5.1 Basis of Liability

5.1.1 Introduction

From the final report of the Uniformity Sub-Committee1 it appears that there was a consensus within the Uniformity Sub-Committee that the system of liability adopted in the Hague-Visby Rules should be retained except for the defence relating to faults in the navigation and management of the ship, in respect of which views were divided. There was also a consensus on the need for a provision such as that contained in Article 3(1) and (2) of the Hague-Visby Rules. The Uniformity Sub-Committee did not deem it appropriate to draft any text in view of the work that had commenced on other issues of transport law.

The ISC considers that, in view of the broader spectrum covered by the draft Outline Instrument and, also, of the future possible extension of the scope of such Instrument to door-to-door transport, in addition to a liability regime based on the Hague-Visby Rules, with or without the defence relating to faults in the navigation and management of the ship, some alternative options should be envisaged.

5.1.2 The first of such additional options could consist in a general rule pursuant to which the carrier is liable for loss of or damage to the goods unless he proves the absence of his fault. It was suggested that a provision to give effect to this option could be modelled on Article IV Rule 2 (q) of the Hague-Visby Rules. Such a provision could read:

The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when it receives the goods and the time of delivery, as well as for any delay in delivery, unless the carrier can prove that the loss, damage or delay did not result from any fault or neglect on the part of the carrier or its servants or agents.

It is submitted that the effect of this provision would be similar to the effect of Article 5.1 of the Hamburg Rules (read in accordance with the Common Understanding set out in Annex II thereto) whereby the carrier is liable "unless the carrier proves that he, his servants or agents took all measures that could reasonably be required to avoid the occurrence [which caused the loss, damage or delay] and its consequences". The catalogue of exceptions would consequently disappear, except for the exception relating to saving of life or property at sea. Also if this option were adopted, a provision setting out the duties of the carrier, along the lines of Article 3(1) of the Hague-Visby Rules might still be considered useful.

5.1.3 The second of such additional options might impose a more stringent basis of liability. It was suggested that a provision to give effect to this option could be modelled on Article 172 of Convention on the Contract for the International Carriage of Goods by Road (CMR) on the grounds that it was familiar to the industry and had been interpreted by the courts. Such a provision could read:

(i) The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when it receives the goods and the time of delivery, as well as for any delay in delivery.

(ii) The carrier shall however be relieved of liability if the loss, damage or delay was caused by:

(a) The wrongful act or neglect of the claimant3;

(b) The instructions of the claimant given otherwise than as the result of a wrongful act or neglect on the part of the carrier;

(c) Inherent vice of the goods;

(d) Perils, dangers, and accidents of the sea or other navigable waters;

(e) Saving or attempting to save life or property at sea;

(f) Circumstances which the carrier could not avoid and the consequences of which it was unable to prevent.

(iii) The burden of proving that the loss, damage or delay was due to one of the causes specified in 2(a)-(f) shall rest upon the carrier.

It is arguable that exceptions (c) and (d) are embraced in (f) and that they are unnecessary.

5.1.4 Of course other options could be envisaged. For example, a liability regime could be adopted whereby the carrier is liable for loss of or damage to the goods unless he proves that such loss or damage resulted from an event beyond his control. This concept has been adopted in the Convention on Contracts for the International Sale of Goods 1980 ("Vienna Sales Convention"), article 79.1 of which so provides:

A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.

5.2 Allocation of damages

If a breach of the carrier’s obligations combines with another cause to produce loss, damage, or delay in delivery, the carrier is liable only to the extent that the loss, damage, or delay in delivery is attributable to such breach, provided that the carrier proves the amount of the loss, damage, or delay in delivery not attributable thereto.

This provision follows article 5.7 of the Hamburg Rules.

