The Bill of Lading

Holder Rights and Liabilities

Frank Stevens

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351214209
• Edition: 1
• Topic: Business
• Subtopic: Corporate Governance
• Index: Business

The carriage of goods by sea starts off with a contract of carriage, an essentially simple and straightforward contract between two parties, the shipper and the carrier. Very often, however, a bill of lading is issued and a third party appears on the scene: the holder of the bill of lading. The holder was not involved in the making of the contract of carriage, but does have rights, and possibly obligations, against the carrier at destination. The question then is how the third-party holder of the bill acquires those rights and obligations.

Analysing the different theories that have been proposed to explain the position of the third party holder, this book makes a distinction between contractual theories and non-contractual theories to explain the holder's position. Contractual theories build on the initial contract of carriage and apply contract law mechanisms while non-contractual theories construe the position of the third-party holder independently.

Following the analysis and appraisal of the different theories, this book makes the case that the position of the third-party holder of the bill of lading is not obvious or self-evident; and submits that a statutory approach to the position of the holder of the bill of lading has advantages and would be preferable.

1 Introduction

1 The existence of a bill of lading presupposes the existence of a contract of carriage.¹,² This contract of carriage may be an explicit, written³ contract such as a charter party, or an implicit, verbal one, the existence of which is proven indirectly by the later issuance of the bill of lading.

2 In essence, a contract of carriage is a simple, two-party contract between a shipper and a carrier for the transport of certain goods from a place of departure to a place of destination.⁴ Sometimes, the constellation stays as simple as that, and no third parties are or become involved. This is the case when the shipper is also the consignee of the carried goods. This can happen, for instance, when a manufacturer ships semi-finished products from one of its locations to another for further processing.⁵

3 In most cases, however, the consignee is not the same person as the shipper. The contract of carriage is still made between the shipper and the carrier, but there is, right from the very start, the presence of a third party looming in the background. In the port of destination, the consignee, holder of the bill of lading, will be able to claim delivery of the cargo from the carrier. Conversely, the consignee may be bound to pay freight or other costs to the carrier. So, even though the consignee did not negotiate or enter into the initial contract of carriage, there clearly is a relation between the consignee and the carrier, with rights and obligations on both sides. The question then, of course, is what is the nature of this relationship? How and when does it come into being?⁶ These questions are the main focus of the present research.

4 The question what the exact nature is of the relationship between the carrier and the holder is not always explicitly raised, let alone answered. Sometimes, the relationship is readily assumed to be of a certain nature, without much analysis or reasoning. Standard or preconceived ideas, however, may turn out to be incorrect upon closer inspection. The relevance of the research lies firstly in recalling to the attention the fact that the nature and characteristics of the relationship between the carrier and the holder of the bill of lading is indeed a question which merits to be raised explicitly and the answer to which is not obvious or self-evident. The relevance of the research further lies in the attempt that is made to find a solid and convincing answer to the questions indicated above, which is relevant both on a theoretical and on a practical level. The theoretical importance of these questions hardly needs explaining. A coherent legal system requires a theoretical basis for every legal concept that is part of that system.⁷ The importance is, however, more than merely theoretical, of interest to academics only.⁸ Even today, the relation between the carrier and the bill of lading holder has not been entirely charted. To what extent, for example, is a third party holder bound by statements or agreements in the initial contract of carriage, that are not included or referred to in the bill of lading? Does a third-party holder become liable for events that predate his holdership, such as demurrage in the loadport? The theory that explains how and why the relation between the carrier and the holder comes into being will also provide the answer, or at least the building blocks to construe the answer, to new problems in this respect.

5 That theory will also need to bring clarity in more complex situations than the one sketched above, where the bill of lading is directly transferred from the shipper to the consignee. In certain trades, it is customary for the bill of lading to be negotiated several times before ending up in the hands of the party that will present it in the port of destination. What is the legal position of those intermediate holders, who, for a certain period of time, hold the bill of lading but do not present it to the carrier to obtain delivery? Do they have rights against the carrier, and perhaps even more importantly, does the carrier have rights against such intermediate holders? Is it possible, for instance, for the carrier to collect the freight or other costs from an intermediate holder if the ultimate holder is unable to pay?

