Introduction

In September 2015 47% more containers were shipped through the Port of Beirut than in the same month in 2014. The head of the Beirut Chamber of Navigation attributed the increase in container handling to the closure of the crossing points between Lebanon and Syria, which rendered land transport to Jordan and the Gulf countries impossible and prompted the Lebanese authorities to seek an agreement with exporters and shipping companies to move from land transport to sea carriage of Lebanese-made goods.

Since much seaborne trade is containerised, there has been a notable increase in containerised cargo claims in recent years. Carriage of containerised goods requires special attention from both the shipper and the carrier. Additional care must be taken when containers are delivered to the ship after they have been loaded and sealed by the shipper or where the carriage is for temperature-controlled cargoes, which are invariably perishable and whose safe carriage depends on maintaining suitable storage conditions during transportation.

The starting point in handling a cargo claim in Lebanon is to understand that the claim is not always based on the carrier's breach of contractual obligations under the carriage contract (usually the bill of lading). Based on the carrier liability regime under the UN Convention on the Carriage of Goods by Sea (the Hamburg Rules), in certain circumstances the carrier has a valid defence against a potential claim based on the fact that the damage did not occur when the carrier was in charge of the goods, as defined in Article 4 of the Hamburg Rules.

For carriers, whose core business is transportation, processing claims is an integral part of business; they are in most instances well prepared to defend against these claims and limit their liability according to the various applicable laws and regulations.

Applicable legislation

The main piece of legislation in Lebanon regulating the carriage of goods by sea is the Merchant Shipping Code (1947) which is based on the stipulations of the Hague-Visby Rules. However, cargo claims commenced in Lebanon by the shipper or consignee/endorsee under the bill of lading will be governed by the Hamburg Rules, which came into effect in 1992. Article 2 of the Hamburg Rules provides that the rules shall apply where there is a contract of carriage by sea for transport between two different states, and:

  • the port of loading or discharge is located in a contracting state; or
  • the bill of lading or other document evidencing the contract of carriage is issued in a contracting state.

The Hamburg Rules have been adopted by only a few states – including Lebanon, Chile and Egypt – and by none of the major maritime trading nations.

However, the following applies even if the bill of lading stipulates a different governing law for the various considerations:

  • The Hamburg Rules apply mandatorily;
  • Article 23.1 of the Hamburg Rules provides that:

"any stipulation in a contract of carriage by sea, in a bill of lading, or any other in any other document evidencing the contract of carriage by sea is null and void to the extent that it derogates, directly or indirectly, from the provisions of this Convention."

Hence, a statement in the bill of lading that the contract of carriage is subject to a foreign law will be regarded as an implied derogation from the provisions of the Hamburg Rules, rendering such statement null and void; and

  • By application of Article 212 of the Merchant Shipping Code (which corresponds to Article 23.1 of the Hamburg Rules, except that it specifically annuls any clause that conflicts with the applicable competence rules), Lebanese Courts have long considered that a clause in the bill of lading subjecting a dispute arising under the contract of carriage to a foreign law has no effect.

Carrier liability regime for cargo damage or loss

According to Article 4 of the Hamburg Rules, the period of the carrier's liability is limited to when it is in charge of the goods at the port of loading, during carriage and at the port of discharge. The carrier is deemed to be in charge of the goods from when it takes over the goods from the shipper or an authority at the loading port until it delivers the goods:

  • by handing them over to the consignee or an authority to whom the goods must be handed over at the port of discharge; or
  • by placing them at the disposal of the consignee in accordance with the contract, law or usage of the particular trade applicable at the port of discharge.

