Protection & Indemnity Cargo Liability Maria Berndtsson The Nordic Association of Marine Insurers The Nordic Association of Marine Insurers

Session 5 - Purpose present the legal back- ground for cargo liabilities give you an understanding of the scope of the P&I cover related to cargo claims cargo claims handling - workshop

Cargo claims 2004-2013 The Nordic Association of Marine Insurers

The Sea Carriers’ Cargo Liability

Some General Principles Carrier – the person who undertakes, in return for payment, to provide transportation of goods for others (normally a ship owner or charterer) Contract of carriage – the terms on which the goods are carried, usually evidenced by a bill of lading or a waybill Consignor (shipper) – from whom the goods have been received Consignee – to whom the goods are to be delivered

The Contract of Carriage A charterparty is a contract to provide a ship to carry goods: can be for one voyage (voyage charter) or a period of time (time charter) A bill of lading is a contract for the carriage of goods and an evidence of title to the goods described in the bill of lading A waybill is evidence of a contract for the carriage of goods

Contract arrangement SHIPOWNER T/C B/L V/C

The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers

Function of Bill of Lading Characteristics: 1) evidence of a contract of carriage by sea and of the carrier having received or loaded the goods 2) sender’s receipt 3) entitling the holder to receive the cargo (named person, named person or order or to the holder) 4) value as evidence: prima facie/conclusive evidence of leading marks, number of packages or pieces, quantity, weight, apparent order and condition, reception of the goods etc.

Obligation to issue a bill of lading – statements in relation to cargo Carrier is obliged to issue a bill of lading stating: Leading marks necessary for identification of goods Number of packages or pieces, or the quantity, or weight Apparent order and condition of the goods. Carrier is NOT bound to state in the bill of lading number of packages/pieces, quantity or weight if he has reasonable grounds for suspecting not accurately represent the goods actually received, or has had no reasonable means of checking. The Nordic Association of Marine Insurers

Who is the carrier under the Bill of Lading? The carrier = the party on whose behalf the B/L was signed. Could be Owners or Charterers. Depends on if the B/L is a contract between the charterer and the shipper, or the shipowner and the shipper

Jurisdiction and arbitration clauses Where is a dispute tried? Where the defendant has his principal office, or usual domicile Where the contract of carriage was entered into provided the defendant has an office, branch or agency there through whose activity the contract was made Where the agreed port of loading or the agreed or actual port of discharge is situated The parties may agree by written contract that disputes shall be referred to settlement by arbitration

Inter-Club Agreement ”ICA” (Inter-Club New York Produce Exchange Agreement) Used to be an agreement between the P&I clubs to recommend members to settle claims on the terms of the ICA, now often included in the C/P (NYPE) as a term = binding on the parties ICA is an agreement of allocation of responsibility between shipowners and time charterers for various types of cargo claims The apportionment of claims arising out of e.g.: Unseaworthiness = 100% owners Loading, stowage, discharge = 100% charterer Shortage, overcarriage = 50/50 split

Cargo Liability Regimes International legislation: Hague Rules 1924, Carriage of Goods by Sea Act (COGSA) Hague-Visby Rules 1968 Hamburg Rules 1978 (UNCITRAL Convention 2008 ”The Rotterdam Rules”, not yet in force) Domestic law: eg Nordic Maritime Codes 1994 Paramount clauses (used to implement H/V rules into the contract of carriage)

The purpose of the Cargo Liability Conventions Create uniformity of rights and obligations of the carrier and cargo owner Impose minimum obligations on the carrier Provide the carrier with some limited defences Entitle the carrier to limit its liability

Carrier’s obligation under the Hague/Visby Rules Exercise due diligence in respect of: making the vessel SEAWORTHY before and at the beginning of the voyage properly man, equip and supply the vessel vessel fit for the safe receipt and carriage of cargo properly handle and care for the cargo throughout the voyage

The Hague/Visby Rules - key defences The carrier shall not be liable for any loss of or damage to cargo arising from, inter alia, Error in navigation or in the management of the ship Fire Perils of the sea Act of God Act of war Insufficiency of packing Insufficiency or inadequacy of marks Latent defect (vessel)

Limitation of cargo liability: Hague Rules: GBP 100 (COGSA: USD 500) per package (time bar 1 year) Hague-Visby Rules: 2 SDR per Kg or 666,67 SDR per package (time bar 1 year) Hamburg Rules: 2,5 SDR per Kg or 835 SDR per package (time bar 2 years) [Rotterdam Rules: 3 SDR per Kg or 875 SDR per package (time bar 2 years)] 1 SDR = 1,12 EUR 1,59 USD (17 March 2011) 1 SDR = 1,55 USD (March 2014)

Package limitation example The cargo owner contracted for the carriage of a new gantry crane from Gothenburg to Sydney. The crane was to be carried onboard the M/V ”Heavy Lift”. During the loading operation the gantry crane tipped over and was severely damaged. The carrier, owners of the ”Heavy Lift”, was found fully liable for the damage. The cargo had a weight of 200 mt and a sound market value of 15 MUSD. What is the carrier’s maximum liability (H/V rules to apply)?

