Official blog of Swansea University's IISTL, where we keep you up to date with the latest maritime and commercial legal news.
Author: Professor Richard Williams
Richard Williams is a Professor at the School of Law, Swansea University and lectures on the LLM programme. He was formerly a senior partner with Ince & Co, a leading City law firm specialising in shipping and related matters. In practice he specialised in charterparties and bills of lading and was regularly recognised in the professional press as one of London’s leading practitioners. For many years he was Head of the firm’s Chartering and Dry Shipping Group and he retains a consultancy position with his former firm. Throughout his career he has been involved not only in the litigation of individual cases but also in the development of policy and documentation within the industry both for clients and international industry bodies and regularly advised various UN Agencies and other international bodies in relation to industry–wide issues and the drafting of standard documents. He was also recently appointed to serve on the Rotterdam Rules Consultative Committee, which was edtablished by the UK The Department for Transport.
He is a frequent speaker at conferences and seminars around the world. When in practice he took a keen interest in professional training and continues to retain this interest.
He is co-author with Patrick Griggs, ex-president of the Comite Maritime International, of 'Limitation of Maritime Liability', 4th ed (2005, LLP Ltd) and has published many articles and book chapters on various aspects of charterparties and bills of lading.
Clause 2 of Gencon 1994 first saw light of day in the 1922 charter and is the product of the thinking of an era that predates the Hague Rules when freedom of contract reigned supreme and carriers were able to include in contracts of carriage clauses that exempted them from liability for practically anything. Consequently, many people and certainly most charterers, now consider the clause to be completely out of touch with modern industry practices and current legislation. By way of contrast, and perhaps not surprisingly, many owners continue to value the wide protection that they believe it affords against liability. However, the reality is that the clause does not really meet the needs of either party and can give rise to some unforeseen and highly unwelcome surprises. Consequently, it is not really satisfactory for either the charterers or the shipowners.
It does not meet the charterers’ needs since it provides the shipowners with a very wide defence for cargo claims. In a nutshell, the Owners are not liable unless there is personal negligence on the part of the higher management of the company [1]. Equally, it does not satisfy the shipowners because protection is limited to claims for physical loss or damage to the goods or for delay in delivering the goods, and the clause provides no defence for other claims relating to purely financial loss, such as a failure to load a full cargo or for delay in arriving at the loadport [2].
These deficiencies have been recognised for many years and the industry has tended to adopt a rough and ready solution by simply replacing Clause 2 with a Paramount Clause that is perceived to introduce greater balance in the form of the Hague or Hague-Visby Rules. However, the weakness of this “broad brush” solution has been repeatedly recognised by the English courts. For example, it has been said that:
“The courts have not found it easy to make sense of the Hague Rules in the context of a charter-party since clearly these rules were not designed to be incorporated in such a contract.”[3]
Consequently, the BIMCO sub-committee concluded that the insertion of a Paramount Clause was really no more than a “sticking plaster” solution in that it papered over some of the fault but failed to provide a satisfactory balanced solution.
A Paramount Clause clearly improves the charterers’ chances of making a recovery from the shipowners but makes the shipowners’ duty to exercise due diligence to make the ship seaworthy a continuing one that could potentially extend to all time “before” the commencement of the voyage[5], and which could, therefore, cover a very substantial time before the arrival of the ship at the loadport. It is also unclear whether the Rules provide the owners with protection in all jurisdictions against purely financial loss such as delay either in arriving at the loadport or in performing the laden voyage.
Therefore, the more balanced remedy favoured by the sub-committee was for the new clause 2 of Gencon 2022 to mirror the general approach of the Hague-Visby Rules and
(1) firstly, place on the shipowners duties that are the equivalent of the non-delegable ones that apply under the Hague-Visby Rules to exercise due diligence to provide a seaworthy ship and to properly and carefully care for the cargo, but to restrict the applicability of the seaworthiness obligation to the two points in time that matter for the charterers, namely, the loading of the cargo and the commencement of the laden voyage; and
(2) secondly, enable the shipowners to rely on all those rights, defences, immunities, time bars and limitations of liability that are available to a “Carrier” under the Hague-Visby Rules and to make such protection applicable to claims for loss, damage, delay or failure in performance of whatsoever nature. As is the case under the Hague-Visby Rules, these various rights, defences, immunities, time bars and limitations of liability fall into two categories: those that are applicable in any event regardless of breach, such as the time limit for claims under Art III Rule 6, and those that are available only if the shipowner has satisfied his obligations as to seaworthiness, such as those listed under Art IV Rule 2.
