Lien Clause

Lien Clause

Shipowners shall have a lien on the cargo for freight, dead freight, demurrage and damages for detention. Charterers shall remain responsible for dead freight and demurrage, including damages for detention, incurred at the port of loading.

Lien on the Cargo for:

1- Freight
2- Dead Freight
3- Demurrage
4- Damages for Detention

Charterers shall also remain responsible for freight and demurrage, including damages for detention, incurred at the port of discharge, but only to such extent as the Shipowners have been unable to obtain payment thereof by exercising the lien on the cargo.

The effect of Lien Clauses in this form is to allow owners the right to exercise a lien over the cargo in the first instance in order to effect recovery from cargo owners, to the extent that they are able.

As can be seen from in the Miramar Case, such a lien clause needs to be drafted carefully as do provisions within the charterparty transferring responsibility for the payment of such things as freight, dead freight and demurrage.

Ineffective transfer of these responsibilities to a third party cargo owner will result in the lien being ineffective as against those parties. The effect of such clauses is to cease liability on the part of the charterer in so far as recovery can be made from the cargo owner at the time.

In the Sinoe Case, the vessel was chartered on the Gencon form but with the normal Lien Clause deleted and replaced by a clause reading: ‘Charterers’ liability shall cease as soon as the cargo is on board owners having an absolute lien on the cargo for freight, dead freight and demurrage and average’.

Demurrage was incurred at the discharging port. Although the bill of lading duly incorporated the terms of the charterparty, and hence the Lien Clause, no lien was in fact exercisable because the receiver was the Government of the country in which discharge was effected and it had issued a proclamation of emergency empowering it to forbid, inter alia, the enforcement of such liens.

Right of Lien

The Arbitrator found that the Lien could not be exercised legally or practically either ashore or on board. The charterers argued that it was enough that a Right of Lien was created irrespective of whether the right was enforceable.

The Court of Appeal rejected this argument, holding that the Right of Lien had to be enforceable and effective at the time of discharge for the charterers’ liability to cease. Only Lord Denning MR referred to the normal Lien Clause having been deleted but he did not appear to think that it would have produced any different result, the ‘Sinoe’ 1972.

Commonly one finds Cesser Clauses which are not expressly related to the provision of a Lien. In such cases it has been held that so long as the charterparty contained provisions for the grant of a lien, even though apparently separate from the Cesser Clause, the Cesser and Lien provisions will nevertheless be treated as co-extensive.