The power of the sword

Christoph Hasche, of Taylor Wessing in Hamburg, looks at the issues surrounding the lack of uniformity in time limits

TIME limits are like a sword of Damocles hanging over the head of every lawyer. One of the first things lawyers must do when handling a legal dispute is to check if there is still time to pursue the matter. If not, they run the risk of the sword falling on their head. But finding out whether a claim is time-barred is not always easy.

The first question to answer is which national law has to be applied in order to decide on time limits. If a claim arises under a bill of lading or charter party which contains a choice of law clause, the situation is simple. For example, if the clause says,"All disputes out of or in connection with this contract shall be governed by Icelandic law", then everyone knows where to ask. But if the contract is silent, the lawyer will first have to decide which court to go to in case the dispute cannot be settled amicably. That court would then apply its own national law in order to decide which was the proper law of the dispute.

The problem is that different jurisdictions have very different time limits, at least as far as the Hague-Visby Rules are concerned. As an example, if a charterer lodges a claim against a shipowner because the owner did not properly describe the vessel or did not deliver the vessel to the charterer as provided for in the charter party, the general time limit for such a claim under French, German or Dutch law is one year. However, in England it is six years, and in Spain the same claim would not become time-barred for fifteen years.

In some countries, the situation is different for a claim made by a shipowner against a charterer. A claim to pay charter hire, for example, would be time- barred in Spain within six months, within one year in France and the Netherlands, within three years in Germany and within six years in England. The statutory time limits between countries are far from uniform.
Such is the case for time limits of conventions connected to transport. The Hague-Visby Rules apply in 24 different countries, including the UK, France and Spain, but not in Germany or Portugal. Germany decided not to ratify the Hague-Visby Rules but rather to phrase its commercial code in a way that it is fully in line with the rules. In all Hague-Visby countries there is a one-year period within which a cargo claim has to be filed. The same period can be found in COGSA. But this one-year period is only applicable to claims under bills of lading. All others, such as those in tort, are not covered by these conventions and have a longer time limit.
Claims under CMR also become time-barred after one year but claims under the Athens Convention have a two-year time limit, as do those under the Warsaw Convention for air transportation. Of course the applicability of the different conventions has to be checked carefully.

Time limits can be set not only in statutes or conventions but also in contracts, mostly charter parties or bills of lading. The three-month time limit under the Centrocon arbitration clause is well-known, but there are even shorter ones in existence demonstrating how different contracts can have different requirements which again differ from the statutory provisions.
Article III Rule 6 of the Hague-Visby Rules provides for a one-year period. But even such a widely known and accepted convention does not guarantee uniformity. There are also many more questions to be answered when applying a rule on time limits. For instance, when does the one-year period begin? Article III Rule 6 says the period starts to run when the cargo is discharged or should have been delivered. But what does this mean?
The English high court rendered a decision in June last year in the case of Trafigura v Golden Stavraetos. On arrival of the vessel at the original contractual destination, the receiver refused to accept delivery of the cargo because it was damaged. The receiver subsequently arranged with the shipowners for the cargo to be carried to and delivered at another port. It could have been argued that with both parties' consent they are able to change the contract at any time and that the second port finally became the only port where the goods are discharged and, therefore, the decisive one.

But the high court thought differently, ruling that the time limit under Article III Rule 6 of the Hague-Visby Rules began to run from the time at which the cargo "should have been delivered" at the original port of discharge and not from the time that discharge was completed at the second port. The claimants' suit was, therefore, time-barred and summary judgment was entered in favour of the defendant shipowners.

It is clear that it is not always easy to say when the one-year period begins to run. But this is just one of a whole host of uncertainties where time limits are concerned. For instance;
- Is time limit a question of procedural law (as in England) or of material law (as in Germany)?
How are contractual time limits to be incorporated into a contract in order to make them binding?

What is a recourse action according to Article III Rule 6 of Hague Visby which provides for a time limit of three more months? There are recent decisions on this question by the Israeli supreme court and the Dubai courts.

• Is it possible to interrupt the running of time and, if so, how?
• Is it sufficient to appoint an arbitrator or is it necessary to file points of claim?
• Can the time be stopped from running so that it counts again from the very beginning?
• Can the time limit be extended? Is it automatically extended by negotiation?
• Which formal requirements are to be observed when obtaining a time extension?
• Can a time-barred claim still be offset against a running claim?
• Does a court have to dismiss a time-barred claim even if the debtor did not invoke the argument of time bar?
• When has the debtor lost its right to argue that the claim is time-barred?

The first conclusion to be drawn is that time limits are not uniform at all, varying even from country to country. Things would be far less complicated if there was only one time limit, such as one-year, which applied in all jurisdictions throughout the shipping world. But, while unifying time limits would answer the first question of how long the time limit is, it would not address the many other - and in some cases more difficult - questions as mentioned above. There is also the danger that harmonising time limits in the shipping would lead to disharmony in national legislation so, in fact, very little would be gained by creating one uniform time limit.

Instead, there needs to be harmonisation of the different legal systems which, if we go back to the old Greek heroes, would be hard work even for Hercules. It looks like lawyers will just have to learn to live with the sword of Damocles hanging over their heads for the time being.

This is an edited version of the presentation given by Christoph Hasche at the Barcelona Shipping Law Forum in December 2002.