An alternative approach is illustrated by the proposed amendments to the U.S. COGSA, which put an equal burden on each party. The cargo claimant has the burden of showing the extent to which the loss or damage was due to a cause for which the carrier is responsible. Conversely, the carrier has the burden of showing the extent to which the loss or damage was due to a cause for which the carrier is not responsible. The court would then allocate the responsibility for the loss or damage in proportion to the respective causes. This provision is drafted in the U.S. proposal as follows:

If loss or damage is caused in part by a breach of a carrier’s obligations, or the fault or neglect of a carrier, and in part by one or more of the exceptions [for which the carrier is not responsible], then the carrier or ship is-

(A) liable for the loss or damage to the extent that the party seeking to recover for the loss or damage proves that it is attributable to that breach, fault, or neglect; and

(B) not liable for the loss or damage to the extent the carrier proves that it is attributable to one or more of those exceptions.

Under article 5.7 of the Hamburg Rules, it is unnecessary to consider what happens if there is insufficient evidence to determine the cause of the loss or damage. Because the full burden is on the carrier, the carrier is fully responsible for the loss or damage in cases of insufficient evidence. If the parties carry an equal burden, however, it is necessary to consider what happens if there is insufficient evidence for either party to carry its burden. Under the proposed amendments to the U.S. COGSA, the responsibility for the loss or damage in such an unusual situation would be divided equally between the cargo claimant and the carrier (on the theory that each was equally unable to carry its burden).

5.3 Liability of Contracting and Performing Carriers

5.3.1 A performing carrier is subject to the responsibilities and liabilities under this Instrument, and entitled to the rights and immunities provided by this Instrument (a) during the period it has custody of the goods; and (b) at any other time to the extent that it is participating in the performance of any of the activities contemplated by the contract of carriage.

This provision is generally based on the discussion at the ISC’s third meeting in July and on the proposed amendments to the U.S. COGSA. The contracting carrier is liable (subject to the terms of this Instrument) under the contract of carriage for the entire period of responsibility under 3.1. A performing carrier, in contrast, is not liable under the contract of carriage, and under this Instrument it is not liable in tort. In return for escaping liability in tort, the performing carrier assumes liability under the Instrument during the period it has custody of the goods or when it is otherwise participating in the performance of the contract of carriage.

The current draft provides for uniform liability for performing carriers. An alternative approach would be to impose liability on performing carriers under the "network" system, whereby each carrier would be liable under its own liability system. European truckers, for example, would presumably be liable under the terms of CMR instead of under the terms of this Instrument.

5.3.2 Subject to 5.3.4, a carrier shall be responsible for the acts and omissions of any performing carrier who performs, undertakes to perform, or procures to be performed any of that carrier’s responsibilities under the contract of carriage as if such acts or omissions were its own.

5.3.3 Responsibility is imposed on a carrier under 5.3.2 only when the performing carrier’s act or omission is within the scope of its contract, employment, or agency, as the case may be.

5.3.4 If an action is brought against a performing carrier who proves that it acted within the scope of its contract, employment, or agency, as the case may be, the performing carrier is entitled to the benefit of the defences and limitations of liability available to the contracting carrier under this Instrument.

5.3.5 To the extent that both the contracting carrier and performing carrier are liable, their liability is joint and several but only up to the limits provided for in [5.4], 5.6 and 5.7.

5.3.6 Without prejudice to the provisions of 5.8, the aggregate liability of the contracting carrier and performing carriers will not exceed the overall limits of liability under this Instrument.

Under 5.3.2, each carrier is responsible for the acts and omissions of any performing carrier who works under it. Thus the contracting carrier is responsible for the acts and omissions of any performing carrier because all performing carriers work directly or indirectly for the contracting carrier (who assumes all of the carrier’s responsibilities under the contract of carriage). A performing carrier is responsible for the acts and omissions of the performing carriers who work under it, i.e., its own subcontractors, employees, and agents; their subcontractors, employees, and agents; and so on, indefinitely. The length of the chain connecting a performing carrier to the contracting carrier does not matter; when a performing carrier is performing its duties under the contract of carriage, all those above it in the chain are responsible for its acts and omissions.

The responsibility imposed on a carrier under 5.3.2 is limited by 5.3.3, which provides that the rule stated in 5.3.1 only applies when the performing carrier’s act or omission is within the scope of its contract, employment, or agency, as the case may be. In other words, if a carrier subcontracts part of its responsibilities under the contract of carriage, it is liable for the subcontractor’s acts or omissions only when the subcontractor’s act or omission is within the scope of its contract. Similarly, if a carrier hires employees, it is liable for the employees’ acts or omissions that are within the scope of their employment. And if a carrier engages agents, it is liable for the agents’ acts or omissions within the scope of their agency.

