Rights and Immunities of Shipowner

Rights and immunities of the Shipowner (Carrier) under Hague/ Visby Rules. (I) The catalogue of exceptions
Article IV rule 2 lists the exceptions which are available to the carrier under the Hague/ Visby Rules. He is permitted to surrender the protection afforded by these exceptions in whole or in part, but he is not allowed to add to the list. The full catalogue reads as follows:‘Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from –
a) Act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship.
b) Fire, unless caused by the actual fault or privity of the carrier. c) Perils, dangers and accidents of the sea or other navigable waters. d) Act of God. e) Act of war. f ) Act of public enemies. g) Arrest or restraint of princes, rulers or people, or seizure under legal process. h) Quarantine restrictions. i) Act or omission of the shipper or owner of the goods, his agent or representative.
j) Strikes or lockouts or stoppage or restraint of labour from whatever cause, whether partial or general. k) Riots and civil commotions.
l) Saving or attempting to save life or property at sea. m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods. n) Insufficiency of packing. o) Insufficiency or inadequacy of marks. p) Latent defects not discoverable by due diligence. q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.’The meaning and effect of these exceptions are discussed fully elsewhere, but certain points are worth noting at this stage. All but two of the exceptions listed involve no fault on the part of the carrier or his servants or agents. Indeed, as we have already seen, the presence of fault will normally prevent the carrier from relying on the protection of the exceptions. The two anomalous cases are the exceptions covering navigational or management error, and the liability of the carrier for damage caused by fire. Both have been strongly criticised by cargo interests and the exception covering navigational error is unique in that no equivalent is to be found in any other transport convention. The second comment relates to the final  exception on the list. If the carrier is unable to establish that the cause of loss falls within one of the specific exceptions, he can still avoid liability by proving that whatever the cause, it involved no fault on the part of himself or his servants or agents. This is a difficult though not impossible burden of proof to discharge and it is not surprising to discover that carriers seek, wherever possible, to rely on one of the other 16 exceptions. (II) Limitation of liability The concept of limitation of liability in its various forms has a history dating back to the sixteenth century and was originally designed to encourage investment in shipping. While the justification for its continued retention in the context of the package limitation in the con- tract of carriage is less evident, it does still serve two useful purposes. It protects the carrier from the risks associated with cargoes of high undisclosed value and, by establishing a standard level of liability, enables him to offer uniform and cheaper freight rates. There is the obvious danger that, left to his own devices, the carrier might limit his liability to a derisory amount, and it was to obviate this risk that the draftsmen of the Hague Rules, and succeeding conventions, sought to prescribe a minimum standard. The option was still left open for the shipper to obtain full cover by declaring the full value of the cargo to the carrier before shipment, and having this amount entered on the bill of lading. Evidence has shown, how- ever, that this option is rarely used since declaration of the cargo’s value invariably attracts an ad valorem increase in freight rates which is normally more expensive than the cost to the cargo owner of obtaining his own insurance cover. Two problems face the draftsmen of an international convention seeking to establish a formula for limitation of liability. First, selection of an appropriate quantitative unit of goods by which to calculate the carrier’s overall liability and, secondly, agreement on a monetary unit on which to base the minimum liability. (a) Under the Hague Rules Article IV rule 5 of the Hague Rules limited the liability of the carrier to £100 gold value per package or unit. The United Kingdom in implementing the Hague Rules in COGSA 1924 initially interpreted the figure as £100 sterling, while many other signatories to the Convention converted the amount into equivalent sums in their own currencies.Inflation over succeeding years has resulted in these limits now bearing little relation to the actual damage suffered by cargo owners, but few states have seen fit to amend their respective figures in the light of this development. The problem was to some extent solved in the United Kingdom by successive Gold Clause Agreements drawn up by the British Maritime Law Association in 1950 and 1977 under which the signatories undertook to waive the ‘gold value’ criterion and substitute the sums in sterling of £200 and £400 respectively. Problems have also arisen in many countries in interpreting the terms ‘package’ and ‘unit’ as used in the formula. What constitutes a ‘package’? Is size relevant and is it essential that the article carries some form of wrapping? Again, is the term ‘unit’ intended to refer to a ship- ping unit, such as a crate, package, or container, or would it equally apply to a freight unit, i.e. the unit of measurement used to calculate the freight? The latter interpretation would be particularly appropriate when dealing with bulk cargo such as grain or oil. There is little authority on these points in English law, where the issue has attracted little litigation prob- ably due to the fact that the terms ‘package’ and ‘unit’ have been used interchangeably, the word ‘unit’ having been interpreted as meaning ‘shipping unit’. This approach has obviated the need to provide a definition for the word ‘package’, though it is perhaps surprising to find an absence of any formula to cope with the problem of bulk cargo.
