Gold Clause of the Hague Rules 281
Gold Clause of the Hague Rules:
Why have the Korean Court Rejected the Rosa S ?
Choon Won Lee*
< 目次
>
Chapter 1 Introduction
Chapter 2 Rule established by The Rosa S
Chapter 3 Construction of the Hague Rules
Chapter 4 Construction of bills of lading
Chapter 5 Rule declared by The Spar Two
Chapter 6 Conclusion
(논문 제출일자 : 2004.10.12)
Abstract
81)
The Hague Rules entitles a carrier to limit its liability to 100 per
package or unit, but at the same time declares that the monetary units
in the Rules were to be taken to be gold value.
The relationship
between the limitation of liability clause (Art.IV, r.5) and the gold
clause (the first sentence of Art.XI) has been long argued in terms of
whether the wording of the gold clause was so clear and specific as to
qualify the words of the limitation of liability clause.
The Rosa S ([1988] 2 Lloyd's Rep 574) concluded that the
above two provisions should be read together to the effect that the
* 변호사 법무법인 세경
282 韓國海法學會誌 第26卷 第2號(2004년 11월)
gold value of 100 sterling be taken as defined by the Coinage Act 1971,
and the limitation amount be taken as the value of that quantity of
gold at the time of accrual of the cause of action.
However, from many English authorities, we can arrive at a
conclusion that in a case where (i) the relevant bill of lading does not
have the clear incorporation wording similar to all provisions of the
Hague Rules including Art.XI or (ii) the English law or the law of the
nation which has the corresponding legislation to the Coinage Act is
not applied to the relevant bill of lading, the above two provisions
should not be read together.
In this regard, we note that the Korean court, in the Spar Two
(the Seoul District Court Judgment, Case No. 2001 Kahap 25714)
rejected the Rosa S. The Rosa S rule needs more rigorous testing in
the English courts in light of whether the first requirement was met.
[Key Words]
Hague Rules-bill of lading-incorporation-limitation of liability-gold
clause-gold value-the Rosa S- the Spar Two
Chapter 1 Introduction
1. Basic explanation
This dissertation is an exploration of the relationship between
Art.IV, r.5 ('the limitation of liability clause') and the first sentence of
Art.XI ('the gold clause') of the Hague Rules.
The meaning of the
Hague Rules is important in many countries, since the Rules are
Gold Clause of the Hague Rules 283
frequently incorporated by the agreement of the parties into a bill of
lading with regard to international shipping carriage. The issue dealt
with in this dissertation has been considered as being difficult and
even very difficult problems coming up in course of interpreting the
Hague Rules.1)
This study is based primarily upon (i) the critical review of
the English case law, (ii) the comparison of the case law in England
and in Korea and (iii) the pursuit of a satisfactory solution. While The
Rosa S2) holds the key to solving the relevant problem under English
law, the leading case in Korea is The Spar Two3) which has adopted a
totally different approach from that of The Rosa S.
2. Background of the study
In cargo claims the amount that can be actually recovered by
the claimant takes precedence over other factors in determining
whether or not it is worthwhile resorting to legal proceedings.
The
parties, for this reason, are gravely concerned with the extent to which
the carrier is entitled to limit its liability.
As to the limitation of the carrier's liability, Art.IV, r.5 of the
Hague Rules provides that:
Neither the carrier nor the ship shall in any event be or become
1) Mocatta, A, Mustill, M and Boyd, S, Scrutton on Charterparties, 18th ed, Sweet &
Maxwell(1974), at p.449.
2) The Rosa S [1988] 2 Lloyd's Rep. 574.
3) The Spar Two, Seoul District Court, Case No.: 2001 Kahap 25714.
284 韓國海法學會誌 第26卷 第2號(2004년 11월)
liable for any loss of damage to or in connection with goods in an
amount exceeding 100 per package or unit or the equivalent of that
sum in other currency unless the nature and value of such goods have
been declared and inserted in the bill of lading.
On the other hand, Art.XI of the Rules provides that:
The monetary units mentioned in this convention are to be taken to
be gold value. Those contracting states in which the pound sterling is
not a monetary unit reserve to themselves the right of translating the
sums indicated in this convention in terms of pound sterling into terms
of their own monetary system in round figure. The national laws may
reserve to the debtor the right of discharging his debt in national
currency according to the rate of exchange prevailing on the day of the
arrival of the ship at the port of discharge of the goods concerned.
The Hague Rules, as was stated above, entitles the carrier to
limit its liability to 100 per package or unit, but at the same time
declares that the monetary units in the Rules were to be taken to be
gold value. It has been long argued whether the wording of the gold
clause was so clear and specific as to qualify the words of the
limitation of the carrier's liability clause.
Nowadays, it is understood that, under English law, the
meaning of the gold clause was finally established through The Rosa S
in 1988.4) The Rosa S concluded that the above two provisions should
4) Treitel, G and Reynolds, F, Carver on Bills of Lading, Sweet & Maxwell (2001), at
para 9-224.
Gold Clause of the Hague Rules 285
be read together to the effect that the gold value of 100 sterling be
taken as defined by the Coinage Act 1971, and the limitation amount be
taken as the value of that quantity of gold at the time of accrual of the
cause of action. In that case, the gold value of 100 was calculated as
being equivalent to the present value of 6,630.50.
However, in January 2003, the Korean court rendered its
judgment in The Spar Two5) to the effect that 100 in Art.IV, r.5 of the
Hague Rules should be interpreted as the mere nominal value and not
the gold value. Therefore, the limitation amount agreed by the parties
was found to be the present value of 100 per package or unit.
Although the same provisions of the Hague Rules were
applied, no less than approximately sixty-six times difference in the
amount of limitation between the two cases occurred. This great gap
will cause the parties to handle the dispute in an entirely different
manner.
3. Problem statement
The key issue in this study is, put simply, whether or not
Art.IV, r.5 of the Hague Rules must be read with the first sentence of
Art.IX in construing a contract of carriage covered by a bill of lading
which incorporates the Rules.
5) This case is the first judgment in Korea which dealt with the gold value issue.
Before then, the parties involved in a dispute which could give rise to the gold
value issue had a tendency to settle the case amicably for the purpose of reducing
the uncertainty that might be caused by the gold clause and, thus an opportunity
for the Korean court to consider the meaning of the gold value was not provided.
286 韓國海法學會誌 第26卷 第2號(2004년 11월)
We need to determine two important questions in order to
successfully deal with that issue: (i) What is the true construction of
the Hague Rules? In other words, in interpreting the provisions of the
Hague Rules apart from a bill of lading, should Art.IV, r.5 be read with
the first sentence of Art.IX? If so, (ii) what is the proper construction
of the carriage contract? To put it another way, was the first sentence
of Art.IX effectively incorporated into the bill of lading?
4. Overview of the dissertation
We will consider carefully, in chapter 2, the rule established by
the English court, in particular, in The Rosa S. Further to this, the
evaluation of that case by various commentators will also be reviewe
d.6)
Chapter 3 will cover the construction of the relevant provisions
in the Hague Rules, including two apparently contradictory approaches
with regard to the issue whether or not the first sentence of Art.XI
was addressed to individual shippers and carriers.
will study
Furthermore, we
two different constructions on the function of the gold
clause.
In chapter 4, we will explore the construction of the relevant
bill of lading. The key problem in this chapter would be whether or
not the parties to the contract of carriage intended to incorporate the
6) The Rosa S comes over as being affected more by the Australian case Brown
Boveri v Baltic Shipping than any other English cases. Thus, we will review
The Rosa S together with the above Australian case in this dissertation.
Gold Clause of the Hague Rules 287
first sentence of Art.XI into the bill of lading. It is also necessary for
us to examine whether or not The Rosa S can be justified in the light
of the English case law regarding the incorporation issue.
We will next concentrate on The Spar Two case and then
analyse the reason why the above two cases come to arrive at
different conclusions in chapter 5.
Lastly, chapter 6 will pursue a satisfactory solution to the
relevant issue.
Chapter 2 The Rule established by The Rosa S
1. Basic facts
In 1984, a consignment of 222 cases consisting of one
aluminium casting plant together with related ancillaries was loaded on
board the defendants' vessel Rosa S for carriage from Italy to Kenya.
The carriage was covered by a bill of lading issued on behalf of the
defendants, Clause 1 of which was a paramount clause providing It is
mutually agreed that this Bill of Lading shall have effect subject to the
provisions of the International Convention relating to Bills of Lading
dated Brussels 25th August 1924 . The goods were consigned to a firm
that later became the plaintiffs in the relevant action. It was found that
one of the cases together with its contents was badly damaged when
the consignment came to be discharged in Kenya. The damage was
caused by the defendants' breach of their contractual duties as carriers
288 韓國海法學會誌 第26卷 第2號(2004년 11월)
under the bill of lading.7)
The plaintiffs brought an action against the defendants
claiming damages. The defendants said that they were entitled to limit
the liability as a carrier to 100 sterling per package according to
Art.VI, r.5 of the Hague Rules. In this regard, the plaintiffs submitted
that Art.IV, r.5 must be read with the first sentence of Art.IX so that
instead of saying 100 sterling it says 100 sterling gold value.8)
2. Decision by MJ Hobhouse
In The Rosa S, MJ Hobhouse held that It seems clear beyond
argument that the first sentence of Art.IX was intended to qualify the
reference to 100 sterling in Art.IV, r.5 and There was no reason to
suppose that those words were not intended to have any effect.9) He
explained that the purpose of the gold clause in Art.IX was to escape
from the principle of nominalism10) and to provide a single and
constant measure of value by reference to gold and not a fluctuating
value11).
