Hague Rules

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Hague Rules 17

The Hague Rules, the Hague-VisbyRules, and the Hamburg RulesFrancis Reynolds*

This paper is an edited transcript of an address given byDr FrancisReynolds to the MLAANZ New Zealand Branch Conference heId a tTokaanu in April 1990.I have been asked to talk about the Hague, Hague-Visby andHamburg Rules. So what I will do is talk about all three sets of Rulesbrie fly and then offer some views on possible adoption of the HamburgRules.Let us start with the Hague Rules which are operative in thiscountry together with - shall guess, I have not brought the figureswith me - 0 or 60 other countries.The Hague Rules are so called because the work on them com-

menced at a meeting of the International Law Association at TheHague in the Netherlands in 1921. They were eventually adopted by adiplomatic convention at Brussels in 1924 so they are also referred toas the Brussels Convention, although they are normally called theHague Rules. They are therefore very much connected with theNetherlands and Belgium. They represent the first effective interna-tiona lly agreed control of bill of lading terms.One has to view them against the background operative at the ti meof the ir introduction. This was that in many trades, many shipownerswere at that time undertaking no liability whatsoever. There is afam ous quotation fr om the Annual Report of West of England P & IClub in 1889 which says (in effect) that "the Committee congratulatesth e members on the absence in recent year s of cargo claims which hasbeen brought about by the now general adoption of th e negligenceclause; the premiu m reduction for use of this clause is therefore

discontinued".So one has to remember that in certain areas, especially the NorthAtlantic, at least some shipowners were apparently excluding virtuallyall, or at any rate a great deal of, their liability. NOW,what they call

the negligence clause which, in effect, excluded all shipowners' liabil-ity for all events including their own negligence, was valid in Englandbefore English courts, subject to presumptions that the basic liabilityof the shipowner in regard to seaworthiness and c are of cargo was notexcluded unless clearly stated. But this clause in most forms was clearand therefore was valid.In the United States, such a clause was not always valid. It might be

held invalid as contra ry to public policy. So if there was litigation inthe United States, or governed by the law of one of the St ates, thisclause might be ineffective. But of course a lot of litigation took placein England; and there was a case which may well have caused someannoyance in the United States called Re Missouri Steamship Corn-pany.' Here an English court - where it was disputed what lawgoverned a bill of lading - aid "This clause may be invalid underAmerican law and valid under English law. The shipowner must haveintended it to be valid; therefore the contract is governed by Englishlaw". As I say, this view may well have caused some annoyanceoutside England. And as many, or probably al l of you will know, aresult of such developments was the Hart er Act of 1893 in the UnitedStates which established a compromise which has survived in a sensein Hague and Hague-Visby (Hamburg is different) which was that theshipowner is not allowed to contract out of a liabilit y for due diligence- ot the strict liability, but due diligence - s regards seaworthinessand car e of cargo; and in return for that , he is not liable for negligencein navigation and management of the ship. The lat ter notion issometimes referred to as "nautical f ault" (a translat ion of the Frenchfaute nautique, a phrase which is a little easier and quicker to refer to).This, of course, was a scheme of split risk. Some risks are carr iers'risks and some risks are cargo risks. Carriers' risks are seaworthiness(not as I said, the strict duty which the common law required, butrathe r a duty of reasonable ca re as to seaworthiness) and car e ofcargo; shippers' risks are negligence in navigation and management. Ajustification for that was perhaps (a rather old fashioned one) that seatransit was a dangerous adventure. A person participating in itassumes that the ca rrier will do the best he can and therefore i t is fairto excuse him of the pa rticularly maritime, as opposed to the bailee,aspects of the responsibilities undertaken.The Harter Act compromise was taken through to the Hague Rulesand therefore to the Brussels Convention. which represented a compro-mise between shipowners. I think, to quite a considerable extentBritish, who operated under considerable immunities which they werenot keen to surrender, and cargo-owning countries, especially the

" Reader in Law in the University of Oxford


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Hague Rules 1918 (1990) 7 MLAANZ JournalUnited States and what are now called Commonwealth countries -Canada , Australia and New Zealand and so forth. These countriesregarded themselves to some extent as being in the hands of foreignshipowners. This was true even in the United States, because duringt h e American Civil War, a lot of tonnage was transferred from theAmerican flag; and the movement from wooden vessels to metalvessels and screw vessels also gave European carriers a strongposition in the North Atlantic which they had not had in the days ofwooden vessels (in respect of which I believe that t here was someAmerican predominance).

This compromise was sold to shipowners on the basis of uniformityin bills of lading. A major argument put forwar d at that time was thatdiffer ent forms of bills of lading made them very difficult to handle;people had to read them carefully to see what liability was involved;t h e position of financing banks had become difficult; uniformity wouldbring great advantages.S o the Hague Rules, adopted at Brussels in 1924, are a scheme forunifor mity of bills of lading adopting the Harter Act compromise oft h e split risk between carr iers' risks and cargo owners' risks.I t should be noted, as I am sure you know, that on the whole thebalance might well appear to be in favour of cargo, because theshipowner was not allowed to exclude his liability beyond what the