Burden of proof Claimant must show: Title to sue Contract (tort) Responsible party (contractual carrier/bailee) Loss/damage occurred whilst cargo in Carrier’s/ bailee’s custody Physical and monetary extent of loss/damage University of Lund 28 September 2010

Burden of proof Carrier must show: Show absence of (causative) negligence Has exercised due diligence to make vessel seaworthy The cause of loss/damage falls within one of the excepted perils University of Lund 28 September 2010

The Hague/Visby Rules - Summary A regime regulating rights and liabilities under bill of lading contracts Defines carrier, contract of carriage, goods etc. Outlines carrier’s responsibilities (Article 3) and defences (Article 4) Period of responsibility – ‘tackle to tackle’ – freedom to contract on shore Limit of liability: SDR 666.67 per package or SDR 2 per kilogram of lost or damaged cargo, whichever is higher Time bar – one year

Limitation of liability Who is entitled to limit liability? The shipowner, charterer, manager, operator and the liability insurer are able to limit the liability according to the provisions in the Limitation Convention International Convention on Limitation of Liability for Maritime Claims 1957 and 1976+1996 Protocol The Convention contents rules about the right to overall limitation at a maritime incident Property claims 0-2000 GT: 1 million SDR 2001- 30.000 GT: 1 MSDR + 400 SDR per GT 30.001-70.000 GT: As above + 300 SDR per GT Higher than 70.000 GT: As above + 200 SDR per GT

Limitation of liability Global limitation Package limitation

P&I Cover related to Sea Carriage of Cargo

P&I cover - Cargo liability Legal liability in respect of cargo: intended to be or being or having been carried on board the insured vessel

P&I cover Cargo - claims Liability for loss, shortage, damage to cargo or other responsibility arising out of any breach by the Member or his servants or agents of his legal obligations in the carriage of cargo (properly load, stow, carry, keep, care for, discharge or deliver the cargo or out of unseaworthiness of the vessel) List of exclusions, examples: misdescription of goods in B/L, ante-dated or post-dated B/L misdelivery (e.g. other port than stated in the B/L, other party than B/L holder voluntary assumption of liability, excess H/VR liability failure to fulfil transport obligation, late arrival to load deviation which deprives the carrier of defences or rights of limitation contractual delay (loss arise from a provision in the B/L or C/P)

P&I cover Cargo – extra handling costs In handling and discharging cargo where the extra costs and expenses are necessarily consequent upon damage to the cargo or damage to the Ship Cargo which has been rejected by the consignee Exclusions: - Member has recourse to recover from any other party - daily running costs and expenses

P&I cover Cargo – General Average Unrecoverable General Average contributions Cargo interests may not be legally obliged to pay their contribution in the GA due to Member’s breach of the contract of carriage (e.g. Member failed in their obligation to exercise due diligence in providing a seaworthy vessel before and at the beginning of the voyage). In case a GA contribution is unrecoverable because the GA was caused by negligence for which the carrier is liable, the Member’s loss is covered by P&I

P&I cover Cargo - practical problems Clean bills of lading Misdescription, misdelivery, letters of indemnity – P&I cover implications University of Lund 28 September 2010

Bill of Lading: Security - Evidence The bank is checking the shipping documents to make sure they comply with the instructions under the sale contract. B/L is security for money – demand delivery of the goods in discharge port, or sell the goods. B/L is not the contract of carriage but provides evidence of the terms of the contract of carriage.

Complete set of shipping documents B/L issued by Master or agent Cargo insurance policy Commercial invoice Certificate of quality Certificate of origin Shipper pass to his buyer or to the shippers’ bank trigger payment under a Letter of Credit Only B/L concern Master, since only B/L is issued by the Master

Cargo claims handling - Workshop

The purpose of this session was: to give you an understanding of the scope of the P&I cover related to cargo claims, to present the legal background for cargo liabilities as well as handling various cargo claims in practice

Thanks for your attention!