Bills of lading limitation periods under the Hague/Hague-Visby Rules

Introduction

IT is well-known that the Hague and Hague-Visby Rules, where they apply, impose certain obligations on a carrier in relation to the seaworthiness of the vessel and care of the cargo. Article III rule 6 of each of these regimes imposes a one-year time limit for bringing suit against the carrier which, if not complied with, may have prejudicial consequences on a potential claimant.

This time-bar is particularly hazardous to the unwary because in most cases it will not be mentioned in black and white on the face of a bill of lading. By way of illustration, a common scenario is for a bill of lading to incorporate the terms of a particular charter party. That charter party may contain a Clause Paramount which in turn incorporates the provisions of the Carriage of Goods by Sea Act 1971 (COGSA 71). COGSA 71 incorporated into English law the Hague-Visby Rules, including the Article III rule 6 one-year time-bar. Someone reading the bill of lading without unravelling the chain of incorporated provisions might easily miss the fact that any claims under that bill of lading must be brought within one year of cargo discharge.

Even an exhaustive investigation of the contractual chain will not always reveal whether or not the one-year time-bar will apply to a claim. The contracts may be completely silent on this point but the Hague or Hague-Visby Rules may nonetheless apply if the bill of lading was issued in a state which is party to either regime or where the cargo was carried from a port located in such a state.

What is the scope of the time-bar?

Generally speaking, the time-bar will apply to all claims in respect of the carriage of goods by sea under bills of lading which are subject to the Hague or Hague-Visby Rules. Despite the best efforts of some lawyers, it has proved difficult for potential claimants to circumvent the general application of the one-year time-bar (see, for example, the Captain Gregos [1989] 2 Lloyd's Rep 63. The time-bar will apply not only to claims for damaged or lost cargo but also for general average and salvage contributions. These may take time to quantify, and care must be taken to ensure that the time-bar is not missed whilst such claims are being quantified. If in doubt, a protective writ should be issued, or arbitration proceedings commenced within the one-year period, even if the claim cannot be quantified at that time.

How does one protect against the expiry of the time-bar?

Absent agreement between the parties as to whether a voluntary extension will be given (which will not, in any case, be effective in all jurisdictions), the first consideration is to determine whether or not the relevant dispute resolution clause details the steps which need to be taken in order to commence proceedings and protect time. If, as is often the case, the required procedural steps are not specified, then one should determine whether the dispute resolution clause provides for high court proceedings or arbitration.

In the case of the former, the issuance of a writ may, without more, suffice to protect time, although this will depend on the jursidiction in which proceedings are being brought. For the purposes of "protecting time" in English high court proceedings, the writ itself need not be served, although it should be borne in mind that, generally speaking, a writ issued from the English high court will only remain valid for four months (or six months if it is to be served outside the jurisdiction), after which time the plaintiff may pursue an ex parte court application for a time extension. Such extensions may be challenged by the defendants, which can lead to difficulties in relation to the time-bar. The prudent approach would be to serve the writ prior to the expiry of its initial period of validity.

The requirements for protecting time in the context of an arbitration will, to a great extent, be dependent on the type of arbitration clause in question. The position under the Arbitration Act 1950 caused certain difficulties, due principally to the fact that the 1950 act did not specify the steps which would be required for the purposes of protecting time.

By way of illustration, in the recent case of Vosnoc v Transglobal Projects, Judge Jack QC held that a notice requiring the matter to be referred to arbitration in accordance with a contract (and nothing more) did not satisfy the requirements of the Limitation Act 1939 for the purposes of protecting time (see The Maritime Advocate, Issue 1, page 2). This decision has been criticised on the basis that it does not accord with the provisions of the UNCITRAL Model Law although, in reaching his conclusions, Judge Jack considered Article 21 of the Model Law but was bound to accept that English law took a different approach.

The position under the Arbitration Act 1996 is rather simpler in that section 14 makes it clear that, absent agreement between the parties, an arbitration should be commenced by one party serving on the other party or parties a written notice requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter. Again, the requirements under the Arbitration Act 1996 are more stringent than those found in Article 21 of the Model Law and, in those circumstances, present particular pitfalls to potential claimants who ordinarily operate in jurisdictions which prefer the UNCITRAL Model Law approach to the commencement of arbitration proceedings.

In essence, the English law position has not been radically altered by the advent of the Arbitration Act 1996. The crucial requirement seems to be that the party seeking to commence arbitration proceedings (and protect time for the purposes of any time- bar) must take a step towards getting the arbitration under way, in effect a step towards the appointment of the tribunal.

What options are open to a party which has fallen foul of the one-year time-bar?

Section 12 of the Arbitration Act 1996 (which has now replaced section 27 of the Arbitration Act 1950) gives the court a discretion to extend time for the commencement of arbitration proceedings subject to certain requirements being met. A word of caution, however. The new test under section 12 of the Arbitration Act 1996 is more stringent than that which prevailed under section 27 of the Arbitration Act 1950. In those circumstances, although there is an abundance of case law on the operation of section 27, there are very few indicators at present as to how section 12 is to be interpreted. Although a time extension was granted in relation to a Hague Rules time-bar under section 12 in Vosnoc v Transglobal Projects, that conclusion was reached on the basis of the particular facts of that case, and few general principles can be drawn from it.

There are further difficulties under section 12 of the Arbitration Act 1996. Section 27 of the Arbitration Act 1950 - which previously governed the granting of time extensions - was expressed as being "...without prejudice to the provision of any enactment limiting the time for the commencement of arbitration proceedings."

In the Antares [1987] 1 Lloyd's Rep 424, the Court of Appeal concluded that, due to the particular way in which the Hague-Visby Rules had been incorporated into English law (through COGSA 71), the Article III rule 6 time-bar was such an "enactment" and, in those circumstances, the courts did not have a discretion to extend time under section 27 where the Hague-Visby Rules applied. By contrast, the Hague Rules were incorporated into English law by a different legislative technique (under COGSA 24) and did not carry the same force of law as the Hague-Visby Rules. Furthermore, COGSA 24 has been replaced by COGSA 71. The result is that the courts are able to exercise a discretion to extend time under section 27 of the Arbitration Act 1950 in relation to a contractually incorporated Hague Rules one-year time-bar but not in relation to a Hague-Visby Rules time-bar applied by virtue of COGSA 71.

Section 12 of the Arbitration Act 1996 does not contain the section 27 "without prejudice" wording cited above. The corresponding provision (found in section 12(5)) reads: "An order under this section does not affect the operation of the Limitation Acts".

The definition of "Limitation Acts" for the purposes of that part of the Arbitration Act 1996 includes the words: "....and any other enactment (whenever passed) relating to the limitation of actions". There is considerable uncertainty as to whether these words will create the same result as under the Arbitration Act 1950, i.e., that no time extension may be given by the court in respect of the Hague-Visby one-year time-bar.

Certainly Mustill & Boyd have suggested, albeit in a slightly different context, that the words "any other enactment relating to the limitation of actions" relate only to statutes exclusively, or at least mainly, concerned with limitation. If that view is correct, and given that COGSA 71 is not exclusively (or even "mainly") concerned with limitation, then the conclusion must be that section 12 of the Arbitration Act 1996 can now form the basis of an application for the extension of a Hague-Visby Rules time-bar.

The contrary view is that, by virtue of the fact that section 12 is expressed as applying to an "arbitration agreement", it cannot have any relevance to a Hague-Visby time-bar which will apply by force of law (under COGSA 71) and not merely by contract. If that is indeed the case then the position will remain unchanged from that prevailing under the Arbitration Act 1950 and the decision in the Antares.