CHAPTER 15

THE HAGUE AND HAGUE-VISBY RULES

15.1 Origin of the Hague Rules: the Harter Act

The breadth and efficacy of the exceptions regularly used by shipowners led to concern among countries which were primarily cargo-owning, rather than ship-owning, namely the United States and the former British Dominions. The first step towards controlling such clauses was taken in the United States by the Harter Act of 1893, which imposed certain duties on the shipowner and forbade certain types of exclusion. The division of responsibility on which it was based was this: the shipowner could not contract out of a duty to use reasonable care to provide a seaworthy ship and in care of the cargo, and in return was exempted from liability for loss caused by his negligence in navigation and management of the ship (a concession partly based on the hazards of maritime adventures and partly on the assumption that the shipowner is likely to look after his own ship). Similar legislation was soon adopted in New Zealand (1903), Australia (1904) and Canada (1910).

15.2 The Brussels Convention of 1924: the Hague Rules

Various factors, including continued dissatisfaction by cargo-owning countries, commercial problems caused by the handling of bills of lading containing differing terms and the UK government’s wish to introduce uniform legislation throughout the then British Empire, led to the formulation of the Hague Rules, so-called because an initial draft was settled at a meeting at The Hague in 1921. These were actually adopted at an international convention at Brussels in 1924. In general, the Rules adopt the same division of risks as the Harter Act, but seek to provide something nearer to a complete code for carriage by sea under bills of lading.

15.3 Application of the Rules

Under the 1924 Act, the Rules apply as follows:

(a)to outward shipments from UK ports (other than coastal trade). Problems arose where the contract contained a clause selecting the law of another country for such a shipment (the so called Vita Food gap, a problem of the conflict of laws traditionally associated with Vita Food

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Products Inc v Unus Shipping Co (1939)); and which appeared to declare that such a choice was effective;

(b)to such shipments, covered by a bill of lading – even when such is never issued (wrongfully, in error, or because the shipowner lost the goods while loading them);

(c)to those loading and unloading operations which the contract places upon the carrier the ‘before and after’ problem, discussed in Pyrene v Scindia (1954), 19.1.1, below;

(d)they do not cover deck cargo and live animals;

(e)such provisions as protect the carrier do not protect his employees or independent contractors (for example, stevedores). This was the problem of Midland Silicones v Scruttons (1962). In this case, the House of Lords held (Lord Denning dissenting) that a cargo owner who could not sue the shipowner because of the rules in respect of damage to his goods could sue the stevedores who had (negligently) handled the goods. This was commercially inconvenient because it subverted the insurance arrangements. Shipowners sought to overcome this difficulty by inserting words into the bill of lading, particularly the ‘Himalaya clause’; see The Eurymedon (1975), The New York Star (1980), The Pioneer Container

(1984), The Mahkutai (1986), which show that such clauses will usually be successful. Further, the Contract (Rights of Third Parties) Act 1999 will usually produce a similar result;

(f)they are displaced, as are other contractual terms, by deviation.

15.4 Provisions of the Rules

The basic provisions of the Rules are that the shipowner owes a duty to exercise due care (only) as to seaworthiness and care of cargo (Arts II, III.1.2 and IV.1). In return, he is exempted in 17 ways (Art IV.2(a)–(g)) of which the most conspicuous are negligence in navigation and management of the ship, fire unless caused by his actual fault, perils of the sea, war, seizure, strikes, inadequate packing and any other cause arising without his fault (for example, pilferage). These duties cannot be varied except to increase the shipowner’s responsibility.

The important limits are that suit must be brought within one year (Art III.6); and that the shipowner’s liability is limited to £100 gold value per ‘package or unit’ unless a higher value is declared (which would lead to higher freight). Great difficulty is caused in determining what ranks as a package or unit, especially with containerised or palletised cargo.

