Main Provisions of the Hague-Visby Rules - Case Study Example

Analysis of the main provisions of the Hague-Visby Rules [Name] [Professor Name] [Course] [Date] Table of Contents Table of Contents 1 Abstract: 2 Analysis of the main provisions of the Hague-Visby Rules 3 Overview 3 Implementation of the Rules 5 Duties of the Carrier 6 Duties of the shipper 8 Allocation of Burden of Proof 9 Liability of the carrier for other persons 11 Notice of Delay, Damage or loss 13 Contract documents 15 Freedom of contract 16 Conclusion 17 Bibliography 18 Abstract: A carrier or cargo owner has a significant obligation to deliver goods as agreed in the contract of carriage arrived with the shipper. This is indeed among the primary objectives and the key issues of carriage of goods by sea. Through the completion of the delivery of goods, the obligations of the parties to the carriage contracts are consequently discharged. The delivery of goods is viewed as a crucial component of carriage of goods by sea. This obligation is covered by current regimes such as the Hague-Visby Rules, The Hague Rules and the Hamburg Rules. With reference to the Hague-Visby Rules, the rules have been criticized for failing to address key issues, particularly concerning effective protection of the shipper. Based on these perspectives, this essay argues that the shipping practice cannot be guided entirely by the Hague-Visby Rules. Besides, a number of uncertainties should be tackled by an up-to-date convention on international carriage of goods via the sea. In any case, as a convention that pertains to the carriage contract of international transit of goods by sea (partly or wholly), the Hague-Visby Rules should attempt to make detailed provisions governing delivery of goods. However, it is critical to distinguish the strengths and the significance of the HVR which should be discussed and analysed. This essay seeks to review the provisions of the HVR. This paper concludes that the Hague-Visby Rules are to a greater extent unfair to the shipper and more sympathetic to the carrier. Analysis of the main provisions of the Hague-Visby Rules Overview The global shipping community dedicated standardized international practices that govern the functions and obligations of transit of goods by sea, transport documents and liability of damage or loss of goods under carriage by sea. At present, three international conventions govern international shipment of goods by sea. The three include The Hague Rules, the Hague-Visby Rules and the Hamburg Rules1. This essay focuses on the Hague-Visby Rules. The Hague-Visby Rules comprise a set of international regulations governing the carriage of goods by sea internationally2. Drafted in 1924, the official title for the regulation is the "International Convention for the Unification of Certain Rules of Law relating to Bills of Lading." Following a series of amendments in 1968 by the Brussels Amendments, the regulations were renamed the Hague-Visby Rules3. The key principle of the Hague-Visby Rules is that the carrier (the owner of the ship who enters into a contract of carriage with the shipper) has a superior bargaining power compared to the shipper and that in order to proper the cargo-owner or the shipper’s interest, the law ought to enforce minimum obligations on the carrier4. These set of international regime that regulates the duties of the carrier under the bill of lading contract are effective in the United Kingdom courtesy of the Carriage of Goods by Sea Act 1971. The provisions of the Hague-Visby Rules provide for the obligations of the carrier by sea under the contract of carriage as overseen by the bills of lading5. Under the HVR provisions, the carrier’s primary obligation is to exercise due diligence by providing a seaworthy ship (under Article III rule 1) as well as to protect the cargo (under article III rule 2). The provisions related to the “care or cargo” are particularly subject to the exclusions for liability for damage or loss of the carriage that arises under circumstances listed in Article 2 Rule 16. Implementation of the Rules The HVR were integrated into English Law in 1972 by the Carriage of Goods by Sea Act 1971. However, it is significant for English lawyers to take note of the provisions of the rules and the texts. For example, although Article 1(c) rules against carriage of deck cargo and live animals, Section 1(7) classifies the items in the category of goods. In addition, even though Article III (4) provides that a bill of lading is a prima facie evidence of the receipt by the carrier of the goods, Section 4 of the Carriage of Goods by Sea Act 1992 upgrades the bill of lading into the level of being a “conclusive evidence of receipt. Article X of the HVR applies in circumstances when a bill of lading is given out in a contracting state or when the carriage originates from a port “in a contracting state.” Therefore, if the HVR applies, then the entire texts of the HVR are integrated into the contract of carriage. Any effort to exempt the rules is annulled under Article III (8)7. Duties of the Carrier Under the HVR, the principle obligations of the career are to handle, load, carry and take care of the goods under carriage. The carrier also has to exercise due diligence in ensuring