According to The Rosa S, the wording of the gold clause
was of sufficient clarity12), and under the Coinage Act 1971, it was
possible to identify the monetary unit that was being referred to so
that there was no uncertainty or inability to ascertain what the gold
value would be which the parties were agreeing by their contract13).
7) [1988] 2 Lloyd's Rep 574, at p.575.
8) Ibid, at p.577.
9) Ibid, at p.578.
10) Ibid, at p.579.
11) Ibid, at p.581.
12) Ibid, at p.581.
13) Ibid, at p.579.
Gold Clause of the Hague Rules 289
In the circumstances, MJ Hobhouse concluded that the
plaintiffs were entitled to damages in the gold value of 100 ascertained
in accordance with the Coinage Act 1971, say, 6,630.50.
3. Related authorities
In a number of English cases, where the limitation had been
pleaded, no reference was made to the gold clause by the court
because the point had not been argued.14)
MJ Hobhouse considers
Pyrene v Scindia Navigation15) as the very English authority which is
supporting The Rosa S. MJ Devlin, in Pyrene v Scindia Navigation,
explained as a dictum that The limit stated in that rule is 100, but this
is subject to Art.IX which prescribes the figures to be taken to be the
gold value.16) But we cannot take any valuable advice from that case,
since it does not explain any reasoning behind that statement of MJ
Devlin.
Instead, The Rosa S appears to be most affected by the
Australian judgment by MJ Yeldham in Brown Boveri v Baltic
Shipping.
Based on his construction of Art.IX and Art.IV, r.5, MJ
Yeldham held that the limitation confining recovery to 100 per unit was
to be calculated by reference to the quantity of gold which was the
equivalent of 100 sterling in 1924.17)
In this regard, MJ Hobhouse
explains that MJ Yeldham's decision rebuts the argument that Art.IX
lacks sufficient clarity to be effective and shows that there has been a
14)
15)
16)
17)
[1989] 1 Llyod's Rep 518, at p.526.
[1954] 1 Lloyd's Rep 321.
Ibid, at p.326.
[1989] 1 Lloyd's Rep 518, at p.518.
290 韓國海法學會誌 第26卷 第2號(2004년 11월)
consistent international practice of recognizing and giving effect to
Art.IX.
Furthermore, he admits that the above Australian case
supports the conclusion at which he has reached.18)
It should be noted that there was an appeal by the carrier
from the judgment by MJ Yeldham concerning the meaning of the
limitation provision.
The Australian Supreme Court of New South
Wales Court of Appeal rendered its judgment on 7 Feb 1989 after The
Rosa S had been issued19), dismissing the appeal. After reviewing The
Rosa S, the Australian Supreme Court stated that MJ Hobhouse
specifically approved the approach adopted by MJ Yeldham and took a
similar approach to the same provisions of the Rules in reaching his
own opinion.20)
The judgment in the first instance court in Brown
Boveri v Baltic Shipping affected The Rosa S, and The Rosa S in turn
influenced the judgment in the court of appeal in Brown Boveri v
Baltic Shipping.
4. Evaluation by the commentators
Various commentators approve of the line of reckoning given
in The Rosa S. For example, the editors of Scrutton on charterparty
accepted the conclusion widely, thus explaining that The gold clause in
Art.IX qualifies the 100 figure in Art.IV, r.5 of the Hague Rules with
the result that the limitation figure is 100 gold value.21) What is more,
18)
19)
20)
21)
[1988] 2 Lloyd's Rep 574, at p.583.
The Rosa S judgment was issued on 21 July 1988.
[1989] 1 Llyod's Rep 518, at p.522.
th
Boyd, S, Burrows, A and Foxton, D, Scrutton on Charterparties, 20 ed, Sweet &
Maxwell(1996), at p.451.
Gold Clause of the Hague Rules 291
the editors of Carver on bills of lading declared that the meaning of
Art.XI had been finally established through The Rosa S.22) Not only J.
Cook23) but also J. Wilson24) agree with MJ Hobhouse on this issue.
The above commentators, however, fail to clarify the reason why they
are supporting The Rosa S, while only repeating the conclusion of that
judgment. It is difficult for us to encounter any clear criticism of that
case because the vast majority of the commentators do not go any
further.
Chapter 3 Construction of the Hague Rules
1. Matters of approach
1.1 General approaches to the Hague Rules
Generally speaking, there could be two schools of thought in
the way we approach the Hague Rules.
Those are depending upon
whether or not we deal with the relevant problem as one which is
exclusive for each state.
Regarding the Hague Rules, being both international in origin
and application, it is strongly argued that they must be construed in
the context of their intended operation in an international setting of
great importance not only for shippers and carriers but also for the
22) Treitel, G and Reynolds, F, at para 9-224.
23) Cooke, J, Young, T, Taylor, A, Kimball, J, Martowski, D and Lambert, L, Voyage
charters, LLP (1993), at p.779.
th
24) Wilson, J, Carriage of goods by sea, 4 ed, Longman (2001), at p.199.
292 韓國海法學會誌 第26卷 第2號(2004년 11월)
trade between nations.25)
Thus, it will be necessary for courts to
avoid parochial or chauvinistic approaches to the exercise of their
jurisdiction and to adopt an approach which is more sensitive to legal
developments in other jurisdictions.
It has been recognised that a
national court, in the interests of uniformity, should construe rules
formulated by
an international
convention,
in particular,
rules
formulated for the purpose of governing international transactions such
as the carriage of goods by sea, in a normal manner, appropriate for
the interpretation of an international convention, on broad principles of
general acceptation.26)
The Rosa S appears to adopt this approach as far as possible.
MJ Hobhouse says It does not need to be stressed that, in connection
with international Conventions such as the 1924 Brussels Convention,
the court should seek to give such Conventions and the contracts into
which they are incorporated an interpretation which is consistent with
the international practice and not over-influenced by domestic
prejudices.27)
However, even though we accept the above approach, we
cannot assert that it should be excluded from our consideration the
meaning which has been attributed by a national court to words and
expressions
commonly
used
in
the
documentation
related
to
international trade. Nor does the said way of interpreting the Hague
Rules prevent us from having recourse to municipal law of nations for
25) [1989] 1 Llyod's Rep 518, at p.521.
26) Ibid, at p.521.
27) [1988] 2 Lloyd's Rep 574, at p.583.
Gold Clause of the Hague Rules 293
the purpose of elucidating the meaning and effect of the Rules. Indeed,
it should be conceded that if there were ambiguity in the Rules, the
court would quite properly prefer a local construction of the Rules
which conformed to a consistent international approach to the
construction of the Rules, thereby bringing a certain local law into
harmony with the law of others.
It would be a fallacy to think that, in construing a statute or
the language of an agreement, only one construction can be accepted.
If there is a considerable degree of ambiguity and uncertainty
surrounding the draftsmen's intention and the language, it could be the
best way for us to offer the relatively preferable construction. In this
regard, President Kirby at Australia Supreme Court of New South
Wales Court of Appeal, in Brown Boveri v Baltic Shipping, concludes
that When this element of imprecision and choice is acknowledged, it
is sensible for the courts to hesitate before they insist that the choice
which they would initially make is right, so many others being wron
g.28)
1.2 Scheme of the construction of the gold clause
In construing the gold clause, first and foremost, we should
answer the question whether or not the first sentence of Art.XI of the
Rules is still valid.
If a provision of international convention is no
28) [1989] 1 Lloyd's Rep 518, at p.523, P Kerby added that This is one which fits
most harmoniously with the language chosen and appears most clearly to achieve
its apparent purpose.
294 韓國海法學會誌 第26卷 第2號(2004년 11월)
longer effective, then the intention of parties to resort to that provision
would not come off. Only if the answer to the above question is Yes,
then can we proceed to the next question of what effect the first
sentence of Art.XI does have.
We will explore the historical background to the gold value
clause and the gold standard system for the purpose of answering
effectively the first question. In particular, we need to understand the
historical background to the inclusion of the gold value clause in the
Hague Rules.
Our primary concern is whether or not the draftsmen of the
Hague Rules intended to operate the gold clause on condition that the
gold standard system is in working. If so, hasn't the collapse of the
gold standard in 1931 rendered the gold clause invalid?
2. Historical background
2.1 History of the gold standard
2.1.1 What is the gold standard?
In the generation before World War I, nearly all of the world
economy was on a particular fixed exchange rate system: the gold
standard.
The gold standard was a system in which each country
fixed the price of its currency in terms of gold and stood ready to
exchange gold for currency at the stated parity.29) All currency issued
was backed by gold to that value so that one pound sterling was
Gold Clause of the Hague Rules 295
represented by one gold sovereign. This system, in turn, implied fixed
nominal exchange rates between countries.
