A relatively recent case of 2018 was heard by the English Court, which has brought a significant update in understanding the bulk carriers’ right to limit their liability under the Hague Rules, which induces even more questions.
In The “Aquasia” [2018] case the appellant shipping company appealed against a High Court decision that it was not entitled to limit its liability for damage to cargo carried on its vessel under the article IV, paragraph 5 of the Hague Rules 1924.
While the point of actual damage to cargo was not the subject of disputes, the owner claimed that it was entitled to rely on Hague Rules’ limitation of liability clause. As soon as the first instance court had declined such possibility, the owner referred to the Court of Appeal.
In its decision the Court of Appeal considered the appeal from different perspectives. In particular, the Court of Appeal addressed the issue of meaning of “package or unit” used in the Hague Rules. For such a determination the Court referred to travaux preparatoires (description of the documentary evidence of the negotiation, discussions, and drafting of a final treaty text); the product of Hague Rules’ development, i.e. Hague-Visby Rules; and the Commonwealth authorities.
In its research the Court found that the word “package” contained in article IV paragraph 5 unquestionably referred to a physical item and the interpretation of the words “package” and
“unit” together undoubtedly pointed towards the fact that these both wards were concerned with physical items rather than units of measurement. Therefore, a logical conclusion follows that in the Hague Rules the word “unit” meant a physical item of cargo, not a unit of measurement.
The same was confirmed by the travaux preparatoires and the respective judicial precedents, e.g. El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202.
Examination of the Hague-Visby Rules led to the same conclusions – it was concluded by the Court of Appeal that the article IV of the Hague-Visby Rules suggested that a “unit” constituted a physical item of cargo rather than a freight unit.
Having found such conclusions, that that “unit” means a physical item of cargo or shipping unit but not a unit of measurement or a freight unit, the Court has decided that it is impossible for the Hague / Hague-Visby Rules to be applicable for a bulk cargo, which of course brings a significant level of uncertainty as for the owners’ options for limitation their liability.
Source: Interlegal, https://interlegal.com.ua/en/