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Web Alert: ‘The Aqasia’ – The package limitation in Article IV Rule 5 of The Hague Rules not to apply to bulk cargoes

20 October 2016

At last we have an English authority to determine whether Article IV Rule 5 of the Hague Rules applies to bulk cargo. The judgment of the Aqasia[i], handed down by the Commercial Court on 13 October 2016 clarifies that there is no limit of liability in bulk cargo cases because there is no relevant ‘package’ or ‘unit’ to which such limit can apply. Article IV Rule 5 of the Hague Rules provides that the carrier’s liability for loss or damage to or in connection with goods shall not exceed £100 'per package or unit'.

The Facts

In September 2013 the vessel loaded 2,056,926 kgs of fishoil in bulk at Faskrudsfjordur and Vestmannaeyjar under a Congenbill bill of lading. About 550,000 kgs loaded into tanks 1P, 2P and 5S were commingled with further cargo of fishoil loaded at Lovund. The cargo was found to be damaged at the discharge port.

The dispute arose under a charterparty between the charterer, who was also the shipper under the bill of lading and the vessel’s disponent owner. The disponent owner was not the carrier under the bill of lading. The charterparty incorporated the Hague Rules.

The claimant charterer claimed damages for USD 367,836 together with interest and costs. The defendant owner accepted liability but argued that it was entitled to limit liability up to GBP 57,730.90 (i.e GBP 100 per mt of cargo damaged) pursuant to Article IV Rule 5 of the Hague Rules.

The High Court Decision

The Judge held that the word 'unit' in Article IV Rule 5 of the Hague Rules cannot apply to bulk cargoes and that even if it could apply, the only legitimate application would be by way of interpreting the word 'unit' as 'freight unit'. This could not be done in the present case in a way which would provide a lower limitation figure than the claim due to the lump sum nature of the freight. The claimant charterer was successful in this instance.

Conclusion

This decision is of great significance for bulk cargo claims where the Hague Rules apply. This case makes clear that there would be no limit of liability for loss of or damage to the goods under the package limitation provided for in Article IV Rule 5.

This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. The law is also not static. If in doubt, The Standard Club is always on hand to assist.

[i] [2016] EWHC 2514 (Comm)