An ocean carrier’s liability for loss or damage to cargo is subject to limitation under the Hague Rules or Hague Visby Rules. The Hague Rules no longer have the force of law in the United Kingdom (having been replaced by the Hague Visby Rules) but remain widely used and may be incorporated as a term of a contract subject to English law.
The dispute concerned a cargo of fish oil carried in the tanker “AQASIA” from Iceland to Norway under a charter party dated 23 August 2013. The charter party included the following provision:
“… 26. – The Owners in all matters arising under this Contract shall also be entitled to the like privileges and rights and immunities as are contained in Sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and in Article IV of the Schedule thereto …”
“… Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100l per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading ….”
The vessel owners accepted that it was liable for the damage to the cargo but sought to limit its liability pursuant to Article IV r.5 as quoted above.
The issue – meaning of package or unit?
The question before the court was whether Article IV r.5 of the Hague Rules was capable in principle of applying to bulk cargo. In considering this question the main issue was the meaning of the term “unit”. Did the word “unit” refer to a physical shipping unit or to a unit of measurement, such as a kilogram or cubic meter? In the latter case, a unit of measurement might be seen as that utilised for freight purposes (e.g. the “customary freight unit” which is the expression used in the US Carriage of Goods by Sea Act 1936)
The limitation provisions set out in Article IV r.5 could only apply to bulk cargoes if “unit” meant a unit of measurement.
The court held that that the word “unit” in Article IV Rule 5 of the Hague Rules means a physical shipping unit and thus this provision cannot apply to bulk cargoes.
This decision provides a useful and overdue decision on the limitation in the context of bulk cargoes carried under the terms of the Hague Rules. However:
- A different outcome may arise if the reference to “unit” in Article IV Rule 5 of the Hague Rules has been amended. For example, the US Carriage of Goods by Sea Act 1936 which gives effect to the Hague Rules under United States law uses the expression “customary freight unit” rather that the word “unit” in r.5.
- A different outcome may also arise under the UK Carriage of Goods by Sea Act 1971 which gives effect to the Hague Visby Rules (which replaced the Hague Rules). Article IV r.5(a) of the Hague-Visby Rules reads as follows:
“Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.”
The judgment recognised the possibility that this limitation by reference to a unit of weight could apply to bulk cargoes when he stated:
“The fact is however that the later convention (the Hague Visby Rules) provided for limitation “per package or unit or per kilogramme of gross weight of the goods lost or damaged”, which undoubtedly means that bulk cargoes can be subject to limitation (by reference to the weight of the lost or damaged goods) as well as individual packages or objects.”