The present monetary
arrangements have emerged from the collapse of the post-war system,
which was put in place as a reaction to the interwar experience
following the abandonment of the gold standard.30)
It was at the end of the 19th century that gold became the
premier international medium of exchange. Until the late 1870s, gold
and silver co-existed as the main monetary metals.
Gold standard
payment system is said to have been established by about 1873.31)
As the world going on a full gold standard system, gold coins
and certificates served as the medium of exchange.32)
The price of
each major currency was fixed in terms of a specific weight of gold.
Individual countries need only ensure (i) that gold could flow freely
between countries, (ii) that gold backed the domestic money supply,
and (iii) that the market was free to set interest rates.
2.1.2
Suspension of the gold standard
The international gold standard was, however, suspended
when World War I began in 1914.33) Every country used inflation to
29) Blanchard, O, Macroeconomics, Prentice Hall (1997), at p.396.
30) Burda, M and Wyplosz, C, Macroeconomics, Oxford University Press (1993), at
p.384.
31) Griffiths, A and Wall, S, Applied Economics, 8th ed, Longman (1999), at p.596. In
1873, the Gold Standard Act was passed in the US.
32) Kuhlman, J and Skinner, G, The economic system, Rev. ed, Richard Irwin (1964),
at p.274.
33) Delong, J, Macroeconomics, Rev. ed, McGraw-Hill (2002), at p.416.
296 韓國海法學會誌 第26卷 第2號(2004년 11월)
help finance its massive war expenditures. Inflation was inconsistent
with the gold standard, because under the gold standard, attempted
inflation simply leads everyone to immediately trade its currency for
gold.
The UK suspended the gold standard in 1914 to finance war.34)
2.1.3
Return to the gold standard
When World War I was over, costly reconstruction prevented
any
country
from
monetary affairs.35)
challenging
British-American
supremacy
in
At that time, the British politicians and central
bankers sought to restore the gold standard. They believed that the
pre-World War I system of a fixed exchange rate through the gold
standard had been a success. In 1925, the UK quickly pledged a return
to the gold standard under the leadership of Winston Churchill.36)
Germany and a number of other central European countries returned to
the gold standard only eliminating their celebrated hyperinflations.37)
France devalued the franc immediately after the war but underwent
rapid inflation in the years of 1922-1926.
Its return to the gold
standard in 1926 marked the return to the pre-war situation.
2.1.4
Collapse of the gold standard
It took more than half a decade to fully restore the gold
34) Blanchard, O, at p.396.
35) DeLong, J,at p.416.
36) John Maynard Keynes criticized the return to gold standard as monetary disaster
with huge macro-economic implications. Shama, S, A history of Britain, book 3,
BBC (2002) at p.354.
37) Burda, M and Wyplosz, C, at p.390.
Gold Clause of the Hague Rules 297
standard.
But the revived gold standard did not produce prosperity.
Instead, in less than half a decade the Great depression began, and the
restored gold standard broke apart in 1931.38)
2.2 Advent of the gold clause
2.2.1 Origin of the limitation clause
In the late 19th century a regime of complete freedom of
contract prevailed in the area of English law.
The dominance of
British shipowners led to American shippers being placed in what was
perceived as a disadvantageous position. The need for regulating the
liabilities of carriers made the Harter Act 1893 passed in USA.39) The
general scheme of the Harter Act was subsequently followed in many
other jurisdictions such as New Zealand, Australia and Canada.40) In
particular, the Canadian legislation went further than the Harter Act in
introducing a package limitation.
2.2.2 Dawn of the gold clause
Hague Rules was adopted by an International Conference on
Maritime Law held at Brussels in 1924.
The original Rules was
drafted mainly by the representatives of major shipowners with the
assistance of the Maritime Law Committee of the International Law
Association.41)
38)
39)
40)
41)
They drafted a series of rules based upon the then
Delong, J, at p.416.
Treitel, G and Reynolds, F, at para 9-062.
E.g., Water Carriage of Goods Act 1910 in Canada.
Oxford Dictionary of law, Oxford university press (2002), p.50.
298 韓國海法學會誌 第26卷 第2號(2004년 11월)
Canadian statute.42)
The draft Convention did not embrace the gold
clause, but the final Convention included it.43)
The Carriage of Goods by Sea Act 1924 (1924 Act) was based
upon the draft Convention, the substance of which was subsequently
to become the existing Hague Rules.
It should be noted that even
though Art.IX of the final Convention was not part of the draft
Convention, UK legislature chose to include in the rules as scheduled
to the 1924 Act a sentence which corresponded to the first sentence of
Art.IX of the final Convention. So, in the Schedule to the 1924 Act,
only the first of the three sentences appears, the other two being
deleted.44) The 1924 Act has been repealed by the Carriage of Goods
by Sea Act 1971 and was not in force at the time when the bill of
lading had been issued with regard to The Rosa S case.
2.2.3
Relationship between pound sterling and the gold
standard
Up to 1914 the currency of England was based on, and
stabilized by the sovereign as established by the Coinage Act, 1870;
the sovereign and other gold coins were minted only at the Royal Mint.
Although the country had its note issue, these gold coins were legal
tender. Being issued by the Bank of England under the Bank Charter
42) Treitel, G and Reynolds, at para 9-063.
43) See para 4.2.1 in this dissertation.
th
44) Richardson, J, The Hague and Hague-Visby Rules, 4 ed, LLP (1998), at p.43.
So far as UK is concerned, the second and the third sentences were considered as
being irrelevant, as they cover details of the rights of contracting states where
pound sterling is not the local currency to exchange the limits into their own local
currency.
Gold Clause of the Hague Rules 299
Act of 1833, the English notes were, by law convertible into gold
according to the same gold coinage. There can have been little, if any,
reason to distinguish one currency from the other. In 1921, the legal
position had not changed, save that in England during the course of
the War and by an Act of 1920 the export of gold had been prohibited.
In fact gold had by 1921 practically gone out of circulation in England,
but in law the notes were still convertible into gold as before. Later,
in 1925, by the Gold Standard Act, the Bank of England was relieved
of its obligation to pay its own notes in gold, though it was bound to
sell bullion in bars of about 400 ounces at a fixed rate. Finally in
England by the Gold Standard (Amendment) Act, 1931, the obligation
of the Bank of England to sell gold bullion at a fixed rate was
suspended. Thus England went off the gold standard, and the value of
the pound was left to depend on the credit of governments and banks
of issue.45)
2.3 The gold standard and the gold clause
As was reviewed above, the gold clause appeared at the time
when the world economy was trying to return to the pre-World War I
system represented by the gold standard.
The intention of
international community to return to the gold standard resulted in
including the gold clause in the Hague Rules, one of the important
agreements between states which were about to be signed at that time.
What is more, we cannot assert that the idea of gold clause stemmed
from the regime of package limitation.
To some extent, the gold
45) Adelaide Electric v Prudential Assurance [1934] A.C. 122.
300 韓國海法學會誌 第26卷 第2號(2004년 11월)
clause must have had the mere declaratory character in its nature.46)
In this regard, we should note that the operation of gold
standard is of vital importance in the agreement on the gold clause.
The gold standard could be an essential prerequisite for the working of
the gold clause.
3. Does the gold clause still have any effect?
3.1 The Rosa S and Brown Boveri v Baltic Shipping
MJ Hobhouse in The Rosa S states about Art.XI that
there
is no reason to suppose that those words were not intended to have
any effect.
They were clearly intended to have the effect of
expressing the sterling figure as a gold value figure.47)
This is the
only line in The Rosa S which deals with the issue as to whether the
first sentence of Art.XI still has any effect. It appears to us that MJ
Hobhouse felt no need to wrestle with that issue since he firmly
believed in the effectiveness of the gold clause.
On the other hand, we cannot see any line of reckoning on this
issue in Brown Boveri v Baltic Shipping. The Australian judges must
have dealt with the effectiveness of the gold clause as a self-evident
truth.
46) The Spar Two, at p.13.
47) The Rosa S, at p.578.
Gold Clause of the Hague Rules 301
3.2 Foundation of agreement
There is a school of thought which doubts the truth of the
above axiom, challenging the proposition of The Rosa S and Brown
Boveri v Baltic Shipping.48) This argument places heavy weight upon
the historical background of the gold clause. Furthermore, the above
argument adopts 'the foundation of the contract' theory which was
presented as a juristic basis of frustration in English contract law.
The foundation of the contract theory was first stated in the
dissenting speech given by Lord Holdane in Tamplin SS v
Anglo-Mexican Petroleum.49) Lord Holdane said When people enter
into a contract which is dependent for the possibility of performance on
the continued availability of a specific thing, and that availability
comes to an end by reason of circumstances beyond the control of the
parties, the contract is prima facie regarded as dissolved Although the
words of the stipulation may be such that the mere letter would
describe what has occurred, the occurrence itself may yet be of a
character and extent so sweeping that the foundation of what the
parties are deemed to have had in contemplation has disappeared, and
the contract itself has vanished with that foundation.50)
In this regard, according to the above argument, the agreement
on the gold clause should be considered as being dependent on the
operation of the gold standard. But the gold standard has come to an
48) The counsel for the carrier in The Spar Two expressed this view in his brief, and
the Korean court appears to have been affected this argument to some degree.
