Lost Cargo - What Currency Should Be Used When Assessing Damages?

June 2003

(Sea Venture Volume 21)

It is well established that English courts and arbitral tribunals have jurisdiction to award damages in a foreign currency.¹

One of the issues for determination in The Mosconici² was whether the Claimants were entitled to damages in U. S. Dollars or, as the Defendants argued, Italian lira. The case concerned loss of cargo carried on board the vessel. The Defendants conceded liability for the loss. It was also agreed that they were entitled to limit their liability.

A key step in determining the appropriate currency in which a claim should be assessed is to establish the currency in which the Claimant incurred his loss. In The Mosconici the sale contract provided for transactions to be effected in U. S. Dollars. The contract also contained provisions requiring damages for non-delivery to be assessed in U. S. Dollars.

The Defendants argued, however, that the contract contained a number of provisions linking performance with Italy, that the goods in question were manufactured in Italy and the Claimant was an Italian company. Based on this, the Defendant argued that damages should be assessed in Italian lira.

The English courts are not generally prepared to award damages in one currency when that currency is merely a buffer or front for funds maintained in another currency³. The courts are also reluctant to award damages for claims in one currency if the lost or damaged cargo has been replaced or substituted in a different currency.

In the Texaco Melbourne⁴ a claim was brought for non-delivery of a crude oil cargo. The crude oil was to have been refined locally and then sold to local buyers. The House of Lords held in that case that damages were recoverable in local currency, and not U. S. dollars, which was the currency with which the cargo was to have been imported.

In The Mosconici the Court took the view that the claim should be assessed by reference to the arrived sound value⁵. It also stated that evidence of that value may be obtained from a range of sources, including invoice price, local market price or the replacement cost⁶. The sale contract for the lost cargo provided for payment to be made in U. S. Dollars. The Claimant, although an Italian company, was part of a group of companies incorporated in the United States. Although there was an "Italian" element to the contract, payment in respect of the Italian element was also to have been made in U. S. Dollars.

It was held that the appropriate currency for assessment and payment of damages was U. S. Dollars. The Italian elements of the contract did not affect the currency aspects in this case.

Careful consideration should be given to the appropriate currency in which to plead a claim as it may affect the true value of any recovery that is made or liability that is established.

1.See the "Folias" [1979] A.C. 685. 

2.[2001] 2 Lloyd's Rep. 313. 

3.See e.g. the Transoceanica Francesca [1987] 2 Lloyd's Rep. 155. 

4.[1994] 1 Lloyd's Rep. 473. 

5.The "Folias" (above) at p.315. The court relied on the "Sanix Ace" [1987] 1 Lloyd's rep. 465. 

6.Ibid.