The interpretation of these terms has, however, caused difficulties elsewhere, and nowhere more so than in the United States where the case law on the subject is prolific. The fact that US legislation expresses the unit of measurement in the alternative as ‘package’ or ‘customary freight unit’ inevitably creates a need for a definition of the term ‘package’. On this point the case law is not decisive. While it would appear that US courts do not regard it as essential that ‘packages’ should be fully covered or wrapped, they are nevertheless hesitant to treat unboxed vehicles or machinery as ‘packages’ for this purpose. On many occasions the cargo owner will find it more profitable to invoke the ‘freight unit’ alternative, as, for example, in circumstances where the freight units exceed the number of shipping units, but this is not invariably the case. A further problem arose in applying the Hague Rules package formula to containers, pallets and other devices for the consolidation of goods. Such methods of handling cargo were not envisaged by the draftsmen of the Rules, but to limit the liability of the carrier to $500 for the entire contents of a container at the present day would be to provide the cargo owner with a derisory remedy. Again until recently there was little authority on the point in English law, although it has been a constant source of litigation across the Atlantic. Over the years, the US courts developed three separate and distinct methods of dealing with the problem:1. Where the contents of a container are listed as separate items in the bill of lading, then each item should be treated as an individual package for limitation purposes. Thus in The Mormaclynx, where the cargo was described in the bill of lading as ‘one container said to contain 99 bales of leather’, the court held that each bale constituted a separate ‘package’. Conversely, where the bill of lading merely refers to the container without listing its con- tents then the container itself will be treated as the package. 2. An alternative solution advanced was the so-called ‘functional packing’ test. The crucial question for the court in this instance was whether the contents of the container could be transported in the individual wrappings or cartons in which they had been packed by the shipper or whether the presence of the container was essential for their preservation. If their individual packing was adequate to withstand the hazards of transport, then each would count as a separate package for limitation purposes. The leading case in which the theory was advanced was The Kulmerland where a consignment of 350 adding machines had been shipped inside a container in individual corrugated cartons sealed with thin paper tape. In the view of the US Court of Appeals (2nd Circuit) these cartons did not satisfy the functional packing test since, until they were packed into containers, they were not suitable for ocean transportation. In consequence, it was the container and not the individual carton which constituted the package. The only disadvantage of this solution is that it is contrary to normal business practice and does not make economic sense. One of the main objectives of containerisation is to reduce the cost of transport by interalia removing the necessity for expensive and elaborate packing of individual items of cargo. 3. The third approach concentrated on the identity of the party responsible for stuffing the container and the reasons underlying its use. Thus, if the shipper or his agent selects, packs and seals the container without any supervision or participation by the carrier, it is more likely that the courts will treat the container as the package rather than its contents. This is particularly true where the shipper fails to enumerate the contents in the bill of lading.
