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Web alert: Issuing clean bills of lading - Retla Rust Clauses

05 September 2014

It is well known that owners and their masters often come under commercial pressure to issue ‘clean’ bills of lading in return for a Letter of Indemnity (LOI) from charterers or shippers.  In so doing, not only does this potentially prejudice their club cover, but such LOI's are unlikely to be enforceable under English law.
 
In an attempt to mitigate the consequences of issuing ‘clean’ bills for cargoes of iron, steel and metal products, the practice of inserting a ‘Retla clause’ on the face of the bill has developed. This clause is intended to allow a master to issue a ‘clean’ bill, but also give no representation that the cargo is free of rust or moisture. In the 2012 High Court judgment The Saga Explorer, the court held the ‘Retla clause’ as having a very restrictive meaning and only covering superficial rust and moisture. As a consequence, in this case, the cargo insurers succeeded with their claim in full. See the attached article, included in the club’s April 2013 Standard Bulletin, for more information.
 
This decision has not been appealed so remains good law. Owners and operators should therefore continue to exercise caution when it comes to relying on such ‘Retla clauses’.