Law Of The Carriage Of Goods By Sea (PART 17)

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series the basis and elements of Marine Insurance claims will be explored.

Time Limit For Claims And Financial Limitations On Carriers’ Liability Under The Rules

1. Time limit for claims

   The third paragraph of Art. III, r.6 provides that the carrier and the ship: “…shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. This is a substantive rule, not a procedural bar, and liability is extinguished for all purposes (The Aries). The parties may agree to extend the period after the cause of action has arisen.

   ‘Suit’ means proceedings by and against the correct parties (The Jay Bola) and not in breach of a valid arbitration clause (Thyssen v Calypso Shipping). The word ‘suit’ covers both arbitration and litigation proceedings (The Merak).

   For the time bar to start running pursuant to Art. III, r.6, the proceedings must be commenced before a competent court. If there is a forum selection clause in the contract of carriage, this would be the forum selected in the clause, see The Alhani.

   If proceedings are started within a year of actual delivery, it is immaterial that more than a year has passed since delivery should have been made (The Sonia).

   Because of the words ‘in any event’ and ‘whatsoever’, it has been held that the carrier may rely on the time limit even if the breach alleged is unauthorised deck carriage (The Antares). It is implicit in The Sonia that claims in respect of unseaworthiness are also subject to the time limit.

   The time bar in the Hamburg Rules operates both ways: any action either in tort or contract is time barred if no legal proceedings have been brought within two years from the time when the goods have been delivered or should have been delivered. The time-bar provision in the Hamburg Rules also expressly mentions both litigation and arbitration proceedings, possibly in order to avoid the uncertainties arising from the word ‘suit’ used in the Hague and Hague-Visby Rules (Art. 20). Regarding time for suit, Art. 62 of the Rotterdam Rules has patterns similar to Art. 20 of the Hamburg Rules: it provides a two-year time bar that can operate in favour of both parties, as well as expressly making both arbitral and judicial proceedings subject to the time bar.

2. Financial limitations on liability

   The structure of Art. IV, r.5 is clear. Carriers’ liability is limited ‘in any event’ to the higher of two figures:

   1. 666.67 units of account per package or unit; or
   2. two units of account per kilogramme weight of the goods lost or damaged.

   The unit of account is the special drawing right of the International Monetary Fund (IMF) and has a value of the order of US$1. The Hamburg Rules and the Rotterdam Rules also provide for a package unit limitation, although the amounts of limitation provided in these sets of rules are much higher than those of the Hague-Visby Rules. (Art. 6 of the Hamburg Rules and Art. 59 of the Rotterdam Rules).

   Article IV, r.5(c) deals with the problem of containers and the ‘package or unit’ rule: unless the contents are enumerated ‘as packed’ in the bill of lading, the container is the package or unit. The meaning of ‘enumerated as packed’ has been considered at length by the High Court of Australia in El Greco v MSC. Recently, Baker J in Kyokuyo Co Ltd v AP Moller-Maersk took the view that a statement identifying, and putting a number on, the items that do in fact comprise the cargo ‘as packed’ would justify treatment of each enumerated item as a ‘package or unit’. The language of enumeration did not have to be consistent only with the possibility that the enumerated items were so packed as to be ‘packages or units’.

   On the definition of ‘package or unit’ the decision in The Aqasia is also illustrative. There, Cooke J held that when a cargo was shipped in bulk, there were no relevant ‘packages’ or ‘units’ for limitation purposes. For a comparison see Art. 6(2)(a) of the Hamburg Rules and Art. 59(2) of the Rotterdam Rules.

   Because of the words ‘in any event’ the limits apply even to breaches of the seaworthiness obligation (see The Happy Ranger) and unauthorised deck carriage (see The Kapitan Petko Voivoda). Under the Rotterdam Rules, the legal consequences arising from unauthorised deck carriage are significantly different. Pursuant to Art. 25 of the Rotterdam Rules, carriers may not in some cases be entitled to rely on the defences provided under Art. 17 of the rules.

   The limits also do not apply where the bill of lading provides for a higher limitation with sufficient clarity. In The Superior Pescadores, the bill of lading incorporated the Hague Rules ‘as enacted in the country of shipment’. This wording did not give the cargo interest the right to rely on the Hague Rules where those rules gave rise to a higher limitation figure. The Court of Appeal took the view that the Hague-Visby Rules should apply to the limitation issue, as the country of shipment was Belgium (which is a signatory to the Hague-Visby Rules).

   In The Limnos, a cargo was partly damaged. This partial damage caused the value of the entire cargo to depreciate. When assuming liability for the damage, the carrier argued that it was only liable for the partial damage and that he was entitled to limit his liability by reference to the gross weight of the physically damaged cargo. The cargo interest argued that the carrier should also be responsible for the economic loss. It was held that the words ‘goods lost or damaged’ in Art. IV, r.5(a) of the Hague- Visby Rules meant only goods that were physically damaged or lost.

   The limits do not apply if the shipper has declared a higher value before shipment and this has been inserted in the bill of lading (Art. IV, r.5(a)), but this is rarely done in practice as it increases the freight. There are also similar provisions under Art. 6 of the Hamburg Rules and Art. 59 of the Rotterdam Rules.

   The carrier loses the protection of Art. IV, r.5 if the damage results from an intentional or reckless act or omission of the carrier personally (Art. IV, r.5(e)), but an act or omission of the carrier’s servants does not fall within this provision (see The European Enterprise). The same principle is also adopted under the Hamburg Rules and the Rotterdam Rules (Art. 8 of the Hamburg Rules and Art. 61 of the Rotterdam Rules).

   Art. IV bis clarifies that the limitations apply whether the action is brought in contract or in tort.

   Unlike the Hague and Hague-Visby Rules, actual carriers are brought within the regulatory framework of the Hamburg and Rotterdam Rules.

   The Rotterdam Rules also introduce a new concept, the ‘maritime performing party’, providing ‘statutory Himalaya-type protection’ in favour of third parties that have performed at least part of the contract of carriage.

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by our Principal Associate, Chakaravarthi