Because this new approach is substantially different from that which has been adopted in prior versions of Gencon, the sub-committee thought it prudent to circulate its proposals to the shipping industry before proceeding to a conclusion and received a more or less unanimous approval of its proposals. It is also noteworthy that the International Group of P&I Clubs has confirmed that the new clause 2 should not prejudice Club cover.
Finally, since one of the criticisms of Gencon 1994 is that, unlike many other charters, it does not include an exception clause that protects the rights of charterers, the sub-committee recommended that the new charter should include such a clause. There was some discussion as to whether the charter should include the new BIMCO Force Majeure Clause 2022. However, the sub-committee concluded that such clause was more suited to a time charter than a voyage charter and the industry consultation process supported that view. Consequently, it was decided to include a General Exception Clause of the type that is commonly seen in other voyage charters, and such a clause is now found in Clause 18 of Gencon 2022 thereby ensuring that it is a more balanced charter party.
[1] See, for example, the “Brabant” (1965) 2 Lloyd’s Rep. 546
[2] See, for example, the “Dominator” (1959) 1 Lloyd’s Rep 125 and the discussion in para 11.68 of Voyage Charters (3rd ed)
[3] Per Saville J in the “Standard Ardour” (1988) 2 Lloyd’s Rep 159
[4] Per Devlin J in the “Saxon Star” (1957) 2 Lloyd’s Rep 271
[5] See Art III Rule of the Hague/Hague-Visby Rules
Representing the Institute of International Shipping and Trade Law, Professor Richard Williams was a member of the BIMCO Sub-committee that has produced the new Gencon 2022.
The BIMCO GENCON charter is the most widely used charter for dry cargo and has been described as BIMCO’s “flagship” charter. It is exactly 100 years since the first GENCON charter, which then had the much longer official title of The Uniform General Charter of the Documentary Council of the Baltic and White Sea Conference, saw the light of day in 1922. Since then, there have been revised forms in 1976 and 1994 but the basic risk allocation between owners and charterers has remained essentially the same.
The charter has traditionally been categorised as being more owner- friendly as evidenced by the well-known (some might say, notorious) clause 2 which provides in essence that the owner is liable only if there is negligence on the part of the higher management of the owning company. However, although shipping people tend to stick to tradition, that balance of risk has progressively been diluted as time has marched on as evidenced by the commonly agreed addition of a Paramount Clause the effect of which is to emasculate clause 2 to a very large degree. It is also true to say that shipowners now operate in an environment which is much more tightly controlled and various international conventions have resulted in the implementation of regulatory codes such as the ISM and IMSBC, all of which have created stresses for the traditional GENCON format. Therefore, it was thought that the time had come when approaching the centenary of the first GENCON to have a thorough re-evaluation rather than just make some further piecemeal amendments such as simply adding a Paramount Clause – a solution described by a judge in one case as a “very slapdash way of doing things”[1] and by another as follows: “The courts have not found it easy to make sense of the Hague Rules in the context of a charter-party since clearly these rules were not designed to be incorporated in such a contract.”[2]
Consequently, some 4 years ago, BIMCO established a sub-committee consisting of much-experienced representatives of all sides of the industry – shipowners, charterers, P&I clubs, brokers, agents and lawyers – to produce a new GENCON for a new age. It was initially thought that the process would not take too long. However, as work progressed, the committee came to realise how much the shipping world has changed since even the last revision was made in 1994. As a result, it became necessary to establish some fundamental principles which would underpin the drafting process. The challenge was, therefore. to produce a modern and balanced contract that would reflect today’s commercial reality but would at the same time retain its familiarity to make the users’ transition from GENCON 94 to the new version as smooth as possible.
With this this goal in mind, and following industry consultation, the subcommittee proceeded on the following premises:
The charter should like other BIMCO dry cargo charters be based on FIOST principles which place the responsibility for the cost and risk of cargo operations on the charterers unless such operations affect the safety of the ship.
Laytime and demurrage should be based on the principle that the owners bear the risk of delay caused by navigation risks whilst the charterers bear the risk of delay caused by commercial risks. Consequently, the charter should be based on the concept of a berth charter but with clauses designed to enable the owners to commence the laytime clock if, on arrival at the port, it is not possible for the vessel to berth for reasons other than navigation risks.