rules provided. That is to say, the shipowner could not exclude hisliabili ty for due diligence as to seaworthiness and car e of cargo,though of course in retu rn for th at he had the negligence in navigationa n d management exception. This was to some extent regarded, there-fo re , as a compromise leaning in favour of cargo. One has also,howev er, to remember t hat the shipowner obtained the benefit of theon e year time ba r and the package or unit limitation; and although thela tt er a t that time represented a more considerable sum per packageor unit, especially for the smaller packages then used, I imagine, thannow, nevertheless those two represented considerable benefits to theshipowner. One hundred pounds sterling gold value in 1924 is however,t h e equivalent of qu ite a considerable sum now, as cases like TheRosaS ' and in Australia, Brown Boveri v Baltic Shipping Co show.Those then are the Hague Rules, which is what you have here, andth e general scheme of them I think is well known to most maritime

lawyers the world over.Now what are Visby? The Visby Rules or Hague-Visby Rules arewh at we have in the United Kingdom, and now I believe, in something

of the orde r of 25 other states. These arose really from problems in theHague Rules which were mostly regarded as adverse to carriers; so theVisby amendments were to some extent put forward by carryinginterests. They consist of provisions intended to remedy defects notedin the Hague Rules over some 40 years of operation, to which carriershad drawn attention.The defects were basically five, and three of them resulted from

English cases.The first is the so-called Vita Food gap. This is a gap in theinternation al operation of the rules to which attention was drawn, orwhich was a gap created, by the Vita Food case,' a Privy Council casefrom Nova Scotia. The facts involved Newfoundland but the case wasactually from Nova Scotia.Briefly, the scheme of t he Rules, so as to try to give them inte r-national operation, was that countries who were parties to them shouldenact the Rules for outward shipment s from their ports. Now if you getan outward shipment from country X and there is litigation in country

X, you would assume that the wording of the re levant stat ute incorpo-ratin g the Rules (if such was necessary) would make the courts incountry X apply the Rule wh atever the choice of law in the bill oflading. But what happens if li tigation ar ises on shipments from countryX in country Y? Country Y is not going to apply the law of country Xunless that is the law applicable to the contract - what is called theproper law of the contrac t. It was hoped to make sure that th e courtsof country Y applied the Rules by use of the clause paramount device,with which you are fami liar, which requires bills of lading to containwhat is called a "clause paramount" saying that the Hague Rules areto apply. So if there is litigation in country X on a shipment out ofcountry X, by its own law, the law of country X should be applied. If,however, litigation occurs in country Y, the Rules being incorporatedby contract under the clause paramount. it may be hoped country Ywill apply them too.

The difficulty is this. What happens if the clause paramount isomitted? The Vita Food litigation occurred in Nova Scotia on ashipment out of Newfoundland, which was a Convention country, a tthat time independent. The ship belonged to a Nova Scotian corpora-tion - that was also (part of) a Convention country. The clauseparamount was however, omitted from the bill of lading because anold form of bill was being used. The full complexity of this case takessome time to explain and I do not imagine you want me to go over itfully. But the general t hrust of the case was to expose a difficulty. Thebill of lading - n this ca se out of Newfoundland to New York on a

[ 19881 2 Lloyd's Rep 574"I 9 BS j l Lloyd's Re p 518


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20 (1990) 7 MLAANZ Journal Hague Rules 21ship owned by a Nova Scotian corporation - provided that it wasgoverned by English law. Now English law only applied the Rules to ashipme nt out of the United Kingdom - not surprisingly as that waspa rt of the ove rall scheme. This was not a shipment out of the UnitedKingdom, so if English law applied the Rules were irrelevant . Theimp orta nce of t he decision was that the English choice of law clau sewas valid despit e the absence of connection of the facdts with England.

This led to two difficulties. The first was that if the clause para-moun t was omitted and a bill of lading for shipment out of aConvention country contained a choice of law cl ause for a jurisdictionwhich either did not apply the Rules at all or did not apply them to thatvoyage, the Rules could be evaded; and therefore the internationalapplication of the Rules, at least in many Convention countries, was tosom e extent torpedoed.The re was a second part of the problem which was largely anEnglish problem and could be avoided by different drafting. It wast ha t it was not even really clea r that the Rules were compulsorilyappli cable to a shipment out of the United Kingdom if the bill of ladingconta ined a choice of law clause for another jurisdiction. So if therewas a choice of l aw clause on a shipment out of England for the law ofNorway - upposing Norway to be a Convention country which onlyappli ed the Rules to shipment s out of Norway - t was arguable thatt h e wording was not strong enough to make the English court apply the

ru le s where English law was not the proper law of the bill of lading.To summarise, t he so-called Vita Food gap enabled the Rules, at anyr a t e in theory, to be evaded by a choice of law clause for a jurisdictionwhich either had not adopted the Rules at all or did not apply them toth at voyage.The second matt er i t was decided to change was the result of anEnglish case called Scruttons v Midland Sili~ one s.~hat case held thatt h e protection of th e Hague Rules did not affect stevedores, since theywe re not parti es to the contract of carr iage. So that although you couldn ot sue the carrie r, you might well be able to sue the stevedoring firm;a nd that firm could not rely on the time bar or the package or unitlimi tatio n, which of course they would wish to do.As you know, attention was then given to draf ting a clause which gotroun d this. This is called the "Himalava" clause because it was drafted

to deal with the problem first manifested in an ea rlier Court of Appealca se called Adler v Di~kson.~his concerns Mrs Adler, who was apassenger on the P & 0 liner "Himalaya". She was not able to sue the

