In Yemgas Fzco & Ors v Superior Pescadores S.A. Panama(The Superior Pescadores) [2014] EWHC 971 (Comm), the Commercial Court was asked to consider the effect of a paramount clause in circumstances where the Hague-Visby Rules were compulsorily applicable as a matter of English law (the law governing the contracts evidenced by the terms of the bill of lading).

Background

The MV Superior Pescadores loaded a cargo of machinery and equipment at Antwerp, Belgium (a “contracting state” for the purpose of the Carriage of Goods by Sea Act 1971) for use in the construction of a liquid natural gas facility in Yemen.

The ship owners issued six bills of lading acknowledging that the cargo was shipped in apparent good order and condition.

The terms of these Bills of Lading contained the following paramount clause;

“The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.”

During the voyage, the cargo inside one hold shifted causing damage to part of the cargo. The cargo owners calculated their claims using the package limits under both the Hague and Hague-Visby Rules interchangeably for each individual claim, preferring to use whichever regime resulted in them being able to claim a higher figure.

The ship owners admitted liability, but only to the amount of the package limit under the Hague-Visby Rules, contending that the cargo owners could not ”pick and choose” between limits.

Decision

It was common ground between the parties that by virtue of section 1(2)/Article X of the Carriage of Goods by Sea Act 1971 as the port of loading was Antwerp, the Hague-Visby Rules compulsorily applied to the contract evidenced by the terms of the bill of lading notwithstanding the paramount clause.

Notwithstanding this, the cargo owners contended that as a matter of construction, the effect of the paramount clause was such that the parties had agree contractually on a higher package limitation figure than that for which the Hague-Visby Rules provide (in circumstances where the Hague Rules allowed for a higher figure to be claimed).

Mr. Justice Males, influenced by obiter statements of the Court of Appeal in The Happy Ranger [2002] 2 Lloyd’s Rep 357, concluded that the wording of the paramount clause was not apt to incorporate the  Hague-Visby Rules as a matter of construction.  Instead it incorporated only the Hague Rules.

However, this conclusion did not stop the court rejecting the ”pick and mix” approach of the cargo owners, holding that a paramount clause contractually incorporating the Hague Rules did not have the effect of altering the package limitation under the Hague-Visby Rules.  In the court’s view, the parties must have realised that a contractual choice of the Hague Rules would be largely ineffective (given the compulsory application of the Hague-Visby Rules).

Finally, although not necessary given the court’s decision that the liability regime under the Hague Visby Rules was the sole applicable regime, the court also commented on the relevant date for converting the gold value (under the Hague Rules) into money.

In the court’s view, this was the date of delivery of goods or the date when they ought to have been delivered (in case of loss) as this was when the loss crystallises and the cause of action accrues.