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The Hague and Hague-Visby Rules

15.5 The Hague-Visby Rules

The Hague Rules did not satisfy everyone and one school of thought sought to procure fairly minor amendments of detail to them, so as to eliminate certain well known problems. This led to the Hague-Visby Rules, a draft of which was adopted in Stockholm in 1963. The final protocol was adopted at Brussels in 1968 and enacted here as the Carriage of Goods by Sea Act 1971. The protocol did not, however, receive sufficient ratifications to be brought into force until 1977 (the UK not ratifying until 1976): it came into effect here on 23 June 1977. About 14 countries (including the Scandinavian countries and France) now give effect to them: other countries still retain the old Hague rules.

The changes made in the Visby Rules are comparatively slight. They are as follows:

(a)English courts must apply them to all international carriage where the bill of lading is issued in a Contracting State, the carriage is from a port in a Contracting State, or the bill of lading contract provides directly or indirectly that the Rules are to apply (Art X). This was the view taken by the House of Lords in The Morviken (1983).

In this case machinery had been shipped aboard a Dutch vessel at Leith for carriage to the Dutch Antilles under a bill of lading which included a Dutch choice of law clause and provided that the Court of Amsterdam should have an exclusive jurisdiction over any dispute arising under the bill. The machinery was damaged on arrival in the Antilles and the shippers started proceedings in England. The shipowners contended that the contract was subject to an exclusive jurisdiction of the Dutch courts and to Dutch law. Dutch law was still subject to The Hague Rules and therefore liability was limited to a lower figure than under The HagueVisby Rules. The House of Lords had no doubt that The Hague-Visby Rules applied, since the bill of lading had been issued in Scotland and carriage was from a Scottish port and the United Kingdom was a Contracting State.

(b)The shipowner’s protections cover his servants and agents – but not his independent contractors such as stevedores (a partial solution only to the problem of Midland Silicones v Scruttons). The Rules also apply to claims in tort as well as in contract (Art IV bis).

(c)New monetary limits are set (Art IV.5(a)). It is sought to solve the problem of containers by specifying that ‘the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units’ (Art IV.5(c)). Considerable problems obviously still exist in this area.

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(d)Art III.4 prevents a shipowner proving against a good faith transferee of the bill of lading that goods signed for as loaded in the bill of lading were not loaded (the problem of Grant v Norway, discussed above);

(e)The Rules are no longer excluded from the coastal trade (s 1(3) of the 1971 Act).

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SUMMARY OF CHAPTER 15

THE HAGUE AND HAGUE-VISBY RULES

This chapter considers the mandatory régime laid down for bill of lading contracts by the Hague Rules and Hague-Visby Rules.

The Hague Rules

The Hague Rules were adopted by an international convention at Brussels in 1924. The Rules apply as follows:

(a)to outward shipments from UK ports (other than coastal trade);

(b)covered by a bill of lading;

(c)to those loading and unloading operations which the contract places upon the carrier ‘before and after’ problem;

(d)they do not cover deck cargo and live animals;

(e)such provisions as protect the carrier do not protect his employees or independent contractors (for example, stevedores);

(f)they are displaced, as are other contractual terms, by deviation.

The basic provisions of the Rules are that the shipowner owes a duty to exercise due care as to seaworthiness and care of cargo. In return, he is exempted in 17 ways (such as, negligence in navigation and management of the ship, perils of the sea, inadequate packing). These duties cannot be varied except to increase the shipowner’s responsibility.

The Hague-Visby Rules

The Hague-Visby Rules were adopted at Brussels in 1968 and enacted in the UK as the Carriage of Goods by Sea Act 1971. The protocol did not, however, receive sufficient ratifications until 1976 (it came into effect in the UK on 23 June 1977). The changes made in the Visby Rules are as follows:

(a)English courts must apply them to all international carriage where the bill of lading is issued in a Contracting State, the carriage is from a port in a Contracting State, or the bill of lading contract provides that the Rules are to apply;

(b)the shipowner’s protections cover his servants and agents but not his independent contractors (for example, stevedores);

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(c)new monetary limits are set;

(d)the shipowner is prevented from proving against a good faith transferee of the bill of lading that goods signed for as loaded in the bill of lading are not loaded;

(e)the Rules are no longer excluded from the coastal trade.

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