The owners should be protected against liability for cargo loss or damage unless this has been caused by the failure of the owners to satisfy the fundamental duties that they can reasonably be expected to undertake: namely, to exercise due diligence to provide a vessel that is cargoworthy at the commencement of loading and seaworthy at the commencement of the cargo-carrying voyage, and (subject to FIOST) to properly and carefully care for the cargo after loading and before discharging.
The owners should be protected against liability for delay not only on the laden voyage but also in arriving at the loadport if this has been caused by events which are beyond their control even if such events occur before they commence the approach voyage to the loadport.
Owners should be able to rely on remedies such as the exercise of a lien, the suspension of their services under the charter or, failing all else, a termination of the charter, if charterers fail without justification to pay sums that are clearly due and owing to owners. It was thought that his is realistically the only way in which owners can ensure that they are paid moneys that are clearly owing to them.
The sub-committee has now produced a draft which will be submitted for adoption by the BIMCO Documentary Committee in May.
Prof Richard Williams – member of the BIMCO Gencon sub-committee.
[1]Anglo-Saxon Petroleum v Adamastos Shipping [1957] 1 Lloyd’s Rep. 79
In a recent blog post I commented on various gaps in the limitation regime and the Admiralty court has now given guidance as to how another gap may be plugged – namely whilst an “operator of a seagoing ship” is a “person entitled to limit liability” pursuant to article 1.2 of the 1976 Limitation Convention, what is meant by the term “operator”? That is a term that is not defined in the Convention nor in the travaux preparatoires to the Convention, Furthermore, the issue has not been considered in any prior case and there is no helpful commentary in any of the leading textbooks on the subject.
In the case of the “Stema Barge II”(2020) EWHC 1294 (Admlty) Teare J has engaged in a careful and cogent analysis of the issue. The judge notes firstly that article 2.1 refers to the “manager and operator of a seagoing ship” and comments that in many instances there is considerable overlap between “manager” and “operator” and that the terms may often be used interchangeably:
“I therefore consider that the ordinary meaning of “the operator of a ship” includes the “the manager of a ship”. Indeed, in many cases involving a conventional merchant ship there may be little scope for operator to have any wider meaning than that of manager”. (para 74)
However, he goes on to say that a person may be an “operator” even if that person does not engage in the more conventional management activities which would include manning, fuelling, technical and safety supervision, trading, deployment of the ship etc.
The “Stema Barge II” was an unmanned dumb barge which required unique handling as explained by the judge:.
“The present case does not involve a conventional merchant ship but a dumb barge, laden with cargo, which is towed from the loading port to the discharge location, left there by the tug and thereafter “attended” (to use a neutral word) by a company which places men on board with instructions to operate the machinery of the dumb barge. The question which arises in these circumstances is whether the ordinary meaning of “the operator of a ship” in article 1(2) can include those who physically operate the machinery of the ship and those who cause the machinery of the ship to be physically operated, or whether the ordinary meaning of “the operator of a ship” is limited to the manager of the ship.” (para 75)
The judge concludes that:
“I have therefore concluded that the ordinary meaning of “the operator of a ship” in article 1(2) of the 1976 Limitation Convention embraces not only the manager of the ship but also the entity which, with the permission of the owner, directs its employees to board the ship and operate her in the ordinary course of the ship’s business.”
Whilst the facts of the case may have been somewhat special the decision may have an impact on the wider issue of who is deemed to be an “operator” of an unmanned ship and whether an entity that operates the controls of an unmanned ship “in the ordinary course of the ship’s business” from shore can limit its liability. It is true that in the case of the “Stema Barge II” the entity that sought the right to limit had actually boarded the barge in order to be able to operate its machinery. However, it does not seem that the physical boarding of the vessel should necessarily be a restricting factor and there are indications that the judge was thinking in more general terms. For example, he makes the following more general observations:
“The question which arises in these circumstances is whether the ordinary meaning of “the operator of a ship” in article 1(2) can include those who physically operate the machinery of the ship and those who cause the machinery of the ship to be physically operated…” (para 75)
“Those who cause an unmanned ship to be physically operated…” (para 81)
It is true that the judge says at para 74 that:
“Indeed, in many cases involving a conventional merchant ship there may be little scope for operator to have any wider meaning than that of manager.”
