Carriers Liability in Carriage of Goods by Sea - Essay Example

? Carrier s Liability in Carriage of Goods by Sea Carrier s Liability in Carriage of Goods by Sea Introduction The past few decades witnessed the world’s rapid move toward globalization and trade liberalization. As traders realized the importance of economic integration, the concept of market became rather broader in a way that removes the business barriers of national borders. Progressively, the global markets recognized the need of change in the modes of transport as well. Traders observed that carriage of goods by the sea is more beneficial, for this method is cost effective and raises little threats to the environment. Recently, a new concept called short sea shipping has been introduced which would amplify the movement of goods by sea. This case study will analyze various aspects of Hague-Visby Rules, which involve group of international laws for the international carriage of goods by sea. Possible Causes of Ship Grounding Ship grounding is a marine accident that may lead to severe damages to the vessel as well as to the carriages. All the ports cannot accommodate all ship sizes since the depth of sea varies from port to port. For instance, although the New York port is one of the world’s busiest ports, it cannot allow ships with higher tonnage to enter the port because of its low draft. Sometimes, accumulation of silt and mud near the ports reduces draft and it may lead to ship grounding. It is also identified that an unpredictable change in tides may also cause such marine accidents. Various past incidents show that human error is the main cause of grounding accidents. Insufficient information about the port and navigational waterways may result in severe grounding accidents. “Sheer maneuvering negligence and improper retaliations at the time of grounding has been the root cause of major accidents” (Improved maritime Educatio & Training). The way the ship was maneuvered before grounding would decide how the ship may be stranded after grounding. Finally, it has been proven that unknown rocks and coral reefs in the navigational waters also have the potential to cause ship grounding. Recent studies and experiences point toward the fact that power outage may also cause ship grounding. The power outage may lead to ship steerage troubles and which in turn results in grounding. As reported in nzherald.co.nz (2011), the grounding of the Spirit of Resolution, owned by Pacifica shipping, on 3rd February 2011 can be attributed to power failure. Hague-Visby Rules As Carr (2010, p. 231) points out, the Hague-Visby Rules represent a group of global policies for the international carriage of goods by sea. The official title for the Hague-Visby Rules is “International Convention for the Unification of Certain Rules of Law relating to Bills of Lading,” and this set of rules was drafted in 1924. These rules were amended in 1968 and in 1979. The basic idea behind the Hague-Visby Rules is that a shipper has less bargaining power than the carrier. Therefore, the law has to impose minimum obligations on the carrier in order to protect the interests of the cargo owner. From the given case description, it is clear that the carrier (owners of the Sea Chariot) had issued one bill of lading for the entire cargo and this document involves the application of Hague-Visby Rules. Possible Arguments for Carrier Since this case comes under the Hague-Visby Rules, the carrier must prove that he has met all responsibilities and liabilities described in the Article III of the Hague-Visby Rules. The Article III contains eight sections which specify different responsibilities and liabilities of the carrier. According to the Article III, before the beginning of the voyage, the carrier must exercise due diligence in order to make the ship seaworthy and to ensure that all precautions are taken to secure the carriages. Hence, the carrier may argue that the ship was seaworthy and he had carried out loading, handling, and discharge of carriage goods properly. Similarly, Article IV of the Hague-Visby Rules gives exact idea regarding the rights and immunities of the carrier. It is stated that “neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped and supplied, and to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried fit and safe for their reception, carriage and preservation in accordance with provisions of paragraph 1 of Article III” (Hague Visby Rules). Here, the carrier can claim that the ship grounding is a natural marine accident. From the case study, it can be concluded that the master’s insufficient knowledge about the port was the potential reason for the ship grounding. Since the master’s “hard to starboard” order caused ship grounding, this accident is beyond the control of the carrier. The Article III also specifies that the carrier shall not be responsible for damages arising out of act, neglect, or default of the master in the management of the ship (Hague Visby Rules). Hence, the carrier may strongly argue that the marine accident had caused as a result of ship master’s flaw and not of ship’s unworthiness. Possible Arguments for Consignees According to Moens (2002), in order to claim damages against the carrier, the consignees (holders of the Bill of Lading) have to prove that the carrier has not met all responsibilities and liabilities described