 that COGSA can only apply at all to regulate the rights of the parties if the applicable law of the contract is English law.79 Thus, if a case comes before a court in the UK that is entitled to exercise jurisdiction in the case, then section 1 gives the Rules the force of law. That is the position, whatever the applicable law of the contract might be. However, as discussed below, the court must be entitled to exercise jurisdiction in the first place, and that will depend on the interaction of the common law, the provisions of the Arrest Convention and on Regulation 1215/2012, known as Brussels I Recast, the successor to Regulation 44/2001.80
10.53 The position appears to be the same where the port of shipment is not in the UK but another contracting state. Although The Hollandia was concerned with section 1(3) rather than section 1(2), it is clear from the wording of section 1(3) that it is not intended to qualify section 1(2) but rather to extend the application of the Rules to all shipments from the UK regardless of whether the carriage is between two different states. Thus, in The Benarty81 it was common ground that the Hague-Visby Rules applied by force of law to shipments from western European ports.82
Time for consideration of validity of clause
10.54 In The Benarty the court held that the time for ascertaining whether a provision such as a law or jurisdiction clause offends against Article III rule 8 is when a party seeks to rely on the clause,83 rather than when the claim form is issued. In that case there was an Indonesian law and jurisdiction clause in the bill of lading, and in reliance on it the defendant shipowners challenged the jurisdiction of the English court. The claimant cargo owners contended that no effect should be given to the clause, as the Indonesian court would apply a package limitation figure less than the Hague-Visby limits. However, the defendant shipowners undertook not to seek to limit liability below those in the Hague-Visby Rules, although they did wish to rely on Indonesian tonnage limitation provisions. Because of this undertaking and because the relevant time to consider was when the stay application was made, the clause was held not to offend against Article III rule 8.
The effect of EU Regulation 1215/2012
10.55 The Hollandia predated the Civil Jurisdiction and Judgments Act (CJJA) 1982, the regime of Article 17 of the Brussels and Lugano Conventions, and their successors, Article 23 of Regulation 44/2001 and Article 25 of Regulation 1215/2012, Brussels I Recast.84 The general principle of supremacy of EU law over national law means that the Regulation would prevail.85 However this addresses only the question of jurisdiction and not that of proper or “applicable” law. Thus, a choice of jurisdiction clause satisfying the terms of Article 25 of the Regulation should be upheld for the purposes of considering jurisdiction, notwithstanding that it was in favour of a state which would not apply the Hague-Visby Rules in respect of a shipment to which COGSA 1971 would apply them.86 If the facts of The Hollandia arose today the approach would be different because Article 25 would take precedence over COGSA, section 1. But the result might be little different in practice as the Netherlands is now a contracting state within the meaning of COGSA and would, thus, apply the Hague-Visby Rules. As discussed above, if the English court does have jurisdiction, the Rules will apply by force of law to shipments from a contracting state irrespective of whether foreign law applies to the bill of lading contract.87
The “force of law” and arbitration clauses
10.56 Where the contract of carriage provides for reference of a dispute to arbitration, an English court that would otherwise have jurisdiction over the dispute is required to stay any action brought in breach of the arbitration agreement under section 9 of the Arbitration Act 1996 unless the arbitration agreement is “null and void, inoperative or incapable of being performed”. Can it be argued that it should not grant a stay if the effect of so doing would be that the arbitrators would or might not apply the Hague-Visby Rules? There is no difficulty where there is an English law and London arbitration clause. However, there are three situations that are more complex where the law of state X would not apply the Hague-Visby Rules in a situation where English law would. They are where the contract provides for (i) law of X, London arbitration, (ii) English law, arbitration in X and (iii) law of X, arbitration in X.88
10.57 In considering the position, it is necessary to bear in mind that the key passage on page 574 of Lord Diplock’s judgment in The Hollandia draws no distinction between jurisdiction and arbitration clauses. Moreover, the passage refers generally to “choice of forum clauses” and not specifically to choice of court clauses. Lord Diplock left the position on the effect of Article III rule 8 in this context open,89 and suggested that the English court might consider that an arbitration agreement that had the effect of circumventing the mandatory provisions of COGSA 1971 might be null and void. This is apparently on the basis that the arbitrator should refuse to give effect to the express choice of substantive law on grounds of public policy if it avoided the application of the law of the place where the contract was made or of the law that would have been the applicable law in the absence of the choice of law clause.