shipowner so she successfully sued the cap tain and the bosun in respectof an accident in the operation of the gangway. That set the al armbells ringing, and the same matter was then (unsuccessfully) litigatedto the House of Lords in connection with cargo. Meanwhile a cl auseintended to deal with this was drafted and brought into use. It is calledtfie "Himalaya" clause since it originated from the passenger caseabout the P & 0 liner "Himalaya".As you know, this clause was first held effective to protect steve-dores in the New Zealand Privy Council case ca lled The Euryrnedon.'Subsequently, the issue was raised again in an Australian PrivyCouncil case, The New York Star,' with the sam e result. (The case alsoraised a fur ther point as to application of the Rules afte r discharge ofthe goods from the vessel).The third defect which it was sought to deal with was a case calledThe Muncaster Castle which was unpopular with carri ers. This caseheld that t he shipowner's duty as to due diligence in furnishing aseaworthy vessel was non-delegable. That is to say, the shipownercould not say that he had exercised due diligence by appointingcompetent marine surveyors or repairing companies and so forth. Ifthose organisations were themselves negligent, the shipowner had toanswer. Shipowners did not like this case, though some of the effec ts ofwhich were taken away shortly after by a case called The Amstelslotwhere the actual duty of ca re was set a bit lower - or rather, whatwas negligence was set a bit higher. Nevertheless, carriers thoughtthat they should be able to discharge their duty of ca re by delegating itto competent independent contractors.Fourthly, there were problems regarding the probative effect ofbills of lading, which did not actually, I think, deriv e from common lawcountries. There were questions of exactly of what stat ement s in thebill of lading were proof, and to what ext ent they could be disproved-statements as to the amount of goods loaded and appa rent ord er andcondition on shipment.Fifthly, there were problems regarding the package or unit limita-tion. There were problems of inflation. The limit was 100 poundssterling, "taken to be" gold value. But no one knew what that meant:there were different values of gold, two tier systems and so forth, andthe matt er had not been tested. Recently, of course, it has been - ut

not then.

[I9151AC 154.' [19i?ll1WL R 138.

[I9611AC 807..* [I9631 2 Lloyd's Rep 223


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Hague Rules 2322 (1990)7 MLAANZ JournalI t was also regarded a s unsatisfactory that there was no package oruni t limitation applicable to bulk cargoes- t least not in the Englishversion of the Rules, though the American Act referred to "customaryfre ig ht unit". In default of such wording there might beno package oruni t limitation applicable to such cargo, so it was suggested that the reshould be a limit by reference to weight.Also, there was the problem of containers. Is a container a package

or unit? If it is, a container of high value items such as computers isobviously going to have an enormous value far above the package orunit limitation. So what was to be done about them?These problems - he Vita Food gap, Scruttons v Midland Siliconesan d The Muncaster Castle, the probative effect of bills of lading andthe package or unit problem - were sought to be dealt with by theCMI . The third one, th at of The Muncaster Castle, got lost at somepoint. It proved unpopular and carriers in the end had to drop it. It wasthought that shipowners ought to be liable and sue their own indepen-de nt contractors, which seems to be quite reasonable.The remaining points were worked on and a draft was produced atth e CMI Conference a t Stockholm in 1963 and signed a t the ci ty ofVisby on the island of Gotland in the Baltic at the end of theconference. Further work was done on them and, extensively amended,

th ey were the subjec t of an int ernational P rotocol to the 1924 Conven-ti on adopted a t Brussels in 1968. They are therefore the BrusselsProtoc ol to the 1924 Convention, and the rules as amended ar e calledthe Hague-Vishy Rules: they received sufficient ratifications to comein to effect in 1977.What then are the Hague-Visby Rules? They are simply the HagueRul es with a fairly sma ll number of al terations, some of them quiteimpor tan t but not all ve ry conspicuous. The main bulk of the Hague-Visby Rules is exactly the same a s the Hague Rules. They are Haguewi th certain alterations made in the interests of correcting particulardifficulties perceived then as having emerged from the operation ofthe Hague Rules over 44 years.What is there in the Hague-Visby Rules which is different fr om theHague Rules? Let us go over the main problems which I listed earlier.Th e first is the Vita Food gap. The Vita Food gap was closed by

me an s of a di fferent technique which, at lea st in common law coun-tries, depends on domestic legislation. Article X of the Visby Rulesprescribes itself to what voyages the Rules apply. There was actuallysuch an article in the Hague Rules, with more limited application, butfor some reason it was not enact ed in the English Act and I guess,therefore, not in your New Zealand Aet. However, Article X of theVisby Roles actually prescribes when the Rules apply, They apply fi n

brief) to outward shipments from a contracting s tat e, to bills of ladingissued in a contracting state, and cases where the contract providestha t the law of a cont racting st at e governs. This is then put into effectin the United Kingdom by a new form of s tatutory wording. The oldform said that the Rules "have effect in relation to and in connectionwith" outward ship ments from UK ports. The new form, which is alsoused in connection with other international conventions, says that therules "have the force of law". That means th at an English court has toapply them on a shipment out of a ny Convention country; which wouldof course, have solved the Vita Food case, where a Nova Scotian cour tin a Convention country would have had to apply them on a shipmentout of Newfoundland, another Convention country.

