English Jurisprudence On The Effect Of NORGRAIN And SYNACOMEX Charterparty Provisions Relating To The Loading And Discharging Operations
In English law, there is no special requirement for the incorporation into the Bill of Lading contract of carriage of the charter party terms referring to loading, stowage and discharge of the cargo. Such terms can be incorporated into the Bill of Lading contract of carriage by general words of incorporation1.
The carrier`s liability in claims for cargo damages and shortages depends upon the terms of the voyage charter party setting the responsibility for performing the loading and discharging operations and the terms of the Bill of Lading, particularly the Charterparty Incorporation Clause of the Bill of Lading.
If the charter party terms incorporated into the Bill of Lading contract of carriage stipulate expressly that the responsibility for performing the loading, stowage and discharge operations and related risk thereto is upon the charterers, shippers and receivers, then the carrier cannot be held liable by the third party holders of the Charter Party Bills of Lading for the manner in which other parties carry out the loading, stowage and discharge of the cargo.
Although at common law, the responsibility for loading, stowage and discharge operations is upon the carrier, it could be transferred by agreement to the cargo interests2. What constitutes such an agreement depends upon the words used in the contract of carriage for the transfer of these responsibilities.
In Jindal Iron and Steel Co. Ltd., TCI Trans Commodities AG and Hiansa S.A. v. Islamic Solidarity Shipping Co. Jordan Inc. (The "Jordan II")3, the Bills of Lading incorporated the terms of the voyage charter party which provided that:
"Shippers/charterers/receivers to put the cargo on board, lash, secure and dunnage, and discharge the cargo free of expense to the vessel."
The English Court of Appeal held that these provisions when incorporated in the contract(s) of carriage contained in the Bills of Lading were intended to relieve the carrier of all responsibility for cargo operations and transfer the responsibility for the proper performance of these activities to the shippers and receivers. The Bills of Lading represent the contracts originally made between the shipper and the carrier (the shipowner as carrier). By the terms of these contracts of carriage, the shipper agreed with the carrier that the shipper will carry out the loading and be responsible for it and that the consignee will carry out the discharge and be responsible for it. By taking out the Bills of Lading, the consignee as third party holder of the Bills of Lading becomes a party to the contract of carriage and must accept the contract terms stipulating who has the responsibility for loading and who has the responsibility for discharge.
The English Courts distinguish between the effect of Clauses 10 and 11 of NORGRAIN 89 charterparty form and the effect of Clause 5 of SYNACOMEX 2000 charterparty form when it comes to the responsibility for the loading and discharging operations.
The relevant provisions of NORGRAIN 89 charterparty form are as follows:
"10. Cost of Loading and Discharging
(a)* Cargo is to be loaded and spout trimmed and discharged (to Master`s satisfaction in respect of seaworthiness) free of expense to the vessel.
(b)* Cargo is to be loaded and trimmed at Owners` expense.
Cargo is to be discharged free of expense to the vessel (to Master`s satisfaction in respect of seaworthiness).
11. Stevedores at Loading Port(s) and Discharging Port(s)
Stevedores at loading port(s) are to be appointed by Charterers*/Owners* and paid by Charterers*/ Owners*.
Stevedores at discharging port(s) are to be appointed and paid by Charterers*/ Receivers*.
In all cases, stevedores shall be deemed to be the servants of the Owners and shall work under the supervision of the Master."
In Sea Master Shipping Inc v. Arab Bank (Switzerland) Ltd. & Anor4, the English Commercial Court held that a provision that transfers the responsibility for the cost of discharge to a charterer or cargo receiver will not have the effect of also transferring the obligation to carry out the task of discharge from the shipowner to the paying party.
In Jindal Iron and Steel Co. Ltd., TCI Trans Commodities AG and Hiansa S.A. v. Islamic Solidarity Shipping Co. Jordan Inc. (The "Jordan II")5, the English Court of Appeal held that if the charterer or receiver has agreed to pay for the discharging operation, there is no presumption that it has also agreed to carry it out or be liable if it is done badly.