10.58 In the first situation, with London arbitration and law of X, the action will be stayed, on the basis that the arbitrators would now as a matter of English curial law be bound to apply Article 7(2) of the Rome Convention to apply the Rules irrespective of the provisions of the law of X. Thus, it would be unnecessary to invoke the question of public policy canvassed by Lord Diplock.
10.59 In the second situation (arbitration in X, English law) there is no problem if the evidence is that the arbitrators would apply English law to give effect to the Hague-Visby Rules. But if the position is that they would not (perhaps because of a mandatory provision of the law of X to the contrary) the analysis is more problematic. There are real difficulties in seeking to circumvent section 9 of the Arbitration Act by suggesting that the arbitration agreement is void on grounds of public policy. The court may be exercising jurisdiction in a situation where there is very little connection with England.90 Why should public policy require any regard to be paid to substantive English law? On the contrary, public policy perhaps points to the upholding of arbitration agreements, as required by the New York Convention 1958, the recognition and enforcement of arbitration agreements and awards. The doctrine of separability of an arbitration agreement from the remainder of the contract, as enshrined in section 7 of the 1996 Act, also makes it more difficult now to justify a finding that it is null and void because of its effect on substantive obligations. Recent authority suggests that the scope of a public policy justification for disregarding choice of law clauses is narrow.91 In a commercial context it is likely to be limited to cases where English law would regard the contract as immoral or the making of the contract contrary to “positive law”.92 The point remains open. Logically The Hollandia approach applies equally to arbitration clauses as it does to jurisdiction clauses, but there are good arguments in favour of restricting its application and granting a stay in such cases under section 9 of the 1996 Act, and we suggest that this is what a court would do.
10.60 In the third situation (arbitration in X, law of X) there is even less justification for refusing to apply section 9. Thus, we consider that a stay would be granted for the reasons given above.93
The modern pragmatic approach
10.61 The unrestricted application of the decision in The Hollandia may seriously undermine the principle that, in general, effect will be given by the English courts, to choice of law and jurisdiction clauses.94 It is undesirable, for example, that the fact that a bill of lading is issued in a contracting state may emasculate the law and jurisdiction clauses agreed by parties who are based in non-contracting states, and who contract for a shipment in a non-contracting state. The might happen if the vessel was arrested in England and the matter came before the English court. The application of the The Hollandia doctrine does not,95 however, take away the discretion of the court to stay the action on grounds of forum non conveniens.96 The modern approach, as exemplified in the case of Baghlaf al Zafer v PNSC,97 has ameliorated the harshness of the position. In that case the cargo was shipped from Spain (a contracting state) under a bill of lading containing a Pakistani law and jurisdiction clause, which would on its face have fallen foul of Article III rule 8 of the Hague-Visby Rules, as Pakistan applied a Hague Rules-based limit of liability. The carriers were, however, granted a stay of the English action, in favour of Pakistan, on their undertaking not to rely on the Pakistani limit.98
“Port of shipment” in the United Kingdom
10.62 Without prejudice to the generality of section 1(2) the Hague-Visby Rules have by virtue of section 1(3) the force of law in connection with the carriage of goods by sea where the port of shipment is a port in the United Kingdom. This applies the Rules to coastal trades between ports in the UK, whereas Article X applies them only to carriage between ports in two different states.