On the other hand, if the carrier for his own purposes consolidates cargo received from a variety of individual shippers into a single container, the courts will not entertain the argument that the container constitutes the ‘package’ for purposes of limitation. Indeed, it is arguable that they are prohibited from so holding by Art III rule 8 which renders void any attempt by the carrier to reduce his liability below the prescribed limits US courts have not regarded the above three tests as mutually exclusive and frequently more than one test has been invoked in a particular case. In recent years, however, the courts have sought to evaluate these tests and attempt some form of rationalisation. In The Aegis Spirit a consignment of television sets and various stereophonic equipment had been shipped from Japan to the United States in containers supplied by the carriers. The equipment was contained in double-walled cardboard cartons which had been packed into sealed containers by the shippers in the absence of any representative of the carrier. Elements relevant to all three tests were present in the facts which the trial judge had to consider in reaching a decision as to whether the container or the carton constituted the Hague Rules ‘package’. In his opinion any acceptable test ‘must reflect the realities of the maritime industry of today, while remaining faithful to the express language and legislative policy embodied in the pertinent COGSA provisions’. The functional packing test did not meet these criteria and must be rejected as being ‘commercially impracticable and unwise’. The trial judge stressed that the function of the court was not to create a fair and equitable rule for allocating risks with respect to containerised cargo, but to provide a fair and sensible interpretation of existing legislation. Approaching the construction of Art IV from this angle, the judge considered that containers should be treated as detachable compartments of the ship and the master should insist on their contents being listed in the bill. Whether or not these contents constituted individual packages should be decided in accordance with the plain and accepted meaning of the term. In his view, on the facts of the case, the unit of measurement was the individual carton and not the container. Until recently English courts had not been called upon to adjudicate on this issue, but the opportunity arose in 1998 in the case of The River Gurara. A vessel on a voyage from West Africa had run aground on the coast of Portugal and later sank with total loss of cargo. Much of the cargo was containerised and was shipped under bills of lading incorporating the Hague Rules. Many of the containers had been stuffed privately by the shippers and were covered by bills stating that they were ‘said to contain’ a given number of items such as pallets, crates, cartons or bags. The point at issue was whether the cargo owner’s right of recovery was limited to £100 per container or £100 per individual item listed on the bill.
The Court of Appeal adopted the US approach in holding that, where the contents of the container were individually listed in the bill, each item would prima facie constitute a ‘package’ for limitation purposes. The court then proceeded to consider the effect of the carrier failing to confirm the number of items listed in the bill by the shipper. Any such reservation could take one of two forms. On the one hand, the carrier could deny all knowledge of the contents of the container by the use of a phrase such as ‘weight, number and contents unknown’. The majority of the Court of Appeal took the view that the inclusion of such a clause destroyed the evidential value of any statement in the bill detailing the contents of the container. In such circumstances the cargo owner would have to seek alternative evidence extrinsic to the bill in order to establish the number of items for limitation purposes. Alternatively, the carrier could indicate that any statement in the bill as to the contents of the container was the sole responsibility of the shipper by the use of such phrases as ‘shipper’s count’ or ‘said to contain’. Although the effect of such reservations did not arise for decision in The River Gurara, Phillips LJ expressed the view that such a phrase did not necessarily destroy the evidential value of the bill. ‘It seems . . . at least arguable that the words “said to contain” do no more than make plain that the carrier is, as required by Art III rule 3, stating on the bill the “number of packages . . . as furnished in writing by the shipper” without dis- senting from the description, so that the description can be relied upon as providing prima facie evidence as to what was within the containers.’ (b) Under the Hague/ Visby Rules The Hague/ Visby Rules retained the ‘package or unit’ limitation of liability for individual items of cargo of high value, but also introduced an alternative formula based on the weight of the cargo, the shipper being entitled to invoke whichever alternative produces the higher amount. Presumably the old case law interpreting the terms ‘package or unit’ will still be applicable, while the alternative limitation ‘per kilo of the gross weight’ will be particularly relevant in the case of bulk cargo. The adoption of this formula is certainly a move in the right direction, but certain ambiguities remain which still require clarification. First, what is meant by a ‘similar article of transport . . . used to consolidate goods’? Would a roll on/roll off lorry or wagon fall within this category? Secondly, an interpretation of the phrase ‘units enumerated in the bill of lading’ will be required. Does this mean units as listed by the shipper or only those acknowledged by the carrier as required by Art III rule 3(b)? In respect of the latter it will be remembered that no acknowledgment as to quantity of cargo shipped is required from the carrier unless he has a reasonable opportunity to check. As a substantial proportion of containers are now packed and sealed by the shipper before delivery to the carrier, it is only to be expected that the carrier will take advantage of this proviso