Under 5.3.4, a performing carrier is generally entitled to the same rights as the contracting carrier. This gives performing carriers the benefits of a broad Himalaya clause without the need to include a Himalaya clause in the contract of carriage or the transport document.

5.3.6 reiterates what is already the normal rule under the Hague and Hague-Visby Rules.

5.4 Delay

5.4.1 Delay in delivery occurs when the goods are not delivered at the place of destination provided for in the contract of carriage within the time expressly agreed upon.

At its third meeting the ISC considered that this provision should be drafted to reflect the consensus in the Uniformity Sub Committee.

Time may be an essential factor in the carriage of goods. Sometimes, parties have agreed in the contract specific provision on the performance of the carrier, including the time of arrival of the goods. Often, the agreed freight corresponds with the importance that the parties attach to a timely arrival of the goods. In principle, it is up to the parties to express in their contract what they expect from each other in terms of performance.

5.4.2 The liability for any economic loss caused by delay in delivery shall be limited to an amount equivalent to […times the freight] payable for the goods being delayed. However, the aggregate liability under 5.7.1 and the first sentence of this paragraph shall not exceed the limits, which would be established under 5.7.1 for total loss of the goods in respect of which such liability was incurred.

If the damage due to delay is physical damage to the goods, such damage can be dealt with according to the rule relating to loss or damage to the goods. However, the loss incurred in connection with delay may be wholly or partly economic loss. Under the Hague-Visby Rules such damage arguably does not qualify for compensation. It is proposed to change this. The CMNI Convention limits this liability to the amount of the freight.

In view of the commercial aspects of delay in delivery, it may be questioned whether paragraph 5.4.2 should be of mandatory nature, i.e. parties should be allowed to make their own arrangements as to timely arrivals and to put an agreed amount of liquidated damages on arrivals overdue.

Further, it may be considered whether a new Instrument should contain a provision in the case of excessive delay to the effect that the goods shall be deemed to be lost, for the purposes of the measure of indemnity, if they are not placed at the disposal of the consignee within a period of time (e.g. 90 days) from the date on which the goods should have been delivered. Such provision could include that if the goods are placed at the disposal of the consignee after the lapse of the above period, the consignee should be given an option of either accepting payment of the indemnity for total loss, or accepting the late delivery of the goods, without prejudice to his claim for damages for delay. At its third meeting the ISC considered that no such provision should be drafted at this stage.

5.5 Deviation

(a) The carrier is not liable for damage, loss, or delay in delivery caused by a deviation to save or attempt to save life or property at sea, or any other reasonable deviation.

(b) An unreasonable deviation constitutes a breach of a carrier’s obligations under this Instrument, and the remedies for such a breach shall be determined exclusively under this Instrument.

This provision is generally based on the discussion at the meetings of the Uniformity Sub-Committee. 5.5(a) is based on article 4(4) of the Hague and Hague-Visby Rules. In light of the discussion at the ISC’s fourth meeting in October, delay was added to the provision. 5.5(b) addresses a problem that arises particularly in the United States, and thus it is largely based on the proposed amendments to the U.S. COGSA. The intent of 5.5(b) is that a deviation as such does not deprive the carrier of its right to limit its liability, but a deviation that satisfies the requirements in 5.8 would.

5.6 Deck cargo

5.6.1 Goods may be carried on deck only if

(i) such carriage is required by the relevant laws or administrative rules or regulations, or

(ii) they are carried in or on containers on decks which are specially fitted to carry containers, or,

(iii) in cases not covered by (i) or (ii) above, the carriage on deck is in accordance with the contract of carriage, or complies with the custom of the trade, or follows from other usage in the trade in question.

5.6.2 When the goods have been shipped in accordance with 5.6.1 (i) and (iii), the carrier shall not be liable for the loss or damage to these goods or delay in delivery caused by the special risks involved in their carriage on deck. If the goods are carried on deck in breach of 5.6.1, the carrier shall be liable, irrespective of the provisions of 5.1, for loss and damage to the goods or delay in delivery which are exclusively the consequence of their carriage on deck.

