On Friday, the Commercial Court, in the case of Vinnlustodin HF and another v. Sea Tank Shipping AS (The AQASIA) settled a 92-year-old debate, by finding that the limit of liability under Article IV rule 5 of the Hague Rules does not apply to bulk cargo.
That the English court had not determined the point before was 'perhaps surprising' according to the trial judge, Sir Jeremy Cooke. However, having taken into consideration a broad range of sources including English and Commonwealth authorities, text books and commentaries, and the travaux préparatoires to both the Hague Rules and the Hague-Visby Rules, the Judge had 'no hesitation in coming to the conclusion that the word 'unit' in the Hague Rules can only mean a physical unit for shipment and cannot mean a unit of measurement or customary freight unit as is the case in the United States.' Accordingly, the limits of liability under Art IV rule 5, which apply by reference to the 'package or unit', cannot apply to bulk cargo.
The case concerned damage sustained to '2,000 tons cargo of fishoil in bulk', as described in the charterparty, whilst on board the tanker “AQASIA”. The charterparty incorporated the Hague Rules, including Art IV rule 5. It was the claimant cargo interest’s case that the word 'unit' referred to a physical item of cargo or to a combination of physical items bundled together for shipment. The defendant argued that 'unit' could be read as meaning the unit used to quantify the cargo (e.g. kilograms, tons, bushels etc).
The Judge gave consideration to case law in other jurisdictions and the thoughts of several leading commentators. However, he was particularly influenced by the travaux préparatoires for the Hague Rules from which it was apparent that “unit” was a last minute addition to the wording, with the intention of ensuring that the relevant provision would apply to items that might not be packaged, but that were distinguishable as units, such as 'a car', 'a boiler', or 'a bag of silk'.
The defendant argued that the Hague Rules should be read in the context of the carriage of bulk cargo, as contemplated by the charterparty. The Judge rejected the argument and referenced other provisions in the Hague Rules that could not apply to the subject (bulk) cargo, such as 'insufficiency of packaging'.
In the view of the Judge, it could not have been in the contemplation of those who drafted the Hague Rules that 'unit' should apply to bulk cargo, not least because in 1924, the (gold) value of £100 per unit measure was far greater than the value of most bulk cargo, irrespective of which 'unit' of weight or measure the cargo was expressed in.
It took a long time coming, but what seemed to be the consensus has now been confirmed as the law; the limit of liability under Art. IV rule 5 of the Hague Rules does not apply to bulk cargo.