The Carriage of Good by Sea (Amendment) Act 2020 and the Carriage of Goods by Sea (Amendment of First Schedule) Order 2021 came into operation on 15 July 2021. The effect of the amendments is to give the force of law to a modified version ("Rules") of the Hague-Visby Rules ("HVR") as amended by the 1979 Protocol.1 The amendments go further than the HVR and have similarity to some of the rules applied in Australia via her carriage of goods by sea legislation.
Prior to these amendments, the Hague Rules drafted in 1924 applied in Malaysia via the First Schedule of the Carriage of Goods by Sea Act ("COGSA").2
This alert sets out the salient changes introduced by the Rules.
COGSA now applies to sea-carriage documents, not just bills of lading
Like the pre-amendment position, the rules in the First Schedule of COGSA have effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in Malaysia to any other port whether in or outside Malaysia (section 2, COGSA). However, the Hague Rules only applied to contracts of carriage covered by a bill of lading or any similar document of title.
The application of COGSA has now been significantly widened to apply to sea-carriage documents, and the category of documents covered is much broader than the HVR (see sections 4 and 6, COGSA) In Article I(g) of the Rules, a sea carriage document is defined as:
- a bill of lading;
- a negotiable document of title that is similar to a bill of lading and that contains or evidences a contract of carriage of goods by sea;3
- a bill of lading that, by law, is not negotiable; or
- a non-negotiable document including a consignment note4 and a document of the kind known as a sea waybill or as a ship's delivery order which either contains or evidences a contract of carriage of goods5 by sea.
The Rules have also made provisions for technological developments and cater for electronic sea carriage documents. The application of the Rules covers sea carriage documents in the form of a data message, which is defined in Article I(ba) of the Rules to include information generated, stored or communicated by electronic, optical or analogous means, even if such information is never reproduced in printed form.
Application to deck cargo
The Rules now apply to cargo carried on or above deck. This is different to the position under the Hague Rules/HVR where the definition of goods excludes cargo which by the contract of carriage is stated as being carried on deck and is so carried.
Under the Rules, if the shipper has specific stowage requirements for the goods carried on or above deck, the shipper must inform the carrier in writing of the requirements at or before the time of booking the cargo, in order for the carrier to be subject to the responsibilities and liabilities under the Rules (Article II rule 3, Rules).
However, if a carrier carries goods on or above deck contrary to an express agreement with the shipper of the goods made at or before the time of booking the cargo, then, the carrier is not entitled to avail himself of any exception or exemption, or to limit its liability for loss or damage, in accordance with the Rules in respect of any loss or damage to the goods that results solely from them being carried on or above deck (Article II rule 4, Rules).
Responsibilities and liabilities of shipper and carrier
The obligation of the carrier to exercise due diligence in relation to the seaworthiness of the vessel before and at the beginning of the voyage, and to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried remains unchanged.
However, there have been changes to the effect of a sea carriage document issued by a carrier on demand of the shipper, showing, amongst others, the leading marks necessary for identification of the goods, either the number of packages or prices, or the quantity, or weight, as furnished in writing by the shipper, or the apparent order and condition of the goods. While under the HVR, a bill of lading is prima facie evidence of the receipt by the carrier of the goods as therein described, it is now expressly provided that no proof to the contrary shall be admissible in the case of a negotiable sea carriage document that has been transferred to a third party acting in good faith (Article III rule 3, Rules).
Time bar
Under the Rules, the 1-year time-bar remains, but liberty is given for such period to be extended with the agreement of parties after the cause of action has arisen (Article III rule 6, Rules).
Further, an action for indemnity against a 3rd party may be brought even after the expiration of one year (or an agreed extended period) if brought within the time allowed by law at the court seized of the case. The time allowed shall be not less than three months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself (Article III rule 6bis, Rules). In Malaysia, the time allowed to bring a claim for indemnity is six years.
Defences and limitation of liability
The defences available to the carrier remain the same, but perhaps one of the most important and awaited amendments are in relation to limits of liability under the Rules. This is because the Hague Rules did not cater for limitation in relation to bulk cargo, was drafted before containerisation of cargo and limitation had to be calculated by reference to the gold value of £100.6 Now, these shortcomings have been largely addressed. Under the Rules, the carrier and the ship are entitled to limit liability for any loss or damage to or in connection with the goods to either of the following, whichever is higher (Article IV rule 5(a), Rules):-
- an amount not exceeding 666.67 units of account per package or unit. Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the sea carriage document as packed in such article of transport shall be deemed the number of packages or units. Otherwise, such article of transport shall be considered the package or unit; or
- two units of account per kg of gross weight of the goods lost or damaged.