10.63 “Port of shipment” is used in section 1(3) of COGSA and “carriage from a port” are phrases also used in Article X(b) of the Rules. The meaning of these expressions, and in particular the words “port” and “shipment”, may give rise to problems in the case of transhipment, especially in the case of through bills. The applicability of the Rules will depend on the particular terms of the contract. Goods will be subject to the Hague-Visby Rules, at least by virtue of section 1(3), even if the carriage is to start at an inland point, so long as the goods are to be carried by sea from a “port of shipment” within the UK. Thus, in Mayhew Foods v Overseas Containers Ltd.99 the contract provided for carriage from Uckfield (an inland town in England) to Jeddah in Saudi Arabia, with the intended carrying vessel named as The Benalder, and the intended load port as Southampton. Clause 21 of the bill of lading provided a wide liberty to the carrier concerning route and means of transportation. The goods were, in fact, carried from the English port of Shoreham to Le Havre in France by a different vessel and then transhipped on to the named vessel. Bingham J. held that the Hague-Visby Rules applied from the time of shipment at Southampton, stating:100
As Mr. Justice Devlin pointed out in Pyrene Co. Ltd. v Scindia Navigation Co. Ltd.  1 Lloyd’s Rep. 321;  2 Q.B. 402, at pp. 329 and 415, the rights and liabilities under the Rules101 attach to a contract or part of a contract. The contract here was for carriage of these goods from Uckfield to the numbered berth at Jeddah. The rules did not apply to inland transport prior to shipment on board a vessel, because under s. 1(3) of the 1971 Act, they are to have the force of law only in relation to and in connection with the carriage of goods by sea in ships. But the contract here clearly provided for shipment at a United Kingdom port, intended to be Southampton but in the event Shoreham, and from the time of that shipment, the Act and the rules plainly applied.
10.64 For the purposes of the Rules “shipment” does not include transhipment.102 Thus, the key to the analysis in transhipment cases is whether there is one contract or two.103 If there is one contract, then the Rules will apply (if the relevant criteria are fulfilled) throughout the period of carriage by sea, whether or not there is transhipment onto another vessel and even during any period when the goods are ashore in the course of or pending transhipment.104 If there are two contracts, each has to be analysed separately. Thus: (i) there is “shipment” at the first port of shipment under the contract, and if the carriage (to which a bill of lading relates) is from a “port” in a contracting state, then Article X(b) applies; (ii) if the “shipment” is at a port in the UK and the shipment is “in connection with the carriage of goods by sea”, then section 1(3) will apply, even if the carriage originated inland; (iii) however, if the original shipment was at a port that is not in a contracting state nor in the UK, and there is then a transhipment, either in a UK port, or at a port in a contracting state, then that transhipment will not, in itself, constitute a “shipment” for the purposes of section 1(3); nor will it be regarded necessarily as “carriage from a port in a contracting state” for the purposes of Article X(b), unless the “transhipment” takes place because there are, upon analysis, two contracts of carriage.
COGSA, section 1(6)
10.65 Section 1(6)(a) is largely a reflection of Article X(c)105 and gives the Rules the force of law where the contract contained in or evidenced by the bill expressly106 provides that the Rules shall govern the contract.107
10.66 Section 1(6)(b) applies the Rules to a non-negotiable receipt if it (a) is marked as such, (b) contains or evidences a contract of carriage which (c) expressly provides for the Rules to apply as if the receipt were a bill of lading. In The European Enterprise108 a strict construction of the sub-section was adopted in holding that the words “as if the receipt were a bill of lading” had to appear in the receipt, and that a partial incorporation of the Rules would not qualify under the sub-section. Steyn J. declined to follow the earlier decision in The Verschroon.109 The principal relevance of the section is that, where it applies, the Rules have statutory force and override any other term that might otherwise restrict or exclude the carrier’s obligations under the Rules.
10.67 As discussed above, if the contract of carriage is, by English conflict of laws rules, governed by an applicable law other than English law, then that law will apply to determine the rights of the parties, including whether the Hague-Visby or Hague Rules apply. As also discussed above this is subject to the application of The Hollandia or the application of Article 7(2) of the Rome Convention, under either of which a choice of foreign law or jurisdiction may be invalid if it would result in the disapplication of the Hague-Visby Rules which as a matter of English law apply by force of law. The question of the applicable law of a contract of carriage is discussed in Chapter 14 below.
