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Hague-Visby Rules

The objective of the Hague-Visby rules (HVR) was to protect the shipper against the widespread exclusion of liabilities by the sea carriers. The common law regime imposed strict obligations to the carrier, but the liabilities from these obligations were subverted by the carriers’ tendency to insert wide exemption clauses in the bill of landing. Under the common law regime, the carrier had a duty to provide a sea worth vessel, load the cargo carefully and properly, take reasonable care for the cargo in the course of the voyage, and also proceed to the agreed route without due dispatch, and also to hand over the cargo to the owner in the same condition and order as they were received.

However, as the stronger bargaining party, the carrier inserted exemption clauses to the bill of landing thereby limiting their liability under these obligations[1]. The shipper had to accept the prescribed terms or not to ship at all[2]. Unfortunately for the shipper, the court enforced the exemption clauses with respect to the common law doctrine of privity of contracts. As such, The Hague rules were enacted with an aim of limiting the extent to which carriers could rely on exclusion clauses as well as balance the interest of the shipper and those of the carrier. A critical analysis of their provisions, however, reveals that the rules rarely displaced the inequalities existing under the common law.

Seaworthiness obligation

The foremost duty of a carrier is to provide a sea-worthy vessel, but the test for a seaworthy vessel under the Hague-Visby rule is different from the expectations in the common law.  In common law, the duty to provide a seaworthy vessel is absolute[3]. Even if this duty is not expressly stated in the bill of landing, it is implied. Like Channel J ruled in McFadden v Blue Star Line, the carrier warrants the shipper that the vessel is seaworthy before and at the commencement of voyage. Such a strict liability means that even if the cause of unseaworthiness could not be identified by due diligence, the carrier is still liable for the loss[4]. The carrier could only exempt itself from this strict obligation by inserting an exclusion clause.

However, when the Hague-Visby rules are incorporated into a contract, the duty of absolute seaworthiness is reduced to a duty of due diligence. In Article III (1) the rule states that “the carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to make the ship sea worthy and to properly man, equip and supply the ship”. The meaning of due diligence is a question of facts. Thus in Smith, Hogg & Co Ltd v Black Sea and Baltic General MacKinnon LJ resolved that question of due diligence to make the ship seaworthy “is a limitation or qualification more apparent than real because the exercise of due diligence involves not merely that the shipowner personally shall exercise due diligence, but that all his servants and agents shall exercise due diligence”[5].

In English law, the test of due diligence is similar to that of reasonable care. Like it was explained in The Kapitan Sakharov the test of due diligence shall be whether the carrier exercised “all reasonable skill and care to ensure that the vessel was seaworthy at the commencement of voyage, namely, reasonably fit to encounter the ordinary incidents of the voyage...”[6] If the damage or loss is caused by want of due diligence, the carrier is liable. In case of a claim of damage or loss, it is the onus of the carrier to prove that he exercised due diligence. Comparing the common law and the Hague-Visby rules in terms of vessel seaworthiness, the latter is less stringent. However, it is important to point out that the requirement of due diligence under the HVR is overriding; it cannot be contracted out.  Further still, as the court ruled in Maxine Footwear if due diligence is “not fulfilled and the non fulfillment causes the damage the immunities of Article IV cannot be relied on”[7]. The exceptions in Article IV (2), however, are almost similar to the exceptions allowed in the common law. Such exceptions as Act of God, inherent vice of the goods and Queen's enemy as applied in Hague Visby rules are inherited from common law.

Then there is the challenge on when the obligation to provide a seaworthy vessel starts and ends. In both common law and Hague-Visby rules, the obligation is not continuous. In Hague-Visby rules, the obligation to exercise due diligence is before and at the commencement of the voyage. What this means is that the carrier is only liable for unseaworthiness at the beginning of loading until the vessel starts her voyage[8]. This seems to be less stringent than the common law doctrine of stages. Under the absolute warranty of seaworthiness, the carrier is expected to provide a seaworthy vessel at the beginning of each stage. The doctrine of stages in common law holds that a voyage may be made up of separate stage and thus the test of seaworthiness is restricted to the particular stage[9]. Like Lord Penzance explained, there can be “seaworthiness for the port, seaworthiness in some cases for the river, and seaworthiness in some cases ... for some definite, well-recognised, and distinctly separate stage of the voyage”[10]. In strict sense, therefore, the Hague-Visby rule is less stringent than the common law. It is not clear why under the Hague-Visby rule the carrier due diligence should not be continuous. One notable exception, for instance is Rule IV (2) (a). In this rule, the carrier is exempted from the liability arising from “act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship”. In this day and age, by the virtue of advanced technology, the carrier has considerable control of the vessel in the entire voyage. Such wide exceptions are therefore in favour of the carrier. It is likely therefore that the carrier may not exercise due diligence in hiring employers or in taking due consideration to ensure that the ship is seaworthy in the course of the voyage.