However, it is equally true that an unmanned ship is not a “conventional merchant ship.”
Whilst the adoption of the 1976 Limitation Convention has brought much clarity to the implementation of limitation rights, it is not a complete code and there are a number of important issues that are not regulated by the Convention and which are left to be determined by the lex loci of the place where the fund is constituted. Article 14: Governing Law, of the Convention specifies that:
“Subject to the provisions of this Chapter the rules relating to the constitution and the distribution of a limitation fund, and all rules of procedure in connection therewith, shall be governed by the law of the State Party in which the fund is constituted”.
In the recent case of As Fortuna Opco BV and another v Sea Consortium Pte Ltd and Others[1] the Singapore High Court has given helpful guidance in relation to two such issues.
The Supreme Court Building, Singapore (where CA and HC cases are heard)
Limitation fund interest
Article 11 of the Convention specifies that a limitation fund should include interest “from the date of the occurrence giving rise to liability until the date of the constitution of the fund” but makes no provision for subsequent interest. This is, presumably, since the fund has traditionally been established by way of deposit and it was assumed that the fund would continue to earn its own interest thereafter in accordance with the law of the country of deposit. However, this assumption has been undermined by the fact that the courts of (at least some) countries[2] are now prepared to allow a limitation fund to be established by the provision of security in the form of a guarantee or P & I letter of undertaking (LOU) if satisfied of the sufficiency of that security[3]. In such circumstances, a fund constituted by a LOU would not automatically earn interest during the period of its currency.
In the As Fortuna Opco case the parties agreed that:
the LOU should include interest from the date of the incident to the date of the constitution of the fund at the same rate as that which would have applied if the fund had been constituted by payment into court; and that
provision ought to be made for post-constitution interest where a limitation fund is constituted by way of a guarantee or LOU.
The Convention itself does not specify what rate of interest should apply to the constitution of the fund. Accordingly, the rate is to be determined pursuant to Article 14 in accordance with the law of the place where the fund is constituted. In the case of the UK the relevant rate is that specified by the Secretary of State in the Merchant Shipping (Liability of Shipowners and Others (New Rate of Interest) Order 2004. i.e. one per cent more than the base rate quoted from time to time by the Bank of England. Since there was no equivalent legislation in force in Singapore, the Singapore court held that the pre-constitution interest rate should be that which corresponded to the statutory interest rate on judgement debts in Singapore, namely 5.33%.
However, the parties disagreed regarding the rate of post-constitution interest. The ship owners argued that the rate should approximate that which would actually be earned by a payment into court, which they considered to be 2%. However, the cargo interests argued that a fair interest rate should be that which applied to the pre-constitution period (i.e. 5.33%) since by not making a payment into court, the ship owners would gain an advantage by their ability to benefit from the higher interest rate that the money could probably earn on deposit in the open market.
In determining this issue the court was guided by the fact that article 11.2 of the Convention provides that the guarantee or LOU should be “acceptable under the legislation of the State Party where the fund is constituted and considered to be adequate by the Court or other competent authority” . In considering what is “acceptable” and/or “adequate” the judge held that:
“…it should place the claimants in a position no worse than if the limitation fund had been constituted by payment into court. I therefore considered that an LOU ought to make provision for post-constitution interest at a rate which approximates the interest which could be earned on a limitation fund paid into court during the period that the fund remains in court.”
The court also opined that since the ship owners were entitled under the Convention to establish a limitation fund by the provision of a guarantee or LOU rather than by a payment into court, the court’s role was to ensure that the claimants against the fund should not be in a worse position in such circumstances. However, provided they were not put in a worse position, there was no reason why the court should restrict any benefit that the ship owners might incur as a result of proceeding in this manner. Consequently, having made enquiry as to the rate of interest earned previously on moneys paid into court pursuant to other types of proceedings, held that the appropriate post- constitution interest rate should be 2.5%.
Limitation proceedings Costs
The fundamental principles relating to the allocation of costs in a limitation action brought under the 1976 Convention were described by Clarke J in the “Captain San Luis”[4] At pages 578-9 of the judgement the judge emphasised the difference that has been brought by Article 4 of the 1076 Convention as follows:
“There is a radical difference between the case where the shipowner must prove that the damage occurred without his actual fault or privity before he is entitled to a decree and the case where the shipowner is entitled to a decree unless the claimant proves either that he intended to causethe loss or that he acted recklessly and with knowledge that damage would probably result.”[5]
He then went on to conclude:
“a fair balance is struck between the parties if it is held that the shipowner must pay the costs of proving those matters which he must prove in order to obtain a decree and that the claimant must pay the costs of investigating and determining the facts which the Convention provides that he must prove if, at the end of the day, he fails to establish those facts.