that the ship is seaworthy. Common law implies that the carrier should not stray from the usual or agreed route. However, Article IV (4) suggests that such deviations may be allowed in circumstances when the carrier attempts to save the property or life at sea. It should be observed that the duties of the carrier are flexible as they are not strict. In any case, it only requires that a reasonable standard of care be taken8. The flexibility of HVR on the part of the carrier is further suggested by Article IV, which allows the carrier a number of circumstances that exempt them from liability9. For instance, carriers are exempted from liability in situations when damage or destruction is caused by hazards or the sea, fire or acts of war10. Additionally, a contentious provision exempts the carrier from liability of cargo claim due to default of neglect of the master in navigating or managing the ship. Indeed, this provision is controversial and can to some considerable extent be regarded as unfair to the shipper. In addition, the more recent Rotterdam Rules and the Hamburg Rules repudiate exemptions for damages of destruction of the carriage on transit. This is due to negligence in navigation or poor management of the ship11. Further, the HVR demands that a ship has to be seaworthy only at the beginning of the voyage and not during the voyage. This can be criticized for being unfair to the shipper as the carrier is not obligated to keep the ship seaworthy during the voyage12. With regard to the transport documents in Hague-Visby Rules, the rules provide that the carrier is obligated to issue a bill of lading. Provisions are however not made in circumstances when the carrier issues any other transport document other than the bill of lading without indication13. A carrier has to show that he has fulfilled his primary obligations by ensuring that the ship is seaworthy as required under Article II Rule 1, for it to be protected by exemptions specified in Article 4(2). Indeed, Article 4(2)(a) of the Hague-Visby Rules should be criticised for clearly showing that it is bent on protecting the carrier of neglects or acts due to its agents or servants while in the modern day shipping scenario, the carrier has more control and contact over the ship’s crew and master in navigating and managing the vessel14. This scenario is illustrated in a case where the Supreme Court of New Zealand in 2007 ruled that the charterer and the owner of Tasman Pioneer, a ship, were to rely on the exemptions provided for under Article 4(2)(a) of the Hague-Visby Rules. In the case, the deck cargo had been damaged and lost as a result of the fault of the master of the ship after taking off from Japan. The claimant claimed for US$3 million of compensation of the goods (dairy products) that had been damaged and lost due to immersion in water after the ship’s refrigeration had become faulty. The court rejected the claimant’s claim that the carrier had failed to fulfil its obligations of due diligence and to provide seaworthy ship as required in Article III Rule 1 of the Hague-Visby rules15. Duties of the shipper Compared to the duties of the carrier, the shipper has fewer obligations which are generally implicit in nature. The principle obligations of the shipper include payment of freight, package of the goods, description of the goods accurately, and honestly, duty not to ship dangerous cargo unless is agreed in the carriage contract and the duty to make the goods available for shipment as agreed in the contract with the carrier16. Indeed, the Hague-Visby Rules contain three provisions on the shipper’s liability and obligation. Article 3(5) of the Rules stipulates that the shipper is assumed to have provided to the carrier accurate number, quantity, weight and marks of the goods at the time of shipment. Second, Article 4(3) stipulates that the shipper will not be held responsible for the damage or loss of goods sustained by the carrier of the ship that results or arises from any causes without its neglect, fault. It therefore suggests that, with a similar language to that applied in Article 4(2) for the carrier, the shipper will still be liable for damages or losses sustained by the carrier that are caused by the neglect or misconduct of the shipper17. Third, Article 4(6) stipulates that the shipper will be directly and indirectly held liable for all the damages, losses and expenses that result from transit of dangerous goods which the carrier has not consented to. On analysis, of these three provisions, the stringent liability in the first and the second provisions, fault the shipper’s liability in the second provision18. It should however be perceived that the three provisions elucidate the nature of the shipper’s obligations. This means that violation of the provisions would amount to the liability of the shipper as provided for under Article 4(3) of the Hague-Visby Rules. With regard to the delivery of goods on carriage, the Hague-Visby Rules does not specify the obligations of the shipper. On the contrary, it only specifies the shipper’s obligations in the preparing the goods for carriage. Lack of this specific provision therefore shows a weakness of the Hague-Visby Rules. However, using a different perspective, it can still be argued