Scope of Application of the Article III Rule 6 Hague-Visby Rules Time Bar when incorporated into Charterparty

March 1997

In the "Marinor", the English High Court considered the effect of the one year time bar contained in Article III Rule 6 of the Hague-Visby Rules when this is incorporated into a time charter ([1996] 1 LLR. 351).

The owners chartered the "Marinor" to the charterers on a long term time charter for worldwide trading, although the charterers’ intention was to perform consecutive round voyages between Canada and the United States carrying sulphuric acid on the outward leg and clay slurry on the return leg in segregated tanks. The charterparty required the vessel to be capable of loading a full cargo of sulphuric acid and clay slurry in fully segregated tanks (clause 53) and to be manned with a full complement of crew properly trained in the safe handling of the intended cargoes (clause 47). Rider clause "A" of the charterparty incorporated the Canadian Carriage of Goods by Water Act 1993 which enacted the Hague-Visby Rules. Article III, rule 6 of these Rules provides, inter alia, that:

".... the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year after the delivery of the goods or the date when the goods should have been delivered".

The vessel successfully carried sulphuric acid for nine months. After this, a number of voyages resulted in some tanks of acid being found to be contaminated on discharge. The owners and charterers were unable to agree on the cause of this contamination or how its occurrence could be avoided. The charterers, therefore, chartered the "Chembulk Trader" to replace the "Marinor" for one sulphuric acid voyage and shipped a test cargo of sulphuric acid (which could be used by the receivers even in a contaminated condition) on the "Marinor"(voyage 32). This test cargo was discharged by the "Marinor" in a contaminated condition whereupon the charterers informed the owners that they would use substitute tonnage for the carriage of sulphuric acid to the United States until they were satisfied that the "Marinor" could carry sulphuric acid safely. The problem was ultimately resolved to the satisfaction of the charterers and the "Marinor" resumed service under the charter.

The charterers commenced arbitration in London against the owners, alleging that the sulphuric acid cargoes had been contaminated because they had failed to man, equip and operate the vessel in accordance with the terms of the charterparty. In respect of voyage 32, the charterers claimed the difference between the price fetched by the test cargo and the price their usual customers would have paid for uncontaminated cargo, together with the additional expenses of the test voyage. The charterers also claimed the additional cost of the one voyage performed by the"Chembulk Trader" and the voyages performed by the "Aurum" (which was period chartered to replace the "Marinor" until she was returned to service).

The charterers realised that they may have commenced arbitration outside the one year time period specified in Article III Rule. 6 and so made an application to the Court for a declaration that their claims were not time barred.

The Court noted that the Hague/Hague-Visby Rules are incorporated into charterparties because owners desire their rights and obligations under these contracts to be co-extensive with their rights and obligations under bill of lading contracts. The Court also noted, however, that time charters generally require owners to provide a wider range of services than bill of lading contracts and so many instructions given by charterers may not be confined to the carriage of cargo. In consequence, the Court ruled that Article III Rule 6 was capable of applying generally to charterparty rights and obligations, even if these are more extensive than the rights and obligations owed under bills of lading. That said, the Court held that the wording of Article III Rule 6 narrows the scope of its application in the context of a time charter. Article III Rule 6 specifies that the liability must be "in respect of goods" and that the time limit is to be calculated from the "delivery of the goods," or "the date when the goods should have been delivered". The Court held, therefore, that an owner can only rely on the time bar contained in Article III Rule 6 as a defence to charterparty claims which:

1. assert either (a) a liability involving physical loss of or damage to goods, or (b) a liability for financial loss sustained in relation to goods, and
   

2. concern goods either shipped or intended to be shipped pursuant to the charter, provided (in the case of the latter) that the particular voyage in question was in the contemplation of the parties at the time of the breach.

In applying these principles to the case before it, the Court ruled that the Article III Rule 6 time bar applied to the claim under voyage 32 because this claim was based on an assertion of loss sustained in relation to the sulphuric acid carried by the "Marinor" on that voyage. With regard to the claims for the additional cost of chartering in substitute tonnage (both the "Chembulk Trader" and the "Aurum"), the Court held that these claims were not time barred under Article III Rule 6 since they did not relate to any particular cargo carried or intended to be carried on the "Marinor" (the charterers having issued no instructions to the "Marinor" in respect of the cargoes in question at the time of the alleged breach). Instead, the Court concluded that the claims were in respect of a liability in respect of the charterers' loss of use of the "Marinor" on grounds of its alleged inability to perform the services required of it.