A Cargo Claim: Meaning, Limitations, Recommendations

CONTRIBUTED BY ARIA ONYI- OTU

INTRODUCTION

The practice of transporting goods and people by water, alongside the utilization of marine resources, commerce, and navigation, is all governed by the maritime rules and laws in Nigeria. These laws include; The Constitution of the Federal Republic of Nigeria, 1999 (as amended), The Merchant Shipping Act of 2007, The Coastal and Inland Shipping (Cabotage) Act of 2003, The Nigerian Maritime Administration and Safety Agency Act of 2007 (the NIMASA Act) and The Admiralty Jurisdiction Act of 1991. The Admiralty Jurisdiction Procedure Rules govern cases involving admiralty that are brought before the Federal High Court, which is the court with jurisdiction over such matters.

In Nigeria, if a ship or its owners commit a wrong that gives rise to a maritime claim, a suitable way to make things right is to file an action in rem against the ship and have her arrested to get security for the claim if the ship is already or will be, within the court’s jurisdiction three days after the claim is filed and the arrest is being initiated. Under maritime law, a ship is regarded as real property rather than personal property, giving her a separate legal personality from her owners. It is against the foregoing background that this present article shall examine the concept of cargo claims, its limitations as well as recommendations for better maritime practice in Nigeria.

MEANING OF CARGO CLAIMS

A cargo claim is when a shipper or consignee files a legal claim against a carrier for the loss or damage of a shipment, it is known as a freight claim or cargo claim.[1] In general usage, the term “freight” refers to “cargo,” although in the law of carriage, it refers to the “cost of carriage”. “Shipping claims”, “transportation claims”, or “loss and damage claims” are other terms for freight claims. The focus of this study shall be restricted to maritime cargo claims. Accordingly, claims that concern the ownership, possession, mortgage, or general operation of a ship are known as maritime claims. According to Section 2 (1) of the Admiralty Jurisdiction Act of 1991, maritime claims may be either proprietary or general in nature. Proprietary maritime claims are those that have a direct impact on the res or subject matter, as opposed to general maritime claims, which result from the operation of the res or any arrangement connected to or related to the res. General Maritime Claims, unlike Proprietary maritime claims, do not directly affect the res or subject matter but arise out of the operation of the res or any agreement relating to or connected with the res. There are certain claims which attach to the ship even when the ownership changes. These types of claims are known as Liens and the Admiralty Jurisdiction Act 1991 recognizes 2 types of liens and these are Maritime and Statutory Liens. Section 5(3) Admiralty Jurisdiction Act 1991 provides that “maritime lien” means a lien for salvage, or damage done to a ship, wages of the master or a member of the crew of the ship, or master’s disbursement. Section 5 of the Admiralty Jurisdiction Act of 1991 further provides that an action in rem or personam may be brought in the Court in all cases within the admiralty jurisdiction of the Court. In admiralty jurisdiction, two main types of proceedings can be heard and determined by the Federal High Court which are “admiralty action in rem and action in personam”. A freight claim is intended to allow the carrier to compensate the shipper or consignee and put them in the same situation as if the carriage had been correctly completed following the bill of lading.[2]

PARTIES TO A CARGO CARRIAGE CONTRACT

  1. The Shipper: This is the party that makes arrangements for the shipping of his goods by sea and hands over the items to the ship’s owner. He could be the buyer or the seller of the items.
  2. The Carrier: It is this party that enters into a marine freight contract with the shipper. For the benefit of the item’s owner, he agrees to send the items.

Other parties include:

  1. The Consignee: The person to whom the shipper consigns or sends the goods may be the buyer or the buyer’s representative.
  2. Freight Forwarder: The clearing agent who helps prepare clearance papers and customs documents.

ESSENTIAL PRINCIPLES APPLICABLE TO CARGO CLAIMS AGAINST THE CARRIER

According to the law, the Carriage of Goods by Sea Act, 2004, only applies to outbound cargo shipments; “the Hamburg Rules” apply to both inbound and outbound cargo shipments.[3] However, due to a condition that is important in the bill of lading contract between the carrier and the consignee, the Hague Rules may still apply to the inward transfer of cargo.[4] A written notice of loss or damage to cargo must be made to the carrier at the port of discharge in accordance with Article 3 Rule 6 of the Hague Rules, either before or at the time the person entitled to delivery of the goods takes custody of the items. The notice must be delivered within three days if the loss is not immediately evident.

Consequently, when cargo is removed without providing such notice, this acts as prima facie proof that the carrier delivered the products in excellent condition.[5] Additionally, if a lawsuit is not filed within a year after the date the goods were delivered or should have been delivered, a claim for loss or damage to cargo against the ship is waived and the Hamburg Rules’ Article 20 Rule 14 establishes a one-year limitation period.

The Hamburg Rules, in contrast to the Hague Rules, mandate that the carrier be notified of any damage within one day of the date of delivery and the only parties allowed to file a lawsuit based on a bill of lading are the carrier, shipper, consignee, and endorsee.[6] In the right situations, a carrier may be subject to a concurrent tort claim for violating the conditions of a contract of carriage.[7] A cargo claimant is free to choose whether to base his claim on a contract or a tort.

Usually, the bill of lading gives the carrier the right to restrict his liability. However, if the cargo claimant can prove that the carrier acted negligently in carrying out his contractual obligations, the carrier may lose the authority to limit his liability.

LIABILITY FOR CARGO LOSS AND DAMAGE

When a shipment of cargo is under-delivered or lost, the cargo owner may file a lawsuit under the terms of the bill of lading against the carrier to recover the value of the portion of the shipment that was under-delivered or lost.[8] When the cargo is lost while in the terminal operator’s care, a claim for breach of the bailment contract may be made, and damages may be obtained for the claimed breach.

