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Limitations on Liability for Losses at Sea – High Court Ruling

Ship22The perils of the oceans are obvious and, in order to facilitate international trade, the law has long placed limits on potential liabilities in respect of losses incurred at sea. However, in a case that broke new legal ground, the High Court has ruled that one such limitation does not apply to bulk cargoes.

The Hague Rules, which are incorporated in the Carriage of Goods by Sea Act 1924, provide that a sea carrier’s liability in respect of loss or damage to cargo shall not exceed £100 ‘per package or unit’. Despite the longevity of the rules, there was no English authority as to whether that limit applied to goods carried in bulk.

The case concerned a cargo of 2,000 tonnes of fish oil that arrived at its destination in a damaged condition. The carrier accepted in principle that it was liable for the loss. It argued, however, that its liability should be limited to £54,730 on the basis that each tonne of fish oil should be treated as a ‘unit’ for the purposes of the rules.

The cargo owners, however, argued that the limit on liability had no application to liquids or other bulk cargoes that are shipped neither as ‘units’ nor ‘packages’. In upholding those arguments, the Court found that, on a true interpretation of the rules, the word ‘unit’ was not apt to describe bulk cargoes. The ruling opened the way for the cargo owners to recover the whole of their $367,836 loss.