5.6.3 When the goods have been shipped in accordance with 5.6.1 (iii), the fact that particular goods are carried on deck must be stated in the transport document. Failing this, the carrier shall have the burden of proving that carriage on deck complies with 5.6.2.(iii) and is not entitled to invoke that provision against a third party which has acquired the negotiable transport document in good faith.

5.6.4 If the carrier under this paragraph 5.6 is liable for loss or damage to goods carried on deck or for delay in their delivery, its liability is limited to the extent provided for in 5.4 and 5.7; however, if such liability occurs while it was expressly agreed to carry the goods under deck, the carrier is not entitled to limit his liability.

At the third meeting the ISC considered that the draft provisions should reflect the consensus in the Uniformity Sub-Committee.

If goods are carried on deck, additional risks like weather exposure may be involved. Therefore, 5.6.1 limits the possibilities to carry goods on deck.

5.6.2 sets out the carrier’s liabilities for loss or damage to goods carried on deck. An exception is made for containerised goods. The current practice is that, for operational reasons, container carriers want to have the option to load containers either under or on deck. The consequence thereof is that containers on deck must be subject to the same liability regime as containers carried under deck.

Again, because of the additional risks involved, the carriage on deck according to 5.6.1.(iii) should be stated in the transport document. 5.6.3 takes care of that and adds as a sanction a reversal of the burden of proof on the carrier and the denial of the benefit of the special provisions of 5.6 for the carrier.

5.6.4. makes clear that a carrier is also entitled to limit his liability in the event loss or damage occurs due to the special risks inherent to deck carriage. However, he will loose the benefit of limitation if he breaches an express agreement to carry the goods under deck.

At the fourth ISCmeeting a proposal was made to simplify 5.6. It might be sufficient to say that deck cargo is covered by the Instrument and leave the general rules to apply. If the cargo needs to be on deck, then the carrier satisfies its duties by stowing it there. If the carrier stows cargo on deck that should not be there, it is a breach of duty to properly care for the cargo. If the carrier does so knowingly, then it loses the benefit of limitation.

Further, a matter that requires attention is that, because of their special nature, odd size or otherwise, some cargoes are exclusively carried on deck. Examples are: goods carried on board of offshore supply vessels, construction modules on deck of pontoons, etc. Usually, in these cases parties agree on special conditions, such as knock-for-knock provisions, coinsurance arrangements and the like. It is proposed that these cases should be dealt with under a separate article dealing with special carriage along the lines of article VI of the Hague Visby Rules.

5.7 Limits of liability

5.7.1 The carrier’s liability for the loss of or damage to or in connection with the goods is limited to […] units of accounts per package or other shipping unit, or […] units of account per kilogram of the gross weight of the goods lost or damaged, whichever is the higher, except where the nature and value of the goods had been declared by the shipper before shipment and inserted in the transport document, [or where a higher amount than the amount of limitation of liability set out in this article had been agreed upon between the contracting carrier and the contracting shipper.]

5.7.2 In the event of carriage of goods in or on a container, the packages or shipping units enumerated in the transport document as packed in or on such container are deemed packages or shipping units. If not so enumerated, the goods in or on such container are deemed one shipping unit.

5.7.3 The unit of account referred to in this article is the Special Drawing Right as defined by the International Monetary Fund. The amounts mentioned in this article are to be converted into the national currency of a State according to the value of such currency at the date of judgement or the date agreed upon by the parties. The value of a national currency, in terms of the Special Drawing Rights, of a Contracting State which is a member of the International Monetary Fund is to be calculated in accordance with the method of valuation applied by the International Monetary Fund in effect at the date in question for its operations and transactions. The value of a national currency, in terms of the Special Drawing Right, of a Contracting State which is not a member of the International Monetary Fund is to be calculated in a manner to be determined by that State.

At the fourth meeting of the ISC a clear view was expressed not to introduce a special limit per container.