that such provisions are implied even if they are not clearly specified. This is evident in Article 4(2) which has a reference to “insufficiency of packaging” among the excluded perils. Hague-Visby Rules specify that the shipper is liable for the losses or damages resulting from carriage of dangerous goods shipped without the carrier’s knowledge. Based on the expression “shipped without knowledge,” it then follows that the shipper will be held responsible for the damages or losses if the carrier is not informed on the nature of the dangerous goods19. Allocation of Burden of Proof The Hague-Visby Rules do not cover the delay of goods on carriage by sea. Under the Rules, the carrier is pardoned from any liability with regard to loss of damage of goods during the course of the journey (un-seaworthiness) unless the carrier breaches the duty of due diligence. In addition, he is relieved from liabilities resulting from damage of loss of the goods cause by carelessness of fault of the pilot, marine, or the crew of the ship20. Concerning the allocation of the burden of proof, the HVR does not refer to the original burden and the proof lies on the claimant. It however provides two options. First, the proof of the damage, loss or delay is not attributable to carrier’s mistake or fault for whom he is liable. Second, the burden of proof is only a supposition of the absence of fault if the carrier is able to prove that the loss, damage or delay is due to an accepted peril21. On critical analysis of the allocation of burden of proof in case of damage, delay or loss during the course of the voyage puts the claimant (in this case the shipper) at a compromised position. Indeed, while under Article 4(1) of the Hague-Visby Rules, it is the claimant who has the burden of proof if he claims that a loss of damage to the goods happened, the carrier has the burden of proving he exercise due diligence. In this case, by proving that the loss or damage was caused by un-seaworthiness, the carrier is exonerated of the burden22. With this in mind, it is critical to note that the Hague-Visby Rules can be criticised for being unfair to the shipper – claimant. In an Australian case Nikolay Malakho v. Shipping Co. Ltd v. Seas Sapfor Ltd, matters concerning the bill of lading and time-bar case are illustrated23. In the case, the goods under a bill of lading were shipped from Malaysia. However, a deviation occurred during the voyage. The deviation caused a dispute between the shipper and the carrier as the goods were discharged at a different port in New South Wales rather than the one indicated in the bill of lading. The goods were damaged by rain while held at a storage awaiting transportation by road to the nominated port. The shipper had the burden of proof as to whether the damage occurred during the shipment of goods at the sea, while the carrier had to prove that he had the burden of proving he exercised due diligence. New South Wales Court Judge Sheller ruled that the carrier was only responsible for the goods at the point at which he had discharged the goods at the port. Liability of the carrier for other persons Concerning the liability of the carrier, under Hague-Visby Rules, the carrier will be held responsible of the faults caused by his agents or crew [except for the faults are classified in Article 4(1)(a), which provides that the carrier or the ship will not be liable for damage or loss resulting from the neglect, act or fault of the mariner, master or carrier’s servants in the event of poor navigation or management of the ship]. Indeed, the exemptions provided for under Article 4(1)(a), imply that the liability of the carrier is limited. It therefore gives an indication of not favouring the shipper24. Further, even though Article 4(2) (q) implies that the carrier will be held liable for the defaults of his agents or servants, the category of the agents is limited since Article 4bas (2) stipulates that the agents and the servants does not include independent contractors25. Note that, in most cases, the agents or servants work are independent contractors. Here, the agents may include the crew and the master of the ship who may not be working under contract as employees of the carrier. This scenario is common in cases where the carrier is the ship’s time charterer. Additionally, application of Hague-Visby Rules is restricted to the period between the start of loading and the finish of offloading. This means that there are not provisions in the Rules governing all actions performed ashore. This shows a major weakness of the Hague-Visby Rules, as the carrier is seen to be exonerated in critical instances at the expense of the shipper. For instance, it shows that the acts performed ashore at the ports of loading and offloading are not conditional on the Hague-Visby Rules26. In situations where there is multimodal or combined transportation system, the liability situation is complex as the carrier’s responsibility only goes as far as the place of receiving the goods and the point of delivering the goods27. In cases where the carriage has to combine transport systems or use multimodal transport, it is therefore clear that different rules of liability will apply. Hypothetically, the Hague-Visby Rules should apply in themselves