CARGO DISPUTES LESSONs 5 & 6: ALLOCATION OF RISK BETWEEN CARRIER AND HOLDER OF BILL OF LADING - AKA THE APPLICATION OF THE HAGUE AND HAGUE-VISBY RULES
Lessons 5 & 6 - Incorporation
Risk of damage to goods normally passes from the seller to the buyer on shipment. If a cargo then arrives at the unloading port damaged, short, or not at all, how does the buyer know whether the carrier is actually to blame and whether you should be able to bring a claim against them?
For example, if you bought 15 MT of grain from Mexico and it arrived in Portsmouth ruined by mould, and some of it was missing, is that the carrier's fault?
The starting point is that contracts for the carriage of goods by sea are contracts of "bailment" which means prima facie the carrier has to (re)deliver the goods in the condition they took them. But caselaw (and now international conventions) developed more fairly to allocate responsibility for loss and damage to cargo.
One of two international conventions are incorporated into most bills of lading or similar documents of title that help allocate whether the carrier should be held liable - these are the Hague Rules (1924) and the Hague-Visby Rules (1968). The latter represents a slight tweak on the first, but the broad thrust is the same.
Most countries involved with shipping have become signatories to the Hague Rules; many have become signatories to the Hague-Visby Rules. In these jurisdictions the Rules have been incorporated into law by statute.
Whether those Rules apply to the relevant contract of carriage is, however, dependent on the test(s) in those Rules and/or by the Rules being expressly incorporated into a contract of carriage.
While you should read the Rules as a starting point, there is also a huge volume of caselaw interpreting the Rules. So be sure to read the practitioner texts and caselaw to get a deeper understanding.
The key texts are:
(1) Carver on Bills of Lading;
(2) Scrutton on Charterparties and Bills of Lading;
(3) Aikens, Lord and Bools, on Bills of Lading;
(4) Debattista on Bills of Lading.
The diagram on this slide addresses the different ways the Rules can be incorporated into a bill of lading or similar document of title. The next slide addresses their substance.
Lesson 6 - how the Hague and Hague-Visby Rules allocate responsibility
Among other things, the Hague and Hague-Visby Rules allocate responsibility for damage to cargo between the carrier and the holder of the bill of lading.
Broadly speaking, Article III requires the carrier to provide a seaworthy (which includes cargoworthy) vessel, and to properly load and stow the cargo.
Article IV, by contrast, provides certain exceptions to the carrier's liability for damage/loss to cargo in certain scenarios.