Vinnlustodin HF & Another v. Sea Tank Shipping AS ('AQASIA')

Does the Hague Rules Article IV Rule 5 'package or unit' limitation apply to bulk cargoes?

In this case Clyde & Co ( Jai Sharma and Ian Woods) represented the successful cargo interests to set a precedent in English law that has clarified a 92 year old debate as to whether the Hague Rules unit element of 'package or unit' limitation can apply to bulk cargoes.

The 1924 Hague Rules no longer have the force of law in England since they were succeeded by the Hague-Visby Rules (the Hague Rules Amended by the Brussels Protocol of 1968). Nonetheless, the Hague Rules are still regularly applied as a result of their incorporation into sea waybills, charterparties and bills of lading issued in and relating to cargoes loaded in non-Hague Visby contracting states. In Vinnlustodin hf and another v. Sea Tank Shipping AS the Court was asked to consider whether the word "unit" in Article IV r.5 of the Hague Rules, could be read to refer to a unit of measurement, such as a metric ton or kilogramme, so as to extend the application of the limit to cargoes carried in bulk.

This question has generated a number of articles from eminent academics and practitioners and features in all leading texts on the carriage of goods. However, in the 92-year history of the Hague Rules, the question has never been answered determinatively under English law until now.

Background Facts

The claim arose out of damage to a cargo of fish oil during carriage on board the motor tanker "AQASIA", which at the material time was under charter from the Defendant to the First Claimant by a charterparty evidenced by a 'Fixing Note' dated 23rd August 2013 ("the Charterparty"). The Defendant agreed to carry a cargo described as "2,000 tons cargo of fish oil in bulk, 5% mol chopt" from ports in Iceland to ports in Norway for freight of "NOK 817,500, - lump sum".

The Fixing Note provided that the Charterparty was to be on the "London Form". The London Form Charterparty provides:

"26. – The Owners in all matters arising under this Contract shall also be entitled to the like privileges and rights and immunities as are contained in Sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and in Article IV of the Schedule thereto ..."

The Schedule to the Carriage of Goods by Sea Act 1924 ("COGSA") contains the Hague Rules. Article IV Rule 5 of the Hague Rules provides:

"Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100l. per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading."

The vessel loaded a cargo that was described in the bill of lading as 2,056,926 kgs of fish oil in bulk, of which about 550,000 kgs was loaded into tanks 1P, 2P and 5S ("the Subject Cargo"). After loading the cargo, the vessel sailed to Lovund in Norway and there loaded a further cargo of fish oil. Part of this further cargo was loaded in tanks 1P, 2P and 5S, causing it to become co-mingled with the Subject Cargo. On arrival at the discharge port(s), 547,309 kgs of the Subject Cargo was found to have suffered damage. The First Claimant claimed for the loss and/or damage to the cargo in the sum of US$367,836.

The Defendant accepted in principle that it was liable for the damage to the Subject Cargo under the terms of the Charterparty. However, the Defendant argued that it was entitled to limit its liability in the sum of £54,730.90 (i.e. to £100 per metric tonne of cargo damaged) pursuant to Article IV r. 5 of the...