49) [1916] 2 A.C. 397.
50) Ibid, at p.406.
302 韓國海法學會誌 第26卷 第2號(2004년 11월)
end in 1931 by reason of the Great Depression which was beyond the
control of the parties to the agreement on the gold clause, and
therefore the agreement itself has vanished with the foundation, that is
to say, the gold standard. In the circumstances, this school of thought
regards the gold clause as a dead letter.
3.3 Evaluation
At present, there is no authority which supports the view that
Art.XI is no longer effective.51)
The fundamental weakness of that
view would be that (i) there could be difference in nature between the
agreement by nations and the contract by private individuals, and (ii) it
is not certain whether the gold clause should be necessarily dependent
upon the operation of the gold standard.
In this dissertation, we will proceed to the next question as to
what effect the gold clause has, based on the proposition that the gold
clause is still effective.
4. What effect does the gold clause have?
4.1 Two questions
We will now explore the issue regarding the nature and effect
of gold clause which has been debated most severely by the parties to
the dispute. The editors of Scrutton on charterparties described this
51) Even the Korean court has not clarified its position.
Gold Clause of the Hague Rules 303
issue as very difficult52), and P Kerby agreed with this description in
Brown Boveri (Australia) v Baltic Shipping.
53)
P Kirby states that In
the end, it is necessary for the court to determine the preferable
construction of the agreement between the parties incorporating the
Rules. No construction is obviously right or wrong.54)
There are two questions to be determined: (i) To whom is the
first sentence of Art.XI addressed, to contracting states or to individual
shippers and carriers? and (ii) What function does the first sentence of
Art.XI perform, to prepare for inflation or to fix the amount of
damages?
4.2 To whom is the gold clause addressed?
4.2.1
Was the gold clause addressed to individual
shippers and carriers?
In order to answer this question, we need to investigate the
history of the origin of the Hague Rules in greater detail. The original
Rules were drafted by the representatives of a number of major
shipowners who opposed legislation but were willing to consider
incorporation of generally applicable rules in the standard terms of bills
of lading. The rules, as drafted, were comprised of Arts. I to VIII of
the draft convention. Arts. IX to XVI were added later.55) Based on
this history of the origin, the editors of Carver's carriage by sea
52)
53)
54)
55)
Mocatta, A, Mustill, M and Boyd, S, at p.449.
[1989] 1 Lloyd's Rep 518, at p.519.
Ibid, at p.519.
Ibid, at p.525.
304 韓國海法學會誌 第26卷 第2號(2004년 11월)
concluded that Arts. I to VIII of the draft convention provided Rules
for incorporation in bills of lading, but Arts. IX to XVI contained
provisions regarding the adoption of those Rules by municipal
legislation, and regarding accession to, and ratification, denunciation,
and amendment of the proposed convention.56) In other words, Arts. I
to VIII were intended to have contractual operation between individual
shippers and carriers, but Art. XI to XVI were addressed to the
contracting states, and were not intended to be incorporated in the bill
of lading.
Given the foregoing, it could be argued that the reference to
gold value in Art.IX was not intended to be read with, and as part of,
the substantive Rules between the individual parties, in particular
Art.VI, r.5. It was simply part of an added series of articles which the
High Contracting Parties (Art.XIII) or contracting States (Art.IX)
adopted as between each other.
They were addressed to issues
relevant to the states concerned, but not addressed to the concerns of
the individual shippers and carriers.
This argument can also be supported by the other sentences of
Art.IX.57) As per the second sentence of Art.XI, the contracting states
in which the pound sterling is not a monetary unit have a choice
between (i) to pass domestic legislation referring to the pound sterling
and (ii) to translate the sums in Art.IV, r.5 into terms of their own
monetary system in round figure.
Therefore, the contracting states
which choose the latter way would be under the obligation to take the
56) Colinvaux, R, Carver's Carriage by Sea, 13th ed, para 443.
57) The Rosa S, p.580.
Gold Clause of the Hague Rules 305
sum in their own currency which corresponds to the gold value of
sterling not some other nominal value.
Furthermore, the domestic
legislation of the contracting states may give the carrier the right to
discharge his liability in the national currency according to the rate of
exchange prevailing on the day of the arrival of the ship at the port of
discharge.
When the Hague Rules were signed, it was contemplated that
such local legislation might come to be passed some considerable time
after 1924.
Actually, in passing the Hague Rules into their national
law, some nations adopted it as drafted including Art.IV, r.5. However,
most nations, in adopting or ratifying the Rules, translated Art.IV, r.5
into domestic currency as allowed in Art.XI.58)
4.2.2 The Rosa S
When going through The Rosa S, we come to discover that
the reasoning of MJ Hobhouse on this point has not reached its target.
He rejected the argument that Art.XI was not addressed to individual
shippers and carriers based on the construction of the draftsmen's
intention.59)
However, he might have confused 'the intention of the
draftsmen of the 1924 Act' and 'the intention of the draftsmen of the
Hague Rules'. He said as follows:
58) Richardson, J, The Hague and Hague-Visby Rules, 4th ed, LLP (1998), p.43.
The limitation amount of the main Hague Rules nations are as follows:Australia
A$200, Canada C$500, Germany DM1,250, Greece DR8,000, Japan Y100,000 New
Zealand NZ$200, Portugal ESC100,000, USA US$500, USSR R250.
59) The Rosa S, at p.580.
306 韓國海法學會誌 第26卷 第2號(2004년 11월)
It would appear that this was the belief of the draftsmen of the 1924
Act since the 1924 Act was of course domestic United Kingdom
legislation. Since the pound sterling was (and is) the monetary unit
used in the United Kingdom and the gold sovereign was (and still is)
legal tender in the United Kingdom, if the defendants be right there
was no need or justification to include any reference to gold value in
the 1924 Act. But as already remarked, a reference to gold value was
specially inserted in the 1924 Act even though it had not appeared in
the draft Convention.
This can only have been to underline as a
matter of English law that what was being referred to in Art.IV, r. 5
was the gold value of the pound sterling not its nominal or paper
value.60)
MJ Hobhouse set too much store by the fact that only the first
sentence of Art.XI of the Hague Rules had been included in the
Schedule to the 1924 Act, the other two being deleted. According to
his reckoning, the draftsmen of the 1924 Act firmly believed that the
first sentence of Art.XI of the Hague Rules had been addressed to
individual shippers and carriers, thus including it in the Schedule to the
1924 Act aside from the second and third sentences of Art.XI which
had been addressed to nations.
In this regard, it would be pointed out that 'the intention of
the draftsmen of the 1924 Act' should be distinguished from 'the
intention of the draftsmen of the Hague Rules'. The key problem here
is how to construe Art.IV, r.5 and Art.XI of the Hague Rules, and not
60) Ibid, at p.580.
Gold Clause of the Hague Rules 307
the corresponding provisions in the 1924 Act.
MJ Hobhouse himself
declares clearly as follows61):
Accordingly the question of what is the limit of the defendants'
liability under this bill of lading must be ascertained by reference to
the provisions of the 1924 Convention and that alone.
Nonetheless, MJ Hobhouse is trying to replace the construction
on the intention of the draftsmen of the Hague Rules with that of the
1924 Act.
Thus, his reckoning on this point could be considered
inappropriate.
4.2.3 Pyrene Co. v Scindia Navigation
It is fascinating that MJ Hobhouse cites Pyrene Co v Scindia
Navigation as the authority which strongly supports his conclusion.
He explains that They were clearly intended to have the effect of
expressing the sterling figure as a gold value figure. This, in respect
of the 1924 Act, was regarded as too obvious for argument by Mr.
Justice Devlin in Pyrene Co v Scindia Navigation
62)
However, when scrutinizing Pyrene Co v Scindia Navigation,
we found ourselves more than a little bemused because the above case
is not so obvious on that issue, contrary to the explanation given by
MJ Hobhouse.
In this case, the plaintiff sellers delivered a fire tender sold
61) Ibid, at p.576.
62) The Rosa S, at p.578.
308 韓國海法學會誌 第26卷 第2號(2004년 11월)
under a contract of sale f.o.b. London alongside a ship nominated by
the buyers. While the tender was being lifted on to the vessel, it was
dropped and damaged. When being sued by the sellers in tort for the
cost of repairing the tender, the shipowners admitted liability but
claimed that the amount should be limited by Art. VI, r.5 of the Hague
Rules. In this regard, MJ Devlin said63):
The damage to the tender cost 966 to repair and the plaintiffs sue
for that sum. The defendants admit liability but claim that the amount
is limited under Art.IV, r.5, of the Hague Rules. The limit stated in
that rule is 100, but this is subject to Art.IX, which prescribes that the
figure is to be taken to be gold value.
There are doubts about the
interpretation and effect of this latter Article, and they have been very
sensibly resolved for the parties to this case by the acceptance of the
British Maritime Law Association's Agreement of Aug. 1, 1950, which
fixes the limit at 200.
In the whole context of the judgment, it is not easy for us to
conclude that MJ Devlin was convinced that the first sentence of
Art.IX is intended to qualify the reference to 100 sterling in Art.IV, r.5.
