Reporting on a recent judgement by the US Supreme Court which gives authority to the position that an ocean carrier will be protected by the terms of his own contract irrespective of the terms of a NVOCC B/L
Any book or chapter written about the liability of an ocean carrier when a NVOCC* is involved can now be either re-written or clarified following a recent decision rendered by the US Supreme Court in the Kirby-case**.
The decision deals with a couple of important issues – including the extent of a Himalaya clause. However, this will not be dealt with in this short article which purports only to deal with a NVOCC carrier’s role in relation to agency and, more specifically, whether a NVOCC carrier will bind cargo interests to ocean carrier’s terms in the bill of lading, or alternatively bind ocean carrier to the terms agreed between the NVOCC and cargo interests – a NVOCC bill of lading.
The facts of the case were as follows:
An Australian manufacturer sold machinery from Australia to a buyer in the US. The seller arranged for the transportation from Australia to Huntsville, Alabama through a company called International Cargo Control (ICC) who issued a bill of lading for the entire voyage. The trans¬portation consisted of several modes. The ocean voyage ended in Savannah, Georgia and the machinery was then transported inland by railway to the end destination Huntsville.
ICC - who issued the bill of lading to the seller - did not use its own vessel for the ocean voyage. In fact they used the service of a German shipping company, Hamburg Süd. Hamburg Süd issued a bill of lading to ICC covering the ocean voyage performed by Hamburg Süd.
Both bills of lading contained traditional terms to be found in bills of lading including the carrier’s right to limit liability in accordance with US COGSA to USD 500 per package. The ICC bill of lading did, however, contain a higher limitation amount for the land leg.
The machinery was allegedly damaged during inland railway transport for approximately USD 1.5 million. The inland railway transport was performed by Norfolk Southern Railway (Norfolk) and cargo interests now tried to circumvent the limitation clauses contained in the bills of lading by suing Norfolk in tort.
Both bills of lading also contained Himalaya clauses extending liability limitation to any servants, agents and independent contractors and inland carriers. The Supreme Court - by reversing the decision made by the Eleventh Circuit - decided in brief that Norfolk was protected by Himalaya clauses in both bills of ladings and was able to rely on the liability limitations contained in those bills of lading.
Since the damage was sustained during the land leg, the limitation amount was lower under the Hamburg Süd bill of lading than under the ICC bill of lading, and thus Norfolk had a specific interest in being protected also by the limitation provisions contained in the Hamburg Süd bill of lading.
The Supreme Court stated that when an intermediary (NVOCC) contracts with a carrie,r the cargo interests will be bound by the terms of the contract (typically bill of lading) between the intermediary and the carrier if they are seeking recovery directly from the carrier. For this purpose an intermediary is considered the agent of the cargo interest and not the agent of the carrier.
The Supreme Court did not consider this decision to be unjust on cargo interests. Cargo interests would retain their right to sue the carrier with whom they entered into a contract of carriage under the bill of lading issued by the carrier, in this case ICC.
On the basis of this decision, it now appears that carrier’s position vis-à-vis cargo interests is more clarified when a NVOCC is involved. In case of inconsistency between the terms of bills of ladings involved, a carrier will apparently be able to rely on the terms of its own bill of lading and therefore needs no knowledge of other contracts of carriage involved.
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* NVOCC means Non Vessel Operating Common Carrier
** Norfolk Southern Railway Company, petitioner v. James N. Kirby, Pty Ltd., DBA Kirby Engineering, and Allianz Australia Insurance Ltd – Case no 02-1028 – decided November 9, 2004