merely the period of carriage instead of period of being outside the sea. For instance, the in the Australian case N.P.L. (Australia) Pty Ltd. v. Kamil Export (Aust.) Pty Ltd, the Supreme Court of Victoria held that the Rules applied exclusively to the contract of carriage by sea and therefore the obligation to deliver the goods after offloading at the point of discharge was not part of the obligation of the carrier28. Notice of Delay, Damage or loss The Hague-Visby Rules stipulates that the notice of loss, delay or damage of goods must be given before the delivery or at the time of delivering the goods. However, if the damage or loss is not clear, then it may take three days of delivery29. Article 6 of the Hague-Visby Rules specifies that unless the notice of the loss or damage is made in writing to the carrier at the port of offloading before or during delivery within three days, then such removal will be prima facie evidence as showed in the bill of lading. However, the notice in writing need not be issued if the condition of the goods is the subjected to joint inspection at the time of delivery30. This implies that the shipper is protected. However, the effects of the provisions of Acts 6 are counteracted by Article 4(1) of the Hague-Visby Rules, which specifies that the claimant has the burden of proof if he claims that a loss of damage to the goods happened. Conversely, carrier will only have the burden of proving he exercised due diligence. Further counteractions of Act 6, are specified under Act 6bis, which starts that the carrier and the ship shall be discharged of the liability concerning the loss or damage of the goods unless the claimant brings a suit within one year of delivery of the goods31. Therefore, any claim against the carrier must be made by the shipper (claimant) within a period not exceeding one year. The period (one-year-time-bar) can indeed be criticised for being relatively short from delivery or when delivery should have occurred. Further, any clause that aims to reduce to period is contrary to The Hague –Visby Rules and is hence “null and void.” This scenario is illustrated in the case Compania Portorafti Commerciale S. A. v. Ultramar Panama Inc. when the court explained that the reason for treating it as “null and void” is because the purpose of Article 3(6) is intended to achieve finality32. It should however be observed that the one-year period creates an imbalance between the shipper and the carrier as there would be no such time described as special time limit, in the claims that the carrier can make against the shipper in case the shipper’s cargo contained dangerous goods that caused damage to the ship. Indeed, such claims by the carrier are often conditioned by normal national limitation periods, which are often much longer and flexible. For instance, in the English case Total Transport Ltd v. Aries Tanker Corporation, a carrier sued the shipper for claim of freight after one year, which was however met by a cross-claim for damage of shipment33. The Hague-Visby Rules applied the time-bar to actions to provisions that fall within them. It was held by the House of Lords that the effect of the expiry of the one-year period as provided for by Article 6 of the Hague-Visby Rules did not merely bar remedy but extinguish the cross-claim by the shipper for cargo damage. Hence, while the claim of freight by the carrier existed, the cross-claim brought by the shipper did not exist any longer34. Contract documents The Hague-Visby Rules can be commended for formalizing the international shipment of goods by sea. Indeed, it is seen to bind the shipper and the contract in an enforceable legal contract. The contract documents are effective in describing the nature of the goods at the port of loading. This can be a useful instrument in determining the extent of damage or loss as provided for under Article 4. With regard to contract documents, under Article 3(3) of the Hague-Visby Rules, requires that the carrier should, after receiving the goods for transit, demand a bill of lading. Under Article 3(7), the carrier must issue the shipper with a bill of shipping after the goods are loaded onto the ship ready for transit35. Article 3(3) of the Hague-Visby Rules further provides that the shipper should indicated the particular of the goods in the bill of lading as well that he shall not accept responsibility for any particulars that do not represent the nature of his goods. This gives the shipper reasonable ground to refuse any particulars that are incorrect. However, the Hague-Visby Rules do not include the obligation of the carrier to determine that the information in the bill of lading meets the requirements even if the actual knowledge or reasonable ground to believe that the information is false or misleading. The Hague-Visby Rules can be criticized for this weakness. This is particularly of great concern because the goods described in the bill of lading may be delivered in closed containers. In relation to the identity of the carrier, the Hague-Visby Rules do not have provisions that are of significant assistance to the claimants36. For instance, it if the contract identifies the carrier by name in the contract particulars, it fails to indicate if it will have any effect. At