He clearly describes that there were doubts about the interpretation
that the package limitation amount is subject to the value clause.
Consequently the explanation of MJ Hobhouse that Pyrene Co. v
Scindia Navigation supports his conclusion and fails to come as being
persuasive.
63) [1954] 1 Lloyd's Rep 321 at p.326.
Gold Clause of the Hague Rules 309
4.2.4
Brown Boveri v Baltic Shipping
P Kerby's reckoning is more specific compared with that of
MJ Hobhouse. He comments that 뱟 although the above argument has
a superficial attractiveness and is given some support by the history
and structure of the Rules, it does not survive close examination.64)
He expounds his view into three categories.
Firstly, the critical
provision in Art.IX (i.e., the first sentence) appears before any
reference is made in that article (e.g., in the second sentence) to the
contracting States.
Secondly, Art.X provides: The provisions of this
Convention shall apply to all bills of lading issued in any of the
contracting states.
Art.X is plainly not an article limited to the
relationship between contracting States.
Thirdly, the monetary unit
referred to in the first sentence of Art.IX is to be found only in the
reference to pounds sterling in Art.IV, r.5.
In the circumstances, P
Kerby declares that The relationship between Art.IX and Art.VI, r.5 is
established. The two must be read together.65)
However, many questions still remain unsolved in spite of P
Kerby's resolute declaration.
To begin with, P Kerby could not
explain the reason why the first sentence of Art.XI was included in the
same article together with the second and third sentence of Art.XI. If
we follow the line of P Kerby's reckoning, the former sentence which
is addressed to individual shippers and carriers is totally different in its
nature from the latter sentences which are addressed to contracting
states. It is extremely unusual for the draftsmen to tie together two
64) [1989] 1 Llyod's Rep 518, at p.525.
65) Ibid, at 525.
310 韓國海法學會誌 第26卷 第2號(2004년 11월)
different provisions in one article.
Conversely, the draftsmen of the
Hague Rules may have believed that the first sentence is so closely
connected with the second sentence which contains the reference to the
contracting states that it is not needed to make any reference to that
wording in the first sentence.
Secondly, it has not yet been established that Art.X of the
Hague Rules should be read with Art.XI.
If P Kerby is right, the
second sentence of the Hague Rules should also be applied to bills of
lading. The second sentence is, however, related only to the right of
the contracting states to translate the sums of pounds sterling into
their own monetary system, thus not being applied to bills of lading.
Thirdly, the reference to monetary unit in the first sentence of
Art.IX can be found in the second sentence in the same wording of
monetary unit.
That implies that the first sentence and the second
sentence should be read together.
4.2.5
Evaluation
Both The Rosa S and Brown Boveri v Baltic Shipping failed
to provide us with sufficient reasoning on this issue. Considering the
history and structure of the Hague Rules, one could not prefer the
conclusion of The Rosa S and Brown Boveri v Baltic Shipping. Thus,
P Kerby felt the need to hesitate before he insisted that his choice
would be right.66) P Kerby might have thought that it is not so much
66) [1989] 1 Llyod's Rep 518, at p.523.
Gold Clause of the Hague Rules 311
a question of 'right or wrong', but more a question of mere 'choice'.
4.3 What function does the gold clause perform?
4.3.1
General considerations
In the above paragraph 3-4-2, we have reviewed the issue of
to whom the gold clause is addressed. If we follow the argument that
the gold clause is addressed to the contracting state, then we can
arrive at the conclusion that the gold clause only becomes material
when it is necessary for the contracting state where the pound sterling
is not a monetary unit to convert from the pound sterling into their
own currency. Therefore, Art.VI, r.5 was to be construed without any
reference to Art.XI.
Conversely, if we follow the argument that the gold clause is
addressed to individual shippers and carriers, then Art.XI was to be
construed as affecting the meaning of the phrase 100 sterling in Art.IV,
r.5. In this regard, there could be two different ways of solving the
issue of how Art.XI affects Art.VI, r.5. The first view considers the
function of the gold clause as to prepare for inflation, and thus
concluding that 100 sterling in Art.IV, r.5 should be the 100 sterling
gold value. That is to say, the limitation amount should be fixed as
per the amount of gold which could have been exchanged by 100
sterling as of 1924 with the result that even though time goes by, the
limitation amount remains constant. The other view considers it as to
fix the amount of damages, and thus concluding that 100 in Art.VI, r.5
was to be defined to the amount of gold that could be purchased now
312 韓國海法學會誌 第26卷 第2號(2004년 11월)
for 100 sterling.
4.3.2
As for
To prepare for inflation
this problem, it is debated whether the international
community had been concerned about the stability of the pound
sterling at the time when the Hague Rules were being signed.
MJ Hobhouse explains that in the 1920s a number of
currencies including the pound sterling were under very strong
inflationary pressure.67) The question of the gold standard and of the
gold backing of currencies was in the forefront of every economist's
mind.
The degree to which the English paper currency was to be
convertible into gold and the extent to which the UK should adhere to
the gold standard were the subject of successive policy until the UK
finally abandoned the gold standard in 1931.
On the other hand, P Kerby, based upon John Maynard
Keynes, states that
World War I produced the shattering effect of
inflation upon the economies of many of the combatants and the
inflationism of the currency systems of Europe has proceeded to
extraordinary lengths.68)
P Kerby concludes that (i) the long era of
stability with its reference to the gold standard, (ii) the serious and
debilitating inflation which accompanied and followed
World War I
and (iii) the concerted effort, particularly of the international trading
community to return to objective standards measured in gold, all
67) The Rosa S, at p.580.
68) [1989] 1 Lloyd's Rep 518, at p.527.
Gold Clause of the Hague Rules 313
suggest that the reference in the opening words of Art.IX was
intended to apply to the limitation of 뱽100 sterling.
Both of them appear to believe that the only way to give effect
to the objective of the assurance that the monetary units mentioned in
the Hague Rules are to be taken to be gold value is to read Art.VI, r.5
with the first sentence of Art.XI.
4.3.3
To fix the amount of damages
Two alternative constructions were suggested with regard to
the idea of preparation for inflation. The first alternative construction
is that Art.IX could be given adequate effect
by construing it as a
reference to the amount of gold that could be bought with 100 sterling
at the date of the discharge or at the date of the delivery of the goods.
This is related to the stability of pound sterling between the date when
the cargo owner's cause of action accrued and the date when he was
able to obtain a judgment for damages.
This construction
contemplates that the purpose of the first sentence of Art.IX was to
guard against the devaluation of sterling currency between the two
dates. For example, one would assess what quantity of gold could be
bought with the nominal value of 100 on the date of discharge, and
then use that quantity of gold as the basis for assessing the limit of
the carrier's liability which was applicable on the date of judgment.69)
The second alternative construction explains that the relevant
69) The Rosa S, at p.581.
314 韓國海法學會誌 第26卷 第2號(2004년 11월)
provision was designed to ensure against the artificial exchange rates
between currencies which have existed between certain countries in
recent years, without reference to a gold standard. So interpreted, the
provision of Art.IX would ensure that the shipper would recover the
objective value of 100 sterling, fixed in its own currency by reference
to the amount of gold which 100 sterling would purchase. In that way
any artificial exchange rate fixed by local authority would be
overcome.70)
However, a literal reading of the text of the Hague Rules
reveals that the above alternative constructions are not natural. They
insist on the amount of gold that could be purchased now for 100
sterling.
The draftsmen of the Hague Rules could have drafted a
clause which would have this effect, if they had intended to do so.
Considering the meaning of the words in the first sentence of Art.IX,
the above constructions could not be easily accepted.
Thus, MJ
Hobhouse comments that 뱟 It patently does not fit in with the scheme
of the Convention. The purpose of the gold clause provision in Art.IX
of the Convention is clearly to provide a single and constant measure
of value by reference to gold not a fluctuating value. What would
result on the defendants' submission is that value would be constantly
fluctuating up to the time of discharge.71)
4.3.4
Evaluation
Assuming that the first sentence of Art.XI is addressed to the
70) [1989] 1 Lloyd's Rep 518, at p.524.
71) The Rosa S, p.581.
Gold Clause of the Hague Rules 315
individual shippers and carriers, the opinion which gives stress on the
preparation for inflation would be more reasonable.
However, we
cannot but hesitate to accept The Rosa S because the above
assumption is still not established.
Chapter 4 Construction of bills of lading
1. General considerations
In chapter 3, we have explored the relationship between the
limitation of liability clause and the gold clause in terms of the
construction of the Hague Rules. The construction of the bill of lading
would be distinguished from the construction of the Hague Rules, since
the intention of the parties to the bill of lading is not necessarily
identical to the intention of the draftsmen of the Hague Rules. As to
construing the intention of the parties, there are two approaches: (i)
the way of deducing the intention of the parties directly from the
construction of the Hague Rules and (ii) the way of investigating the
intention of the parties separately from or additionally to the
construction of the Hague Rules. P Kerby, in Brown Boveri v Baltic
Shipping, appears to adopt the former approach and he sets more store
upon the analysis of the provisions of the Hague Rules rather than
upon the examination of the clauses of the bill of lading.72)
The
72) In Brown Boveri v Baltic Shipping, JA Hope, in his additional opinion, says The
first sentence contains nothing which suggests that it is doing anything other than
to identify or provide for the manner in which the monetary units mentioned in the
Convention were to be valued.
