A unanimous House of Lords provides definitive guidance on the status of "Straight" bills of lading under s 1(4) of Carriage of Goods by Sea Act 1971 and Art 1(B) of the Hague-Visby rules. Continuing a much needed focus on market trade and practice when interpreting bills of lading, the House stated that international maritime conventions should not be restricted to interpretation under notions of domestic law but rather construed by reference to broad principles of international mercantile usage and acceptance.

At last the House of Lords in JI MacWilliam Co Inc -v- Mediterranean Shipping Company SA [2005] UK HL 11 (The "Rafaela S") has provided some definitive guidance on the recent debate as to whether a bill of lading consigned to a named consignee, a so-called "straight" bill of lading, is a conforming document under Article I (b) of the Hague/ Hague-Visby Rules (the "Rules"). Indeed, on 16 February 2005 the House of Lords unanimously confirmed the Court of Appeal’s 2003 decision that a "straight" bill of lading was indeed a "bill of lading or any similar document of title" within the meaning of Section 1 (4) of the Carriage of Goods by Sea Act 1971 and Article I (b) of the Rules.

In 1989 the Appellants, Mediterranean Shipping Company ("Carriers"), contracted with an American company to carry four containers of printing equipment from Durban to Felixstowe and onward to Boston. The respondent, JI MacWilliam Company Inc (the "Consignees"), were to be the consignees. On 18 December 1989 the Carriers issued a set of three documents, described on their face as bills of lading. The consignee box on the document contained the words "consignee: B/L not negotiable unless "Order Of "". The box was completed with the name and address of the Consignees and with nothing more. Except for the fact that the bill of lading was transferable to the named consignee, it contained the usual terms regarding the matters relevant to the allocation of risks between the parties which are to be found in a traditional bill of lading.

On the voyage the goods were damaged and the Consignees consequently brought a claim against the Carriers. The Consignees contended that the Rules applied to the carriage of the goods and consequently their claim would be subject to the package limitation regime established thereunder (a total of US$150,000). The Carriers however, contended that US COGSA was applicable and therefore the claims were subject to its lower limitation provisions (reducing the Consignees’ claim to no more than US$2,000). The principal question upon which the arbitrators, at first instance, had to focus was which regime should apply to the carriage of the goods, the Rules or US COGSA.

The Arbitrators held, a decision upheld by Langley J on appeal to the Commercial Court, that a "straight" bill of lading fell outside the scope of Article I (b) of the Rules and that the applicable package limitation regime was therefore that under US COGSA. This, however, was reversed by the Court of Appeal (Peter Gibson & Rix LJJ and Jacob J). The House of Lords was quick to adopt the finding of the Court of Appeal and particularly the comprehensive judgment of Rix LJ, upon which the reasoning of the Lords placed the most reliance.

The judgment was delivered by Lords Brown, Steyn and Bingham. Although each gave a separate judgment, they all had a common approach to the issue in question. Whilst this did involve an historical analysis as to the development of the concept of a "bill of lading", their approach nevertheless focussed on matters of market trade and practice. In this respect the Lords preferred to shy away from fine and technical distinctions and arguments on interpretation put forward by the Carriers. Instead the Lords preferred to look at the question of interpretation through the eyes of traders, bankers and insurers who the Lords said would be inclined to take a more commercial view. This is not an unfamiliar approach for the House of Lords when looking at the interpretation of bills of lading (see their judgment (which notably also included Lords Bingham & Steyn) in the "Starsin" [2003] UKHL 12).

By reference to the historical development of the bill of lading both in the UK and abroad and indeed the background to the formulation of, in particular, the Hague Rules and relevant international legislation since, the view expressed by the Lords was that "bill of lading or any similar document of title" were in fact words of expansion as opposed to restriction. Lord Steyn went on to add that the restrictive approach revealed a "preoccupation with notions of domestic law regarding documents of title" which he felt should not "govern the interpretation of international maritime conventions". Indeed, he felt that the Rules should be construed by reference to the "broad principles of general acceptation appropriate to the international mercantile subject matter". He added that "straight" bills were in use before the Hague Rules were adopted and the framers of the Hague Rules would certainly have been aware of the widespread mercantile use of the "straight" bill at the time. Consequently, if it had been intended to exclude "straight" bills of lading from the Rules then no doubt special provision to that effect would have been made.

As far as UK legislation was concerned, the Lords looked at how the "bill of lading" was defined under the Bills of Lading Act 1855. Section 1 provides that "every consignee named in a bill of lading" is empowered to sue upon it. Before the Act property in the goods passed to a named consignee but he had no right to sue in contract for cargo damage during the voyage unless the shipper had effected the original contract as agent for the consignee. If Section 1 is interpreted restrictively then the named consignee in a "straight" bill of lading could, on that basis, neither sue nor be sued on a contract of carriage evidenced by the bill of lading. Lord Steyn was quick in recognising that such an interpretation was implausible and therefore must be rejected.

The Carriers placed much emphasis on the traditional definition of a bill of lading and in particular to its endorseability. They argued that as a "straight" bill was a non-negotiable document, it was this that set it apart from a "traditional" bill and made it more akin to a seawaybill (not recognised as a conforming document under the Rules). The Lords rejected this argument saying that the "straight" bill’s non-negotiability was the only thing that it had in common with a seawaybill. The main difference between the two being that presentation of the seawaybill by the consignee (on production of satisfactory ID) was not required to take delivery of the goods, whereas for a "straight" bill it was, presentation of the original document in order to obtain delivery being the principal characteristic of a document of title. In the hands of the named consignee a "straight" bill is the consignee’s document of title. A seawaybill, however, is never a document of title. The fact that a "straight" bill is issued in a set of three original bills was important, as it was this feature which implied that delivery could only be made against presentation of the bill itself. Lord Bingham confirmed Rix LJ’s comments in this respect which in turn affirmed the Singapore Court of Appeal’s decision in Voss v Apl [2002] 2 LLR 707 and stated that, if necessary, he would hold that production of a "straight" bill is a necessary pre-condition of requiring delivery even where there is no express provision to that effect.

In their adoption of a commercial approach the predominant feature of the Lords’ judgments was that they were prepared not to look too far beyond the face of the document itself. The "straight" bill had all the characteristics and wordings of a traditional bill of lading. Consequently, although the Lords recognised it was for the Court to determine the nature and effect of a legal document and that it was not bound by the label which the parties had chosen to apply to it, in circumstances where such was a bona fide mercantile document issued in the ordinary course of business, the Court would be slow to reject the description which the document bore especially where the document is issued by the party seeking to reject the description (in this case the Carriers). Ultimately the aim was to maintain the function of the bill of lading as intended by the parties, namely that the document should work as merchants would expect it to work.

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