in the Article III of the Hague-Visby Rules (pp.461-463). The most potential strength for the consignees is that they hold a receipt (Bill of Lading) signed by the carrier. The Bill of Lading is evidence that a valid contract of carriage exists between the carrier and the consignees. In the case study, it seems that the consignees try to prove the unworthiness of the Sea Chariot. On the other hand, if the carrier proves that the ship grounding happened as a result of ship master’s fault, the terms of the Hague-Visby Rules may not allow compensation for the consignees. Hence, the consignees must prove that the marine accident occurred as a result of unseaworthiness of the ship rather than human errors. The consignees may argue that the carrier has not ensured the seaworthiness of the ship before and at the beginning of the voyage. By focusing on this point, the consignees may claim that lack of checking activities caused nondisclosure of material facts regarding the defects in the steering equipment. If the consignees can effectively prove this argument, it points toward the fact that the carrier violated the terms of Article III. To be more specific, the consignees would argue that unseaworthiness of the ship caused the damages and hence the cause of the accident can never be attributed to the ship master’s default. While analyzing the viewpoints of both carrier and consignees, it is obvious that both the parties focus on the seaworthiness of the ship as it is a crucial factor that determines the direction of the suit. However, it would be very difficult for both the parties to prove their arguments because a detailed checking is necessary to discover the actual problem of the ship. Perhaps, even a detailed examination may not reveal the actual facts regarding the seaworthiness (or unseaworthiness) of the ship since the grounding accident might have damaged the entire structure of the ship. Ship Mortgage Ship mortgage refers to pledging the title of a ship for a loan by giving its machinery as security. By ship mortgage, a creditor acquires property interest in the ship and it aids him to secure repayment of the loan or performance of some other obligations by the debtor (mortgagor). It must be emphasized that ship mortgages include all the machinery but not cargo or freight. However, some jurisdictions consider cargo or freight as the subject of distinct mortgages even though they are not registered (Ship mortage law & legal definition). From the case study, it seems that the carrier (Sea Chariot) had issued one Bill of Lading for the entire cargo of 20,000 tons of wheat. The Bill of Lading is a contract between the carrier and shipper, which ensures security of goods transportation. In addition, this document serves as a receipt issued by the carrier to the consignee for the goods received (The importance of bills of lading). In total, the carrier has the responsibility to deliver the goods safely at the proper place. Therefore, if the consignees’ claim eventually succeeds, they can recover the damages from the carrier. There is no contractual relationship between the ship mortgagee and consignees. In other words, the mortgage deed between the carrier and mortgagee would not affect the contract between the carrier and consignees. Hence, the carrier is compulsorily required to pay damages if the consignee’s claim eventually succeeds. If the carrier fails to pay the specified damages, the consignees can file a suit against the carrier. Under such a suit, the court may order to arrest the ship in order to recover damages for the consignees. The ship arrest is ordered as the final strategy for law enforcement. If the ship is arrested on such a court order, the carrier has nothing to do legally other than paying the specified damages, because it is the only possible way to recover his ship from legal custody. Thus evidently, the consignees will get a reasonable amount of compensation once the court order goes in favor of them. Conclusion The above discussion highlights major causes of ship grounding as well as possible arguments that the carrier and consignees may use to support their claims. Since this case comes under Hague-Visby Rules, the carrier may try to prove that the marine accident caused due to ship master’s default and not of ship’s unseaworthiness; whereas, the consignees may claim that the ship’s unseaworthiness was the major cause of accident. Evidently, the consignees have the right to recover damages from the carrier if their (consignee’s) claim succeeds. References Carr, I. (2010). International Trade Law. New York: Routledge-Cavendish. Hague-Visby rules. (n.d). Retrieved from http://www.admiraltylaw.com/statutes/hague.html Improved maritime education & training in Turkey. (n.d). Retrieved from http://ec.europa.eu/enlargement/pdf/turkey/ipa/2010/150_tr20100314.01maritimeeducation.pdf The importance of bills of lading: Shipping tips. (n.d). All America Transportation,Inc. Retrieved from http://allamericatrans.com/shipping-tips-bills-of-lading.htm Moens, G. (2002). International Trade & Business Law Annual. Britain: Cavendish Publishing. Power outage causes ship grounding. (Feb 2011). nzherald.co.nz. Retrieved from http://www.anhourago.eu/show.aspx?l=7838973 Ship mortage law & legal definition. (n.d). USLegal. Retrieved from http://definitions.uslegal.com/s/ship-mortgage/ Read More