Bill of lading – clause paramount – agreement for limitation figure

Article published on July 2014 in Stephenson Harwood Shipping Bulletin and reproduced by courtesy of Stephenson Harwood

Cargo was shipped under a bill of lading for carriage from Belgium to the Yemen. It included the following clause:

"Paramount Clause

The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels 25 August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.”

A dispute arose, and it was subsequently agreed that the claim would be subject to English law and jurisdiction. The principal point at issue was the figure of package limitation which was applicable. The Hague-Visby Rules had mandatory application by virtue of Carriage of Goods by Sea Act 1971. However, the claimants argued that by contractually adopting (by a clause paramount) the Hague Rules the parties had contracted out of the Hague-Visby package limitation figure in favour of the claimants.


The Hague-Visby Rules limitation figure applied.

1     The Hague-Visby Rules have been enacted in Belgium. The judge held that he was bound by The Happy Ranger to hold that the Hague-Visby Rules were not to be regarded as the "Hague Rules … as enacted in the country of shipment", as there were important differences between the two codes.

2     The Yemen has not enacted either the Hague or Hague-Visby Rules, so the opening words of the second sentence of the clause paramount did not apply. Accordingly, the last phrase of the second sentence applied, and the clause paramount took effect as a contractual agreement that the Hague Rules would apply.

3     However, the Hague-Visby Rules had mandatory application. Art IV(5)(g) of those Rules permits agreements which increase the carrier's liability above that laid down by the Rules. The judge rejected the view expressed in Voyage Charters that Art IV(5)(g) only permits the use of a formula if there are no circumstances in which it could produce a figure lower than that specified by Art IV(5)(a) of the Rules. The judge held that an Art IV(5)(a) agreement would only be invalid to the extent that in any particular case it in fact produced a limit lower than that permitted by the Rules.

4     However, the judge did not accept that the parties had made any such agreement in this case. Had the parties thought about the clause paramount, they would have understood that the Hague Rules would not apply at all because Belgium is a Hague-Visby Rules State. They would have viewed the clause paramount as surplusage, which could be ignored.

5     If (contrary to the judge's conclusion) the Hague Rules limit applied, then the limit was £100 per package or unit gold value. This refers to the gold value of £100 sterling, not its nominal or paper value, so that the applicable limitation figure is the value of 732.238 grams of fine gold (The Rosa S). The judge held that the time at which this gold value is to be converted into national currency is the date of delivery (or, in the case of loss, the date when the goods ought to have been delivered), and not the date of judgment.

(Yemgas FZCO v Superior Pescadores [ 2014 ] EWHC 971 (Comm))

Authors: Michael Bundock, Senior Associate and professional support lawyer with Stephenson Harwood & Joanne Champkins, Associate specialising in marine insurance with Stephenson Harwood / Publisher: SCMO