The only monetary unit mentioned in the
Convention is to be found in Art.IV, r.5 and it is with the monetary units
316 韓國海法學會誌 第26卷 第2號(2004년 11월)
approach adopted by MJ Hobhouse in The Rosa S is closer to the
latter. We will here go one step further following The Rosa S.
2. The Rosa S
2.1 Relevant clauses in the bill of lading
In order to clarify the intention of the parties in The Rosa S,
we need to examine both the 'applicable law and jurisdiction clause'
and the 'paramount clause'.
Clause 2 of the bill of lading provided that:
Any dispute arising out of this Bill of Lading shall be governed by
English law and . . . the High Court of Justice in London shall have
exclusive jurisdiction . . . and
Clause 1 of the bill of lading read:
It is mutually agreed that this Bill of Lading shall have effect
subject to the provisions of the International Convention relating to
Bills of Lading dated Brussels 25th August 1924 If anything herein
contained is inconsistent with the said legislation or Hague Rules it
shall, to the extent and on the occasion of such inconsistency and no
further, be null and void.
mentioned in the provision that the first sentence of Art.XI is concerned. The first
sentence of Art.XI was thus incorporated in the subject bill of lading as part of
the contract. [1989] 1 Lloyd's Rep 518, at p.532.
Gold Clause of the Hague Rules 317
2.2 Construction by MJ Hobhouse
MJ Hobhouse construes the intention of the parties by means
of applying general rules of incorporation to the relevant clauses in the
bill of lading. He explains that he is concerned with the construction
of a commercial contract between shipper and carrier and there is no
reason why the ordinary rules of construction should not be applied to
that contract. In the circumstances, he decides that the intention of the
parties expressed in the bill of lading, in particular, Clause 1 and
Clause 2 is so clear and sufficiently precise73) as to incorporate the
gold clause.
Even though one assumes that they are not clear or
precise, the carrier should be put at a disadvantage, because he failed
to clearly exclude the gold clause. If the carrier wishes to exclude or
limit his liability, he must do so by clear terms.74)
Furthermore, MJ Hobhouse states that the purpose of any gold
clause must be to escape from the principle of nominalism,75)citing
Feist v Societe Intercommunale76) as the leading authority on this
point. The gold clause if it is to be effective for this purpose must be
the gold value clause, he explains.
3. Critical review
3.1 Which provisions can be incorporated?
Where a bill of lading is to have effect subject to the
73)
74)
75)
76)
The Rosa S, at p.580.
Ibid, at p.580.
Ibid, at p.579
[1934] A.C. 161.
318 韓國海法學會誌 第26卷 第2號(2004년 11월)
provisions of another document, first and foremost, it is necessary to
determine which terms in another document have been incorporated
into the said bill of lading.
This will turn upon an analysis of the
wording of both the bill of lading and another document. If there is to
be successful incorporation, then there should be express reference to
the term to be incorporated.77) To put it another way, for successful
incorporation, effective words of incorporation should be found in the
bill of lading itself, and the words of incorporation must be sufficiently
descriptive to indicate the terms of another document sought to be
included in the bill of lading.78) The practice, however, is to rely upon
general words of incorporation, for example, by reference in the bills of
lading to the incorporation of the all terms and conditions of another
document.
In The Rosa S, the wording of incorporation is only this bill of
lading shall have effect subject to the Hague Rules.
Here, it is
necessary to scrutinize the contract itself in order to precisely see what
is meant by those general words of incorporation.
On this issue, we need to closely examine Dobell v Rossmore
Steamship.79)
This case arises on a bill of lading regarding goods
which were to be brought from the USA to the UK. When the goods
were damaged in transit by reason of water having got into the ship
through a porthole, the shipper has brought an action in respect of the
damage done to them.
The ship owner contended that he was not
77) Thomas, D, The modern law of marine insurance, LLP (1996), at p.58.
78) McMahon, 'The Hague Rules and incorporation of charterparty arbitration clauses
into bills of lading' 1970 JMLC 1, at p.594.
79) [1895] 2 Q.B. at p.408.
Gold Clause of the Hague Rules 319
liable, as the case came within the exceptions of the bill of lading.80)
The relevant bill of lading contained the clause that Neither the vessel,
her owners
shall become responsible for damage, or loss resulting
from faults in navigation provided due diligence has been exercised
by her owners to make said vessel
seaworthy.
In this regard, it
should be noted that the bill of lading states clearly that all the terms
and provisions of, and all the exceptions from liability contained in the
Act of Congress of the United States, approved on the 13th day of
February, 1893.
Based upon this phrase, the bill of lading could be
read as if the words of the Harter Act were set out at length in it.
In The Varenna81), the bill of lading issued under a
charterparty for the carriage of crude oil contained an incorporation
clause providing that 뱟 all conditions and exceptions of which
charterparty including the negligence clause are deemed to be
incorporated in the bill of lading 뀛.
whether
the
arbitration
clause
in
It was debated by the parties
the
charterparty
had
been
successfully incorporated into the bill of lading by means of all
conditions and exceptions.
The court concluded that the arbitration
clause was not incorporated, construing the phrase in question as
referring to only those conditions and exceptions that are appropriate
to the carriage of and delivery of goods and not extensive enough to
cover the arbitration clause.
In The Nerano82), the wording of bill of lading was more
80) Ibid, at p.412.
81) Skips A/S Nordheim v Syrian Petroleum [1983] 2 Llyod's Rep 592.
82) Daval Aciers D'Usinor v Armare [1996] 1 Lloyd's Rep 1.
320 韓國海法學會誌 第26卷 第2號(2004년 11월)
descriptive than in The Varenna.
conditions,
liberties,
exceptions
It provided that 뱟 all terms,
and
arbitration
clause
of
the
Charterparty dated as overleaf are herewith incorporated. The Court of
Appeal held that the arbitration clause in the charterparty was
incorporated in the bill of lading, as it was expressly identified and
specified in the bill of lading.
In this regard, it is understood that the arbitration clause
deprives the parties of access to the courts, and express agreement
rather than implication by incorporation is required for this purpose.83)
The same reasoning has been adopted in relation to (i) exclusive
jurisdiction clause, (ii) choice of law clause and (iii) time bar clause.84)
However, we should note that the court used a relatively
generous standard in relation to the incorporation of demurrage clause
in the charterparty into the bill of lading. In The Miramar85), it was
held that all terms whatsoever had the effect of incorporating the
demurrage clause into the bill of lading.
In the circumstances, we can arrive at the conclusion that the
wording of all conditions or all terms incorporates such conditions or
terms as are related to the substantive rights or obligations, such as
demurrage, but does not extend to collateral conditions or terms which
are not connected with the substantive rights and obligation, such as
83) Thomas, D, The modern law of marine insurance, LLP (1996), at p.59.
84) E.g., AIG Group v Ethniki [2000] Lloyd's Rep, IR 343, Gan Insurance v Tai Ping
[1999] Llyod's Rep IR 229, OK Petroleum v Vitol Energy [1995] 2 Lloyd's Rep
160.
85) Miramar Maritime v Holborn Oil Trading [1984] 2 Llyod's Rep 129.
Gold Clause of the Hague Rules 321
arbitration.
Turning now to The Rosa S, we can find that the wording of
incorporation is only the provisions of the Hague Rules. The bill of
lading does not have any wording similar to all the provisions of the
Hague Rules or the provisions of the Hague Rules including Art.XI.
We have to say that it is not clear whether or not the bill of lading
intended to incorporate the Art.XI of the Hague Rules, since the literal
meaning of the provisions is not necessarily all the provisions
including Art.XI. In this regard, one might consider that the other part
of the paramount clause, that is to say, the wording of 뱟 If anything
herein contained is inconsistent with the Hague Rules it shall be null
and void, performs the function of the clear and precise incorporation
clause corresponding to the wording of all the provisions.
However,
the above passage is merely addressed to any phrase contained in the
bill of lading, and does not contemplate that all provisions of the Hague
Rules should be incorporated in the bill of lading.
Even though the bill of lading includes an incorporation clause
similar to all the provisions of the Hague Rules, it is not certain
whether the first sentence of Art.XI in the Hague Rules is incorporated
in the bill of lading.
The gold clause in its nature does not come
within the category of the substantive rights or obligation with regard
to the carriage of goods by sea. Therefore, it could be argued that as
a matter of English law, in order to incorporate Art.XI of the Hague
Rules, the wording of incorporation clause must have a greater clarity
than that in The Rosa S.
322 韓國海法學會誌 第26卷 第2號(2004년 11월)
3.2 Purpose of the gold clause
As was stated at paragraph 4-2-2, MJ Hobhouse explains that
the purpose of gold clause is to escape from nominalism based on
Feist v Societe Intercommunale. However, so far as the question still
remains unsolved whether or not the gold clause is incorporated in the
bill of lading, we cannot proceed to the next question what the purpose
of gold clause would be. This point is appropriately explained in New
Bruswick Railway v British and French Trust.86)
The New Brunswick Railway issued in 1884 a series of
mortgage bonds by which the company promised to pay to the bearer
or the registered holder on August 1, 1934, the sum of one hundred
pounds sterling gold coin of Great Britain of the present standard of
weight and fineness with interest thereon at the rate of five pounds
sterling per annum …”. There comes the question whether the gold
value provision should apply both to the liability in respect of principal
and the liability in respect of interest.