Suppose, for example, there is litigation in England on a bill oflading out of Singapore providing that "This bill of lading is stat ed asbeing governed by the law of Indonesia" which is a non-contractingstate, though it will, I believe, give effect to clauses paramount. Iflitigation arises in London, the English court has to apply the Rules tothat bill of lading because it covers a shipment out of a co ntractingstate . So the procedure for "internationalisation" is more efficient, atany ra te (in common law countries) if t he domestic legislation bringingthe Rules into effect is properly drafted. Curiously enough in Singaporeitself, the legislation, it seems to me, was not properly drafted. Thedraftsman, perhaps not completely briefed as to the Vita Food gap,actually used the old-fashioned wording "have effect in relation to andin connection with" but retained also the outward shipment rule,despite the presence in the Rules of Article X.This causes difficulty forthem in Singapore but that need not affect us here. It does, however,draw attention to the f act th at if you adopted Visby here, you wouldneed to make sure the implementing legislation uses a correct form ofwords to force the New Zealand courts to apply the rules on shipmentout of any Convention country - an important part of the"internationalisation" system.

As many of you know, we have in England a ver y stro ng case indeedon this, called TheHollandia." In that case there was a shipment out ofScotland in a Dutch vessel, and the bill of lading was governed byDutch law. In the Netherlands they have the Hague rules, under whichthe package or unit limit is lower. The bill was stated as governed byDutch law, with jurisdiction in the Netherlands. The English court heldthe clause for jurisdiction in the Netherlands was a clause reducing thecarriers' liability under Article 111.8 and was therefore invalid. TheDutch jurisdiction clause was therefore struck out and the issuebecame simply one of forum conveniens which led to a decision infavour of English jurisdiction. That is quite a dramat ic (and not


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24 (1990) 7 MLAANZ Journaluncriticised) case holding that this formula "force of law" has acoercive effect on the courts.

Secondly, the Scruttons v Midland Silicones point. This relates toactions against stevedores or indeed, if such are worth bringing,against captains or other individual persons operating the ship orindeed, working cra nes and so forth. Are they protected by the rules?Th e answer prior to the Visby Protocol would be "no". The problem isnow, however, dealt with in Article IV.Bis.2, a whole new section put inafter Article IV. Article IV.Bis.2 provides as follows-If such an action is brought against a sew ant or agent of the carrier (such sewa ntor agent not being an independent contractor), such %want or agent shall beentitled to avail himself of the defences and limits of liability which the carrier isentitled to invoke under these Rules.That presumably, was me ant to deal with The Eurymedon and The

N e w York Sta r situations. But the wording is that if such an action isbrought against the servant or agent of the carrier , such servant orage nt not being an independent contractor, such servant or agent shallb e entitled to avail himself of the defences and limits of liabilitv.Stevedores a re normally independent contractors. Socuriously enough,it does not actually seem to ~r ot ec t tevedores - lthough it wouldprotect employees such as captains, crane operators and such like. Thepro per way of assessing thi s is still not clear. On one view, it must bemeant to cover stevedores and some special interpretation functionmust be deployed to try and make sure they come under the words"servant or agent" despite the following words. On another view,international agreement in Brussels in 1968 was not secured to thee~cemptionof independent s tevedores. Some of you may know ast ate men t of Mr Jus tice Murphy, a sort of cri de coeur in the HighCou rt of Australia in The New York St ar that "Australian importersha ve no real freedom in their arrangements: to regard these as beingin the area of contra ct is a distortion". He held that stevedores couldnmt take advantag e of the Rules.

There is also another enigmatic section in Article IV.Bis, themean ing of which is simply not clear. What is provided is this -Article IV.Bis.The defences and limits of liability provided for in these Rules shall apply in anyaction against the carrier in respect of loss of or damage to the goods covered bya contract of carriage whether the action be founded in contract or in tort.

This obviously covers actions in tort against the carrier. What isineended to be its effect? There are two views, and the matter isalmost, but not quite, untested.

Hague Rules 25One view is that a ll this provision does is to provide tha t if thecarrier could be sued in contract and you elect instead to sue in tort,you will not get a different result - he same protections will apply. Inthat case, it has virtually no effect in common law countries, or atleas t, most of them. Such is the view of Profe ssor Trei tel expressed in[I9841 LMCLQ a t p.304.You will know of course, th at there ar e situations where t here is no

claim against the carrier in contract because delivery orders orwaybills ar e used and the consignee seeks to sue; or because you wantto sue the actual carrier and your contract is with the contractingcar rie r, for instance, on a charte rer's bill of lading, and so forth. Thereis a situation then where you cannot sue the carrier in contract and youseek to do so in tort. As I say. the obvious example is a charter er's billof lading where the plaintiff seeks to sue the actual car rie r. DoesArticle IV.Bis.1 cover that or not? The view that it did in certaincircumstances was taken by Mr Anthony Diamond, QC, a well knownbarrister and writer in this area, in a seminal article on the Hague-Visby Rules in [I9781 LMCLQ 225.'"There is recent a uthority on this in the English Court of Appeal in acase called The Captain Greg o~. ~'he court took the narrow view thatthe provision only protects carriers who are sued in tort when theycould have been sued in contract. It does not appear, however, that the

matter was fully argued and it seems that an appeal to the House ofLords is unlikely. So it may be that the matter cannot be regarded asfinally settled.The third problem - hat of The Muncaster Castle - was as I said,dropped at some stage in the negotiations.The fourth relate s to the probative eff ect of bills of lading. This isdealt with by the addition of one sentence in Article 111 This Articlerequires the ca rri er on demand to issue a bill of lading containingcerta in particul ars. Article 111.4 then says "Such a bill of lading shallbe prima fa cie evidence of receipt by the carri er of the goods thereindescribed in accordance with par agraph s (a) (b) and (c)". That m ay notbe very significant. But the Visby Rules contain one more sentence."Proof to the con trary shall not be admissible when the bill of ladinghas been transferred to a third party acting in good faith". That was, Ibelieve, put in to remedy some defect in a civil law country or

countries, but it has some effect for us in common law countriesbecause it potentially remedies the problem stemming from the caseof Grant v No r~ ay ,' ~hich is still around, although it could be

