Cargo Claims – Nucleus of Maritime Trade

Pradeep Jain, Nalini Mishra | February 2016

INTRODUCTION

Cargo is nucleus of the maritime trade and all other components or activities like chartering of vessel, appointment of agents, involvements of bank or finance revolves around it. Being a nucleus, cargo is also very vulnerable to dispute even it doesn’t involve in disputes or it belongs to innocent owner but on board of rogue vessel. Generally cargo claims are brought by the cargointerest against carriers when the cargo in which they have an interest is not delivered/ short delivered or damaged.

WHO CAN HAVE INTEREST IN CARGO;

Following persons or entity can have interests in the cargo depending upon nature of disputes or circumstances;

The shippers of the goods;
The receivers (or, in the case of non delivery, the intended receivers) of the goods;
Charterers or sub-charterers of the vessel on which the cargo was shipped; d. Banks who have extended a line of credit

WHY CLAIM OF CARGO IS NOT STRAIGHT FORWARD CASE;

To claim of cargo is not simple as terms suggest. When it comes to prove the case, it becomes tough involving so many complexities. The objectives of the parties to the claim, however, are simple but following circumstances whether singly or in combination of others make it complex;

The cargo-claimant has suffered a loss which it seeks to cover through an award of damages against the carrier;
The carrier, for its part, seeks to deny, exclude or limit the liability for that loss.
Whether the ship on which the goods were carried is or is not under charter
Whether the claim is brought by a charterer or a non-charterer,
Who holds the bill of lading or nature of bill of ladings.

ESTABLISHMENT OF THE CASE

In common maritime practice, the sea trading is governed by English law but specific rules prevails over the common practices or rules and therefore governing law mentioned in the contract matters most. For a successful claim, the party having the interest in the cargo has to prove the following;

Whether it has title to sue:
It is first and foremost step to establish a legitimate case in the court of jurisdiction, the claimant without locus standi lacks legitimacy against the carrier. The carrier is also concerned about the claimant’s title to sue as by demolishing the claimant’s locus standi is the quickest escape route from the claim for the carrier. There is no question arises when the cargo claimant is the charterer or the shipper. The doctrine of privity of contract applies in case the claimant is a third party to the contract. The section 2 of carriage of goods by sea act 1992 of UK provides three types of cargo interest with right of suit against the carrier:

Lawful holders of transferable bills of lading;
Parties for the time being names as consignees on sea waybills and straight bills; (iii) Parties to whom the carrier undertakes to deliver the goods under a ship’s delivery order.

Identity the responsible defendant or carrier for the defective delivery:
Generally, the identity of the carrier is not a problem at all, if the claimant’s claim is in contract. In case of several layers of charter parties, the identity becomes difficult. Another part of problem and a part of the solution lies in the way bills of ladings are signed and by whom.
Applicability of Hague Visby rules apply:
Matter under English law depends on whether or not the Hague Visby rules apply.
The legible and provable loss:
It is the claimant to establish that the carrier has failed to deliver the cargo which were loaded into it. It can be proved by the comparison between two photographs taken at the time of loading and discharging of cargo
Whether loss sustained due to commission or omission carrier:
Just to compare the photograph and proving that the goods discharged were not the goods stated to have been shipped, though necessary but not sufficient for the success of the cargo claim. For the claimant to succeed, it needs to prove that its loss was the direct result of a breach by the carrier’s
Excluding or limiting the carrier’s liability:
For the carrier, there are a few remaining routes out of liability or, at any rate, out of as much recovery as the claimant would like. The carrier could extinguish the claim, either by arguing that the claim has been time –barred or by pleading one of the exceptions to liability allowed by the Hague-Visby Rules.

CONCLUSION

Cases involving cargo-interest are very complex in nature as the attorney of the claimant or defendant has to prove various points in the court. Therefore, the attorney has to go through all documents of sea trading and related to it. The size of the shipping documents is massive as it involves the correspondences, invoices, bill of lading or contract between the various parties. Due to the involvement of many parties like charterer or sub-charterer etc. it is a task for the attorney to establish the liabilities. Therefore, knowing the nature of the various documents, laws of the country and the English law is very important to win a case.

About Author

Pradeep Jain

Pradeep K Jain is the Managing Partner at Singhania & Co., Mumbai Office, and an expert in Maritime and Corporate Law.

Nalini Mishra

Nalini Mishra - Senior Associate