Eastern Mediterranean University BANK406 Corporate Banking Law and Practice CHP 4

Carriage by Sea Introduction ● It is the most usual way of transporting goods overseas. These contracts are important because during the transit of the goods neither buyer nor seller has physical control over them. The goods are in charge of the carrier and his agents. ● Usually the carriage contract is not made directly with the carrier instead a forwarding agent makes all necessary arrangements. On the other hand, the carrier employs a loading broker to obtain cargoes for him and to charter the ship. The loading broker signs and gives a bill of lading to the shipper. * If the goods are loaded on board of a ship, the bill of lading is called ‘shipped bill of lading’. * If the goods are not loaded on board of a ship, it is called ‘received for shipment bill of lading’.

Bill of Lading (B/L) is a; 1- document of transport ( evidence of the contract of carriage) 2- document of receipt of the goods 3- document of title * As it is a document of title, the transfer of ownership from one party to another is possible with the delivery of negotiable B/L. So goods can change hands while they are at sea. It should be noted that with the transfer of bill of lading rights of action against the carrier is also transfered to the new buyer.

The Insurance of Goods in Transit ● Goods in transit are at risk and although the carrier and his servants can be held liable sometimes some damages and losses are exempted or not fully covered. That is why all goods must be insured by buyer or seller. * The extent of the insurance differs according to the sale contract. ● The insurance for goods carried by sea is called marine insurance. ● In Ex-Works contract, the buyer is responsible to insure goods. On the other hand in Free Delivered and CIF contracts the seller will be the one who insures the goods.

Competition of Treaties Introduction ● The Brussels Convention on Bills of Lading 1924, better known as the Hague Rules deals with carriage of goods by sea under Bill of Lading. The Hague Rules have been very successful in unifying the rules relating to Bills of Lading with over 70 ratifications worldwide. The Hague Rules came into force on June 2,1931. ● In 1968, an attempt was made to modernize Hague Rules through the adoption of Hague - Visby Rules. The Visby Rules have had only limited success. In 1979 the Hague - Visby Rules were amended by the SDR-Protocol in order to change the unit of account from Gold - Francs into SDRs and it came into force on February 14,1984. ● In 1978, as a result of discontent with the regime of the Hague and Hague-Visby rules, the Hamburg Rules were created and it came into force on November 1,1992. So far it has mainly been ratified by land-locked states.

Hague Rules ● Material Contents - The Hague Rules apply only to contractual claims arising out of the performance of the contract for the carriage of goods under Bills of Lading. - The carrier must provide a seaworthy ship. - In case of damage to or loss of the goods, the carrier is presumed to be liable, unless he can exculpate himself by providing that the damage resulted from one of the long list of excepted causes. - The liability of the carrier is limited to a fixed amount per package, or per kilogram of goods lost or damaged. - The term of limitation, within which claims against the carrier must be brought, is one year from the day of delivery.

Hague Rules (cont.) ● Scope - The Hague Rules are not of direct application to the contract of international carriage by sea under the bill of lading. This follows from its protocol of signature. * The national legislator ratifying the Hague Rules must either incorporate the Convention into the national laws, or give it force of law. - The Hague Rules apply to contracts of carriage by sea for which a Bill of Lading is issued, provided that the bill was issued in a contracting state. Normally, The Bill of Lading is issued where the sea journey begins, i.e in the port of departure, but this is not always the case. - By definition, the Hague Rules do not apply, if no Bill of Lading is issued at all. This means that the Hague Rules do not apply to carriage under Sea Way-Bills or Delivery Orders.

Hague-Visby Rules ● Amendments As we mentioned earlier, the Visby Rules were protocols to amend the Hague Rules. The main amendments were the following; - The Hague- Visby Rules apply to both contractual and non- contractual claims -The protection given to the carrier by the liability system of the Hague Rules was extended to the servants of the carrier as well. -The fixed amounts per kilogram or per package set for the limits of liability were raised. -The carrier cannot benefit from limited liability in case the damage was caused by willful misconduct or recklessness. -The scope of application of the Hague Rules was extended.

Hague-Visby Rules (cont.) ● Scope - Unlike the Hague Rules, the Hague-Visby Rules apply directly to the contract of international carriage under Bills of Lading. * As a consequence of the amendment mentioned under 5, the Hague-Visby Rules apply to every Bill of Lading relating to the international carriage of goods; 1)If the bill is in a contracting state, or 2)If the carriage is from a contracting state, or 3)If the contract of carriage provides for the application of the Hague-Visby Rules.

Hamburg Rules ● Material Contents - The Hamburg Rules apply to both contractual and non-contractual claims arising out of the performance of the contract for the international carriage of goods by sea. - They apply irrespective of whether or not a Bill of Lading has been issued. - The carrier may be liable for loss resulting from damage to or loss of the goods, or delay in the delivery of goods. In addition to the contracting carrier, the actual carrier is liable as well under the Hamburg Rules. * Compared to the Hague Rules and the Hague-Visby Rules, the liability of the carrier under the Hamburg Rules is more severe. The carrier is presumed to be liable if the loss occurred during the time that the goods were in the care of the carrier. - The term of limitation, within which claims against the carrier must be brought, is two year from the day of delivery.

Hamburg Rules ● Material Contents (cont.) - The carrier can not rely on a long list of exceptions like under the Hague Rules and the Hague-Visby Rules. - The carrier, to clear himself, must prove that he and his servants or agents took all reasonable measure to avoid the occurrence and consequences of the loss. - The carrier is not liable for damage caused by fire except when the fire arose from fault or neglect on the part of the carrier. - Like under the Hague Rules and the Hague-Visby Rules, the rules on liability of the carrier are of mandatory law. -The liability of the carrier is limited to fixed amounts in SDRs per package, or per kilogram of goods lost or damaged, whichever is higher. However, the carrier can not rely on limited liability if the damage was the result of his own willful misconduct.

Hamburg Rules (cont.) ● Scope - Like the Hague-Visby Rules, but unlike the Hague Rules, the Hamburg Rules apply directly, without a further interference from the ratifying legislator being necessary. - Compared to the Hague Rules and the Hague-Visby Rules, the Hamburg Rules have a wider scope of application. -The Hamburg Rules apply if the bill of lading, or any other document evidencing the contract of carriage by sea, is issued in a contracting state or provides that the contract of carriage by sea is to be governed by the Hamburg Rules. - Further, it applies if either the port of loading or discharge under the contract of carriage is located in a Contracting State.

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