" 11978)139CLR 231,285' q t ages 248-253p99a) ~1oq;d's ep 310" (1851)10CB 665


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26 (1990) 7 MLAANZ Journal Hague Rules 27overrruled by any supreme appellate tribunal whether in New Zea-land, Australia or t he United Kingdom. It is taken as laying down thata m aste r has no authority to sign a bill of lading for goods not onboard, so that if the goods are not actually on board when the bill oflading is signed, the bill of lading does not bind the shipowner. The newprovision potentially enables one to get round that defence.

There are, however, some slight technical difficulties in it. Thewording is that "proof t o the contrary shall not be admissible". I shalljust touch on two technical points. First, proof to the contr ary of what?Th e opening words make t he bill of lading pri ma f acie evidence ofrece i p t by the carrier; so he cannot prove that the goods were notreceived. So if the carr ier is willing to admit that he received thegoods, and ail he wants to say is that they are not on this ship (but willcome on the next ship in six months time) - n unusual situation,obviously - hen this provision may not work.There is also a second difficulty which is that if no goods were evershipped at all under the contract, it may often be arguable that therewa s no contract of carriag e at all, so that the Hague-Visby Rules areno t triggered off a t all, because they only apply to contracts ofcarr iage . If you take the view that a contrac t of carri age is usually notmade until the goods are put on board - which receives some supportof course from the Scancarriers v Aotearoa '"eeision in New Zealandand see Heskell v Continental Express l7 - hen this provision may not

be as useful as it looks.Lastly , package or unit. As you will know, it was intended to providefo r the inflation problem by linking the package or unit limitation tot h e Poneare franc, which is a unit of curren cy defined by gold content.This subsequently proved not very satisfactory and the limit is now insor ne countries (including the United Kingdom) defined by reference toSpecial Drawing Rights on the International Monetary Fund. Thisraises the limit considerably from 100 pounds sterling (even as raisedby the former Gold Clause agreement) though not as high as the sumprovided by the Rosa S / Brown Boveri reasoning.What about bulk cargo? That is deal t with by the addition of aprovision as to weight. Some countries, I believe, wanted weight to bet h e only criterion for the paekage or unit limitation. The VisbyProt ocol adds an alt ernati ve under Rule IV.5(c) (in the UK form).... neither the carrier nor the ship shall in any event become liable for any loss ordamage to or in connection with goods in an amount exceeding 666.67 units ofaccount per package or unit or 2 units of account per kilogram of gross weight ofthe goods lost or damaged, whichever is the higher.

So an alternative is limit per kilogram gross weight, whichever isthe higher. Then finally, there is the container provision, which isArticle IV.!i(d) which basically says, to put it in a crude form, thatwhether the container is the package or unit, or the contents, dependson how the bill of l ading is made out.Where a container, pallet or similar article of transport is used to consolidategoods, the number of packages or units enumerated in the bill of lading as packedin such article of transport shall be deemed the number of packages or units forthe purpose of this paragraph as far as these packages or units are concerned.Thus, if a bill of lading refers to "one container said to containmachinery", then that is the package or unit. If it ref ers to "onecontainer containing 600 TV sets", the sets would be the packages orunits. This is probably true also where the bill refers to a container"said to contain 600 TV sets". It seems likely that that is sufficientenumeration for this purpose even though of course, in a dispute, theclaimant might have to prove that the contents had been there onfilling the container.One other point to which I draw your attention is Article IV.5(e)-Neither the carrier nor the ship shall be entitled to the benefit of the limitation ofl~ahility rovided for in this paragraph if it is proved that the damage resultedfrom an act or omission of the carrier done with intent to cause damage orrecklessly and with knowled ge that damage would probably result.So the package or unit limitation is broken if the c arri er act s withintent to cause damage or recklessly. The meaning of this new notion is

not yet tested, although there is a relevant recent case called TheChanda '"dealing, however, with a dispute under the Hague Rules.These then are the Hague-Visby Rules, which are simply the HagueRules with certain amendments which carriers and shipowners de-scribe as clarifying and rectifying certain difficulties which hademerged over 40 years of the Rules. Cargo interests may, however, seethem as being largely in the interests of carrier s.Now to the Hamburg Rules. These, as you will know, originatedfrom a report writ ten by the Secret ariat of UNCTAD around 1970,which drew attention to certai n defects in the Hague Rules. These weresaid to be disadvantageous to cargoawning countries and to develop-ing countries in particular, in that they operated to place morebusiness in developed countries, protecting shipowners, and also creat -ing double insurance situations where the cargo owner was carryinginsurance for liability which was really t hat of the shipowners butcould not easily be made to stick.The difficulties perceived in the Hague and Hague-Visby regimeswere these. First ly, the excepted perils of Hague and Hague-Visby do

" f 198512 Lloyd's Rep 419'' 1195011 All ER 1033.'"19999) 1 Lloyd's Rep 518 [I9891 2 Lloyd's Re p 494


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28 (1990) 7 MLAANZ Journalno t apply to deck cargo, for which a shipowner can stipulate specialter ms; nor to ca rri age of live animals, which is obviously a morespeciali sed fo rm of ca rriag e. Both of these involve special risks. It wasnevertheless asked why they should be outside the Rules altogether, sothat the carrier can set his own terms.