That this is not unimportant is illustrated by the case of The Moa.⁹ Because of engine problems, the vessel had dropped anchor in dedicated anchoring grounds in the river Scheldt. When the tide turned, however, the anchor dragged and the vessel went partially aground, requiring tug assistance to be refloated again. Part of the salvage award was initially paid by the cargo interests. The cargo interests however claimed that the engine problems and the subsequent stranding were caused by unseaworthiness of the vessel, and therefore sued the carrier to recover their payment to the salvors. The Antwerp Court of Appeal held that such a claim is a claim under the bill of lading, and can only be brought by the party that held the bill of lading at the time of the salvage operations, which is not necessarily the party that ultimately presented the bill of lading at destination.

6 The theory will also have to explain the position of the ‘non-contracting shipper’, i.e. the party that delivers the goods to the carrier but has not itself made the contract of carriage with the carrier. This is, for instance, the case in an FOB sale, where the buyer must arrange for the carriage of the goods that he bought. The shipper in such case will deliver the goods to the carrier, and may receive the original bills of lading from the carrier, but was not the contract partner of the carrier.¹⁰ There are also non-contracting shippers in case of subcarriage, where A enters into a contract of carriage with B, which then, as principal, enters into a second contract of carriage with C. The bill of lading is issued by C pursuant to C’s contract with B, but names A as shipper and the goods are delivered for carriage by A.¹¹ What is then the position of the shipper? Does he have rights against the carrier, and does the carrier have rights against him?¹²

7 Finally, there are those parties that receive and hold the bill of lading as security (e.g. a bank in the context of a documentary credit). From their own perspective, their position is special: they are not interested in the goods per se, but only as security for a claim, and will therefore only be enforcing rights under the bill of lading if matters have gone ‘wrong’, i.e. if their claim has not been paid. Such holders are not concerned with the carriage as such, and would certainly prefer not to acquire any liability towards the carrier.¹³ The carrier, on the other hand, would be pleased to have an additional debtor under the bill of lading.

8 The issue has been debated since at least the 19th century,¹⁴ and over the years, a number of theories have been proposed, challenged and defended. To this date, however, no single theory has gained universal acceptance, certainly not on an international level. Before having a more detailed look at the different theories, however, it is important to revisit the functions of the bill of lading. Each of the different functions may be relevant to third parties, but not to the same extent.

1On terminology: the term ‘contract of carriage’ is the most general term, referring to any contract that deals with the carriage of goods or passengers. ‘Contract of affreightment’ largely covers the same scope, but is generally not used to refer to the carriage of passengers. Charter parties, on the other hand, are contracts for the use of (a part of) a vessel. In some legal systems, charter parties on the one hand and contracts of carriage on the other hand are strictly distinguished and deemed to be mutually exclusive. It is clear, however, that at least a voyage charter party is very similar to a contract of carriage. In common law countries, (voyage) charter parties and bills of lading are usually seen as two subtypes of the more general category of the contract of carriage. In the Netherlands, Article 8:370.(1) of the Civil Code explicitly provides for the possibility that a contract of carriage may take the form of a voyage or a time charter party. The Spanish Act 14/2014 on Maritime Navigation provides in Article 203 that ‘charter party’ is another name for ‘contract of carriage’ (“Por el contrato de transporte marítimo de mercancías, también denominado fletamento …” – The contract for carriage of goods by sea, also called charter party …).

2This principle is generally accepted. See, for example, R. Aikens, R. Lord and M. Bools, Bills of Lading, London, Informa, 2006, n° 7.6 at p. 125; P. Seck, Reisbevrachting en cognossementsvervoer, Zutphen, Uitgeverij Paris, 2011, at p. 129.