the same time, if no individual is identified as the carrier while the transport documents show the ship’s name, it fails to specify whether the registered owner should be the one to be deemed as the carrier. Freedom of contract With regard to freedom of contract, Hague-Visby Rules are to a large extent flexible and lenient to the carrier. At the same time, they expose the shipper to some risk of loss or damage of goods. Although this may appear as strange, the Hague-Visby Rules generally permit freedom of contract even in circumstances where they do not apply. Indeed, this is shown in Article 3(8) of the Hague-Visby Rules, which provides that any clause that exonerates the carrier from any liability differently from as provided for by the Hague-Visby Rules, is “null and void”. Further, Article 6 provides that the carrier is at the freedom to enter into any new contract in respect of its duties and liability in circumstances when the bill of lading has been issued and the goods under shipment are not of commercial nature. In any case, these provisions seem to favour the carrier at the expense of the shipper. This shows that even as the convention provides the carrier with some level of freedom, it fails to further increase the shipper’s protection by making provisions that in case a loss or damage occurs as a result of a provision that is “null and void”, then the carrier must be held liable. Conclusion It can be concluded that indeed the Hague-Visby Rules are greatly favourable to the carrier than a shipper. Indeed, it is faces critical challenges in its implementation given range of changes in the international trade over the last 5 decades, when they were compiled in 1963. The expectations anticipated by the drafters during the period were majorly transportation by sea as it was the major form of bulk transportation and the safety of the ship and the crew. The Hague-Visby Rules must have been effective at the period as the logistics and the ICT industry were still at infancy. However, international trade has become more globalized and liberalised triggering rapid transit of shipments across the globe37. This has further been perpetuated by the rapid explosion of multinational logistic companies that use multimodal transport sophisticated information systems and chain management techniques in the contract of carriage. The controversial articles that are seen to centre on the protection of the carrier at the expense of the shipper should be amended to strike a balance in the interest of both parties. Bibliography Books, Journals & Articles Berlingieri, Francesco, A Comparative Analysis Of The Hague-Visby Rules, The Hamburg Rules And The Rotterdam Rules, Paper delivered at the General Assembly of the AMD, Marrakesh 5-6 November 2009, [web document] (2009) , accessed 30 August 2013 Berlingieri, Francesco, The Hamburg Rules: A Choice for the EEC? : International Colloquium Held on 18 and 19 November, 1993 (Maklu, 1994) Committee Maritime International, The Travaux Préparatoires Of The Hague Rules And Of The Hague-Visby Rules, [web document] (2000) , accessed 30 AUgust 2013 David, Paul, Carriage of Goods by Sea Under the Hague-Visby Rules- Getting Back on Course, [web dcoument] Paper Delivered at 37th Annual MLAANZ Conference, (2010) , accessed 30 August 2013 David, Paul, 'The Hague-Visby rules back on course?' New Zealand Law Journal, [online journal], (2010), 189-192 , accessed 30 August 2013 Fujita, Tomotaka, 'Shipper’s obligations and liabilities under the Rotterdam Rules,' University of Tokyo Journal of Law and Politics, 8/1 (2011), 59-82 Gyan, Kweku, 'The Hamburg Rules: Did It Increase The Liability Of The Carrier?,' [web document] (2006) , accessed 30 August 2013 Hamid, Abdul, ‘The Legal Implications Of Electronic Bills Of Lading – A Challenge Of The New Millenium’, Paper Delivered At The International Conference On Law And Commerce 2002 – “Law And Commerce In The New Millenium: Adapting To Changing Legal Business Environment” International Islamic University Malaysia, Kuala Lumpur, Malaysia Held On 25 & 26 June 2002. (2002) Hasan, Zulkifli and Ismail, Nazli ‘The Weaknesses Of The Hague Rules And The Extent Of Reforms Made By The Hague-Visby Rules’, [web document] (2008 ) , accessed 30 August 2013 Nikaki, Theodora & Soyer, Bariş, 'A New International Regime for Carriage of Goods by Sea: Contemporary, Certain, Inclusive and Efficient, or Just Another One for the Shelves?,' Berkeley Journal of International Law, 30/2, (2012),1-46 Reynolds, Francis ‘The Hague Rules, the Hague-Visby Rules, and the Hamburg Rules’, [web document] (1990) , accessed 30 August 2013 Richardson, John, The Hague and Hague-Visby Rules (4th Ed, London: Lloyd's of London Press, 1998) pp 107-108. Schmitthoff’s Export Trade, The Law and Practice of International Trade, (9th ed., London: Sweet & Maxwell, 1990) p. 320. Venugopal, Vijayalakshmi,‘The Carrie’s Duty Regarding the Vessel and Voyage under The Hague Rules, Hague Visby-Rules and the Hamburg Rules,’ (2001) Von Ziegler, Alexander, ‘The Liability of the Contracting Carrier,’ Texas International Law Journal, 44/39, (2009) 329-348 Yang, Edward ‘An Analysis of Carrier’s Obligation to Delivery of Goods under the Rotterdam Rules, Seatransport.org,’ [web document] (2000) Read More