i-law

Third Party Protection in Shipping

Page 53

CHAPTER 4

Third party protection under the Hague/Hague-Visby Rules

The background – the Harter Act

4.1 The Harter Act1 has been selected for this analysis even though it is not an international convention and is applicable only to carriage of goods from or between ports in the United States and foreign ports.2 The reason for this is that the contemporary story of regulating the relationship between the parties interested in the venture and liabilities for cargo starts with the Harter Act. The act was the first attempt to draw a compromise between carriage and cargo interests.3 4.2 The Harter Act is the predecessor of all modern international conventions regarding the carriage of goods by sea. The bilateralism of the shipping industry at that time is clearly reflected in the Act itself. It emerged from a peculiar factual context that existed between the shipowners and the cargo interests. Shipowners were financially solid and with such a high bargaining power were able to decrease liability against the cargo owners. They were able to insert substantial exculpatory clauses in the bill of lading, limiting their liability as much as possible. Tetley, quoting Scrutton, notes that the exemption clauses became ‘all encompassing, so much so that it inspired one commentator to remark that there seems to be no other obligation on a shipowner than to receive the freight’.4 4.3 Thus, the balance between the parties was substantially in favour of the carrier. As detailed by Reynolds in 1889, the Annual Report of the West of England P&I Club records the Club’s committee congratulate its members on the lack of cargo-related claims, apparently the result of ‘the now general adoption of the negligence clause; the premium reduction for use of this clause is

Page 54

 therefore discontinued’.5 As Knaught points out, in certain areas and especially the North Atlantic, a typical shipowner would apparently exclude virtually all – or at any rate, a great deal – of his liability when carrying goods, ‘when he liked, as he liked, and wherever he liked’.6 4.4 Cargo and related interests (including trade, financial, and insurance concerns) worked to improve the situation and won passage of the Harter Act in 1893.7 The act strikes a balance between the fact that the carrier was not allowed to contract out of liability for due diligence as regards seaworthiness and care of cargo, but was not liable for negligence in navigation and management of the ship.8 The main aim of the Act was to equalise the bargaining power of the two parties and allocate risk more appropriately.9 As Evans points out, the Harter Act was the solution to the issue of the common law rules of liability in the United States that effectively held carriers strictly liable for any damage to cargo that occurred during shipment.10 4.5 After a brief overview of the Act, it must be noted that almost nothing in the Harter Act concerns third parties and this is because, at the time of its drafting, the only parties entitled to have relevance to the carriage were the carrier and the shipper; contemporary shipping was a bilateral activity. 4.6 The Act defines the term ‘carrier’ to include ‘the owner or the charterer who enters into a contract of carriage with a shipper’.11 This definition does not include any other party who may play one of the carrier’s duties under the contract for the carriage of goods by sea. Problems arise because nothing in the Harter Act extends limitation and liability from the carrier to a third party (even though warehousemen or stevedores often enter in a contract with the carrier for that period).12 In fact, while the carrier in that period was responsible for the goods, a cargo owner could have sued a carrier’s sub-contractor or servant.13 Apart from the owner/manager of the vessel, the only category of third party inserted in the Harter Act is the agent and the master of the vessel, but their responsibility is restricted to loading, stowage custody, care, and delivery. Nothing outside the strict role of the ship and the people involved is mentioned.

Page 55

Third parties in the Hague/Hague-Visby Rules and the COGSA of the United States (1924–1968)

4.7 After the Harter Act, the need to allocate the risk and balance in the relationship between carrier and shipper became more pressing.14 The result, in 1924, was the birth of the Hague Rules.15 Enacted in the United States as the Carriage of Goods by Sea Act, or COGSA16 and subsequently the Visby Protocol,17 the Hague Rules were the first international regimes regarding the topic and remain the primary international tools for risk allocation between the Harter Act and the as yet unratified Rotterdam Rules.18 4.8 Within the Hague Rules (as within the Harter Act), the protection of third parties in the carriage of goods by sea concerned only the carrier and shipper. The basic relationship between vessel interests and cargo interests is clearly stated in the travaux préparatoires, in which the committee mainly considered the law of the carriage of goods by sea to be ‘the law governing the relations of shipowners and cargo owners with regard to carriage by sea under bills of lading’.19 Narrowing the focus to third parties, the provisions of the Hague Rules are even more ‘ship-related’, being concerned only with tackle-to-tackle approaches; literally, from loading onto the ship to unloading from the ship. Article 1 stipulates that the contract of carriage (to whom the rules apply) only applies to the bill of lading20 and regulates the relationship between the carrier and the holder of the bill of lading.21 Article 1(e) regulates the tackle-to-tackle provision by saying that ‘carriage of goods covers the period from the time when the goods are loaded on to the time they are discharged from the ship’.22 4.9 This provision is unclear and highly controversial. It has the potential to create problems for the carrier and then for any other category of third parties working for said carrier. Although the Rules are expansive enough to cover the period from ‘when the goods are loaded on, to the time they are discharged’, a limitation is then created in the wording ‘to and from the ship’. This is a problem because goods are usually managed by the carrier or one of his auxiliaries before and after what is called the hook-to-hook phase.

Page 56

 4.10 In the time that elapsed between the ratification of the Hague Rules and the emergence of the Visby Protocol, carriage started to evolve23 but third parties outside the scope of the bill of lading could only rely on domestic protection.24 However, the fact that shipping was moving ashore was already clear from the travaux, where it appears that shipping companies at that time were much more focussed on their activities at sea and wanted to limit their liability only to the sea leg.25 Furthermore, the problem of the restricted scope of application was noted in the travaux préparatoires:

It is true that the shipowner can negotiate his own terms as every other trader, on the other hand it is true that if not regulated, all the responsibilities (included third parties) will be regulated randomly. The next point, and it is one to which the British shipowner attaches the greatest importance, is that the Rules control only the actual sea carriage. They are applicable only from the time the goods reach the ship’s tackle. The shipowner is left as free as, but no freer than, every other trader, to make his own terms in regard to all other services he renders as collecting, receiving, distributing, and as forwarding agent, or in any other capacity.26

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.

Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited.

Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.