7 April 2005

We write again on the English Rafaela S judgment, which we first addressed in the last edition of TT Talk.

As will now be well known, the House of Lords approved a leading judgment in the Court of Appeal by Lord Justice Rix to the effect that a "straight" bill of lading is a "bill of lading or similar document of title" for the purpose of the Hague-Visby rules. The judgment was made principally for the following reasons.

• Intention of the Parties

  The straight bill "looked and smelt" like a bill of lading. If the parties had wished to create something else (for example: a non-negotiable receipt or waybill), they should have done so.

• Title

  Central to the unsuccessful appellant's case was the argument that a straight bill was not a document of title at English common law. To a large extent this relied on a Law Commission Report of 1991. But the House declined to be influenced in this way by English common law. The question was whether a straight bill was a document of title for the purposes of Hague-Visby. The House found that it was because it was used to transfer title - albeit only once, to a named consignee - and therefore had the capacity to affect third parties other than the shipper and carrier. Finally, as we mentioned in the last edition of TT Talk, the words "or any similar document of title" in the Hague-Visby rules were intended to extend rather than restrict the class of documents to which the rules apply, and to frustrate attempts to avoid Hague-Visby by inventing a new form of document.

• Policy

  The straight bill was used in the normal course of trade, and there was no policy reason to distinguish it in this respect from a negotiable bill - indeed it would be inequitable to do so. Although straight bills were rarer when the Hague-Visby (and Hague) Rules were drafted, there was evidence that they were within the contemplation of the drafters. In order to make sense of relevant statute and case law, it was necessary to distinguish a bill of lading (straight or otherwise) from a receipt or waybill. Foreign courts (for example in Netherlands, France and Singapore) had recognised straight bills as documents of title for the purposes of Hague-Visby, and it was not appropriate to resist this by relying on divergent domestic law.

The House agreed that an original of a straight bill must be produced to obtain the goods, although an express "attestation provision" to this effect was not required. Questions of presentation, as well as negotiability, are clearly important to the characterisation of documents of title for the purposes of Hague-Visby. However the criteria according to which documents should be distinguished in this connection are still not entirely clear.

This uncertainty extends not only to waybills and non-negotiable receipts, but also to "borderline" documents, presentation of which may not be required, such as short form bills, express bills, electronic bills and memo bills. One law lord came close to defining "document of title for the purpose of Hague-Visby" as "document entitling the shipper to sea carriage". This definition was clearly wider than the one stated above, on which the judgment was generally based. It relied to an extent on an examination of the original French text and on the attribution to the word titre of its alternative meaning ticket, and could therefore include waybills and non-negotiable receipts. It would probably be going too far to make this inclusion on the basis of the present judgment, but the question will no doubt be tested in the future. The straight bill in this case was port to port.

There is no reason to think that the judgment would not apply to an intermodal bill, but this is not entirely free from doubt. In spite of the remaining uncertainties, the Rafaela S brings welcome clarity to the interpretation of documents of carriage. It is important that Members be aware of its implications both in issuing their own documentation as carriers and in accepting documentation as shippers from their subcontractor carriers.

It is now clear that an English court will apply Hague-Visby rules by force of law to contracts evidenced by documents which are entitled bills of lading, and are formatted as bills of lading, whether they are "to order" or not. If Members hope to avoid this, the document must be entitled "Waybill" or "Receipt for Carriage", should restrict itself to details of the carriage and should not carry standard terms on the reverse. Conversely, a bill of lading should obviously be a bill, that is to say: it should "look and smell" like one.

The Club's Series 100 Bill, for example, meets this requirement. Members should also realise that Hague-Visby is not always "bad" for them when they act as carriers. In seeking to avoid Hague-Visby by issuing a document to which it does not apply, Members may be sacrificing not only a limitation structure, but also defences such as error in navigation. Further, risks of misdelivery are often increased by the use of a document, presentation of which is not required. However some carriers will continue to seek to issue documents which are not caught by this judgment, in order to restrict their liability to below Hague-Visby levels. This is what happened in the Rafaela S itself - the carrier sought to rely on the $500 US COGSA package limitation in preference to the more generous Hague-Visby alternative.

Members may find tactics like this employed by ocean carriers to whom they subcontract carriages difficult to resist. Any resulting "mismatch" with the Member's own conditions will not of itself prejudice insurance with the Club. But Members should be aware of the problem and, as far as possible and appropriate, be prepared to negotiate the terms of carriage and to ensure that the documentation which they themselves issue to their customers is on the same terms. It is worth recalling two basic points in this connection. One, if the party issuing a waybill wishes to incorporate Hague-Visby, there is nothing to stop this being done explicitly (as long as the normal requirement to bring it to the attention of the shipper is satisfied). Two, Hague-Visby will only be "imposed" as a result of Rafaela S in respect of voyages - generally exports from signatory countries, including of course the United Kingdom - to which Hague-Visby applies by force of law. The Managers would welcome readers' views on this matter, and are always ready to offer further advice.

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