for his own protection by indorsing the bill ‘said to contain’, or ‘contents unknown’. If the container in question should subsequently be lost overboard without any further opportunity of inspecting its contents, what is the extent of the carrier’s liability? The wording of the Article suggests that, even in such an event, the units of limitation will be the items listed on the bill and not the container itself, and this should certainly be the result in cases where the carrier has adjusted the freight in response to such itemisation. A third problem of interpretation has recently arisen in relation to the meaning to be attributed to the phrase ‘as packed in such article of transport’ in Art IV rule 5(c). Allsop J in the Australian case of El Greco (Australia) Pty v Mediterranean Shipping Co considered the words ‘as packed’ to be significant in this context. He drew a distinction between individual items such as cars or boilers, capable of being carried without the need for packaging, and loose items such as bottles or posters which required some form of consolidation before shipment. In the latter case such items would only qualify as ‘units’ for limitation purposes where they are individually packed as separate items into the container. ‘The rule does not refer to the pieces or articles contained within the container; rather to packages and units as packed – that is as they are packed in the container.’ For this reason the Court held that cargo described in the bill of lading as ‘200,945 pieces, posters and prints’ without any indication as to how the items were made up for transport, were to be treated as one unit for limitation purposes. If this interpretation of Art IV rule 5(c) is correct, and taking into account that the number of posters and prints in the container was clearly stated on the face of the bill, the conclusion must be that the phrase ‘units enumerated . . . as packed’ applies exclusively to articles which are in a condition to be shipped separately without the need for packaging. While Allsop J denied that this was an alternative version of the discredited ‘functional economics test’ it bears a remarkable resemblance to it.
In conclusion, there remains a doubt as to whether the new container formula will be of any material benefit to the cargo owner. It has already been noted that the provision enabling the shipper to declare the full value of the cargo in the bill of lading is rarely invoked because it invariably results in an increase in the freight rate which exceeds the cost to the shipper of insuring the balance. It remains to be seen whether the itemisation of the contents of the container produces a similar result. So far as the monetary unit of limitation is concerned, the draftsmen of the Hague/Visby Rules abandoned the pound sterling in favour of the Poincaré franc in an attempt to devise a
‘currency’ which would retain its value during a period of inflation. The franc was defined in Art IV rule 5(d) as ‘a unit consisting of 65.5 milligrammes of gold of millesimal fineness 900’ and it was further provided that the date of conversion of the sum awarded into national currencies should be governed by the law of the court seised of the case. So far as the United Kingdom was concerned, the problems of conversion were simplified by s 1(5) of the COGSA 1971 which empowered the Secretary of State periodically to specify the conversion amount in sterling by statutory instrument. The Poincaré franc has in turn been replaced as the unit of account by the special drawing right, as defined by the International Monetary Fund, as the result of s 2(4) of the Merchant Shipping Act 1981. The prescribed limitation amounts are 666.67 units of account per package or unit or 2 units of account per kilo of the gross weight of the goods lost or dam- aged, whichever is the higher. The special drawing right has been preferred to the Poincaré franc since the unit is based on a basket of currencies, the value of which is probably more sensitive to the trends of inflation than the fluctuating market price of gold. (c) Problems of limitation.Two further problems associated with the operation of the Hague/ Visby limitation rules remain to be discussed. The first relates to the scope of application of the rules. What types of claim are they intended to cover and are their provisions designed to afford protection not only to the carrier but also to other parties engaged by him in performance of the contract of carriage? Secondly, in what circumstances, if any, will the carrier’s conduct prevent him from invoking the protection of the limitation provisions? Scope of application The common law doctrine of privity of contract prevents a person who is not a party to a contract from relying on its provisions for protection against any claim brought against him. Consequently, it was held in Adler v Dickson (The Himalaya) that a member of a ship’s crew sued in negligence for causing injury to a passenger could not rely on an exception clause in the contract of carriage concluded between the passenger and the shipowners. On similar grounds the House of Lords refused to allow a firm of stevedores engaged by the carrier in Scruttons v Midland Silicones to invoke the protection of the Hague Rules limitation of liability provisions when sued for negligently damaging the cargo during the discharging operations. In neither case could the party being sued be regarded as a party to the contract of carriage. A partial solution to this problem is now to be found in Art IV bis rule 2 of the revised Hague/ Visby Rules which provides that ‘a servant or agent of the carrier (such servant or agent not being an independent contractor)’ can, in the event of an action being brought against him, avail himself of the same defences and limits of liability provided by the Rules as could be invoked by the carrier himself. The provision clearly reverses the effect of the decision in Adler v Dickson, thus enabling an employee of a carrier to rely on the protection of the Hague/ Visby Rules to the same extent as his employer. On the other hand, it does not extend the cover to independent contractors engaged