Bills Of Lading - Owners' or Charterers'?

June 2003

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(Sea Venture Volume 21)

On 14 March 2003 the House of Lords handed down it's decision in The "Starsin" bringing clarity to the problem of identifying the contractual carrier under a bill of lading that had run through a number of cases including The "Berkshire"1, The "Ines"2, The "Hector"3, and The "Fletcha"4.

The first instance and Appeal Court decisions in The "Starsin", as well as the related decision of The "Hector", are discussed in "Sea Venture" Vol.s 18, 19 and 20.

The House of Lords decided a number of issues on appeal. This article deals with the identity of carrier aspect of the case which the House of Lords unanimously decided in favour of the shipowner. In reaching it's decision the House of Lords upheld the first instance decision of Colman J as well as the dissenting judgment of Rix LJ in the Court of Appeal. Further, the decision recognised the disapproval voiced by a number of academic writers at the legalistic approach of the majority of the Court of Appeal in seeking to make sense of conflicting statements on the face of the bill of lading and the general terms and conditions set out on the reverse.

The "Starsin" had been chartered by Continental Pacific Shipping ("CPS"). Under the terms of the charterparty CPS was entitled to require the master to sign bills of lading on behalf of the shipowner or to authorise their agents to issue bills of lading. The question was whether the bills of lading that had been issued evidenced a contract of carriage created between the shipowner and cargo shipper or between CPS and the cargo shipper?

The face of the bills of lading contained all the normal details as to the shipper, consignee and notify party, vessel, cargo, and voyage. At the top right hand corner was the prominent logo and the printed name of CPS. The attestation clause towards the bottom right hand corner provided "IN WITNESS whereof the Master of the said Vessel has signed ……….. Bills of lading ….", below which was the signature box and in which was typed "As Agent for Continental Pacific Shipping (the Carrier)". Below this was the rubber stamp of the port agent of CPS.

The reverse of the bill of lading was headed the "Company's Standard Conditions''. These were broken down into 35 conditions in what Lord Bingham described as "….2 dense columns, in print which was very small but just legible by a painstaking and persistent reader". Of relevance was clause 1c, which defined the carrier as "the party on whose behalf this Bill of Lading has been signed", and clauses 33, the Identity of Carrier clause, and 35, the demise clause.

The majority of the Court of Appeal had decided that the two latter clauses evidenced a contract with the shipowner, notwithstanding that they were inconsistent with the form of and the signature on the face of the bill of lading, and therefore with clause 1c.

However, the House of Lords decided that the bills of lading evidenced contracts of carriage with CPS alone and that the contractual carrier should be identified objectively and "in the way in which a reasonable person, versed in the shipping trade would read the bill" (Lord Steyn). In this respect, the reasonable reader of a bill of lading does not construe the bill of lading as a whole.

"I have great difficulty in accepting that a shipper or transferee of a bill of lading would expect to have to resort to the detailed conditions on the reverse of the bill ……. in order to discover who he was contracting with. And I have greater difficulty in accepting that he would expect to do so when the bill of lading contained, on it's face, an apparently clear and unambiguous statement of who the carrier is." (Lord Bingham)

This commercial approach also reflects and is consistent with the provisions of article 23 (a) of the ICC Uniform Customs and Practice for Documentary Credits. This provides that the banks will, unless otherwise stated in the credit, accept bills of lading that appear on their face to indicate the name of the carrier and to have been signed by or on behalf of either the carrier or master of the vessel. The article further makes it clear that the banks will not examine the terms and conditions on the reverse of the bill of lading.

The House of Lords decision is to be welcomed for creating clarity and applying business sense where there is a clear and unambiguous statement on the face of the bill of lading identifying the contractual carrier. Indeed, it would be unhelpful if there were two different sets of rules to determine a contractual carrier; one applying to documentary credits and the other as between a shipper or consignee and carrier. This also accords with the approach adopted by most continental jurisdictions.

However, even a clear and unambiguous statement identifying the carrier on the face of the bill of lading may be open to challenge by a shipper (not an endorsee therefrom) if the bill of lading is not with the same carrier as under the contract of carriage that the bill evidences.