Financiers beware: English Supreme Court of Appeal confirms the applicability of the 12-month time limit in the Hague and Hague-Visby Rules to all claims under bills of lading

A November 2024 UK Supreme Court decision in Fimbank Plc v KCH Shipping Co Ltd, [2024] UKSC 38, has provided clarity on the applicability of the 12-month time limit for claims under the Hague and Hague-Visby Rules (Rules), particularly in the context of misdelivery claims arising after the discharge of goods. In upholding the carrier’s arguments, this judgment settles the debate on when the one-year time limit stipulated in Article III, Rule 6 of the Rules extends to claims for misdelivery occurring after discharge of the cargo. This is of particular importance to financiers and commodity traders who hold bills of lading as security for their exposure at various stages in the transfer of the bills of lading and sales of the cargo. The decision is also a timely reminder to all cargo interests with claims under bills of lading to bring their claims within 12 months of the date of delivery or date on which delivery should have taken place.

Legal Framework

The 1924 Hague Rules and their subsequent amendment by the 1968 Brussels Protocol (Hague Visby Rules), are pivotal in governing the international carriage of goods by sea.  These rules have been ratified by over 95 states and are usually contractually incorporated into bills of lading or apply compulsorily to bills of lading as a result of national legislation. Article III, Rule 6 of both the Hague and Hague Visby Rules stipulates that the carrier is discharged from “all liability” unless suit is brought within one year of the delivery of the goods or the date when they should have been delivered.  Although this time limit is universally accepted as applying to claims such as those for damage to the cargo, there has been some debate about whether it applies to all claims relating to bills of lading or cargo, in particular where the cargo is delivered to someone other than the named consignee or bill of lading holder. 

Background

Fimbank Plc (Bank) claimed against KCH Shipping Co Ltd (Carrier) for the misdelivery of a cargo of 85 510 metric tons of steam coal.  The cargo was shipped aboard the mv Giant Ace from East Kalimantan, Indonesia, to Indian ports under 13 bills of lading.  The Bank alleged that the Carrier delivered the cargo to someone else without the production of the original bills of lading, and this misdelivery occurred after the discharge of the goods.  The Bank asserted that it was the lawful holder of the bills of lading and accordingly was entitled to delivery of the cargo or compensation for its value as it had been delivered to another party.  It asserted that a time bar of 6 years applied under English law.

The Bank initiated arbitration proceedings against the Carrier on 24 April 2020, more than 12 months after the cargo was delivered or should have been delivered.

The Carrier contended that the Bank’s claim was time-barred as the suit was not brought within the one-year time limit specified in Article III, Rule 6 of the Hague Visby Rules.

Supreme Court’s Analysis

The Supreme Court’s analysis focused on several key aspects to determine the applicability of the one-year time limit to post-discharge misdelivery claims:

• Ordinary Meaning and Context

The court examined the ordinary meaning of the third paragraph of Article III, Rule 6, which states: “In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.” The court noted that the phrase “in any event” indicates a broad application, suggesting that the time bar applies to all liabilities, not just those arising under the Rules.  This interpretation is supported by the French text “en tout cas,” which similarly implies an all-encompassing scope.

The court also considered the context within which the time bar operates. Delivery, as opposed to discharge, marks the completion of the contract of carriage under the bill of lading.  The court emphasized that delivery often occurs after discharge, and the time bar reference to “delivery” rather than “discharge” supports its applicability to events occurring post-discharge.

• Object and Purpose

The primary object and purpose of the time bar are to ensure finality and to enable the closure of accounts and books.  The Court highlighted that an all-embracing time bar regime serves this purpose better than a split regime.  It would be impractical and commercially unsound to have different time limits for claims arising from the same set of facts, depending on whether they occurred before or after discharge.

• Travaux Préparatoires

The court referred to the travaux préparatoires (preparatory works) of the Hague and Hague Visby Rules to confirm the intention behind the time bar.  The travaux indicates that the one-year limit was seen as a significant concession to cargo interests, intended to apply broadly to all related claims, including those for misdelivery.

• English and International Case Law

The court reviewed relevant English and international case law, noting that English authorities have consistently interpreted the time bar as applying to misdelivery claims.  The court also considered decisions from Malaysia and Australia, which suggested a more limited application of the time bar.  However, the court found these decisions unpersuasive and inconsistent with the broader purpose and language of the Rules.

Conclusion

The Supreme Court concluded that the one-year time limit in the Hague Rules does apply to claims for misdelivery occurring after discharge.  This conclusion is supported by the wide wording of the rule, its context, the purpose of ensuring finality, and the consistent, persuasive interpretation by English courts.  The court also affirmed that the Hague Visby Rules, with their even broader wording, necessarily extend the time bar to such claims.

This decision underscores the importance of the one-year time limit in providing certainty and finality in maritime commerce. It clarifies that carriers can rely on this time bar to protect against stale claims, even when misdelivery occurs after the discharge of goods. For cargo interests, particularly financiers who are not involved in the operational side of the delivery of cargo, this decision highlights the need for vigilance in pursuing claims within the stipulated time frame to avoid being time-barred.

Although only binding in jurisdictions that apply English law to bill of lading claims such as South Africa, it is also likely to be followed in most common law jurisdictions.  All cargo interests are reminded that regardless of other time periods that may apply in the jurisdiction where they bring their claims, they must bring them within 12 months of delivery or date on which the cargo should have been delivered.