Normally, the products would be protected against fire damage if they were covered by a cargo insurance policy. When they settle the claim, the cargo insurance acquires ownership of the loss. It is referred to as subrogation.[9] Depending on the circumstances, the insurer may then elect to pursue the owner of the exploding products.[10] It is crucial to remember that cargo insurance is merely a property policy and does not cover responsibility if the shipper’s products catch fire and harm the ship or the goods of others or cause the ship to catch fire.

CARGO CLAIMS’ ACTIONS TIME LIMITATIONS

  1. TIME LIMIT FOR BRINGING AN ACTION UNDER THE HAGUE RULES

By Article 3 Rules 6 of the Hague Rules, a notice of loss must be delivered in written form to the carrier or his agent at the port of his charge before or at the time the goods are removed into the possession of the party entitled to take possession, or if the loss is not visible within three days. When the cargo is taken, this removal shall serve as conclusive proof that the carrier delivered the items according to the bill of lading. According to Article 3 Rule 6 Paragraph 4, a ship is further released from any duty for loss or damage unless the lawsuit is filed within a year of the date the goods were delivered or the date they should have been delivered. This is demonstrated by the decision made by Karibi Whyte JSC in the case of Kaycee Nigeria Ltd v. Prompt Shipping Corporation[11], where the court held that “the Hague Rules only applied to claims for which the notice of damage was filed within the allotted 3-day period”.

  1. TIME LIMIT FOR BRINGING AN ACTION UNDER THE HAMBURG RULES

Any action relating to the carriage of goods under this Convention is time-barred if legal or arbitral procedures have not been commenced within two years, according to Article 20 Rule 1 of the convention. The Hamburg Rules, like the Hague Rules, subject this restriction to a written notice of damage given to the carrier. However, the Hamburg Rules allow a shorter notice period, one working day, in accordance with Article 19 Rule 1 of the Rules.

DISPUTE AS TO THE APPLICABLE RULES IN NIGERIA

The Hamburg Rules and Hague Rules have continued to coexist, which has caused uncertainty among shipowners, carriers, cargo owners, and shippers on which Rule should be applied. The Hamburg Rule’s Article 25, Rule 5 stipulates that the convention must be followed for contracts of carriage that were in effect on the convention’s effective date to be covered. Additionally, Article 25, Rule 5 of the same Rule states that any state party to the International Convention for the Unification of Certain Rules Relating to Bills of Lading Signed at Brussels on August 25, 1924 (“1924 Convention”) that becomes a contracting state to this Convention shall notify the Government of Belgium as the depository of the 1924 Convention of its denunciation of the said Convention and of its declaration that the denunciation shall take effect as of the date specified in the notification.

Nigeria has officially denounced Belgium to the government in the manner described above, but the National Assembly has not yet revoked the Hague Rules, leaving open the question of the status of both Rules. The Supreme Court stated, among other things, in the case of Ibidapo v. Lufthansa Airlines[12] that;

“The Court will not imply a repeal unless two Acts are so plainly incompatible with one another that effect cannot be given to each one at the same time.”

From the foregoing, it follows that both Rules require an express repeal. Additionally, the Court questioned the application of both Rules in Mega Plastic Ind v. MV Kota Halus[13] on the grounds that they had not been denounced.

CONCLUSION

This article has laid a foundation for the issue of cargo claims in line with its limitations and surrounding issues, as enumerated above. It is submitted that while the current situation in the ambiguity of the applicability of both rules continues; it is in the best interest of the national law-making body (that is, the National Assembly of Nigeria) to go back and take the following actions.

  1. The Hague Rules need to be repealed and the pertinent legislation needs to be reviewed.
  2. Additionally, care must be taken to make the necessary notification of denunciation to the Government of Belgium together with a declaration that the Hamburg Rules are effective as of the date they came into force.

By carrying out or committing to the aforementioned, the ongoing misunderstanding in the law and practices surrounding contracts for the carriage of cargo by sea will be rectified.

  1. Merriam Webster Dictionary, (Online Edition). Available at <http://www.merriam-webster.com/dictionary/freight%20claim> Accessed 20th May 2023
  2. K. K. Anele, Rethinking the arrest of ship regime in Nigeria. Commonwealth Law Bulletin 45, no. 2 (2019): pp. 345-372.
  3. J. A. Osuntogun, Delivery of Goods to Carriers in International Sales: An Examination of what It purported to be in Nigeria. Business Law Review 39, no. 2 (2018).
  4. Ibid
  5. M. M. Kathleen, Cargo Legal Liabilities: A Comparison of the Liabilities of Carriers, Stevedores, Terminal Operators and Others for Cargo Damage. Cumb. L. Rev. 17 (1986): 763.
  6. Ibid
  7. K K Anele, op cit
  8. P O Ebinimi and T. A. Oputa, A Re-appraisal of the Contract for Carriage of Goods by Sea applicable to Nigeria and the Global Commercial Community International Journal Of Comparative Law And Legal Philosophy (IJOCLLEP) 2, No. 3 (2020).
  9. O. Somoye, Principle of Indemnity and Related Doctrines in Nigerian Insurance Law and Practice: A Comparative Study with the Counterparts in Other Jurisdictions. Bangor University (United Kingdom), 2021.
  10. Ibid
  11. (1986) 2 NWLR (Pt 23)
  12. (1997) All N.L.R. 88
  13. Suit FHC/L/CS/1436/12, decision of Justice I N Buba

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