According to Article 5.1 of the Hamburg Rules, the carrier is liable for loss of or damage to goods, as well as loss from delay in delivery, unless it proves that it took all reasonable measures to avoid the occurrence and its consequences. The burden of proof is thus on the carrier, except in the case of loss or damage caused by fire (where the claimant must prove that the fire arose from fault or neglect on the part of the carrier). A high degree of care must be demonstrated by the carrier to evade liability under Article 5.1. The exclusions of liability that were available to the carrier under Article IV.2 of the Hague-Visby Rules were abolished in the Hamburg Rules, which means that a carrier may not exclude liability for navigational error or an act or omission of the shipper.

Further, the Hamburg Rules – unlike the Hague-Visby Rules – impose joint and several liability of carriers, which is intended to resolve the problem of suing the actual carrier when a charterer's bill of lading is issued. This is quite complicated and can cause difficulties, but potentially makes it easier to sue the actual carrier, as well as making it easier for the carrier to rely on the excepted perils (which can be impossible, at least in common law countries, under the existing regimes).

However, Article 6 of the Hamburg Rules limits a carrier's liability for loss of or damage to goods to the equivalent to 835 standard drawing rights (SDR) per package or other shipping unit or SDR2.5 per kilogram of gross weight of the goods lost or damaged (whichever is higher). Carrier liability for delay in delivery is limited to an amount equivalent to two and a half times the freight payable for the goods delayed (not exceeding the total freight payable under the contract of carriage of goods by sea). Under Article 6 of the Hamburg Rules, the carrier will lose the right to limit its liability if:

"it is proved that the loss, damage or delay in delivery resulted from an act or omission of the carrier done with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result."

Containerised cargo discharged at Beirut port: practicalities

Containers have a specific terminal at the Port of Beirut, the management and operation of which have been granted by the port authority to the Beirut Container Terminal Consortium (BCTC). Discharged containers are handled by the BCTC and remain in its custody until withdrawn by the clearing agent of the cargo interest. On their discharge, the BCTC issues an entry form in which any apparent damage to the containers will be noted. The containers are then stacked in the yards until they are withdrawn by the clearing agent of the consignee/endorsee.

A claim is usually initiated by a reserve letter sent to the carrier by the consignee or its clearing agent as soon as the container is handed over. This general reserve letter is based on Article 19 of the Hamburg Rules, which stipulates that unless the consignee gives the carrier written notice of loss or damage (specifying the general nature of such loss or damage) not later than the working day after the date the goods are handed over to the consignee, such handing over is prima facie evidence of the delivery by the carrier of the goods in good condition.

At a later stage, the consignee addresses to the carrier a proper claim requesting indemnification against the sustained loss and inviting it to attend a joint survey of the cargo. From the carrier's perspective, its protection and indemnity club must be informed as soon as possible to ensure proper recovery, even if the carrier has a valid defence against the claim and the damage did not occur during the period of liability, as defined in Article 4 of the Hamburg Rules. From the cargo interest's perspective, the marine cargo insurers should also be notified of the potential damage to the cargo and invited to joint survey as quickly as possible – especially if the transported cargo is perishable.

Following the survey, the filed claim must be referred to legal counsel for advice on its merits, so as to enable the carrier or its legal counsel to handle it properly.

Further, if the carrier has a valid defence against the claim, it must address reserve and liability letters to the entities which must be held liable for the damage (eg, the port authority and the BCTC). In any event, this must not prevent the carrier from considering the amicable settlement of a claim in order to avoid potential arrest of its vessel.

Comment

Since cargo claims give the cargo interest the right to arrest a vessel at the Port of Beirut (the Lebanese Merchant Shipping Act does not regulate the arrest of vessels in Lebanese territorial waters), carriers are recommended not to underestimate or disregard any claim or reserve letter submitted by a cargo interest – even if the carrier is not liable for the damage under Article 4 of the Hamburg Rules – as the arrest of a vessel is usually more expensive than settlement.

For further information on this topic please contact Zeina Wakim at Wakim & Associates by telephone (+961 3 776 432) or email (zwakim@wakim-law.com). The Wakim & Associates website can be accessed at www.wakim-law.com.?

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