Supreme Court at the Helm

Choice of Law
Bills of Lading
Contributory Negligence Setoff
Shipowners' Limitation of Liability

Although there was no major new enactment in maritime law in 2000, there were several significant Supreme Court decisions.

Choice of Law

Supreme Court Decision 98Da9038 of December 10 1999 confirmed that although the Korean Commercial Code (as amended in 1991) adopted many provisions of the Hague and the Hague-Visby Rules, Korea is not a signatory to either of the rules, nor are the rules ratified as law.

In the case the bill of lading contained the following clause:

" The receipt, custody, carriage and delivery of the goods are governed by the provisions of the transportation agreement evidenced hereby and incorporated by this reference, including (i) the terms and conditions of the carrier's applicable freight tariffs (ii) the terms and conditions stated on the front and back of this bill of lading and (iii) the provisions of the US Carriage of Goods by Sea Act 1936 or the Hague Rules of 1921, as amended, except as provided in clause 5b below, in effect in the country in which a court having jurisdiction adjudicates a dispute arising out of the transportation agreement."

The court held that the Korean Commercial Code was not the governing law in the subject carriage contract, although it adopted many provisions of the Hague Rules. In view of Article 6(1) of the Constitution, "treaties duly concluded and promulgated under the Constitution and the generally recognized rules of international law shall have the same effect as the domestic laws of the Republic of Korea."

Bills of Lading

In Supreme Court Decision 99Da55052 of March 10 2000 the exporter, LG International Corp, requested that the freight forwarder Pacific Logistics Co Ltd carry its cargo to Thailand. Pacific issued its house bill of lading and then ordered Sealand Services Co Ltd to carry out the carriage. On the master bill of lading issued by Sealand the consignor was stated as "Pacific Logistics Co Ltd O/B of LG International Corp."

The court held that Pacific had entered into the carriage contract with LG and that Sealand's role was that of assistant or agent. The court dismissed LG's claim against Sealand (which was based on breach of carriage contract) on the grounds that Sealand was not a carrier. It could not be decided that LG rather than Pacific was the party to the carriage contract covered by the master bill of lading, solely on the basis that the consignor on the bill of lading was stated as "Pacific Logistics Co Ltd O/B of LG International Corp."

Contributory Negligence Setoff

In marine cargo claims where concurrent causes of loss are possible, the general rule is that the carrier must bear the entire loss unless he can show what portion of the damage is attributable to the cause for which he is not responsible. In cases of concurrent causation the carrier is liable for the entire loss since this burden is rarely discharged.

However, the Korean courts have frequently applied the Civil Code to uphold a contributory negligence setoff at their discretion where such concurrent causes exist. The courts have permitted setoffs where a fault on the shipper's side is involved, such as an act or omission of the good's shipper or owner, his agent or representative, and insufficiency or inadequacy of packing or marks. Supreme Court decision 98Da35389 of June 13 2000 confirms this principle.

The court held that a contributory negligence setoff should be permitted even in cases of simple negligence on the claimant's part, if the negligence contributed to or aggravated the damage. The court further held that in deciding on the scope of liability for damage based on breach of contract, the issues of whether such contributory negligence exists and its extent should be determined by considering the overall circumstances of execution and performance of the contract in question, and the fault of each party. The court allowed a 30% contributory negligence setoff based on the shipper's fault in respect of the insufficient packing of the goods.

The finding of facts in relation to the existence and ratio of contributory negligence is entrusted exclusively to the first and second instance courts, unless the finding is manifestly unreasonable according to the principle of equity.

Shipowners' Limitation of Liability

According to Supreme Court Decision 99Da9646, 9653, 9660, 9677 of August 22 2000 a shipowner may not limit his liability for expenses in respect of the raising, removal, destruction or rendering harmless of his vessel when it is sunk, wrecked, stranded or abandoned, including wreck removal expenses. Article 748(4) of the Korean Commercial Code was referred to.

The court held that the claim of the shipowner against the owner of the offending vessel for recovery of expenses did not constitute 'wreck removal expenses' and was therefore subject to limitation.

For further information on this topic please contact Young Seok Lee or Hee-Joo Lee at Jin & Lee by telephone (+822 538 0180) or by fax (+822 538 0244) or by e-mail ([email protected] or [email protected]).