10.68 If the Hague-Visby Rules are not applicable on any of the grounds discussed above, the Hague Rules may be applicable instead. Since the repeal of COGSA 1924, the only way in English law that the Hague Rules can apply to a contract of carriage of goods by sea contained in or evidenced by a bill of lading is if they are incorporated contractually. This could be done by the use of a “clause paramount” or other similar techniques of incorporation that have already been discussed. Thus, the Hague as opposed to the Hague-Visby Rules are still of practical importance, particularly in the case of shipments from non-contracting states.
10.69 The individual Hague-Visby Rules are now considered in order. Under each rule there is also, where appropriate, a commentary on the original version in the Hague Rules and the underlying common law.
10.70 The layout of the Rules might be said to be not entirely logical. Some Rules are of much greater practical significance than others. The basic scheme is that Article I deals with definitions. Applicability is governed by Articles X and II, but subject also to parts of Article V. The key obligations of the carrier are in Article III rules 1 and 2. The rights and immunities of the carrier are in Article IV rules 1, 2 and 5, although an important limitation on the ability of the cargo interests to bring suit in respect of alleged breaches of the carrier’s obligations, by way of time-bar, appears in Article III rule 6. Other rules of practical importance are Article III rule 8, which renders contractual terms derogating from the scheme void, and Article IV rule 6, which deals with the shipment of dangerous cargo.
“In these Rules the following words are employed, with the meanings set out below: –
(a) “Carrier” includes the owner or the charterer who enters into a contract of carriage with a shipper.”
10.71 In Article I(a) what is important is not the status of the party in relation to the ship, but its function in relation to the relevant contract of carriage, as the counterparty to the shipper or (where he is the contracting party) the consignee.110 The word “includes” suggests that other parties apart from an “owner” or “charterer” could come within the definition of “carrier”. The word could embrace a ship’s manager, a carriage contractor, a freight forwarder or a freight agent, provided that the contract was one “of” carriage rather than merely a contract “for” carriage.111 However, in all cases the “carrier” must be the contracting carrier, that is, the entity that is contractually liable under the contract of carriage.112
(b) “Contract of carriage” applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.
10.72 Article I(b) cannot be considered in isolation from Articles I(e) and II and the relationship between these is considered under Article II below.
10.73 An important limitation on the application of the Rules is that they only apply to contracts “covered by” a bill of lading. In Pyrene v Scindia113 Devlin J. said:
In my judgment, whenever a contract of carriage is concluded, and it is contemplated that a bill of lading will, in due course, be issued in respect of it, that contract is from its creation “covered” by a bill of lading, and is therefore from its inception a contract of carriage within the meaning of the rules and to which the rules apply.
10.74 Thus, the fact that no bill of lading has been issued will not prevent the contract being covered by a bill of lading. Neither will the fact that the terms of the contract of carriage are also contained or evidenced in a separate document,114 although the Hague Rules do not apply to charterparties.115
10.75 The Rules will, however, only apply where the document that “covers” the contract is a “bill of lading or similar document of title”. This will not include a mere receipt. The question of what documents do so qualify is discussed above.116
10.76 The wording makes it clear that even if the contract is covered by a bill of lading, the Rules regulate relations between the parties only in relation to the carriage of goods by sea, although that may include a period on land during or pending a transhipment.117
10.77 The concluding words deal with the situation where a bill of lading is issued to the charterer, in which case it generally acts as a mere receipt. It has no contractual force and does not “regulate” relations between a carrier and the holder until endorsement to a third party.118 Even on the assumption that such a contract comes into existence only on endorsement, it will regulate relations retrospectively as well as prospectively. Conversely, where the bill is endorsed to the charterer, it will cease to have contractual effect.