When two claims are subject to different limitation periods, such as cargo claims and freight claims, the question of right to invoke set off arises. A cargo claim is typically time-barred after one year under The Hague-Visby Rules art. III no. 6, third paragraph, while other maritime claims may have different limitation periods, such as claims for salvage, collision, freight or demurrage. Thus, the question is whether or not a time-barred claim, e.g. cargo-claim, may be set off against a valid claim not exceeding the applicable limitation rules for such maritime claim.
This article will argue that such set off should be allowed under The Hague-Visby Rules, although such set off has been held to be inapplicable by some jurisdictions, including Great Britain, having ratified The Hague-Visby Rules, cf. chapter 1.2 below. Thus, The Hague-Visby Rules may be interpreted differently across jurisdictions, notwithstanding the unifying purpose of the convention.
1. The legal framework
Art. III no. 6 third paragraph of The Hague-Visby Rules, has the following wording:
"Subject to paragraph 6bis 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 period, may however, be extended if the parties so agree after the cause of action has arisen."
We will first outline how certain jurisdictions have interpreted The Hague-Visby limitation rule and how these jurisdictions have resolved the issue of set off with time-barred claims. Then our view on how this issue should be resolved will be outlined.
Norway has implemented The Hague-Visby Rules in the Maritime Code of 1994, with section 501 no. 7 codifying the one-year limitation rule for cargo-claims and section 501 no. 8 codifying the one-year rule for wrongful delivery. The carrier's claim for freight is not regulated by The Hague-Visby Rules and time-bar is thus subject to national legislation, in Norway being three years under the Limitation Act section 2, cf. the Maritime Code section 502.
The Limitation Act section 26 provides the general rule that a time-barred claim may be set off against other claims if such set off is agreed between the parties or if the claims has connexity, i.e. arising from the same contractual relationship. However, such set off is precluded under the Norwegian Act on Road Carriage, implementing the CMR Convention article 32 no. 4. The absence of similar provisions in the Maritime Code may be interpreted in both directions, i.e. by applying an analogous or contradictory interpretation
Preparatory works considering the implementation of the Rotterdam Rules in Norwegian maritime law, acknowledge that there is in general a certain right to set off time-barred claims under the Limitation Act section 26. Article 61(3) of the Rotterdam Rules allows time-barred claims to be used as defense or set off against claims. Thus, to some extent the Rotterdam Rules may codify already existing Norwegian statutory limitation law, which may arguably also apply to non-statutory maritime law.
This is also in line with Per Gram, the Norwegian participant at the Stockholm Conference on the amendment of The Hague Rules in 1963, who expresses that under Norwegian law set off probably is permitted for unliquidated claims as opposed to English law. The leading view today seems to be that the Norwegian Maritime Code of 1994 does not provide an answer to the question of set off for unliquidated claims and nor does the legislative theory.
Thus, the prevailing view is that in the absence of clear legislation or case law, the question of whether a time-barred cargo-claim may be set off against a valid freight-claim is uncertain under Norwegian law. In our opinion, such set off is permitted for closely connected claims such as a time-barred cargo claim against a freight claim arising under the same charter party. In this respect, we are referring to section 502 of the Norwegian Maritime Code of 1994 which incorporates the Norwegian Statute of Limitations by reference. The Limitation Act section 26 expressly permits time-barred claims to be set off against closely related claims. We believe that the Maritime Code section 502, cf. the Limitation Act section 26 enables the set off of time-barred cargo claims against charter hire, unless expressly prohibited in the charter party.
In English common law, there is no general right of set off, unless this is expressly incorporated into the contract of carriage. Thus, for claims under a B/L, The Hague-Visby Rules seem to have been interpreted to not allow set off for time-barred claims.
In the leading case The Aries  1 Lloyd's Rep. 334 (HL), the voyage charterparty incorporated article III the Hague-Visby Rules. On completion of the discharge it was found that there was a short delivery, in which the receiver deducted from the payable freight. The carrier refused to accept the deduction. The House of Lords considered that the claim was extinguished due to the one-year limitation rule and that the rule against deduction was settled common law. Lord Wilberforce expressed in that regard:
"I am therefore firmly of the opinion that the rule against deduction has to be applied to this charterparty so that the charterers' claim for short delivery cannot be relied on by way of defense. On any view, therefore, of the time bar, and even assuming the latter to be only procedural, it must defeat the claim …"
The charterers also argued for equitable set off as a second defense, but Lord Wilberforce did not find any grounds for such equitable intervention on the mere existence of a cross claim.
From this, it must be concluded that English common law does not recognize time-barred claims to be used as defense in set off actions. Thus, the wording "discharged from all liability whatsoever" in The Hague-Visby Rules article III no. 6 third paragraph is interpreted as extinguished in all respects. As we will see under no. 2 below, this does not correlate with the amendments made in The Hague Rules, as presented by the US during the Visby conference in 1963.
American law permits recoupment of time-barred cargo claims as a defense against freight claims, see Distribution Services Ltd v. Eddie Parker Interests Inc, 897 F2d 811 (5th Cir. 1990). The district court had dismissed the set off claim as barred by the statute of limitations under the US Carriage of Goods Act ("COGSA"), implementing The Hague Rules of 1924 (subject to some modifications), but not the Visby protocol adopted in Brussels in 1968. The United States Court of Appeal, however, found that a counterclaim for cargo damages brought by way of recoupment was permitted under COGSA.
