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Introduction 

Establishing a Carrier’s liability for cargo damage under a Bill of Lading is not always as straight forward as it seems.

Liability for the carriage of cargo on deck is often excluded, but certain steps must be taken for this to be the case.

This article is designed as a quick guide to follow, to determine the steps to be taken to establish a Carrier’s exposure generally and more specifically in relation to deck cargo.

The Bill of Lading

The first place to start is the Bill of Lading and the Conditions of Carriage therein. Read these conditions to determine what law applies. For example, on a standard form Congenbill 94, Clause 1 reads as follows:

“All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated”. 

In this case, we would check the Charterparty to establish which law and arbitration applies. This would not necessarily be English law.

The incorporation of law and arbitration provisions into Bills of Lading is a detailed subject in itself and is beyond the scope of this article.

Hague/Hague-Visby Rules

Sticking with the Congenbill 94, Clause 2 of the standard form printed “Conditions of Carriage” is the General Paramount Clause. This clause tells us which Rules (i.e. Hague Rules (“HRs”) or Hague Visby Rules (“HVRs”)) governing the carriage of cargo are to apply to the Bill of Lading.

If the Bill of Lading is subject to English law (either expressly or via the incorporation of a Charterparty), then the Carriage of Goods by Sea Act 1971 (COGSA 71) will apply.

COGSA 71 expressly states (at Section 1(1-2)) that the HVRs have force of law. The Schedule to the Act (essentially a reproduction of the HVRs) tells us when the Rules apply to a Bill of Lading, via Article X:

(a) the  bill of lading is issued in a contracting State, or

(b) the carriage is from a port in a contracting State, or

(c) the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State giving effect to them are to govern the contract, whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person.

One can work through the above steps to determine if the HVRs apply to the Bill of Lading.

To explain (c), once it has been established that English law applies to the Bill of Lading, the contract governing the Bill of Lading (usually the Charterparty) will normally then apply the HVRs via the Clause Paramount contained within the Charterparty. The Charterparty should therefore be checked carefully, to see if such a Clause Paramount does apply. If it does, it should also be confirmed that the Clause applies the HVRs. This is how the HVRs are applied compulsorily via force of law.

More often than not, however, the distinction between the HRs/HVRs will not be of huge importance. The subtle differences between the sets of rules are beyond the scope of this article.

The Carrier’s Liability and Deck Cargo

Now that you have established what law applies to the Bill of Lading and what set of Rules are to apply, the Carrier’s liability in respect of deck cargo can be examined briefly.

Under the HVRs, the default position is that the Carrier is responsible for the care of the cargo from loading until discharge. However, this is only the default position, and the Carrier may have defences available to escape from liability. These possible defences are listed in Article IV of the HVRs.

Deck cargo is an anomaly from most other cargoes. Under the HVRs, cargo which by the contract of carriage is stated as being carried on deck and is so carried is excepted from the definition of ‘Goods’ (Article I (c)) and so does not fall within the scope of the HVRs.

However, to ensure that deck cargo avoids the operation of the HVRs two requirements must be satisfied:

(1) the cargo must be actually stowed on deck; and,

(2) the deck stowage must be clearly stated on the Bill of Lading.

The first requirement is easy enough to establish, for this is a question of fact. However, the second requirement that a clear statement should appear on the Bill of Lading, is not as straightforward as it first appears. The crucial question appears to be whether a third-party transferee of the Bill of Lading would be able to ascertain from the Bill, whether the goods were stowed on or under deck. If the Bill is transferred during sea transit, the third-party transferee will not be able to verify the location of the stowage and so this statement specifying the location of the cargo, is crucial.

Under English law, the following statement on the face of the Bill will be enough to exclude the Carrier’s liability for deck cargo:

"Carried on deck at shipper’s risk without liability for loss and/or damage howsoever caused."

Without this statement, the deck cargo exclusion available to the Carrier under the HVRs will not apply. The deck cargo will then be subject to the Rules in the same way in which they make a Carrier responsible for cargo carried inside holds.

Although excluding liability for deck cargo is relatively straight forward, it is important that the above steps are followed to make the exclusion certain.

Summary 

So then, precision matters and the wording of clauses in both Bills of Lading and in Charterparties should be carefully checked. If not, the consequences for the Carrier could be severe, despite their best intentions to contract out of liability for deck cargo.