In this regard, the House of
Lords held that as regards the interest, the gold value clause should
not apply because the intention of the document was not clear.
In
particular, the House of Lords rejected to follow the lines of the Feist
decision, because the so-called gold clause obligation was not
expressed in precise language toward the interset.
The Feist decision cannot support The Rosa S unless it is
established that the gold clause has been clearly described in the bill of
86) [1939] A.C. 1.
Gold Clause of the Hague Rules 323
lading for the purpose of incorporation.
3.3 Who should express clearly?
MJ Hobhouse states that the carrier who wishes to exclude or
limit his liability bears the burden to clearly express its intention
concerning the gold clause.
In other words, the carrier should have
included the wording to the effect that Art.XI is not incorporated in the
bill of lading. He concludes that in The Rosa S, the carrier should be
put at a disadvantage because he had failed to clearly exclude the gold
clause.
It is generally accepted that the burden of proof on any
exception or proviso rests upon the very person who is relying on that
exception or proviso.87) MJ Hobhouse also admits this rule, referring
to it as the ordinary rule of construction.88) There is no doubt about
the fact that the person who wishes to rely on any contractual term
should express it clearly.
In this regard, MJ Hobhouse's reckoning would be criticised
because he failed to discern the exception or proviso from the main
term. If we assume ' the carrier's liability' to be a main term, then
'the limitation of liability' would be considered as the exception or
proviso toward 'the carrier's liability'.
In turn, assuming that 'the
limitation of liability' (Art.VI, r.5) is a main term, 'the gold clause'
(the first sentence of Art.XI) must be considered as an exception or
87) E.g., Adamjee v Sadeen [1957] A.C. 94.
88) The Rosa S, at p.580.
324 韓國海法學會誌 第26卷 第2號(2004년 11월)
proviso. The carrier will rely on Art.VI, r.5, but he would not resort
to Art.XI.
By contrast, the cargo owner will try to rely on Art.XI.
Given the foregoing, the burden of proof or clear expression regarding
Art.XI lies, beyond doubt, with the carrier. It would be a strange and
unusual argument that the party who would refuse to resort to Art.XI
should prove or clarify the circumstance regarding Art.XI.
The cargo owner should bear the burden to prove that the
gold value has been incorporated into the bill of lading, because he is
trying to rely on it. If it is not clear whether or not the parties agreed
to incorporate Art.XI, the cargo owner should be put at a disadvantage.
Where a linguistic construction did not indicate clearly with
whom the burden of proof should lie, the court may look to other
considerations to determine the intention of draftsmen.89) Just as an
aside, a specified content of right could be given through a purposive
construction rather than a purely literal one derived from the kind of
meticulous verbal analysis.90) Whether we place more weight upon the
intention of draftsmen rather than upon a linguistic construction, or we
set more store by a purposive construction rather than on a purely
literal construction, we cannot find any justification for MJ Hobhouse's
above reasoning.
3.4 Relationship between The Morviken and The Rosa S
The Morviken91) is rated as a leading case on the issue of the
89) R. v Hunt (Richard Selwyn) [1987] A.C. 352.
90) Anchor Building Products Ltd v Redland Roof Tiles Ltd [1990] R.P.C. 283 CA.
Gold Clause of the Hague Rules 325
legal effect of the Hague Rules.
The rule established by The
Morviken is that with regard to the bill of lading to which the
Hague-Visby Rules shall apply, an agreement to limit carrier's liability
as per the Hague Rules should be found null and void, since it would
lessen the carrier's liability enshrined in the Hague-Visby Rules.
In this case a piece of machinery was carried from an English
port to a Dutch port under a bill of lading which included a 'Dutch
choice of law clause' and an 'exclusive jurisdiction of Dutch court
clause'.
The cargo was severely damaged during the discharging
operation.
The shippers commenced proceedings in rem in UK, and
the carrier sought to a stay of action based upon the above exclusive
jurisdiction clause.
While the Hague Rules were still in operation
under the Dutch law, the Hague-Visby Rules were operative in UK.
In the circumstances, the House of Lords ruled that the Hague-Visby
Rules were clearly applicable to the bill of lading in question, since the
carriage was from a port in a contracting state to the Hague-Visby
Rules. Moreover, the House of Lords declared that to give effect to
the choice of law clause in these circumstances would clearly
contravene Art.III, r.8 which renders null and void any attempt to
lessen the carrier's liability as enshrined in the Hague-Visby Rules.
We should note here that The Morviken is based on the proposition
that the limitation of liability clause in the Hague-Visby Rules is more
favourable to the cargo owner than that in the Hague Rules.
However, if we take the line of reckoning in The Rosa S, the
91) [1983] 1 Lyod's Rep 1.
326 韓國海法學會誌 第26卷 第2號(2004년 11월)
limitation amount under the Hague Rules, ironically, can be greater
than that under the Hague-Visby Rules.92)
Thus, the conclusion of
The Rosa S could be in apparent contradiction to the proposition of
The Morviken.
4. Evaluation
Even though we assume that Art.VI, r.5 must be read with the
first sentence of Art.XI in the light of the intention of the draftsmen of
the Hague Rules, the question still remains unsolved whether the
parties to the bill of lading intended to incorporate both of them. For
this reason, we need to explore the intention of the parties to the bill
of lading aside from the Hague Rules.
In The Rosa S, the incorporation wording of the provisions of
that of the Hague Rules is not so clear or precise as to qualify the first
sentence of Art.XI, considering the English case law on the issue of
incorporation. MJ Hobhouse declares that the carrier bears the burden
to exclude the Art.XI
he seems to try to get to grips with the
situation where the above wording will be considered as unclear or
imprecise.
However, the fundamental weakness of his reckoning
would be found at this point. His reckoning is in direct contradiction
to that of the general rule that the party who is relying on a
contractual clause should prove it. It is natural that the cargo owner
who is trying to resort to Art.XI should bear the burden to clearly or
precisely incorporate it.
92) Gaskel, N, Asariotis, R and Baatz, Y, Bills of lading: Law and contracts, LLP
(2000), at p.512.
Gold Clause of the Hague Rules 327
Chapter 5 Rule declared by The Spar Two
1. General considerations
Korea is not a contracting state to the Hague Rules or the
Hague-Visby Rules. Instead, the Korean Commercial Code provides a
special clause regarding limitation of carrier's liability. As a result, a
carrier is entitled to limit its liability to 500 SDR per package or
shipping unit for damage arising out of failure to provide a seaworthy
ship or to take care of the cargo, unless the parties agreed to a higher
limit than 500 SDR.93) The scheme of limitation of liability must have
been taken from the Hague-Visby Rules.94)
It should also be noted
that any agreement excluding or lessening a carrier's liability or
obligations as shown in the Korean Commercial Code is null and voi
d.95)
For this reason, a package limitation amount agreed by the
parties to a bill of lading which is lower than 500 SDR is void and
should read 500 SDR, but a package limitation amount higher than 500
SDR is valid.
Therefore, if it is agreed by the parties to a bill of lading that
the carrier may limit its liability to the present value of 100, such an
agreement should be found void since the limitation amount is lower
than 500 SDR. In the circumstances, the limitation amount should read
500 SDR.
93) Korean Commercial Code s.789-2 (1).
94) Chai, L,S, Korean Maritime Law, 1st ed, Korea University Press (1999), at p.149.
95) Korean Commercial Code s.790 (1).
328 韓國海法學會誌 第26卷 第2號(2004년 11월)
2. The Spar Two
2.1 Basic fact96)
In The Spar Two, 766 coils of galvanized steel were loaded on
board the defendants' vessel Spar Two for carriage from Indonesia to
Canada in 1999. The carriage was covered by a bill of lading issued
on behalf of the defendants, and the parties agreed that the relevant
bill of lading was subject to the provisions of the Hague Rules.
Indonesia had not been a contracting state to the Hague-Visby
Rules at the material time. Canadian COGWA 1993 which enacts the
Hague-Visby Rules was not applied to that bill of lading because it
was applied only to outbound carriage and not to inbound carriage.
Thus, the Hague Rules was effectively incorporated.
During ocean voyage, the vessel encountered boisterous
weather with the result that 241 out of 766 coils were damaged.
2.2 Relevant clauses in the bill of lading97)
Clause 25 in the Relevant bill of lading provides:
The claims arising from
this bill of lading shall be exclusively
governed by the law of Korea … and
Clause 2 provides:
the terms of the Hague Rules shall apply ….
96) The Spar Two judgment, Seoul District Court Case No.:2001 Kahap 25714, at p.6.
97) The Spar Two, at p.9.