COGSA section 3(6) has a similar provision as The Hague-Visby Rules article III article 6:
"In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered ...." (our underlining)
The questions was whether the wording "discharge" extinguished the claim (as the plaintiff argued and in line with the English Aries case) or whether the defendant could still assert its claim defensively by way of offset or recoupment, even though an affirmative action for cargo damages would be barred.
The Court of Appeal defined "recoupment" as "a defense that goes to the foundation of plaintiff's claim by deducting from plaintiff's recovery all just allowances or demands accruing to the defendant with respect to the same contract or transaction". The rationale behind a recoupment rule was its nature of defense against a timely main action by the plaintiff, as described by US case law. The court referred to the Supreme Court in United States v. Western Pac. R.R., 352 US 59 (1956) regarding a similar wording in the Interstate Commerce Act. The Supreme Court had here stressed that "[o]nly the clearest congressional language could force us to a result which would allow a carrier to recover unreasonable charges with impunity merely by waiting two years before filing suit".
Based on the language of COGSA section 3(6), the Court of Appeal held that "discharge" did not include any clear intent to prevent set off actions, even though the claim would be considered time-barred if brought as an affirmative action.
2. The interpretation of The Hague-Visby Rules
From the above, it seems that no uniform practice of the right toset off time-barred claims under The Hague-Visby Rules may be found. The effect of "discharge" varies across jurisdictions. Thus, a closer consideration should be made of The Hague-Visby Rules and its preparatory works.
The Hague Rules preparatory works does not give a clear answer to whether a time-barred set off claim was thought to be allowed under article III no. 6. The US proposal presented during the Visby conference in 1963, was to provide a one-year limitation of time to sue in the "broadest possible terms".
The wording of The Hague rules article III no. 6 was amended by the Brussels protocol from comprising “all liability in respect of loss or damage” to comprising “all liability whatsoever in respect of the goods”. Hence, by the amendment the time for suit was broadened from comprising all liability for “loss or damage” to the cargo to comprising all liability for cargo claims, i.e. also including wrong delivery and delay. However, the wording “all liability whatsoever in respect of the goods” does not relate to the effect of a suit not being timely filed, but to the scope of application of the rules, cf. the word “from” which points to the liability that one will be discharged from. The effect of failure to file a suit within one year remained unchanged as “discharge” of the carrier’s liability. That a party is discharged from liability does not necessarily imply that said party is prevented from using the discharged claim as a defense against claims, but he cannot actively pursue said claim after the lapse of the time to file suit.
A distinction should perhaps be made between the act of actively suing for collection of a claim and the use of the claim as a defense against a lawsuit from the claimant. A statutory procedural time limit for filing a lawsuit, does not necessarily imply that the claim also is time-barred or otherwise extinguished in all respects. It is our view that The Hague-Visby Rules include a one year limitation period for submitting legal actions, but do not include a time-bar rule to prevent defense actions against closely related claims.
The wording "discharge" does not itself exclude the right to set off a time-barred claim as defense against the main claim, as opposed to “extinguished” used by the House of Lords in England in The Aries referred to under 1.2 above. Given that there is connexity between the claims, allowing set off also seems reasonable to avoid the main claim to out-wait the defense claim before it is filed. This is in line with the American recoupment institute, expressing the view that dismissal of a defendant’s set off claim should be clearly communicated by the legislative framework, which it is not.
Further, the Brussels protocol adopted a provision that extended the limitation period for recourse actions, even after the expiration of the one year. Thus, the proposals seems to presuppose a wide scope of the wording, unless there are clear grounds for rejecting a claim based on time limitation.
There are good grounds for supporting the view that a time-barred claim should be allowed to set off against the main claim if connexity may be established, e.g. between the freight claim and a cargo claim or demurrage. The wording of The Hague-Visby Rules article III no. 6 does not prevent such interpretation and we agree with the US Court of Appeal when expressing that clear language must be required to dismiss set off as a defensive action. It is our view that in jurisdictions being based on The Hague-Visby Rules and in which no local legislation or case law prevents set off for time-barred claims, such defense lies within the scope of the current Hague-Visby Rules.
However, acknowledging the uncertainty of the current legal interpretation of article III no. 6 on this point, we advise express regulation of the right to set off time-barred cargo claims in the charter party/bill of lading until clear legislation or judgement is made in the relevant jurisdiction or until the Rotterdam Rules eventually are ratified and enter into force.
As shown in 1.1 – 1.3 above, a convention may be interpreted differently in various jurisdiction and the choice of law and jurisdiction may have a large impact on the possibility of recovery through litigation.
 See also the article by the Norwegian law firm Wikborg Rein of 1 July 2015, published in The International Law Office, where they seem to argue that set off should not be allowed under Norwegian maritime law, although acknowledging the uncertainty under the current rules.
 NOU 2012:10 page 122-123.
 See Per Gram: "Fraktavtaler" (1977) page 76.
 See Falkanger, Bull & Brautaset: "Scandinavian Maritime Law" 3rd edn. (2011) page 401-402.
 Among others, see Stephen Girvin "Carriage of Goods by Sea" 2nd edn. (2011, Oxford Uni. Press) page 342
  1WLR 185 (HL), pages 189-191
 The Travaux Preparatoires of The Hague Rules and The Hague-Visby Rules (the "Travaux Preparatoires")
 See the Travaux Preparatoires paragraphs 111-120, page 308.
 See the Travaux Preparatoires paragraphs 111-120, page 317.