Shipping goods internationally involves complex legal frameworks, particularly concerning ownership and liability for cargo loss during transit. Over time, legal reforms have been made to address gaps in these frameworks, most notably through two key pieces of legislation: the Bills of Lading Act 1855 and the Carriage of Goods by Sea Act 1992. This article explores both regimes, highlighting the evolution of statutory transfers and rights of suit in maritime law.
The Bills of Lading Act 1855 was a groundbreaking law for its time, aiming to address the issues surrounding the rights of cargo owners to sue for losses in transit. This Act sought to resolve challenges where the cargo owner, other than the original shipper, could find themselves without a legal pathway to recover damages. The solution provided by the Act was a statutory transfer of the contract rights contained in the bill of lading to the consignee or the indorsee (the party to whom the bill was transferred), provided that the property in the goods had also passed to them through the consignment or indorsement process.
However, the 1855 Act had its limitations. First, the law implied that bearer bills (those without a named consignee) could not assign rights of suit to transferees. Similarly, it raised doubts about whether charterers, acting as intermediaries, could effectively transfer contract rights when the bill of lading was not considered a contract of carriage in their hands. Despite these uncertainties, the prevailing legal assumption was that such scenarios fell within the scope of the Act.
The key provisions of the 1855 Act placed both rights and liabilities on the transferee. This meant that the consignee or indorsee could sue the carrier for losses but was also liable for any freight or demurrage owed to the carrier. Importantly, the original shipper retained liability for unpaid freight, as established by Section 2 of the Act, a point later confirmed in the famous case The Giannis NK. In this case, the original shipper was held accountable for shipping dangerous cargo, even though the consignee had taken over the contract.
The statutory transfer mechanism under the Bills of Lading Act was not automatically triggered upon naming a consignee or indorsing the bill of lading. The Act explicitly required that the transfer of property in the goods must coincide with the consignment or indorsement. This condition, referred to as the "property link," created significant issues for certain parties who were excluded from statutory rights of suit, including:
Banks Financing Cargo through Letters of Credit: When banks received a bill of lading as a security, they acquired only special property in the goods, not full ownership. Therefore, they were not considered rightful owners under the Act and could not exercise statutory rights of suit.
Multiple Buyers of Unascertained Bulk Cargo: Under the Sale of Goods Act 1979, property in an unascertained bulk could not pass to multiple buyers until the goods were separated into distinct parcels. Consequently, these buyers lacked ownership and could not exercise rights under the 1855 Act.
Buyers Where Indorsement Did Not Pass Property: In cases like The Delfini, where property had already passed to the buyer by the time the goods were delivered, subsequent indorsement of the bill of lading failed to fulfill the property link requirement. This rendered the bill of lading "spent" and ineffective in transferring rights.
Buyers Using Non-Bill of Lading Documents: The 1855 Act applied strictly to bills of lading, excluding other shipping documents like delivery orders and waybills from its scope.
To address the gaps left by the property link, the courts developed the doctrine of implied contracts. This doctrine, formalized in Brandt v Liverpool Brazil & River Plate SN Co, allowed a consignee or indorsee to claim contract rights through an implied agreement with the carrier. However, the restrictive application of this doctrine, as seen in The Aramis, underscored the need for statutory reform.
The Carriage of Goods by Sea Act 1992 (COGSA 1992) marked a significant departure from the 1855 Act by addressing many of its deficiencies. The new regime was influenced by the 1991 Law Commission Report, which recommended sweeping reforms to simplify and modernize the legal framework for transferring rights of suit.
One of the most important changes introduced by COGSA 1992 was the abolition of the "property link." Under the new Act, the transfer of rights and liabilities no longer depended on whether the consignee or indorsee had obtained ownership of the goods. Instead, the Act provided for an independent statutory transfer of contractual rights and duties based solely on the transfer of the bill of lading, waybill, or ship's delivery order.
COGSA 1992 applies to bills of lading dated on or after September 16, 1992. The Act expanded the scope of statutory transfer to include not only bills of lading but also waybills and delivery orders, thus covering a broader range of shipping documents. This change allowed for more flexibility in commercial transactions, as rights of suit could be transferred through a wider variety of documents.
The new regime also clarified that the person holding the bill of lading or other document was entitled to sue the carrier for loss or damage to the goods, even if they did not own the goods. The Act achieved this by providing for a statutory transfer of all rights and liabilities under the contract of carriage to the holder of the document, whether or not they had a proprietary interest in the goods.
COGSA 1992 also introduced clarity regarding bearer bills of lading. Unlike the 1855 Act, the new legislation explicitly allowed for the transfer of rights of suit to the holder of a bearer bill, thus resolving one of the major ambiguities of the previous regime.
In addition to expanding the categories of claimants, COGSA 1992 also streamlined the process for multiple buyers of unascertained bulk cargo. By eliminating the property link, buyers could now exercise rights of suit as long as they held the appropriate shipping document, without waiting for the goods to be separated into distinct parcels.
Overall, the Carriage of Goods by Sea Act 1992 modernized and simplified the legal framework for maritime transport, providing greater clarity and flexibility to cargo owners, financiers, and carriers alike. The Act's elimination of the property link and inclusion of various shipping documents ensured that the transfer of rights of suit was more accessible and equitable.
The evolution from the Bills of Lading Act 1855 to the Carriage of Goods by Sea Act 1992 represents a significant shift in maritime law. The old regime, while innovative for its time, was hampered by the property link and other limitations that excluded certain parties from statutory rights of suit. The new regime, embodied in COGSA 1992, removed these barriers, offering a more comprehensive and modern approach to transferring rights and liabilities in international shipping. By expanding the types of documents covered and simplifying the legal process, COGSA 1992 ensures a more flexible and fair framework for all parties involved in the carriage of goods by sea.
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