Gold Clause of the Hague Rules 329
2.3 Decision by the Korean court
The Seoul District Court rejected the cargo owner's argument
that Art.VI, r.5 of the Hague Rules must be read with the first
sentence of Art.XI based on The Rosa S. The court declared that the
limitation amount agreed by the parties in The Spar Two was the mere
present value of 100 per package or unit, which is lower than 500 SDR
allowable limitation amount by the Korean Commercial Code, thus
being void.98) The court concluded that the limitation amount should
read 500 SDR as per the Korean Commercial Code.
The above judgment became final and conclusive, since both
parties had not appealed
2.4 Nature of Art.XI
In arriving at its conclusion, the Seoul District Court places
great emphasis on two considerations. Firstly, After the Hague Rules
being signed, the inflation devalued the currency and, thus the amount
of package limitation in the Hague Rules came to be considered as
being too low.99)
For this reason, the Gold Clause Agreements, the
Hague-Visby Rules and the Hamburg Rules increased the package
limitation amount. Secondly, the second paragraph of the Hague Rules
98) The Spar Two, at p.14.
99) Astle, W, Shipowners' cargo liabilities and immunites, H.F.&G Witherby (1984),
p.189. In this regard, the author says “…because it was apparent in post-war
years that the limitation of liability to 100 pound sterling per package or unit was
not in keeping with the increased values, an agreement (the Gold Clause
Agreement) was entered into …”.
330 韓國海法學會誌 第26卷 第2號(2004년 11월)
provides the contracting state in which the pound sterling is not a
monetary unit with the right of translating the sums in pounds sterling
into their own currency.
In the circumstances, the court stated that the first sentence of
Art.XI is a declaratory provision, under the gold standard system, to
the effect that the currency should be backed by gold.100)
3. Evaluation
3.1 Approach adopted by The Spar Two
The Korean court come appear to agree with the approach that
Art.XI is not addressed to individual shippers and carriers.
If we
follow the line of this approach, there is no need to explore the
intention of the parties to the bill of lading. In actual fact, the court,
in The Spar Two, did not expound its view on the contractual intention
of the parties.
3.2 Uncertainty or inability
If we are to accept the approach that Art.XI is not addressed
to individual shippers and carriers, then we need to go one step further
to explore the intention of the parties to the bill of lading.
However, in The Spar Two, it should be noted that the
'Korean choice of law clause' (Clause 25) would make it difficult to
100) The Spar Two, at p.13.
Gold Clause of the Hague Rules 331
construe the parties' intention as hoping to incorporate Art.XI.
Hobhouse's
conclusion
that
the
gold
clause
was
MJ
successfully
incorporated in the bill of lading is based upon the Coinage Act 1971.
The 1971 Act identifies various denominations of coin including gold
coins, and specifies their weight and fineness.101) Given the 1971 Act,
MJ Hobhouse said102):
It is therefore still possible, as a matter of English law to answer the
question <what is the gold content of 1 gold sterling?>
Therefore
there is no uncertainty about, or inability to ascertain, what is the gold
value which the parties were by their contract agreeing should be the
limit of the carriers' liability.
In this regard, we need to pay sufficient attention to the fact
that the parties, in The Rosa S, agreed on the English choice of law
clause. The English choice of law clause enables the parties to apply
1971 Act, thus to answer the question what the gold value would be
coming to be possible.
However, in The Spar Two, the applicable law chosen by the
parties was Korean law, and thus there could be no room for the 1971
Act applying.103)
As a matter of Korean law, it is impossible to
answer the question <what is the gold content of 1 gold sterling?.
There is still great uncertainty about, or inability to ascertain what the
gold value would be. In the circumstances, the parties must not have
101) Treseder-griffin v Co-operative insurance [1956] 1 Llyod's Rep, 377
102) The Rosa S, at p.578.
103) Korea has no corresponding legislation to the Coinage Act.
332 韓國海法學會誌 第26卷 第2號(2004년 11월)
agreed to incorporate the gold clause in the bill of lading. The critical
difference between The Rosa S and The Spar Two can be found here.
Chapter 6 Conclusion
The key issue in this dissertation is whether or not Art.IV, r.5
of the Hague Rules must be read with the first sentence of Art.IX in
construing a carriage contract through a bill of lading which
incorporates the Rules. The relevant issues investigated fell into two
categories.
What is the true construction of the Hague Rules?
First and foremost, we found that the question whether or not
the first sentence of Art.XI is addressed to the individual shippers and
carriers was difficult to answer. It is not so much a question of 'right
or wrong', but more a question of mere 'choice'. Assuming that we
choose the approach that the first sentence of Art.XI is addressed to
the individual shippers and carriers, we come to encounter the question
of what the function of Art.XI would be.
The Rosa S answers that
Art.XI was provided in order to prepare for inflation.
What is the true construction of the intention of parties?
The incorporation wording of the provisions of the Hague
Rules, in The Rosa S, was not so clear or precise as to qualify the first
sentence of Art.XI, considering the English case law on the issue of
incorporation. For this reason, the cargo owner who is trying to resort
to Art.XI should be put at a disadvantage.
Gold Clause of the Hague Rules 333
Given the foregoing, we can arrive at the conclusion that in
order to read Art.VI, r.5 with Art.XI, two requirements should be met:
(i) the bill of lading should have the clear incorporation wording
similar to all provisions of the Hague Rules including Art.XI and (ii)
the applicable law should be the English law or the law of the nation
which has the corresponding legislation to the Coinage Act.
In The Rosa S, the first requirement was not met. Therefore,
we cannot accept the rule established by The Rosa S.
The Rosa S
rule needs more rigorous testing in the English courts
Table of Cases
Adelaide Electric supply Co. v. Prudential Assurance Co. [1934] A.C.
122
AIG Group (UK) Ltd. v. The Ethniki [2000] Llyod's Rep IR 343
Brown Boveri Pty. v. Baltic Shipping Co. [1989] 1 Llyod's Rep 518
Daval Aciers D'Usinor v. Armare Srl (The Nerano) [1996] 1 Llyod's
Rep 1
Dobell v. Rossmore Steamship Co. [1895] 2 Q.B.
Feist v. Societe Intercommunale Belge D'electricte [1934] A.C. 161
Fiat Co. v. American Export Lines Inc. [1965] A.M.C. 384
Gan Insurance Co. Ltd. v. Tai Ping Insurance Co. Ltd. [1999] Llyod's
Rep IR 229
HIH Casualty & General Insurance Ltd. v. New Hampshire Insurance
Co. [2001] Llyod's Rep IR 596
334 韓國海法學會誌 第26卷 第2號(2004년 11월)
Miramar Maritime Corp. v. Holborn Oil Trading Ltd.
[1984] 2
Llyod's Rep 129
New Brunswick Ry. Co. v. British and French Trust Corp. [1939] A.C.
1
OK Petroleum AB v. Vitol Energy SA [1995] 2 Llyod's Rep 160
Pyrene Co., Ltd. v. Scindia Steam Navigation Co. Ltd.
[1954] 1
Llyod's Rep 321
R. v. Hunt (Richard Selwyn) [1987] A.C. 352
The Rosa S [1988] 2 Llyod's Rep 574
The Spar Two, Seoul District Court, 2001 Kahap 25714
Skips A/S Nordheim v. Syrian Petroleum Co. [1983] 2 Llyod's Rep
592
Tamplin SS Co. Ltd. v. Anglo-Mexican Petroleum Co. [1916] 2 A.C.
Treseder-Griffin and Another v. Co-operative Insurance Society Ltd.
[1956] 1 Lloyd's LL Rep 377
Bibliography
English law
Boyd, S, Burrows, A and Foxton, D, Scrutton on Charterparties, 20th
ed, Sweet & Maxwell (1974)
Colinvaux, R, Carver's carriage by sea, 13th ed, Stevens & sons
(1982)
Cooke, J, Young, T, Taylor, A, Kimball, J, Martowski, D and Lambert,
L, Voyage charters, LLP (1993)
Gaskel, N, Asariotis, R and Baatz, Y, Bills of lading: Law and
Gold Clause of the Hague Rules 335
contracts, LLP (2000)
Moccatta, A, Mustill, M and Boyd, S, Scrutton on Charterparties, 18th
ed, Sweet & Maxwell (1974)
Richardson, J, The Hague and Hague-Visby Rules, 4th ed, LLP (1998)
Thomas, D, The modern law of marine insurance, LLP (1996)
Treitel, G and Reynolds, F, Carver on bills of lading, Sweet &
Maxwell (2001)
Wilson, J, Carriage of goods by sea, 4th ed, Longman (2001)
Richardson, J, The Hague and Hague-Visby Rules, 4th ed, LLP (1998)
Korean law
Chai, L, S, Korean maritime law, Korea university press (1999)
Choi, K, W, Maritime law, Bagyoungsa (1993)
Song, S, H and Kim, H, Maritime law, Bagyoungsa (1993)
Economics
Blanchard, O, Macroeconomics, Prentice Hall (1997)
Burda M and Wyplosz, C, Macroeconomics, Oxford university press
(1993)
Delong J, Macroeconomics, Rev ed, McGraw-Hill (2002)
Griffiths, A and Wall, S, Applied Economics, 8th ed, Longman (1999)
Kuhlman, J and Skineer, G, The economic system, Rev ed, Richard
Irwin (1964)
History
Shama, S, A history of Braitain, Book 3, BBC (2002)