07 - Asynchronous Recording 1 - Bills of Lading

Definition: A document issued by the carrier to the shipper upon receiving the goods for transport.
Parties Involved:
- Shipper: Usually the seller of goods, responsible for shipping the goods to the buyer.
- Carrier: The party responsible for transporting the goods, either the charterer or the owner of the ship.
Functions of a Bill of Lading:
- Receipt of Goods: Acknowledges that the carrier has received the goods from the shipper, including details like weight, number, quantity, and quality.
- Evidence of Contract of Carriage: Reproduces the terms and conditions of the contract between the shipper and the carrier.
- Document of Title: If negotiable, it signifies ownership of the goods; the holder of the bill of lading is considered the owner.
  - Upon arrival at the destination, the holder presents the bill of lading to the carrier to receive the goods.

Historical Context: Several international rules have been established to govern the carriage of goods by sea.
The Hague Rules:
- The original set of rules, largely based on the United States' Harter Act.
- Due to their age and obsolescence, the Hague-Visby Rules were created as an update.
- The United States did not sign the Hague-Visby Rules, preferring to stick with the Hague Rules because they were based on US law.
The Hague-Visby Rules (HVR):
- Signed by many major trading nations, including most of Europe and Singapore.
- Created to address technological innovations and update the original Hague Rules.
When do the Hague-Visby Rules Apply?
- Type of Document: The contract of carriage must be covered by a bill of lading (negotiable).
- Type of Carriage: Applies to all types of carriage, except for goods carried on the deck of the ship where it has been agreed that they should be carried on the deck.
  - Both requirements (agreement and actual carriage on deck) must be fulfilled for the HVR not to apply.
  - Also does not apply to live animals due to their susceptibility to weather conditions and diseases, which are outside the carrier's control.

Step 1: Country of Loading:
- Has the country where the goods are loaded onto the ship (port of departure) signed the Hague-Visby Rules?
  - If yes, the Hague-Visby Rules apply.
  - If no, proceed to Step 2.
Step 2: Country of Bill of Lading Issuance:
- Has the country where the bill of lading was issued ratified the Hague-Visby Rules?
  - The bill of lading is issued where it is signed, typically the headquarters of the shipping company.
  - If yes, the Hague-Visby Rules apply.
  - If no, proceed to Step 3.
Step 3: Clause in Bill of Lading:
- Does the bill of lading itself state that it is governed by The Hague-Visby Rules?
  - If yes, the parties have agreed to be governed by the Hague-Visby Rules, and they apply.
  - If no, the Hague-Visby Rules do not apply.

Problem: Carriers were using ships that should have been scrapped due to being unseaworthy. Scrapping these ships had no real economic value, so carriers would continue to use them.
Legal Issue: Carriers could be held liable if they used ships that were not seaworthy.
Carrier's Solution: Carriers would include exclusion clauses in the contract, stating they would not be liable for any loss occurring due to the ship's unseaworthiness.
Bargaining Power Imbalance:
- Carriers had significantly greater bargaining power than shippers.
- Shippers were often given a "take it or leave it" deal; if they wanted to send their goods, they had to sign the carrier's contract, which was drafted to protect the carrier and included numerous exclusion clauses.
Ethical Concerns: Using unseaworthy ships is a significant issue, similar to an airline using aircraft that should have been scrapped.

Due Diligence Obligation: The carrier is bound to exercise due diligence at the beginning of the voyage.
- Beginning of the voyage: From the start of loading goods onto the ship until the ship departs the port.
Scope of Due Diligence:
- Seaworthiness of the Ship: The carrier must exercise due diligence to ensure the ship is seaworthy.
  - It's not an obligation to make the ship seaworthy, but to exercise due diligence to ensure it is seaworthy.
- Objective Test: The standard is not perfection, but whether a prudent ship owner, knowing the defects, would send the ship out on the journey.
  - Example: A car with a broken stereo is still roadworthy for a trip from Coventry to London.
- Proper Manning, Equipping, and Supplying the Ship: The carrier must ensure the ship is properly manned with qualified personnel and adequately equipped and supplied.
  - If the right people are hired but act negligently, the carrier is generally not liable (e.g., the Titanic).
- Fitness of Holding Areas: Refrigerated units, holds, and chambers should be fit for the reception and preservation of the goods, with no residue from previous cargo that might affect the current goods.

Article 3 duties are overriding obligations.
Impact on Article 4 Immunities:
- Article 4 provides immunities for the carrier, allowing them to avoid liability in certain events.
- However, if the carrier breaches its duties under Article 3 (e.g., failing to exercise due diligence to make the ship seaworthy), it cannot rely on any of the immunities in Article 4.
- Example: If a ship is not seaworthy, the carrier cannot claim immunity under Article 4 for any resulting damage.

General Duty: The Hague-Visby Rules impose a duty on the carrier not to deviate from the route agreed upon in the contract.
- Shippers have an incentive to ensure the agreed route is followed for timely delivery, especially for perishable goods or contracts with specific delivery times.
Exceptions (Immunities under Article 4.4):
- To Save Life: The carrier can deviate to save lives at sea.
  - Example: Responding to an SOS signal from a sinking ship, even if it means putting the carried goods at risk.
- Reasonable Deviation: Deviation is allowed for reasonable causes.
  - Example: Diverting to the nearest port to take a seriously ill person to a hospital or to repair a fault in the ship.
- To Save Property at Sea: The Hague-Visby Rules weirdly include an exception allowing deviation to save property at sea.
  Rationale:
  - Salvaging operations are very lucrative for shipping lines. If another ship is about to lose its goods at sea they could be called to salvage for a fee.
  - Some think this is against their agreement if the carrier's primary job is supposed to be to transport the goods they originally agreed to safely.
- A carrier cannot rely on the immunity if the loss occurred due to their intent to cause damage or if they acted recklessly.