UK: Construing The "Deck Cargo" Exception For The Purposes Of The Hague-Visby Rules

Last Updated: 25 January 2012
Article by Bob Deering and Carl Walker

Sideridraulic Systems SpA and Anor v BBC Chartering and Logistic GmbH & Co KG (m/v BBC Greenland) [2011] EWHC 3106 (Comm)

In this case, the Commercial Court considered whether or not a cargo carried on a ship's deck should be considered a "deck cargo" for the purposes of the Hague-Visby Rules ("the Rules"), such that the carriage of this cargo fell outside the ambit of the Rules.

The background facts

The dispute concerned the carriage of ten sand filter tanks on board the m/v BBC Greenland ("the Vessel") from Italy to the US. The claimants were the cargo interests and the defendants were the contractual carriers and issuers of the bill of lading. During the voyage, one of the tanks was lost and another damaged. The defendants instituted proceedings in the US seeking a declaration that they were not liable to the claimants or, alternatively, that their liability was limited to US$1,000 (or US$500 per package), on the basis that the United States Carriage of Goods by Sea Act 1936 ("COGSA 1936") was applicable to the contract of carriage.

The claimants denied that COGSA 1936 was applicable and sought an anti-suit injunction restraining the defendants from continuing the US proceedings on the basis that they were being prosecuted in breach of an arbitration agreement in the bill of lading.

The case came before the Commercial Court in the context of the defendants' application to set aside an earlier order granting the claimants permission to serve the application for an anti-suit injunction out of the jurisdiction. The defendants also sought an order that the English courts had no jurisdiction in respect of the claim.

The key issue between the parties was whether or not the carriage was subject to the Rules. The defendants contended that it was not because the tanks were deck cargo, that is to say "cargo which by the contract of carriage is stated as being carried on deck and is so carried". The importance of this point was that if the tanks were deck cargo, then they were not "goods" within the definition of the Rules. If that were the case ,then it would follow that the bill of lading did not relate to the "carriage of goods" and the Rules would not be applicable.

The relevant provisions of the contract of carriage

The fixture recap confirming the contract of carriage contained a provision giving the defendants liberty to carry the tanks as deck cargo in the following terms: "The shipment under/on deck in Owners' option, deck cargo at merchant risk and b/l to be marked accordingly".

In addition, the bill of lading included the following relevant terms:

"3. Liability under the contract.

  1. Unless otherwise provided herein, the Hague Rules contained in the International Convention for the Unification of Certain Rules Relating to Bills of Lading, dated Brussels the 25 August 1924 as enacted in the country of shipment shall apply to this contract .... In trades where [the Hague-Visby Rules] apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading. .... Unless otherwise provided herein, the Carrier shall in no case be responsible for loss of or damage to deck cargo and/or live animals...

4. Law and Jurisdiction.

Except as provided elsewhere herein, any dispute arising under or in connection with this Bill of Lading shall be referred to arbitration in London. The arbitration shall be conducted in accordance with .... LMAA terms. English law to apply...

SPECIAL CLAUSES

...

B. US Trade. Period of Responsibility

  1. In case the Contract evidenced by this Bill of Lading is subject to the Carriage of Goods by Sea Act of the United States of America 1936 (US COGSA), then the provisions stated in the said Act shall govern before loading, and after discharge and throughout the entire time the cargo is in the Carriers' custody.... In the event that US COGSA applies, then the Carrier may, at the Carriers' election, commence suit in a Court of proper jurisdiction in the United States in which case this Court shall have exclusive jurisdiction".

The relevant provisions of the Hague-Visby Rules are as follows:

"Art. I(b) "Contract of Carriage" applies only to Contracts of Carriage governed by a bill of lading or any similar documents of title, insofar as such document relates to the Carriage of Goods by Sea, including any bill of lading or any similar documents as aforesaid issued under or pursuant to a Charterparty from the moment at which such bill of lading or similar document of title regulates the relations between a Carrier and a holder of the same.

(c) "Goods" includes goods, wares, merchandise, and articles of every kind whatsoever except live animals and cargo which by the Contract of Carriage is stated as being carried on deck and is so carried...

Art. III.(8) Any clause, covenant or agreement in a Contract of Carriage relieving the Carrier or the Ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure, in the duties and obligations or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect...".

The Commercial Court decision

The key issue was whether or not the tanks were "deck cargo". There was no dispute that the tanks had been carried on deck but they would only be considered "deck cargo" for the purposes of the Rules if the bill of lading stated that they would be so carried. This issue turned on the Master's remark, which was set out on the front of the bill of lading as follows:

"MASTER'S REMARKS

ALL CARGO LOADED FROM OPEN STORAGE AREA

ALL CARGO CARRIED ON DECK AT SHIPPERS/CHARTERERS/RECEIVERS RISK AS TO ANY PERILS INHERRENT IN SUCH CARRIAGE, ANY WARRANTY OF SEAWORTHINESS OF THE VESSEL EXPRESSLY WAIVED BY THE SHIPPER/CHARTERER/RECEIVER.

AND IN ALL OTHER RESPECTS SUBJECT TO PROVISIONS OF THE UNITED STATES CARRIAGE OF GOODS BY SEA ACT 1936".

The claimants contended that this statement should be read as granting a liberty to the carriers to carry the cargo on deck and, if they did so, as providing an exclusion of liability that applied to that cargo.

The judge rejected this argument and accepted the defendants' submission that the Master's remark should not be understood as merely granting a liberty to carry the tanks on deck because such a provision in the bill would have been pointless, given that the parties had already agreed in the fixture recap that the carriers would have this liberty and that the bill was to be "marked accordingly".

The judge considered that the defendants' interpretation was also supported by considerations other than the language of the Master's remark itself and noted that a remark on the face of a bill of lading would not be an obvious or usual place to set out a contractual provision. As such, he considered that the remark is more likely taken to be, or at least to include, a statement of facts about how the cargo was to be carried or otherwise handled.

The judge concluded that the tanks carried on the vessel were, therefore, deck cargo. It followed that the tanks were not "goods" within the meaning of the Rules and, therefore, the contract was not for the carriage of goods and so the Rules did not apply to it.

In the alternative, the claimants argued that even if the tanks were deck cargo and the Rules did not apply compulsorily, the parties had nevertheless incorporated the Rules by the wording of article 3(a) of the bill of lading.

Whilst there is no doubt that it was open to the parties to agree that the Rules would apply to the carriage of deck cargo, the judge held that they had not done so in this case. In fact, by article 3(a) of the bill of lading the parties had agreed that the relevant legislation should be considered incorporated in the bill of lading "in trades where [the Rules] apply compulsorily". The judge's finding that the tanks were deck cargo had the result that the Rules did not apply compulsorily to this carriage and it followed that the Rules were not incorporated by article 3(a) of the bill of lading.

Given that the judge had concluded that the tanks were "deck cargo", such that the Rules did not apply and that the parties had not agreed by the contract that the Rules would apply, it followed that the contract was, as the defendants contended, subject to COGSA 1936 and the US Court had exclusive jurisdiction over the claim.

Comment

This case provides a useful illustration of the approach of the English courts to considering whether a particular cargo will be considered a "deck cargo" for the purposes of the Hague-Visby Rules and the potential implications of this classification for a claim against the carriers. If nothing else, this judgment serves to underline the importance, when carrying a cargo on the ship's deck, of using clear language in the bill of lading to state that the cargo is so carried.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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