We all have our own opinion on who has the problem when something goes wrong.
When a debtor can’t repay a creditor; who has the problem, the borrower or the lender? Well, they both do, the borrower for taking on a loan that they were unable to pay back and the lender for loaning.
We all have our own opinion on who has the problem when something goes wrong.
When a debtor can’t repay a creditor; who has the problem, the borrower or the lender?
Well, they both do, the borrower for taking on a loan that they were unable to pay back and the lender for loaning money they are unlikely to see again.
Similarly when a ship owner loses cargo during a storm at sea, we might determine that because it was in the ship owner’s care that they must be the one with the problem?
To help us make a more informed decision we need to look more closely at maritime law.
Historically maritime law was considered to be a joint venture – someone had a ship and someone had cargo that needed to go from A to B.
One depended on the other, no ship meant no delivery to B and without the cargo there was no one to pay for the voyage.
So historically cargo and vessel owners were in it together, any problems and they both had to dig deep to resolve them.
Joint responsibility.
These rules eventually became the Hague-Visby rules which laid down more clearly the rights and liabilities of the carrier, but that’s not to say that they would have become responsible for the cost of the cargo in the above example.
No, depending on circumstances it could still be the cargo owner’s problem.
There are multiple scenarios during a voyage that could result in cargo loss or damage whereby the cargo owner still has responsibility for the problem.
Take General Average, declared when a vessel has suffered some type of distress and incurs a cost to make good the situation.
This comes right back to the original understanding of maritime law as a joint venture and is even defined by the maxim; “that which has been sacrificed for the benefit of all shall be made good by the contribution of all”
Basically we’re all in this together and have to bear a proportion of the cost to sort the problem.
That’s right – cargo owners have to contribute to salvaging the vessel.
So handing over cargo to an international carriers doesn’t transfer responsibility for the problem in the event that something goes wrong.
Cargo owners will always retain at least a proportion of the problem and need to ensure they are fully protected by goods in transit insurance to cover their liabilities or losses.
Take for example, the Maersk Honam.
The Maersk Honam was one of 9 container ships built by Hyundai Heavy Industries for Maersk.
Almost a year after its launch, the ship caught fire on 6th March 2018 enroute from Singapore to the Suez Canal.
Unable to contain the fire, the crew sent out a distress call which resulted in 23 crew being evacuated.
5 were not so lucky.
Those shippers with cargo aboard the vessel now find themselves under the arrangements of General Average.
According to Alex Kemp, partner at global law firm HFW, General Average is a tool for sharing the losses arising from a marine casualty between all the parties involved including the vessel owners, bunker owners, container shell owners and cargo owners.
“In order to ensure that everyone pays their fair share, the vessel owner usually has the power to detain the cargo pending the provision of security. If security is not provided, it is often open to the vessel owner to sell the cargo in order to raise the funds to pay the contribution due from that particular cargo owner,” he said.
As a shipper of cargo, it is important that you are fully aware of your legal responsibilities and obligations – the repercussions can be unbearable.
For more information on shipping insurance and the laws governing sea cargo, please contact us here.