Care of the Cargo

The important question when it comes to the care of cargo is whether the carrier can contract itself out of the obligation to take care of the cargo in Hague-Visby rules as it is in common law. In common law, it is expected that the carrier has a duty to deliver the cargo in the same condition as it received it. That duty is absolute. However, since the common law hold that parties to a contract are free to set their own contractual terms, that carrier can introduce exclusion clause that severely limits this obligation[11]. The Hague-Visby rules were meant to protect the shipper in such respects. The rules, in Article III (2), impose a stringent obligation on the carrier, subject to provisions of Article IV, to “properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried”. The question is whether such an obligation improves the bargaining power of the shipper compared to the common. This is about how Article III rule 2 interacts with rule 8[12].

Although the wording of rule 2 points towards a stringent obligation, the court continue to refer to due diligence in care for cargo. In a United States court for instance, the court ruled that if a defendant “can show due diligence in protecting the cargoes, he need not show how the damage did, in fact, come about”[13]. The reliance on standard of due diligence to determine carriers responsibility significantly reduces its obligation both to provide a seaworthy vessel and to “properly and carefully” care for the goods.

In addition, English courts have ruled that the duty to “properly and carefully” care for the goods is not overriding. Unlike the duty to provide a seaworthy vessel, the court ruled in Pyrene Co  Ltd v Scindia navigation Company Limited (later confirmed in G H Renton & Co Ltd v Palmyra Trading Corporation of Panama) that Article III rule 2 cannot override the freedom of contracting parties to reallocate responsibilities including those to properly and carefully care for the good[14]. In the words of Devlin J, a contract of carriage of goods can be subject to the Hague Rules, “but the extent to which loading and discharging are brought within the carrier’s obligations is left to the parties themselves to decide”[15] Such ruling erodes the objective of the Hague-Visby rules to protect the shipper against the misuse of exclusion clauses. It follows that as much as the Hague-Visby rules impose a duty to properly and carefully care for the goods, the shipper is still subjected to the common law strict observance to sanctity of contracts.

 

Limitation of liability

The other notable provision of the Hague-Visby rules that touches the interest of the cargo is the limitation of liability. It is important to note that limitation of liability is exclusively a provision of statutes and conventions; the common law is founded on unlimited liability[16]. Like Lord Denning observed, the right of the shipowner to limit liability is not a matter of justice; but it is a rule of public policy which has its origin in history and its justification in convenience[17].

To the advantage of the shipper, however, the Hague-Visby rule increases the maximum limitation of liability. The maximum limit under Article IV 5(a) is “666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of goods lost or damaged, whichever is the higher”. More importantly, HVR gives the shipper the privilege of declaring the package or units in the bill of landing. Under this rule, the contracting parties can agree to raise the limits, but as it was ruled in the Hollandia, the carrier cannot exploit its bargaining power to reduce the limits[18]. In common law, a limit below the one set by the HVR could easily be set through contractual agreements. In addition, the carrier will lose the benefit of limitation if it is proved that the damage resulted from malicious or reckless acts or omissions.

Conclusion

From the above analysis, it is easier to conclude that the Hague-Visby rules are in the interest of the carrier more than the cargo interest. The obligations to provide a seaworthy vessel and to “properly and carefully” care for the goods are less stringent in the convention than in common law. Where the common law impose absolute obligations, the HVR requires due diligence. The obligation not to deviate from the agreed route is the same both in common law as it is in the convention. From that observation, HVR did not realise the intended objective of protecting the shipper. The tradition of the courts to uphold the privity of contract compromises HVR attempts to limit misuse of exclusion clauses has lesser effect.