Secondly, some of th e excepted perils. Why is the shipowner ex-cepted from liability for nautical fault? Why is he not liable fornegligence in management and navigation? The view would be thatthis is an old-fashioned exception dating back to sailing vessels andda ys when marit ime ventures were hazardous. One can now establishwha t shipowners ought to have done in particular circumstances; whyc a n they not be liable for negligence in navigation and management?Why also is there a special exception for fire, unless caused by actualfau lt or privity of the carrie r?

Thirdly, there is a so-called "before and after" problem. When doest h e application of the Rules sta rt and when does it stop? Views on thisdiffer from country to country. The view can be held that the Rulesco me into operation on the ship's rail - when crossing the ship's rail.On another view, the Rules themselves actually say in Article I1 -

Under every contract of carriage of goods by sea the carrier in relation toloading, handling, stowage, carriage, custody, care and discharge of such goodsshall be subject to the responsibilities and liabilities and entitled to the rights andimmunities hereinafter set forth.That suggests the carr ier has to load and unload a s part of hisfunctions. Then there is the English view, established in Pyrene vScindia '4 that it turns on the particular contract as to how muchloading and unloading the carrier does; and on that turns to what theRules apply.Fourthly, there are certain matters hardly touched on at all, forinstance, delay.Fifthly, the time bar. Why should there be such a short time bar foract ion s against th e shipowner, especially if he is subject to no suchspecia l bar for an action against you?Sixthly, the package or unit limitation. One can ask more generallywhy it exists at all; and also, whether it isnot too low. It is said to needraising and inflation-proofing. Of course, to some extent, that is dealtwith by Hague-Visby.Seventhly, there is nothing in the Rules about jurisdiction andarbitration clauses and this gives a free rein to carriers to requirearbi tra tio n and/ or litigation in countries convenient to themselves. Ofcourse, a shipper can negotiate with the carrier for arbitration or

Hague Rules 29litigation somewhere else; but the carrier may not always be veryreceptiv e to such an amendment of his stand ard terms.Next, the burden of proof is differ ent in different countries; and theinterpretation of particular clauses varies from country to country.

But last, and most importantly, the general idea behind Hague andHague-Visby is the split risk regime which comes from Harter -carri er liable fo r seaworthiness and car e of cargo; cargo owner takesthe risk and insures in respec t of negligence in navigation andmanagement. This split risk of course, leads to difficulties. Fi rst, th erear e difficulties of proof. How does cargo prove exactly wh at happened,especially when you have got to get your proceedings going within ayear? It may be difficult to know whether what happened is a ca rrier' sresponsibility or a cargo owner's risk. The re ar e questions of burden ofproof which may differ from country to country, and may not be veryclear. Lastly, even if you do know and can prove exactly whathappened, it may be highly arguable whether what went wrong was tobe classified as negligence in care of cargo or negligence in manage-ment of the ship. So it is possible to litigat e to the highest tribunal a s towhether what happened - ven assuming it to be absolutely clear -should be classified under one risk or the other.

A commonly held view was that this led to disadvantages todeveloping countries and to cargo-owning countries, because it wassaid to favour carriers. In particular, in the cargo-owning country, onemight have to carr y insurance in respect of something for which thecar rie r was really liable, because of the difficulty in establishing this.There were also risks of loss or damage ove r and above the package orunit limitation, of missing the time bar and so forth.

Now of course, if t he cargo owner's insurance car rie s less risks,these should be on the carr ier, so that even if the carr ier's P & Ipremiums then go up, leading to a rise in freight rates, the cost ofcargo insurance should, at least in theory, be diminished. Whether thisis really true or not, it has been said that the existing regime leads todouble insurance which is simply inefficient.Considerations of this so rt led to the promulgation of the HamburgRules. Now the Hamburg Rules were meant to deal with the difficul-ties to which I have referred; they require adoption by 20 countries andI think they have got about 17 at present, though not all are obviouslyleading maritime countries.The main differences between Hamburg and Hague and Hague-Visby are, rapidly summarised, as follows.The principal fea tur e of the Hamburg Rules is the new basic rtrle ofliability in Article 5 -The carrier ts liable for loss resultingfrom loss of or damage to the goods as wellas from detag in delivery, if the oecursence which caused th e loss, damage or


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30 (1990) 7 MLAANZ Journal Hague Rules 31delay took place white the goads were in his charge as defined in Article 4 unlessthe carrier proves that he, his servants or agents, took all measures that couldreasonably be requ~red o avoid the occurrence and its consequences.So the basic rule then is that he is liable in certain circumstancesdefined unless he proves that he, his servants or agents took allmeasure s that could reasonably be required to avoid the occurrencean d its consequences.Then the defence of negligence in navigation and management doesnot appear. There are some provisions about the "before and after"problems which extend the shipowners' responsibility before unloadingan d after unloading, but they are still not very clear. The time bar isextended to two years and applies to actions by the carri er as well asthos e against him; and the time for giving notice of non-apparentdama ge has been extended from 3 days to 15.The package or unit limitation is defined in the special drawingrights and is raised - which is done by Visby anyway.There is a new joint and several liabilit y of ca rri ers and actualcarr iers , which deals with the problem of suing the actual car rier whena cha rte rer 's bill of lading is issued. This is quite complicated and cancau se difficulties; but certainly potentially it makes it easier to sue theactual carrier, and also for the actual carrier to rely on the exceptedperi ls (which may not be possible, at least in common law countries,

