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15 October 2008
The Rotterdam District Court recently delivered judgment in a dispute between cargo interests and carriers/charterers over the alleged unlawful exercise of a lien on cargo involving, among other things, the authority to issue bills of lading and failure to pay freight costs.
The claimants in the case were the cargo interests in respect of a consignment of pipes loaded on board the Onego Forrester at Shanghai, China, for discharge at Alexandria, Egypt.
German Lines Ltd, the sub-time-charterer, issued bills of lading for the shipment which contained a ‘freight prepaid clause’. These bills were not signed by the master. German Lines had chartered the vessel from Onego, which in turn had chartered it from the owner under the terms of a charter on the New York Produce Exchange (NYPE) 93 form. By means of a recap of the clauses of the NYPE form between Onego and the owner, these clauses also applied to the time charter between Onego and German Lines.
Clause 23 of the NYPE stipulates that:
“[T]he owner shall have a lien upon all cargoes and all suffrages or sub-hire for any amount due under this charter party, including general average contributions, and the charterer shall have a lien on the vessel for all monies paid in advance and not earned, and any overpaid hire, all excess deposit to be returned at once.”
German Lines did not pay the freight charge so, under the terms of NYPE 93, Onego exercised a lien on the cargo. The cargo interests claimed for release of the cargo or, alternatively, for an order compelling Onego to instruct the Onego Forrester to proceed to Alexandria. As a second alternative, the cargo interests asked the court to forbid Onego to instruct the Onego Forrester to change its intended destination from Alexandria.
The cargo interests claimed that Onego could not exercise a lien on the cargo against third parties which lawfully held bills of lading. Furthermore, they maintained that they were entitled to assume that German Lines had paid for the freight and the charter rate, in view of the notice on the bills of lading and the mate’s receipt.
Onego argued that the court was not competent to hear the dispute, since no unlawful act had taken place in the Netherlands. The cargo interests argued that the unlawful act had occurred in the Netherlands because Onego's offices were established there and Onego had instructed the owner or the master to exercise a lien from that office. In the opinion of the cargo interests, the unlawful act had therefore taken place in the Netherlands.
On the issue of the right to exercise a lien against the cargo, Onego argued that German Lines was not authorized to issue the bills of lading because by doing so it had violated its agreement with Onego, given that it first had to pay freight to Onego. Onego further argued that since German Lines was in breach of contract regarding the payment of freight, Onego could exercise a lien on the pipes on board the vessel as stipulated in Article 23 of the NYPE form - since it had also suffered damaged due to the breach of contract, it had not committed an unlawful act by withholding the pipes and exercising a lien.
The president of the court held that it was competent to hear the dispute, the unlawful act having taken place in the Netherlands because Onego had instructed its master or the owner to exercise a lien. The president also held that it would apply Dutch law to the claim.
The president held that since the bills of lading were not signed by the master, Onego could not in principle be regarded as a carrier. Since there was no other mechanism that made Onego a carrier under the bills of lading, the cargo interests could not claim delivery of the cargo against presentation of the bills of lading nor demand that Onego instruct the master or owner to head for Alexandria. The court accordingly rejected the primary and alternative claims of the cargo interests.
However, turning to the cargo interests' second alternative claim, the president of the court ruled that Onego could not instruct the owner or the master to sail to a destination other than Alexandria or to release the cargo otherwise than as agreed between Onego and German Lines. The president noted that Onego had not in the first instance acted unlawfully by withholding the pipes and that it had suffered damage due to German Lines’ breach of contract. Neither had the cargo interests proven that Onego had loaded the goods with the intention of blocking discharge at Alexandria. However, given the contractual obligation on the vessel to sail from Shanghai to Alexandria, Onego could be in breach of contract against German Lines if it requested the owner or the master to sail to a destination other than that contractually agreed upon.
Although the breach of contract by Onego against German Lines did not automatically constitute an unlawful act against the cargo interests, it could be argued that such an act had occurred, given that the cargo interests would probably suffer damages in the event that the pipes were released other than in Alexandria. In those circumstances, it could be assumed that Onego, in ordering the owner and/or master to change destination, would be acting unlawfully against the cargo interests.
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