by the carrier, such as the stevedores in Scruttons v Midland Silicones who have to look elsewhere for their protection. There would seem to be no logical commercial basis for this distinction but it is only fair to add that the problems associated with privity of contract and the concept of an independent contractor seem almost exclusively confined to the common law world. Even so, there are two possible avenues of escape open to the independent contractor. First, he can insist on obtaining from the carrier an indemnity to cover this extended liability before embarking on the work. Secondly, he can require the carrier to ensure that he is specifically made a party to the con- tract of carriage, at least so far as the Hague/ Visby provisions relating to excepted perils and limitation of liability are concerned. This object can be achieved by the inclusion in the con- tract of carriage of the so-called ‘Himalaya clause’, the effectiveness of which stems from the decision of the Privy Council in New Zealand Shipping Line v Satterthwaite. Thirdly, he may be able to invoke the protection of the limitation of liability provisions in the contract of carriage if he satisfies the requirements of the Contracts (Rights of Third Parties) Act 1999. In conclusion, it should be noted that Art IV bis rule 1 provides that the overall defences and limits of liability provided by the Rules apply whether the action brought against the carrier is founded on contract or tort, while rule 3 stipulates that should the cargo owner institute separate proceedings against the carrier and his servant or agent in respect of the same damage, the aggregate amount recoverable shall not exceed the limit provided by the Rules. Breaking the limits Under Art IV rule 5 of the Hague Rules, the limits of liability therein prescribed were to be applicable ‘in any event’. Despite this wording, the view persisted that carriers could not rely on the limitation provisions if they were in fundamental breach of the contract of carriage as, for example, where they had deviated from the agreed course or stowed the goods on deck without the shipper’s consent. This approach was, however, challenged by the Court of Appeal in the case of The Kapitan Petko Voivoda, where a number of excavators had been stowed on deck contrary to an express undertaking in the contract of carriage for underdeck stowage. Subsequently, on the voyage, several of the excavators had been washed overboard in heavy weather, while others had suffered salt water damage. When the carrier sought to limit his liability under Art IV rule 5 of the Hague Rules, the cargo owner pleaded fundamental breach. The Court of Appeal rejected this argument, taking the view that ‘the seriousness of the breach is no longer a self-sufficient yardstick for determining whether exception or limitation clauses apply to particular breaches’. Longmore LJ pointed out that breach of the seaworthiness obligation might on occasion result in far more serious loss than unauthorised carriage on deck, yet there was little doubt that the Hague limitation was applicable to such a situation. Adopting the construction approach advocated in Photo Production v Securicor Transport, the Court of Appeal reached the conclusion that the words ‘in any event’ meant what they said and were applicable to a breach irrespective of the seriousness of its nature. This decision leaves two outstanding issues. On the one hand, in reaching the conclusion that the carrier was entitled to limit his liability, the court appears to have attached no particular significance to the express undertaking in the contract of carriage to ship the cargo underdeck. As the same decision would presumably have been reached in the absence of such an express undertaking, it is difficult to appreciate the benefit to the cargo owner of its inclusion in the contract. Secondly, in reaching their decision, members of the Court of Appeal resisted the argument that the application of the limitation provision in the present case would amount to a virtual exclusion of carrier liability. In justification, members of the court drew attention to the fact that several practical methods of avoiding this result were available to the parties. First, the owner of cargo could declare its true value and insert this information in the bill of lading, as the result of which the full loss would be recoverable.150 Secondly, the parties were at liberty to agree a higher limitation figure than the amount specified in rule 5151 and, finally, the parties could specifically incorporate the Hague/Visby Rules into the contract of carriage since they prescribed higher limitation amounts than those contained in the original Hague Rules. These suggestions, however, beg the question as to the relative bargaining power of the respective parties. The phrase ‘in any event’ has been retained in the corresponding Art IV rule 5(a) of the
Hague/ Visby Rules and will presumably receive the same construction as its predecessor. On this occasion, however, account must also be taken of s 1(2) of COGSA 1971, which provides that the Hague/ Visby Rules ‘shall have the force of law’. The effect of the latter provision is also believed to make the Rules applicable irrespective of any fundamental breach of the contract of carriage. The position may be clarified by the fact that the Hague/ Visby Rules themselves do now prescribe certain types of misconduct which will deprive the carrier of the protection of the limitation provisions. Similar conduct on the part of a servant or agent of the carrier will deprive him personally of the benefit, not only of the limitation provisions but also of any other defences provided for in the Rules. It is not intended that misconduct by the servant or agent will break the limit so far as the carrier’s personal liability is concerned. It remains to be seen how the courts will interpret the phrase ‘recklessly and with knowledge that damage would probably result’ in this context. For example, will unauthorised stowage on deck or intentional deviation amount to ‘reckless’ conduct if there is a strong likelihood of damage resulting to the cargo?