However, the Captain San Luis was a case in which the shipowner’s right to limit was contested and in the As Fortuna Opco case the Singapore High Court considered allocation of costs in a case in which the right to limit was uncontested. Having distinguished the Captain San Luis on this ground he court made the following detailed order:
36 “In the light of the foregoing discussion, the following principles should apply to costs of uncontested limitation decrees:
(a) The shipowner should pay the claimants’ costs in relation to those matters for which the burden of proof lies on the shipowner. These would include establishing the shipowner’s prima facie right to limit liability pursuant to Arts 1, 2 and 3 of the 1976 Convention and determining the limitation amount pursuant to Arts 6 and 7 of the 1976 Convention. Where an LOU is used to constitute the limitation fund, it will also include establishing the LOU’s adequacy and acceptability.
(b) In respect of matters for which the burden of proof lies on the claimant (eg, facts required to break limitation pursuant to Art 4 of the 1976 Convention), while the claimant is entitled to seek and be given such information as to enable it to decide whether or not to dispute the shipowner’s right to limit its liability, each party should bear its own costs in this regard.
(c) Where an application for discovery is made pursuant to O 70 r 37(6), the costs of such discovery application should follow the event.
(d) The foregoing principles are subject always to costs being in the discretion of the court.
37 For the foregoing reasons, I ordered the Plaintiffs to pay the Defendants’ costs in relation to:(a) the establishment of the Plaintiffs’ prima facie right to limit liability pursuant to Arts 1, 2and 3 of the 1976 Convention;(b) the calculation of the size of the limitation fund; and(c) the consideration of the adequacy and acceptability of the draft LOU”
Such clarification is sensible and welcomed albeit that there may still inevitably be cases in which the demarcation line between the various heads of costs will be blurred.
The Captain San Luis
The cost of providing the fund
A more complex problem which was not considered in the As Fortuna Opco case arises in relation to the cost of establishing a limitation fund particularly where that fund has to be established in the form of a cash deposit or guarantee.
Article 11 of the Convention provides that:
“Any person alleged to be liable may constitute a fund”
and that
“A fund constituted by one of the persons (that are entitled to limit pursuant to Article 1) or his insurer shall be deemed constituted by all (such) persons…
In most cases the fund will be established by the shipowner since that is the “person” that is most vulnerable to arrest. However, once established, the fund will be available to protect the interest of any of the other “persons” that are entitled to limit pursuant to Article 1. For example, cargo claims may be brought against both ship owners and charterers and charterers may wish to limit their liability by relying on a limitation fund that has been constituted by the ship owners.
David Steel J, observed at first instance in the “CMA Djakarta”[6] that whilst the Convention provides expressly that the limitation fund would protect the “common exposure” of the various parties that were defined under the rubric of “shipowner”:
“no provision is made for allocation of the cost of putting up the fund among the members of the class.”
and again at para 60:
“Not only are questions of responsibility for supplying funds outside the convention…”
Therefore, how is the cost of providing and subsequently administering the fund to be allocated if it is proved in due course that parties other than the “person” that has constituted the fund seek to take advantage of the fund either wholly or partly in order to limit their liability? Since the Convention does not regulate this issue it is presumably to be determined pursuant to article 10 in accordance with the law of the forum, and the answer to the problem may, therefore, differ depending on what that law provides.
If the issue were to be determined in accordance with the law of England and Wales it may be that the most fruitful avenue to follow is the law relating to unjust enrichment. In a nutshell, there is unjust enrichment when one person acquires a benefit at the expense of another in circumstances which are unjust and is required to make restitution to the person that has provided the benefit.
In the case of Benedetti v Sawiris[7]the Supreme Court held that four factors must usually be established in order to establish a case of unjust enrichment, namely:
the defendant has been enriched; and
this enrichment is at the claimant’s expense; and
this enrichment at the claimant’s expense is unjust; and
there is no applicable bar or defence.
