As any shipping lawyer will tell you, the law is not at its tidiest when a bill of lading ends up in the hands of a voyage charterer. Yesterday’s decision in Unicredit AG v Euronav NV  EWHC 957 (Comm) adds a further chapter to the saga, which may be more tendentious than it looks.
The case arose out of the insolvency and suspected fraud of Indian oil trader GP (Gulf Petrochem FZC, now a restructured GP Global, not to be confused with oil major Gulf Oil). BP chartered the 150,000-ton Suezmax Sienna from her owners Euronav and agreed to sell her cargo to GP. GP financed the deal through Unicredit, under an arrangement whereby Gulf agreed to pledge and assign to Unicredit all rights in cargoes and rights arising under bills of lading, and agreed that it would resell the cargo to buyers who would pay Unicredit direct.
A bill of lading was issued by Euronav to BP. On the sale, Unicredit paid BP on GP’s behalf; but instead of the bill of lading being endorsed to GP, the charter itself was novated, BP dropping out and being supplanted by GP. BP retained the bill of lading, still made out in its favour.
In April 2020, GP sweet-talked Unicredit into condoning a series of STS transfers of the cargo to what seem to have been connected entities, despite the fact that the bill of lading was still in the hands of BP. The sub-buyers never paid Unicredit; at the same time GP showed worrying signs of financial strain. Unicredit now realised that something had gone badly wrong with the deal, with their security and with GP as a whole. It swiftly got BP to endorse the bill of lading to it and tried to salvage the situation by suing Euronav for delivering the cargo without its production.
The claim was unsuccessful. And rightly so. On the evidence it was clear that Unicredit had actually condoned the STS transfers in the knowledge that the bill of lading would not available, and therefore had only itself to blame. With this we have no argument.
But the claim also failed for another reason, which we are less sure about: namely, that the bill of lading in fact never governed the liabilities of Euronav in any case. The reason was this. When the bill was issued to BP, it was uncontroversial that it did not form the contract between the parties, since there was also a charter in force between BP and Euronav, and as between the two the charter prevailed (see Rodocanachi v Milburn (1887) 18 Q.B.D. 67). True, at the time of the STS transfers there was no longer a charter between BP and Euronav because GP had been substituted for BP. But this (it was said) made no difference. Although the bill of lading would have been the governing document had BP endorsed it to GP (Leduc v Ward (1888) 20 Q.B.D. 475), this did not apply where there had been no such transfer. In the present case there was no reason to infer that at that time the document’s status in BP’s hands had been intended to change from that of mere receipt to full contractual document; it therefore remained in the former category.
With respect, it is not entirely clear why this should be the case. For one thing, if a carrier issues a bill of lading to a charterer, arguably the reason why the bill of lading does not form the contract between the parties is simply that one has to choose between two inconsistent contracts, and that the obvious choice is the charter. If so, once the charter drops away as between those parties, there is no reason not to go back to the bill of lading. This seems, if one may say so, rather more convincing than the idea that the carrier is implicitly agreeing that the bill of lading gains contractual force if, and only if, endorsed by the charterer to someone else so as to cause a new contract to spring up. (In this connection it is worth remembering that it is equally possible for a bill of lading that once did have contractual force to cease to have it as a result of transfer to a charterer – see for instance The Dunelmia  1 Q.B. 289 – despite the fact that in such a case there can be no question of any new contract springing up.)
Put another way, it seems odd that entirely different results should follow according to whether a charterer transfers the bill of lading and retains the charter, or transfers the charter and retains the bill of lading.
There is also a practical point. Suppose that in the Unicredit case the unpaid party had not been Unicredit, but BP. BP might have thought that they were safe in allowing the charter to be novated in favour of GP provided they kept hold of the bill of lading and with it the assurance that the cargo could not reach GP’s hands without their consent. One suspects they would have been somewhat surprised to be told in such a case that the bill of lading was, and remained, of no effect despite the fact that they were no longer charterers of the vessel.
There clearly won’t be an appeal in this case, given the consent of Unicredit to what would otherwise have been a misdelivery. But the bill of lading point will no doubt give academics and others plenty to speculate about in the next editions of Scrutton, Aikens and other works. We await the results with interest.