Effective Transfer of Responsibility for Stowage from a Contractual Carrier Under a Bill of Lading

Yuzhny Zavod Metall Profil LLC -v- Eems Beheerder B.V. (“the EEMS SOLAR”)

Contractual carriers will welcome the decision in the EEMS SOLAR which extends further the protection afforded to them by the House of Lords in the Jordan II [1] in respect of responsibility for stowage.

The Claimant Russian receivers and bill of lading holders sought to recover losses from the Owners of the m/v EEMS SOLAR following da mage to a consignment of steel coils which were stowed by charterer’s appointed stevedores and had shifted on passage from Xingang to Novorossiysk. The Claimant alleged that unseaworthiness had resulted from a failure by the Owners to properly care for the cargo and/or to equip the Vessel with additional lashing material necessary for the voyage (both of which arguments were rejected by the Court) and in the alternative that they were not contractually responsible for any damage found due to poor stowage.

The primary cause of damage was identified by the Admiralty Registrar, Mr Jervis Kay, Q.C, as poor stowage on account of stevedores’ failure to use locking coils to secure the stow. The question of responsibility for stowage under the contracts of carriage, therefore, arose.

The cargo was shipped under a Congenbill 1994 bill of lading which was accepted by the Claimants to incorporate both the Hague Rules (pursuant to a clause paramount) and a Gencon 1994 charterparty entered into with a third party.

Relevant provisions concerning responsibility for stowage were contained in Article III, Rule 2 of the Hague Rules which provides that “Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried” and clause 5 (a) of the charterparty which provided that “The cargo shall be brought into the holds, loaded, stowed and/ or trimmed, tallied, lashed and/or secured by the Charterers, free of any risk, liability and expense whatsoever to the Owners”.

The Claimant receivers contended inter alia that the contract of carriage did not incorporate the exclusions of liability contained in clause 5 of the charterparty due to the paramountcy of the Hague Rules and that, even if they were deemed incorporated, such limiting provisions were rendered void by virtue of Article III, Rule 8 of the Hague Rules as attempting to relieve the Owner of responsibility for carrying the goods under Article III, Rule 2.

The Defendant Owners argued that the effect of Clause 1 of the Conditions of Carriage in the bill of lading (which provided “All terms and conditions, liberties and exceptions of the Charterparty dated as overleaf, including the Law and Arbitration Clause are herewith incorporated”) was to incorporate all terms of the Gencon 1994 charterparty including clause 5. Accordingly, responsibility for loading and stowage of cargo transferred to the third party Charterers following the decisions in GH Renton v Palmyra Trading Corporation and The Jordan II.

It was held by the Admiralty Registrar that Article III, Rule 2 of the Hague Rules did not impose upon the contractual carrier an obligation to undertake the operation of loading/stowage but specified the terms on which the service was to be performed if that obligation was undertaken. The wording of clause 1 of the bill of lading was sufficiently wide to validly incorporate clause 5 of the charterparty and this clause was effective to transfer responsibility for stowage of the cargo from the Defendant Owners.

Furthermore, the incorporation of a provision which had the effect of transferring responsibility for cargo stowage was not invalidated by Article III, Rule 8. Where the responsibility for the stowage had been contractually passed from the Shipowner to the charterer (or the cargo owner) the Shipowner would not be liable for damage arising from improper stowage, even if it rendered the Vessel unseaworthy, unless the bad stowage causative of the damage occurred due to a “significant” intervention by the Owner or the Master. The court found no evidence of such intervention.

In finding for the Defendant Owners, the Court extended the decision of the House of Lords in the Jordan II to include circumstances where the transfer of responsibility clause in the incorporated charterparty does not include the words “shipper” or “receiver” but refers instead to a third party charterer.

The EEMS SOLAR decision is an important development given the wide usage of the Congenbill 1994 and the Gencon 1994 Charterparty and one that will no doubt be welcomed by owners and their P&I Insurers. QBD (Admiralty Court) ((Jervis Kay QC, Admiralty Registrar) Lawtel doc no.AC0137298.

[1] [2003] 2 Lloyd’s Rep. 87

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About the contributor

  • Lisa Hillary Partner

    Specialises in general commercial shipping disputes, advising on problems arising under bills of lading, charterparties and MOAs.

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