Problems frequently arise in relation to deck carriage of containers in spite of the fact that container vessels are invariably designed to carry a significant proportion of their cargo on deck. Losses in relation to deck carriage are more frequent than for containers in the hold and many shippers therefore try to stipulate under deck stowage. A clean bill of lading was historically assumed to imply under deck stowage and there could be a breach under a letter of credit if in fact the goods were carried on deck. How far is it open to a shipper to control this important aspect of the contract of carriage?
Typical bill of lading term in relation to deck carriage
Bill of lading terms usually define the carrier's right to carry goods on deck in a "liberty clause" and then define the carrier's subsequent liability for loss or damage. A typical liberty clause seeking to restrict the shipper's rights may read:
"Containers, whether consolidated by the carrier or received by the carrier in a consolidated condition from the merchant, may be carried on or under deck without notice to the merchant"
The carrier may then go on to define its liability in a most restrictive manner:
"Goods which are stated in the document evidencing the contract of carriage to be carried on deck are carried without responsibility on the part of the carrier for loss or damage of whatsoever nature arising during carriage by sea whether caused by unseaworthiness or negligence or any other cause whatsoever"
To what extent are such clauses enforceable and what can be done about them?
Position under international conventions
The Hague Rules of 1924 impose certain mandatory liabilities on carriers but these do not apply in the case of deck carriage, where the carrier may stipulate its own provisions in the bill of lading terms. If the face of the bill of lading states that carriage is to be on deck and carriage is actually effected on deck, the carrier is not bound by the Rules in relation to such carriage. Thus the second bill of lading clause quoted above, unfair though it appears, is not outlawed by the Rules. The carrier is free to stipulate nil liability, but equally a shipper could make contrary stipulation.
In practice, many carriers apply the Hague Rules (with their perceived low limit of liability for a "package") by contract to on deck carriage. This is a device to defuse any backlash from shippers at minimal cost. They do not usually apply the apparently more financially generous Hague-Visby Rules in such circumstances.
The use of a "liberty clause", such as the first clause quoted above, is intended to give the carrier additional freedom to decide on-deck carriage at the last minute without notice to the shipper, but such bill of lading terms may backfire badly if a clean bill of lading not stating on deck carriage is issued to an unsuspecting shipper.
The drafters of the Hague Rules required that the face of the bill of lading should state on deck carriage because a shipper in such circumstances might be left totally unprotected and also without effective insurance cover and should be clearly aware of these risks. There should also be clear notice by the notation on the bill of lading to any subsequent holder of a negotiated bill of lading that no claim might be possible against the carrier.
Courts have in some cases reacted harshly against carriers when clean bills have been issued in the case of deck carriage, with some courts refusing to allow the carrier to rely on any of its bill of lading terms or on the Hague Rules to defend itself from a claim or limit its liability. Unfortunately there is no uniformity of treatment as between courts in the UK, the US and Civil Law jurisdictions such as France. It has been held that a clean bill of lading will override the writing on the back of the bill of lading and thus contradict any apparent authority for the carrier to carry on deck. It has been held that a liberty clause obviating the need for notice on the face of the bill of lading is a non-responsibility clause, as it would allow the carrier to avoid Hague Rules responsibilities without informing the shipper. Such non-responsibility clauses are outlawed by the Rules.
It is interesting to note that under the 1968 Hague-Visby Rules, which apply to most UK outward shipments, ship owners have managed to claw back significant protection in relation to unauthorised deck carriage. The defences under the contract and the Hague-Visby Rules may still be disallowed in some cases. However, the 2SDRs per kilo or 666.67SDR per package or unit financial limits of liability under the Hague-Visby Rules may now only be set aside if the shipper can prove that the unauthorised deck carriage was done with intent to cause damage or recklessly and with knowledge that damage would probably result. It is exceedingly difficult to prove such intent on the part of a carrier.
The Hamburg Rules of 1978 are now in force in some 26 states. They generally strike a slightly better balance between carrier and shipper rights. Under the Hamburg Rules, goods may be carried on deck:
if in accordance with an agreement with the shipper or with the usage of the particular trade or
if legislation requires it, for example in the case of some hazardous goods
This suggests that carriers may raise a presumption of legitimate deck carriage of containers when claims occur, as they will claim that such carriage is a habitual trade practice.
Where consent, usage, or legislative requirement applies, the carrier is liable for loss, damage and delay in exactly the same circumstances as for other types of carriage. The Hamburg Rules are thus very different from Hague and Hague-Visby Rules, which take the carrier outside the convention requirements when such authorised carriage occurs. Under the older conventions, the carrier is often able to exclude all losses. This is not possible under the Hamburg Rules as they continue to apply mandatorily to deck carriage.
It is effectively still a requirement under Hamburg Rules for a statement to appear on the face of the bill of lading when deck carriage takes place. In the absence of such a statement, the carrier has the burden of proving shipper agreement to carriage on deck and is not able to plead such an agreement against a subsequent holder of a negotiated bill of lading. In the absence of such a statement, the carrier loses the defences under the Hamburg Rules where loss, damage or delay is caused by the on-deck carriage but benefits from the limits of liability except in the case of wilful misconduct. There may be cases of exceptionally poor stowage or gross negligence concerning maintenance of equipment where such misconduct may be shown.
Where the carrier places goods on deck, contrary to express agreement for carriage under deck, the Hamburg Rules provide that it will be fully liable for any losses.
Practical measures by shippers
i Contract stage
Assessment of needs
Shippers need to consider how vulnerable their containerised cargoes may be to cargo-specific risks when carried on deck rather than under deck. There is a generally higher risk of washing overboard and collision damage, but it is an incremental rather than geometrically increased risk. However where the consequences of even a moderate increase in risk could be severe (cargo required for a specific project, cargo uniquely manufactured for one client) a shipper may wish to avoid risk to the greatest possible extent and to seek an assurance of under deck stowage. In doing so, shippers should appreciate that they are asking the carrier to lose operational flexibility and that this may have a cost attached. In addition, an insistence on under-deck carriage could lead to a sailing being missed while awaiting sufficient capacity. It is, however, a legitimate aspiration to secure an express agreement for under-deck carriage where the nature of the cargo warrants this and to expect the carrier to honour the agreement.
Agreement for under-deck carriage
The agreement would need to state that it was an express variation of the bill of lading terms and comply with any of the carrier's requirements as to the form of such an agreement. It would need to be made at a level in the carrier's management where authority for such variation may be given and the question of authority should be carefully checked to avoid later surprises.
A unilateral request (rather than agreement) for under deck carriage may be of some use as evidence that the shipper failed to consent to on-deck carriage, and as explained above, this may have adverse consequences for the carrier when seeking to defend a later claim.
Bill of lading term to include liability for deck carriage
As has been seen above, typical bill of lading terms may exclude all liability for loss of containers on deck. Where commercially possible, a shipper may wish at least to ensure that the bill of lading term is altered to apply the same regime to on-deck as under deck carriage.
ii Claim stage
Where a survey report indicates that the affected container was on deck, the shipper should review all the circumstances of the carriage. Was a request made for under-deck stowage? Was there an agreement for such stowage? Did a statement appear on the face of the bill of lading or not? Given any element of doubt, a shipper might seek at least to secure compensation identical to that which would have applied in the case of under-deck carriage. Where there is strong legal precedent, a carrier may be identical to that which would have applied in the case of under-deck carriage. Where there is strong legal precedent, a carrier may be pursued for full compensation in some countries. The most critical issue remains whether the bill of lading on its face stated that carriage would be on deck.