Subject to the limitation set out above, the total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged. The value of the goods shall be fixed according to the commodity exchange price, or, if there be no such price, according to the current market price, or, if there be no commodity exchange price or current market price, by reference to the normal value of goods of the same kind and quality.
The unit of account refers to Special Drawing Rights ("SDR") as defined by the International Monetary Fund ("IMF"). The amounts mentioned above is to be converted into national currency on the basis of the value of that currency on a date to be determined by the law of the court seized of the case. The value of the national currency, in terms of the SDR, of a State which is not a member of the IMF, shall be calculated in a manner determined by that State. The Rules also set out the manner of calculation of the value of the national currency for States depending on whether they are members of the IMF and/or whether the law of such State permits the application of the above provisions (Article IV rule 5(d), Rules).
Higher limits of liability may be agreed between the carrier, his master or agent, and the shipper (Article IV rule 5(g), Rules). However, parties cannot agree to a lower limit of liability.
The defences and limits of liability provided for in the Rules apply in any action founded in contract or in tort against the carrier in respect of loss or damage to goods covered by a contract of carriage. A servant or agent of the carrier (not independent contractor) can also avail himself of the same defences and limits of liability as the carrier, but the total amount recoverable from the carrier, and his servants and agents, is subject to the limit provided in the Rules (Article IVbis rules 2 and 3, Rules).
The carrier, or his servant or agent cannot limit liability where it is proved that the damage resulted from an act or omission done with intent to cause damage or recklessly and with knowledge that damage would probably result (Article IVbis rule 4, Rules).
Power to amend
Section 6A empowers the Minister of Transport to amend the First Schedule of COGSA by way of order published in the Gazette. This will hopefully facilitate subsequent adoption of new international conventions without requiring an amendment to legislation to be tabled in Parliament each time. This would enable Malaysia to promptly implement changes in line with international maritime developments.
Commentary
It is an understatement to say that the maritime law community in Malaysia has been eagerly awaiting the HVR's arrival at our shores. The Malaysian Ministry of Transport has stated that the changes are "to further improve trade transactions by redefining documentation terminology and its usage in accordance with the development of current international maritime industry practices" and will "further enhance the legal structure related to liability, compensation and at the same time increase the confidence of industry players in carriage of goods by sea transactions".7
The decision to adopt a modified version of the HVR, which is not used in most other maritime nations, is indeed a bold one. It shows Malaysia's willingness to adapt its laws in line with developments in technology and the industry. Maritime stakeholders can look forward to being the beneficiaries of these amendments which address several of the deficiencies of the Hague Rules which have surfaced in light of changes to the shipping industry.
From a legal practitioner's perspective, as the Rules are similar to the rules applied in Australia via her COGSA equivalent, it is likely that Australian cases in particular, will be persuasive in Malaysia in circumstances where the Rules apply.
Footnotes
1. COGSA is only applicable in Peninsular Malaysia.
2. The Hague Rules have the force of law in East Malaysia by virtue of separate legislation.
3. A "negotiable sea carriage document" means (i) a bill of lading other than a bill of lading that, by law, is not negotiable; or (ii) a negotiable document of title that is similar to a negotiable bill of lading and that contains or evidences a contract of carriage of goods by sea.
4. A "consignment note" means a non-negotiable document that (i) contains or evidences a contract of carriage by sea in connection with which no bill of lading or similar document of title has been issued; (ii) clearly states that no liability for any loss of, damage to or delay of the goods will be accepted by the carrier of the goods; and (iii) is clearly marked as being non-negotiable.
5. "Contract of carriage" applies only to contracts of carriage covered by a sea carriage document, in so far as such document relates to the carriage of goods by sea, including a negotiable sea carriage document issued under or pursuant to a charter-party from the moment at which the document regulates the relations between its holder and the carrier concerned.
6. There are conflicting views on whether £100 should be calculated by reference to its paper or gold value.
7. MOT: New law on carriage of goods by sea took effect on Thursday (July 15); The Star, 16 July 2021.
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.