A possible indicator is to be found in the approach adopted by the Court of Appeal in interpreting an identical phrase in Art 25 of the Warsaw Convention. In the opinion of Dyson J, ‘It is sufficient for recklessness that a person should act regardless of the possible consequences of his acts. What Art 25 requires is that there should be knowledge of the probable con- sequences.’ Moreover, ‘it is clearly established that knowledge in Art 25 is not imputed knowledge. It is not sufficient to show that, by reason of his training and experience, the pilot ought to have known that damage would probably result from his act or omission. The test is subjective . . . Actual knowledge is required.’ If a similar test is applied in the context of Art IV rule 5(e) of the Hague/Visby Rules, the burden of proof on the claimant will be a formidable one. Limitation of actions Municipal law invariably prescribes a general time limit within which actions have to be brought for the recovery of compensation for lost or damaged goods. In the United Kingdom s 5 of the Limitation Act 1980 bars the initiation of a contractual claim after the expiration of six years from the time when the goods in question were delivered or should have been delivered. In an attempt to speed up the settlement of cargo claims, the Hague/Visby Rules impose a one-year time limit which can, however, be extended by agreement of the parties after the cause of action has arisen. Several points relating to this provision call for comment. First, the limitation period runs from the time the goods were delivered, or should have been delivered. The selection of the word ‘delivery’ instead of ‘discharge’ appears deliberate on the part of the draftsmen of the Rules and presumably at least some form of constructive delivery to the consignee or his authorised agent will be required before time will begin to run. In this respect paragraph 6 further provides that ‘In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods.’ Secondly, the Article provides for time to run either from the date of delivery or from the date when the goods should have been delivered without any reference to the respective timing of these events. Consequently, if it can reasonably be concluded that delivery has been made under the original contract, even though the terms of that contract may have been varied to some extent to accommodate problems encountered on a particular voyage, then it is irrelevant for purposes of the time bar that such delivery has been effected at a date significantly later than that on which the goods should have been delivered. Time will run from the date of actual delivery. Only in the event of failure to deliver the goods, or in a situation where delivery is made under what is held to be a separate and distinct contract, will the date on which the goods should have been delivered become relevant for purposes of the time bar.164 Thus in The Sonia a cargo of jet oil was shipped from a Saudi Arabian port for delivery in Lagos under a voyage charterparty incorporating specified provisions of the Hague/Visby Rules. On arrival at Lagos the cargo was rejected by receivers as being off specification due to contamination. After prolonged negotiations between shipowners and charterers, the vessel was eventually rerouted to a Greek port where delivery of the cargo was made some eight weeks later to a receiver nominated by the charterer. In response to a claim against the shipowners for failing to take proper care of the cargo resulting in its rejection in Lagos, the Court of Appeal held that time began to run under Article III rule 6 from the date of delivery in Greece rather than from the date on which the cargo should have been delivered in Lagos. In the opinion of the court, as the cargo had remained on the same vessel throughout and had been delivered by the same shipowner to the order of the same charterer, delivery had been made under the original contract of carriage and no separate and distinct contract was involved. Thirdly, the carrier is ‘discharged from all liability whatsoever in respect of the goods’. This provision has been interpreted as covering not only the normal claim for cargo damage or loss, but also extending to claims arising from a fundamental breach of contract by the carrier or from the type of misconduct listed in Art IV rule 5(e). This view is justified on the grounds that the provision is expressly given ‘the force of law’ Fourthly, the paragraph requires that ‘suit’ be brought within a period of 12 months. A narrow construction was applied to this requirement in Compañia Colombiana