The last part of 5.7.1 is put between [ ] because it has to be decided whether the Instrument should be of mandatory nature and whether any mandatory provision should be one-sided or two-sided mandatory.

5.7.2 complies with the current practice.

5.7.3 is in conformity with similar drafts in other recent transport conventions.

A further provision should be added dealing with an accelerated amendment procedure to adjust the amounts of limitation, along the lines of article 8 of the 1996 Protocol to the Convention on Limitation of Liability for Maritime Claims.

5.8 Loss of the right to limit liability

5.8.1 Neither the contracting carrier nor the performing carrier shall be entitled to limit its liability as provided for in [5.4,] 5.6 and 5.7 of this Instrument, or in the contract of carriage when the nature and value of the goods have been declared, if it is proved that the loss of, or damage to or in connection with the goods resulted from a personal act or omission of such carrier done with the intent to cause such loss or damage, or recklessly and with the knowledge that such loss or damage would probably result.

5.8.2 The servant or agent of the carrier shall not be entitled to limit its liability provided for in the [5.4,] 5.6 and 5.7 of this Instrument, or in the contract of carriage when the nature and value of the goods have been declared, if it is proved that the loss of, or damage to or in connection with the goods resulted from a personal act or omission of the servant or agent of the carrier done with the intent to cause such loss, damage, or recklessly and with the knowledge that such loss or damage would probably result.

The wording of this provision reflects similar provisions in other conventions, with one exception. It is considered that the declaration of the value of the goods effectively sets a new limit, because the declared value may differ from the actual value of the goods.

A point to consider is whether the limits in respect of delay have to be breakable as well. It should be borne in mind that very often delay may be caused by intentional acts (either from servants or agents or from the carrier personally) and that it concerns economic damage.

5.9 Notice of loss, damage or delay

5.9.1 The carrier shall be presumed to have delivered the goods according to their description in the transport document unless notice of loss of, or damage to or in connection with the goods, indicating the general nature of such loss or damage, shall have been given in writing to the carrier before or at the time of the delivery, or, if the loss or damage is not apparent, within three working days after the delivery of the goods. A written notice is not required in respect of loss or damage which is ascertained in a joint inspection of the goods by the carrier and the consignee.

5.9.2 No compensation shall be payable for economic loss resulting from delay in delivery unless written notice of such loss was given to the carrier within 21 consecutive days following delivery of the goods.

5.9.3 Where the goods have been delivered by the performing carrier, which had delivered the goods, the notice in writing referred to in this article given to the performing carrier shall have the same effect as that given to the contracting carrier, and that given to the contracting carrier shall have the same effect as that given to the performing carrier, which had delivered the goods.

The giving of prompt notice is of great practical importance. It enables the parties to do immediately a survey of the goods (preferably jointly) and to take the necessary measures in order to prevent further damage to the goods. As such, giving prompt notice is part of the general obligation of the parties to act reasonably towards each other and to limit the damage as much as possible. If the damage is not apparent, the consignee must have a certain period for inspection. In view of the purpose of the notice, such period may reasonably restricted to three working days.

Under air transportation law, the sanction on not giving proper notice is the loss of the right to claim damages. In maritime transport this is considered a too harsh sanction for physical damage to the goods. Under the Hague Rules, only the assumption will apply that the goods are properly delivered in accordance with their description in the transport document.

This does not apply to not giving due notice in case of economic loss. Any notice of a claim for delay in delivery can and, consequently, must be given within a short period. Normally, such claim is a matter of calculation only. The second paragraph, including the period to be fixed at 21 days, corresponds with a similar provision in the draft CMNI convention.

For practical purposes it is provided in the third paragraph that valid notice may be given to a performing carrier when it is the person who delivers the goods to the consignee. Obviously, in that case notice may be properly given to the contracting carrier as well.

5.10 Non-contractual claims

The defences and limits of liability provided for in this Instrument and the responsibilities imposed by this Instrument apply in any action against the carrier for loss of, for damage to, or in connection with the goods covered by a contract of carriage, whether the action is founded in contract, in tort or otherwise.

This provision reflects a principle which has become common in respect of transport law that contains mandatory provisions.