under the existing regimes).There are provisions about liability for delay, with special limits ondama ges for it. The Rules apply to deck cargo and it is specified whenca rgo can be carried on deck; and to live animals. They ar e applied tospecified voyages, and actually provide where litigation or arbitrationma y take place.This last point requires special notice. Article 21.1 provides -In judicial proceedin gs relating to the carriage of goods under this Convention,the plaintiff, at his option, may institute an action in a court which, according tothe law of th e state where the court is situated , is competent, and within thejurisdiction of which is situated one of the following places(a) the principal place of bus iness or, in the absence there of, the official residenceof the defendant or(b)the place where the contract was made ..;or(c) the port of loading or the p ort of discharge; or(d) any additiona l place designated for that purp ose in the contract of carriage byseaSo the Hamburg Rules actually contain provisions regarding placeof suing which will diminish the effect of some carri ers' jurisdictionclauses. There are similar provisions for arbitration contained inArticle 22.There ar e (in Article 17) ome rather mysterious provisions regard-i n g letters of guarantee - hat i s to say, letters of guarantee against

the issue of clean bills of lading, which one might not think were a verysuitable matter for regulation by the international rules governing thecontract of car riage . And among other things, there is in Article 23.4an attempt to make the carrier pay for loss caused by the use ofinvalid clauses. I imagine everyone is familiar with the problem ofcontracting parties who seek to throw up a smoke screen by purportingto rely on a clause that actually is invalid; and that may cause loss to aclaimant in ti me spent negotiating, etc. Attempts ar e therefore madeto make carriers pay for damage caused by attempts to rely on invalidclauses, though whether they will work is a different matter.

The basic regime then, is one under which the shipowner is liableunless he proves in certain circumstances that he used all reasonableefforts to avoid the occurence. Carriers do not favour the HamburgRules, as I understand it, although there may well be some who do.Why not? The first argument is that the new basic regime is unsatis-factory because it is not really clear how it will work. It providesn"The car rie r is liable for loss of or damage to the goods ... if theoccurrence which caused the loss ...took place while the goods w ere inhis charge, unless he proves that he, his servants or agents took allmeasures that could be reasonably required to avoid the occurrenceand its consequences". All the matters stressed can give rise todifficulties of interpretation and proof. But their overall effect isdoubtful too. At the very end a provision was added - alled "Thecommon understanding" - aying the common understanding of theparties is that the carrier's liability is based on presumed fault. Theargument, however, is that the regime is really getting very near tostrict liability.

And, as I have said, there is a great deal of inte rpretation required tosee how the Rules are going to work. "The carrier is liable for lossresulting from loss of o r damage to the goods ..."- resulting from"-what does that mean?; " .. as well as from delay in delivery if theoccurrence which caused l2 the loss, damage or delay ..." - what doesthat mean and who proves it?; "... took place while the goods were inhis charge as defined in Article 4 ..."- here may be quite a lot ofdifficulty in proving that - ...unless the carrier proves that he, hisservants or agents took all measures that could reasonably be re-quired." This is similar to the wording in the Warsaw Convention onCarr iage by Air and to that of CMR Convention on Interna tion alCarriage by Road - ut not quite the same: what is the significance ofthe different phrases? Perhaps indeed, this is the point on which focusis put. What does this mean? What are "all measures that couldreasonably be required"?z. Emphasis added.z Emphasis added.


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Hague Rules 333 2 (1990) 7 MLAANZ Journa lBut it can also be said that the fire exception is much more clearlybased on fault. Article 5.4 reads -The carrier is liable ... for loss of or damage to the goods or delay in deliverycaused by fire if the claimant proves the fire arose from fault or neglect on thepart of the carrier, hi servants or agents.This is different from the general regime. There is something towork out here.Many carrier s, of course, are reluctant to see the abolition of the

negligence in management and navigation exception - autical fault.They might be willing to see "management" go, but are reluctant to see"navigation" go. And a general view is put forward that carriers will,under these Rules, have to take out much increased P & I insurancecover, especially because they do not know exactly what the claimexperience is going to be; and that is bound to raise freight rates. Itma y also be said tha t this will spread the risk of negligent packersamong all packers, including careful packers. Under the presentsituation, it is said that careful packers may get favourable insurancepremiums if their claim records ar e satisfactory; but the carrier doesno t know who ar e good packers and bad packers, he (or she) willsimply raise the freight rates to cover the P & I premiums. And so it issa id that business will be taken away from local insurance - pointstressed in Australia, I believe - ecause the carriers will be carryingmo st of the risks.Ther e is a slight element of contradiction in all this. One scenario isth at the shipowner will be carrying more risks; he wilt require higherfreight rates because he is carrying more insurance; local insurancewill lose out because people are not going to take insurance locallywhen the shipowner is more or less strictly liable. The converseargument is that actually there is still going to be a need for cargoinsurers because of, say, the package or unit limitation, difficulties inapplying the Rules, cases where shipowners can prove they have usedal l reasonable measures, difficulties of proving what happened andwhe the r it happened before or a fter , collisions caused by negligence ofot he r vessels and so forth. So there is a slight show of mutuallyinconsistent argument. One is that local insurers will lose business, theother is that there will still be a need for double insurance and that willbe inefficient.Th e most general argument is simply - nd it is the strongest one