Clauses 10 and 11 of NORGRAIN 89 charterparty form stipulate that the charterer or alternatively the cargo receiver has only the obligation to pay for discharge and in connection with that obligation it has to appoint the stevedores who are then to carry out the discharging operation on behalf of the shipowners. When the charter party provides for the stevedores to be the shipowner`s servants, the discharging operations remain the responsibility of the shipowner represented by the Master and the shipowner shall be liable for any damage and/or shortage caused to cargo due to bad stevedoring operations. The obligation of the charterer/shipper and the receiver to engage and pay for the stevedores for loading and discharging the cargo does not, without more, impose responsibility for the performance of loading and discharging operations.
The relevant provisions of SYNACOMEX charterparty form are as follows:
"Clause 2
[At loading port] Owners shall provide and install at their risk and expense and on their time all that is required for safe stowage of grain according to local and international regulations."
"Clause 5
Cargo shall be loaded, spout-trimmed and/or stowed at the risk and expense of Shippers/ Charterers ...
Cargo shall be discharged at the risk and expense of Receivers/Charterers ...
Stowage shall be under Master`s direction and responsibility."
In Societe De Distribution De Toutes Merchandises En Cote D`Ivoire (t/a "SDTM-CI") & Ors v. Continental Lines N.V. & Anor6, the buyers of two cargoes of 453,089 bags of rice made claims under the contracts of carriage contained in the Bills of Lading for mould damage, loss of cargo from torn bags and short delivery of bags. The Bills of Lading incorporated the terms of a voyage charter party on the SYNACOMEX form.
The English Commercial Court held that to the extent that the mould damage was caused by the way in which the bags were stowed, then, by virtue of the provisions of Clause 2 and 5 setting the shipowner`s responsibility for the stowage of bags, the shipowner as carrier shall be responsible for such bad stowage. But if the loss or damage to the cargo was caused by the improper loading or discharging, then, by virtue of the provisions of Clause 5, that loss or damage is the responsibility of the shippers and receivers who cannot recover in respect of such loss or damage from the shipowner.
The English Commercial Court held that the words in Clause 5 of SYNACOMEX charterparty form are sufficiently clear to impose the responsibility for the operations of loading and discharge and for any shortcomings in those operations on the charterers and, by incorporation into the Bills of Lading contracts of carriage, on the shippers and consignees.
Unlike NORGRAIN 89 and NORGRAIN SOUTH 2000 forms, SYNACOMEX 2000 and GRAINCON provisions would protect the carriers of grain cargoes in case of claims under contracts that are subject to English law. But in order to avoid ambiguity, the shipowners should add a provision in the voyage charter party (ship`s fixture note) and the Bills of Lading stating that the charterers, respectively the shippers and receivers in the case of Bill of Lading contract of carriage, are to perform the loading and discharging operations on their risk and expense. An example of such clause is Clause 5(a) of Gencon Charter Party form which stipulates that:
"The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed and/or secured and taken from the holds and discharged by the Charterers, free of any risk, liability and expense whatsoever to the Owners."
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Grain Trade Review Edition No. 8.
Endnotes:
1. The general words of incorporation are considered sufficient to incorporate the charter party terms setting the responsibility for performing the loading and discharging operations into the Bill of Lading contract of carriage. See Garbis Maritime Corporation v. Philippine National Oil Co., [1982] Lloyd`s Rep. 284
2. See Jindal Iron and Steel Co. Ltd., TCI Trans Commodities AG and Hiansa S.A. v. Islamic Solidarity Shipping Co. Jordan Inc. (The "Jordan II"), [2003] EWCA Civ. 144; [2003] 2 Lloyd`s Rep. 87.
3. [2003] EWCA Civ 144; [2003] 2 Lloyd`s Rep. 87.
4. [2020] EWHC 2030 (Comm), [2021] Lloyd`s Rep. Plus 21.
5. [2003] EWCA Civ 144; [2003] 2 Lloyd`s Rep. 87.
6. [2015] EWHC 1747 (Comm), [2015] 2 Lloyd`s Rep. 395