The provision of a limitation Fund that is intended to protect the interests of “persons” other than those of the ship owners is likely to satisfy requirements 1 and 2. However, requirements 3 and 4 may be more difficult to justify. On the one hand, it was held in Owen v Tate[8]and McDonald v Coys of Kensington (Sales) Ltd[9] that the person that has benefitted need not have specifically requested the benefit and it is sufficient that he has freely accepted the benefit.
However, it may be argued that by electing to establish a limitation fund, the ship owners do so fully appreciating and accepting that such a fund will automatically benefit not only them but also all the other “persons” identified in articles 9 and 11.3 of the Convention and that, consequently, although there is enrichment of such “persons”, there is no ”unjust” enrichment. Or, to make the same point differently, it cannot be said that the enrichment is “unjustified” if it is simply a voluntary bestowal of a benefit.
Nevertheless, it is noteworthy in this regard that Scarman LJ said the following in Owen v Tate:
“The fundamental question is whether in the circumstances it was reasonably necessary in the interests of the volunteer or the person for whom the payment was made, or both, that the payment should be made – whether in the circumstances it was “just and reasonable” that a right of reimbursement should arise.”
The underlined words would seem to suggest that there is a case for unjust enrichment even if the relevant voluntary act benefits the volunteer as well as the receiver of the benefit.
The concept that since there is a “common exposure” and a “common interest” of all “persons” that are entitled to limit, such “persons” should share the cost of providing the fund was emphasised by David Steel J at first instance in the “CMA Djakarta”[10]:
“These provisions are only consistent with all those identified as within the class of shipowner having a common potential exposure to the relevant claims and a common interest in funding the limit of liability,…”
Furthermore, given the references to, the “just result” and the “fair balance” for allocating costs that was adopted in the “Captain San Luis”, it would appear that a creditable argument could be raised to satisfy criteria numbers 3 and 4.
[2] The Court of Appeal of |England and Wales recognised the sufficiency of a limitation fund established by a P and I letter of undertaking in the case of the “Atlantic Confidence”
[3] For a more detailed commentary see Chapter 10 entitled “Limitation of Liability: Recent important developments in the United Kingdom other common law jurisdictions” of Maritime Liabilities in a Global and Regional Context, Informa 2019
The decision of the Commercial Court (Sir Jeremy Cooke sitting as a Judge of the High Court) in The Aqasia [2016] EWHC 2514 (Comm); [2016] 2 Lloyd’s Rep. 510 (noted swiftly in this blog; a picture of the vessel in question appears here) has clarified an issue that has been at the heart of cargo claim negotiations for decades, namely whether a carrier of a bulk cargo is entitled to limit his liability under the Hague Rules. Article IV Rule 5 of the Hague Rules provides that: “Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £100 per package or unit”.
Whilst there had hitherto been no English authority directly on point the Commercial Court adopted the approach that has been followed by courts in Commonwealth countries and by textbook commentators and held that the words “package or unit” could not be applied to bulk cargo as they were intended to refer solely to physical packages or other units such as cars. It should be appreciated in this connection that the Hague Rules were adopted in the 1920s at a time when bulk ships were not common. Consequently, it appears that a carrier of a bulk cargo may have no right to package limitation under the Hague Rules.
By the time that the Hague-Visby Rules were adopted at the end of the 1960s, bulk shipments had become common and it was recognised that the Hague Rules wording was no longer fit for purpose. Consequently, Article IV Rule 5 (a) of the Hague-Visby Rules provided that a bulk carrier could limit his liability to “666.67 units of account per package or unit or 2 units of account per kilo of gross weight of the goods lost or damaged, whichever is the higher”. The highlighted words were intended to provide a bulk carrier with limitation rights (i.e. based on weight) that were not available under the Hague Rules.
It should also be appreciated that the version of the Hague Rules that the USA adopted in its Carriage of Goods Act 1936 is also worded differently and provides that a carrier may limit his liability to”$500 per package…or in the case of goods not shipped in packages, per customary freight unit…” The phrase “customary freight unit” has been construed to refer to the unit of measurement that is customarily used to calculate the freight for that particular type of carriage (e.g. so much per ton or US Barrel etc) and not to a physical unit.
Therefore, it is important for a bulk carrier (particularly in high value claims) to determine which version of the Rules is applicable in any particular case. This is also important when the Rules are adopted by means of a Paramount Clause since there are many different types of Paramount Clauses some of which refer to the Hague Rules, some to US COGSA 1936 and some to the Hague-Visby Rules. A reference to the “Vague Rules” could be expensive!