3‘Written’ is taken to include modern forms of writing such as emails. Bookings these days are quite often made by email.

4The shipper (chargeur, Absender, afzender), in the legal sense of the term, is the party that enters into the contract of carriage with the carrier.

See A. Kpoahoun Amoussou, Les clauses attributives de compétence dans le transport maritime de marchandises, Presses Universitaires d’Aix-Marseille, 2002, n° 433 at p. 276; M. Spanjaart, Vorderingsrechten uit cognossement, Zutphen, Uitgeverij Paris, 2012, at p. 31.

Article 1.(8) of the Rotterdam Rules explicitly confirms this definition.

The shipper in this sense is not necessarily the party that is identified in the box marked ‘shipper’ on the bill of lading.

5Compare H. Tiberg, “Legal qualities of transport documents”, 23 Tul. Mar. L. J. 1998, at p. 3.

6R. De Wit, Multimodal Transport: Carrier Liability and Documentation, London, LLP, 1995, n° 5.1 at p. 243; G. Ripert, Droit Maritime, Tôme II, Paris, Editions Rousseau et Cie., 1952 (4th Ed.), n° 1579 at p. 489; J.-P. Tosi, “L’adhésion du destinataire au contrat de transport”, in X., Mélanges Christian Mouly, Paris, Litec, 1998, at p. 175.

7P. Seck, Reisbevrachting en cognossementsvervoer, Zutphen, Uitgeverij Paris, 2011, at p. 162.

8During the parliamentary debates on the new Dutch Civil Code, it was explicitly pointed out that the question of whether or not a third-party holder of the bill of lading becomes a party to the contract of carriage has immediate practical relevance, as the answer to this question may have an influence on the validity of jurisdiction clauses. See M. Claringbould, Parlementaire Geschiedenis Boek 8: Verkeersmiddelen en Vervoer, Deventer, Kluwer, 1992, at p. 474.

9CA Antwerp 5 October 2009 (interim) and 9 May 2011 (final), Case 2008/AR/1841, T.B.H. 2011, 731 (case analysis).

10Some legal systems have different terminology to distinguish between the shipper who enters into the contract of carriage with the carrier and the ‘shipper’ who only delivers the goods to the carrier but does not negotiate the contract of carriage with him. Under German law, for instance, the former is called the Absender, while the latter is called the Ablader.

The Rotterdam Rules have introduced the concept of ‘documentary shipper’ (Article 1.9), which is not entirely the same, however. A documentary shipper is a person, other than the shipper (the contract partner of the carrier), that accepts to be named as ‘shipper’ in the transport document. A non-contracting shipper, as the term is used here, refers to the party that physically delivers the goods into the hands of the carrier and that may or may not be named as ‘shipper’ in the transport document.

11See, for example, Cho Yang Shipping Co. Ltd v Coral (U.K.) Ltd [1997] 2 Lloyd’s Rep 641 (Court of Appeal, 14–15 April & 15 May 1997). Coral contracted with Nortrop, Nortrop with Interport, and Interport with Cho Yang Shipping, all parties acting as principals. The goods were delivered for shipment by Coral, which was also named as shipper in the bill of lading, which was on Cho Yang’s form. The question was whether Coral could be sued for freight by Cho Yang.

See also OLG Rostock 27 November 1996, Case 6 U 113/96, TranspR 1997, 113.

12M. Spanjaart, Vorderingsrechten uit cognossement, Zutphen, Uitgeverij Paris, 2012, at p. 148.

13Compare R. Zwitser, “Het cognossement als zekerheidsinstrument”, NTHR 2007–2, at p. 84.

14G. Kirberger, “De positie van den geadresseerde”, Rechtsgeleerd Magazijn 1898, at p. 41; A. Mesritz, De Vrachtbrief, Amsterdam, J.H. de Bussy, 1904, at p. 65; A. Polak, Historisch-juridisch onderzoek naar den aard van het cognossement, Amsterdam, Gebroeders Binger, 1865, at p. 121.

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