 

 

Bibliography

Books and Journals

Dockray, M “Cases and materials on the carriage of goods by sea’, (2nd Ed, Cavendish Publishing Limited, 1998)

Gauci, Gotthard “Limitation of liability in maritime law: an anachronism? (1995) 19 Marine Policy 1: 65-74

Hardy -Ivamy, E.R. ‘The carriage of goods by sea act, 1924, and the doctrine of stages’ [2011] 23 MLR 2, p. 198-200

Hendrikse, M.L H.H Margetson, and N.J. Margetson, ‘Aspects of maritime law: Claims under bills of landing’, (Kluwer Law International, 2008)

Margetson, N.J ‘The system of liability of articles III and IV of the Hague (Visby) Rules’, (Uitgeverji Paris, 2008)

Reynolds, Francis ‘The Hague rules, the Hague-Visby rules, and the Hamburg rules’ (1990) 7 MLAANZ Journal, 16-34

Tetley, William “Marine Cargo Claims’ (4th ed, Thomson Carswell, 2008)

Cases

Calif. Packing Corp v Matson Navigation Co., [1962] AMC 2651

GH Renton & Co Ltd v Palmyra Trading Corporation of Panama [1957] AC 149

Hague-Visby rules – The Hague Rules as Amended by the Burssels Protocol 1968

Kopitoff v Wilson 1 QBD 602

Maxine Footwear v Canadian Government Merchant Marine Ltd [1959] 2 Lloyd’s Rep.105

McFadden v Blue Star Line

Pyrene Co  Ltd v Scindia navigation Company Limited [1954] 2 QB 402

Quebec Marine Insurance Co v Commercial bank of Canada [1870] LR 3 PC 234

Royal Exchange Shipping v Dixon and Co [1887] LR 12 App Cas 11

Smith, Hogg & Co Ltd v Black Sea and Baltic General [1939] 2 All ER 855

The Bramley Moore [1964] 1 All ER 105

The Hollandia [1983] 1 AC 565

The Kapitan Sakharov [2000] 2 Lloyd’s Rep. 255



[1] William Tetley, “Marine Cargo Claims’ (4th ed, Thomson Carswell, 2008)

[2] M Dockray, “Cases and materials on the carriage of goods by sea’, (2nd Ed, Cavendish Publishing Limited, 1998)

[3] Francis Reynolds, ‘The Hague rules, the Hague-Visby rules, and the Hamburg rules’ (1990) 7 MLAANZ Journal, 16-34

[4] N.J Margetson, ‘The system of liability of articles III and IV of the Hague (Visby) Rules’, (Uitgeverji Paris, 2008) at 43

[5] Smith, Hogg & Co Ltd v Black Sea and Baltic General [1939] 2 All ER 855

[6] The Kapitan Sakharov [2000] 2 Lloyd’s Rep. 255 at p.266

[7] Maxine Footwear v Canadian Government Merchant Marine Ltd [1959] 2 Lloyd’s Rep.105

[8]Ibid 7

[9] E.R. Hardy -Ivamy, ‘The carriage of goods by sea act, 1924, and the doctrine of stages’ [2011] 23 MLR 2, p. 198-200

[10] Quebec Marine Insurance Co v Commercial bank of Canada [1870] LR 3 PC 234 at p.241

[11] Tetley, William “Marine Cargo Claims’ (4th ed, Thomson Carswell, 2008)

[12] Article III (8) Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in these Rules, shall be null and void.

[13] Calif. Packing Corp v Matson Navigation Co., [1962] AMC 2651 at p.2653

[14] Pyrene Co  Ltd v Scindia navigation Company Limited [1954] 2 QB 402; GH Renton & Co Ltd v Palmyra Trading Corporation of Panama [1957] AC 149

[15] Pyrene Co  Ltd v Scindia navigation Company Limited [1954] 2 QB 402, at 418

[16] Gotthard Gauci, “Limitation of liability in maritime law: an anachronism? (1995) 19 Marine Policy 1: 65-74

[17] The Bramley Moore [1964] 1 All ER 105

[18] The Hollandia [1983] 1 AC 565

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