de Seguros v Pacific Steam Nav Co where it was held that the suit must be brought within the relevant jurisdiction during this period. The bill of lading concerned provided for exclusive English jurisdiction, but the claimant brought his initial action in New York. By the time the error was discovered, the 12 months period had elapsed and the trial judge held that any action in an English court was then barred. This seems an unnecessarily restrictive interpretation if the object of the time limit is to encourage cargo owners to give prompt notice of their claims to carriers since an action brought in any jurisdiction will suffice for this purpose. The term ‘suit’ has also been construed as including both litigation and arbitration proceedings. Thus in The Merak the bill of lading incorporated the terms of a charterparty which included an arbitration clause. Unaware of this fact, the claimant brought a court action for cargo damage and, by the time this action was stayed, the 12 months period had expired. It was held that the word ‘suit’ included arbitration proceedings and consequently the arbitration avenue was now time barred. In view of the prevalence of bills of lading which incorporate charterparty terms, the problems raised by The Merak are likely to recur, with consequent hardship to the unwary consignee. On the other hand, if suit is brought within the required 12 months Art III rule 6 does not prevent the amendment of such a claim outside that period, provided that the amendment does not substantially alter the nature of the original claim. Fifthly, the case of The Clifford Maersk has established that where the final day of the limitation period falls on a Sunday or other day on which the office of the Supreme Court is closed, suit will be brought in time if the claim form is issued on the next day on which the office is open. Finally, it is important to note the effect of the time bar on the substantive claim concerned. It is generally accepted that the provisions of the Limitation Act 1980 merely bar the relevant claim but do not extinguish it. Consequently, the party entitled to a statute barred debt, while not being able to recover it by action, may still obtain satisfaction if alternative methods of recovery are available to him. The position is, however, different under Art III rule 6 which expressly provides that the carrier ‘shall be discharged from all liability whatsoever’ on the expiry of the time limit. In the case of The Aries the House of Lords held that the effect of this provision was not only to bar the remedy but also to extinguish the right. Here the defendants, in paying freight on receipt of the cargo, had made a deduction to cover short delivery. Two years later they were sued by the carrier for the balance of the freight and sought to serve a defence based on a right of set-off. The court held that no such defence was admissible since any right on which it might initially have been based had been extinguished by the time lapse. Article III rule 6 makes express provision for the extension of the 12-month period ‘if the parties so agree after the cause of action has arisen’. Presumably an agreement reached between the parties at an earlier date will also be effective since Art V allows a carrier to increase his obligations by surrendering a right or immunity to which he would otherwise be entitled, although here there is a requirement that any such provision should ‘be embodied in the bill of lading issued to the shipper’. What has been said above naturally relates to the initial claim against the carrier. The Hague/Visby Rules, however, frequently provide for the carrier to be indemnified by a third party in the event of any successful claim being made against him (e.g. under Art III rule 5) and similar provisions may have been expressly incorporated into the contract of carriage. No such indemnity action can be launched until the initial claim against the carrier has been concluded by judgment or settlement and this is unlikely to occur within the limitation period. Accordingly, Art III rule 6 bis provides that an action for indemnity may be brought outside the 12-month period if it is initiated within the normal limitation period of the court seised of the case. In the case of the United Kingdom, the relevant period would be six years in respect of the normal claim based on contract or tort.179 The paragraph provides that, in any event, a minimum period of three months shall be allowed from the time the party seeking the indemnity ‘has settled the claim or has been served with process in the action against himself.