In the recent case «Aquasia», Vinnlustodin HF and Anor (“Claimants”) v. Sea Tank Shipping AS (“Defendant”), the London Court of Justice ruled on a cargo damage claim, shedding light on a 92-year-old debate as to whether Article IV r. 5 of the Hague Rules applies or not to bulk cargo.
According to the above-mentioned provision «[…] neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £ 100 per package or unit or the equivalent of that sum in other currency […]».
This case must be deemed of particular interest, also taking into account how often the Hague Rules – and, therefore, the above provision – are referred to on the back of a bill of lading as applicable provisions regulating the relevant transport and, especially - for the purposes here - carrier's liability.
I. Factual background.
The claim at issue arises out of damage to a cargo of fishoil, which was carried on board the tanker «Aquasia» pursuant to a charterparty. The charterparty provided for the carriage of 2,000 tons of fishoil in bulk from Iceland to Norway. The vessel sailed to Lovund in Norway and loaded a further cargo of fishoil. On arrival at the agreed discharge port, 543,309 kg of the cargo was found to have suffered damage.
The Claimants claimed damages for US$ 367,836, along with interest and costs. The Defendant in principle accepted its liability for the damage to the cargo, though alleging that it was entitled to limit such liability pursuant to Article IV r.5 of the Hague Rules (i.e. to £ 100 per mt of cargo damaged).
The parties agreed that the Commercial Court should have jurisdiction to determine an agreed preliminary «Limitation Issue», namely, whether the Defendant is entitled to limit its liability as well as whether Article IV r. 5 of the Hague Rules applies to bulk cargo.
The Claimants argued that the Defendant was not entitled to limit its liability, since Article IV r. 5 of the Hague Rules does not apply to shipments of bulk cargoes, on the ground that there is no relevant «package or unit» as provided by the Article at issue.
The Judge, on the basis that the word «package» do not apply to bulk cargoes, investigated the issue of whether or not the word «unit» might do so, having regard to ordinary principles of statutory construction and the construction of international conventions.
More specifically, the Judge investigated the matter considering and analysing: (i) the language of the Hague Rules, (ii) the Hague-Visby Rules, (iii) the Travaux Préparatoires and the real purposes and intention of the draftsmen of the Hague Rules, (iv) the English authorities on point and (v) the textbooks/commentaries on this matter.
In this respect, among the most relevant arguments mentioned above, it is worth underlining that, as concerns the Travaux Préparatoires, the value of the standard units of measurement of bulk cargoes at the time when the Hague Rules were introduced was so low that there was no point in making them subject to a unit/weight limitation.
The judge underlined that there is no English authority directly on point. With respect to textbooks/commentaries, he considered that some noteworthy articles argue that, although the term «unit» may have different meanings, it appears that since this term has been used as a complement to «package» in the Hague Rules, there must be a similarity among them.
The unit therefore is a physical unit that cannot be described as a package and the author goes on stating that since the purpose of the Hague Rules was to create a standard form of bill of lading for the liner trade, it was most unlikely that those who drafted the Hague Rules had in mind bulk cargoes when discussed the limit of carrier’s liability.
In light of the above, the judge concluded that the word «unit» in Article IV r. 5 of the Hague Rules does not apply to bulk cargoes (and that even if it could apply, the only legitimate application would be by way of interpreting such word as «freight unit», which cannot be done in the present case).
As a consequence, shipowners are not entitled to limit their liability under the Hague Rules for damage suffered by bulk cargoes.