Liens

Liens

A lien is the right of the carrier to refuse to release goods or documents belonging to the shipper while its charges remain unpaid. Liens exist under English common law and the subject is particularly complex when the ownership of goods or documents has been transferred to third parties. A particular lien is exercisable only against the goods involved in a specific contract. A general lien is exercisable against any goods of the customer even though they may not be the subject of the particular contract in respect of which sums are overdue. The exercise of a lien is often the carrier's only realistic remedy in relation to unpaid invoices and may also be of value if the carrier suspects that a debtor is close to going into liquidation. While the lien clauses in bill of lading terms are subject to possible negotiation where they are unreasonably widely drawn, it is unlikely that a carrier would renounce its rights to lien altogether.

Typical bill of lading lien terms

"The carrier shall have a lien on the goods and any documents relating thereto for all sums payable to the carrier under this contract and for general average contributions to whomsoever due. The carrier shall also have a lien against the merchant on the goods and any document relating thereto for all sums due from him to the carrier under any other contract"

"The carrier may exercise his lien at any time and any place in his sole discretion whether the contractual carriage is completed or not"

At common law, the contractual carriage should normally be completed and goods should be available for collection before the carrier is entitled to exercise a lien. This clause therefore modifies the position in favour of the carrier.

"in any event any lien shall extend to cover the cost of recovering any sums due and for that purpose the carrier shall have the right to sell the goods by public auction or private treaty without notice to the merchant"

The words in italics are also an extension of common law powers in favour of the carrier.

"The carrier's lien shall survive delivery of the goods"

The essence of a lien is possession of the goods, but here the carrier seeks to prolong the power to a time when possession has been given up.

Position under international conventions

The Hague, Hague-Visby and Hamburg Rules are silent on the issue of carrier liens. In the UK, the common law position may be modified by contract in the case of cargo shipments, making the extent of liens subject to possible negotiation.

Practical measures by shippers

Contract stage

The nature of the carrier's lien should be checked and, where commercially possible, the shipper may wish to limit it as closely as possible to the powers available at common law. In particular, the shipper could seek to agree with the carrier that a lien will not be exercisable where credit terms apply and the shipper has been regularly settling its debts in accordance with the credit terms. However, the shipper needs to recognise the carrier's legitimate concerns, for example in the event of shipper insolvency, and that it will fight hard to protect its legitimate interests in this area by seeking to retain a particular and general lien.

Claim stage

The shipper should check that the lien is being legitimately exercised. This is all the more advisable if the shipper is a third party to a dispute between the consignor or consignee (as the case may be) and the line, rather than the party who is alleged to be in any kind of default. There are legal procedures for obtaining release of cargo and, where it is shown that the carrier has acted improperly, it may become liable in damages for all the losses incurred by the shipper. The issue of liens is particularly complex and there are only a handful of lawyers in most countries who are really competent to advise.