- hat all the points on liability of carr ier s will need redeciding. Wenow have 60 years of experience with Hague Rules. There is still quitea lot to do - hey could be improved. But if one sta rts again withHamburg, everything is going to need redeciding. Finally, I would justlike to make a quotation from a CM I document. Lord Diplock said at aCM I seminar in 1976:Sa while there ha s been no real rriticism of the Hague Rules, there has been It h i n k a consensus of crittciarn of th e changes suggeled in the UNCTAD

UNCITRAL draft. Criticisms because basically these changes will increase thenumber of recourse actions and also because of the vagueness of the phrases usedleading to great uncertainty and doubt as to what the subjective position of thejudge will be in the various jurisdiction s. They will rend er useless all thatexpensive jurisprudence accumulated over 50 years upon the meanings of thephrases in the Hague Rules and for many years after a new and vague criterionhas been set down there will be all the expense incurred again while theuncertainty continues to exist.Other main objections put forward a t that time were these. Theretention of the defence of error in navigation is not only based ontradition, but was founded on the lack of control over master, crew andpilots that continue to exist with the result that any carrier's liability isreally vicarious. Uniformity will, in fact, be jeopardized by use of thenew Rules; liability under the well defined exceptions of the HagueRules is much easier to handle in daily routine claims settiementprocedure which is based upon well established case law all over theworld. Furthermore, i t is as a matte r of principle right t o spread risks.What is happening at present on this front? Many of you may knowmuch more about this than I. The Hamburg Rules are strongly pressedby UNCITRAL and those responsible for their formulation. As fa r as Ican see, there was an initial phase of interest; there was then a phaseof withdrawn interest; the issue then came into prominence again.Whether interest in the Hamburg Rules is now on the increase ordecline, I do not know. It is certainly true that another three ratifica-tions (I think) will trigger them off and their jurisdiction provisions

may make themselves felt in unexpected part s of the world.The CMI meeting in Pari s in June has this topic as one of the ones to

be discussed. My understanding is tha t two diffe rent types of proposalshave attracted interest. One is to prepar e a sor t of improved Hague-Visby under which the ca rrie r surren ders some of his immunities, inparticular perhaps, that for manag ement of the ship, although notnavigation. Such a version could be available for a voluntary incorpo-ration in the contracts. Obviously, some may be sceptical as towhether such voluntary incorporation would often take place. Soanother possibility is obviously to reconsider Hague and Hague-Visby,pinpoint their difficulties and perhaps eventually suggest a new proto-col improving Hague-Visby.Among the points which could be considered in this connection arethe following.First , identity of carrie r. The question of what is a shipowner's billof lading and what is a chartere r's is probably a matt er for local law;but something could be done about the liability of the act '~a 1 arr ier inthe case of a charterer's bill of lading.Secondly, documents. Should the rules be extended to other docu-ments. in particular, mete's receipts, sea waybills and ship's delivery


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3 4 (1990)7 MLAANZ Journalorders? This is a rather sperialised point. It is not actually clear thatthe Rules do not apply to a t least s ome of t hese documents; for theEnglish wording for the application of the Rules, which refe rs to a"document of title" is not the sa me as the French text, which I believe,is the authentic one for international purposes (if not for statutoryinterpretation in some common law countries). Equally, in the UnitedStates, what is elsewhere called a "waybill" would be regarded, itseems, as a " straight consigned" bill of lading.

There are also difficulties as to what happens if the car rie r refusesto issue a bill of l ading either at a ll, or refuses t o issue one containingthe requisite particulars. If you then do not object, have you waivedyour rights to a bill of lading tri ggering off the Rules or do the Rulesapply notwithstanding? Again, there ar e quite a lot of problems aboutdeck cargo - whether deck cargo shipped as such really shoulddisapply the Hague Rules; when is deck stowage authorised, particu-larly in regard to containers; and the extent to which unauthoriseddeck cargo is a deviation. There is the "before and after" problem -period of application - which does not always quite link up with theperiod during which the carrier has the goods.As regar ds the exceptions, some interests (by no means all) as fa r as

I can see, seem reasonably wi lling to contemplate abolition of thedefence of negligence in management of the ship, though most mightwell be reluctant to contemp late abolition of t hat relat ing to naviga-tion of the ship. The fire exception has di fferent wording in Hague andHamburg and may need reconsideration.

The "package or unit" issue may need further consideration, andthere ar e views that the only limitation should be one based on weight.A contrary argument to consider is to what extent cargoes can beweighed? It is also said ther e can be very light cargoes of high value -for instance, textiles.There is also a general point as to whether the package or unitlimi tati on really se rves any purpose, though this of course, raisesagain the well-known "spreading the risk" argument. Some attentionmigh t be given to the effect of deviation. This varies from one legalsystem to another and it has been queried whether the Hague andVisby Rules were right to extend the right to a deviation to saveproperty as well as life. It is also arguable that provision should bema de (or, a t last, the existing provisions clarified) in respect of delay.As I understand the present picture, there are some people urgingadoption of Hamburg and there a re some who are against Hamburgfo r the reasons I have given but are suggesting further attention toHague and Hague-Visby with a view to seeing whether the defects atpresent perceived in them can be altered. No doubt there are numerousvariants, and a third group which sees no need far change.

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