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Hague Rules or Hague-Visby Rules?

In Yemgas FZCO & Ors v Superior Pescadores SA (“Superior Pescadores”) [2016] EWCA Civ 101, the Court of Appeal was asked to consider whether the Clause Paramount wording incorporated the Hague Rules or the Hague-Visby Rules.

The dispute involved the shipment of LNG machinery and equipment under six bills of lading from Antwerp, Belgium to Balhaf, Yemen on the vessel Superior Pescadores in January 2008. During the voyage to Yemen, the cargo in hold no.1 shifted, causing damage to part of the cargo, which resulted in a loss of USD 3.6 million. A Club LOU was provided by the Owners P&I Club to the cargo interests which agreed that the claim would be subject to English law and jurisdiction.

As a matter of English law, the cargo claim was subject to the limitations detailed in the Hague-Visby Rules as carriage was from a port in a contracting state – Belgium. Accordingly, the Hague-Visby rules were incorporated by force of law. However, the six bills all contained a clause paramount which provided that, “the Hague Rules as enacted in the country of shipment shall apply to this contract”. There was no mention of the Hague-Visby Rules.

Cargo interests spotted this. They argued that the clause paramount contractually incorporated the Hague Rules and, as a result, they should be afforded the benefit of the Hague Rules package limit where it was higher than the Hague-Visby Rules limit. This enabled them to claim an extra USD 200,000.

First instance decision
At first instance, Males J held that he was bound by authority, referring to the first instance decision in the Happy Ranger and the obiter comments of Lord Justice Tuckey in the same case on appeal. He held that the clause paramount was a contractual agreement that the Hague Rules would apply. However, he held that it was not an agreement for a higher package limit and that cargo interests were bound by the Hague-Visby package limits. Cargo interests appealed.

Court of Appeal decision
The Court of Appeal (Lord Justices Longmore, Tomlinson and McCombe) unanimously upheld the first instance decision that cargo interests were bound by the Hague-Visby Rule package limits, albeit on a different basis. The Court of Appeal held that, where a bill of lading is issued incorporating the Hague Rules as enacted in the country of shipment and the country of shipment has enacted the Hague-Visby Rules, this wording should be considered to incorporate the Hague-Visby Rules.

This decision provides clarity and enables contracting parties to be clear on what their obligations will be at the outset of a contract. However, it goes without saying that the decision of the Court of Appeal is specific to the particular wording of the clause and the circumstances of the case.

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