The English Court of Appeal’s decision in Batavia Eximp & Contracting (S) Pte Ltd v Pedregal Maritime SA[1] addresses two issues of practical significance for cargo interests, carriers, and their insurers.
- First, whether proceedings commenced solely to obtain security amount to a “suit” for the purposes of the one year time bar under Article III rule 6 of the Hague-Visby Rules (HVR).
- Secondly, what degree of identification is required before cargo can fall within the deck cargo exception in Article I(c) of the HVR.
On the first issue the Court confirmed that a security arrest was not a “suit” for the purposes of the HVR. On the second issue the Court found that deck cargo needs to be clearly identified in a bill of lading to fall under the Article I(c) exception.
The decision is particularly relevant to New Zealand considering logs comprise significant export cargo, often a mix of under deck and on deck cargo.
Of wider relevance is the confirmation that an arbitration clause incorporated into a bill of lading means arbitration proceedings are the effective “suit” for the purposes of the HVR.
Background
The dispute arose out of the carriage of a cargo of logs from New Zealand to India. The cargo was carried pursuant to four bills of lading, two of which recorded that a proportion of the cargo was carried on deck.
On arrival at the discharge port, the cargo was discharged without presentation of the original bills of lading and against a letter of indemnity provided by the vessel’s charterers.
The bill of lading holders, who were also the financiers of the cargo (Holders), subsequently alleged mis-delivery after it was discovered the cargo had been removed from the port without presentation of the original bills of lading.
The bills incorporated a London arbitration clause. Before commencing arbitration, the Holders arrested a sister ship in Singapore and obtained security for their claim. However, arbitration proceedings were not commenced until December 2020, more than one year after the cargo had been discharged.
The arbitrator held that the Holders’ claim was time barred under Article III rule 6, although only in respect of the under deck cargo because the deck cargo fell outside the HVR pursuant to Article I(c). The Holders’ claim in respect of deck cargo was not time barred.
Both parties appealed.
The Commercial Court’s Decision
At first instance, the Commercial Court concluded that “suit” in Article III rule 6 means substantive proceedings capable of determining the underlying claim. On that basis, the Singapore arrest proceedings did not prevent the claim from becoming time barred.
On the deck cargo issue, the judge upheld the arbitrator’s conclusion that the bills of lading contained a sufficient statement identifying cargo carried on deck. Although the cargo carried on deck had not been specifically identified by parcel or serial number, the judge adopted a pragmatic and commercial approach, finding that the statement was sufficiently clear in the circumstances.
Again, both parties appealed.
The Issues Before the Court of Appeal
The Court was required to determine two principal questions:
- Whether proceedings commenced solely to obtain security, such as a ship arrest, constitute a “suit” within the meaning of Article III rule 6 of the HVR.
“…the carrier and the ship shall in any event be discharged from all
liability whatsoever in respect of the goods, unless suit is brought
within one year of their delivery or of the date when they should have
been delivered.”
- Where only part of a cargo is carried on deck, what must be stated on the face of the bill of lading for that cargo to fall within the Article I(c) deck cargo exception.
““Goods” includes goods, wares, merchandise, and articles of every
kind whatsoever except live animals and cargo which by the contract
of carriage is stated as being carried on deck and is so carried.”
The Court of Appeal’s Decision
What constitutes a “suit” under Article III rule 6?
The Court of Appeal unanimously agreed with the Commercial Court that proceedings seeking security alone do not amount to a “suit” for the purposes of Article III rule 6.
Reviewing the language of the HVR and the authorities, the Court held that the natural meaning of “suit” in its context is proceedings seeking to establish liability for the cargo claim.
The Court noted that the purpose of the time bar is to give certainty and to encourage the prompt prosecution of cargo claims. If the Holders were correct, a security action would permit claimants to preserve their rights indefinitely and to commence substantive proceedings at a much later stage, undermining the finality that Article III rule 6 is intended to achieve.
The Court therefore held that a proceeding will only qualify as a “suit” if it is capable of determining the substantive liability of the carrier. As the arrest proceedings were brought solely to obtain security and could not determine the merits of the claim, they did not interrupt the running of the one-year time bar.
The deck cargo exception: what must be stated?
The Court, allowing the Owners’ appeal, reached the opposite conclusion to the Commercial Court on the second issue.
Article I(c) excludes from the definition of “goods” any cargo which the contract of carriage states is carried on deck and which is in fact carried on deck. Cargo falling outside the definition of “goods” is not subject to the HVR, including the Article III rule 6 time bar.
The bills in issue identified the total number of logs shipped and stated that specified numbers of pieces were carried on deck. However, they did not identify which particular logs or parcels were carried on deck. The logs also varied in weight and therefore value.
The Court held that this was insufficient.
In circumstances where only part of a non-homogenous cargo is carried on deck, the cargo carried on deck must be specifically identifiable. The Court emphasised that Article I(c) creates two potentially different contractual regimes within the same shipment: one governed by the HVR and one outside it. Commercial parties, including cargo owners and insurers, must therefore be able to determine in advance which goods fall into which category.
The Court considered that certainty is central to the operation of Article I(c). Without specific identification, parties cannot properly assess risk or arrange insurance. The Court endorsed the reasoning of the British Columbia Court of Appeal in the Gearbulk decisions, which stressed that parties must be able to evaluate risk prospectively, rather than after loss has occurred.[2]
Accordingly, the Court held that the bill of lading must specifically identify the cargo carried on deck, for example by parcel number or serial number. The bills of lading in this case did not do so, therefore none of the cargo fell within the Article I(c) exception. The HVR applied to the entirety of the shipment and the Holders’ claims were time barred.
Key Takeaways
- Security proceedings are not enough
The decision confirms that proceedings (such as an application to arrest) for security will not stop time running under Article III rule 6. Cargo interests must ensure that substantive proceedings capable of determining liability are commenced within the one-year period.
- The focus remains on finality
The Court reaffirmed that the purpose of the Hague-Visby time bar is to promote the prompt commencement and pursuit of substantive proceedings. The judgment is consistent with the long-recognised commercial objective in shipping of providing finality and allowing carriers to “close their books” after one year.
For cargo interests and their insurers, the message is a familiar but important one. The one year HVR time bar:
- must be calculated and diarised from delivery (or the date when delivery should have occurred); and
- protected by substantive proceedings within the one year limit.
- Incorporation of arbitration clauses
Where a bill of lading incorporates an arbitration clause, the substantive proceeding is the commencement of arbitration proceedings. Commencing court proceedings is a breach of arbitration agreement and is not the substantive proceeding for the purposes of the HVR.
See also The “Navios Koyo” and other matters [2021] SGHC 131.
- Clarity is essential for deck cargo clauses
In New Zealand, logs are routinely shipped part under and part on deck and may not be homogenous in weight or value. A bill of lading that merely records a total number of pieces shipped, without specifying the under deck and on deck quantities will not satisfy Article I(c).
Carriers wishing to rely on the Article I(c) exception should review their bill of lading wording and operational practices to ensure that cargo carried on deck can be separately identified. Failure to do so may result in the HVR applying to the entire cargo notwithstanding an intention that a portion be carried on deck at shipper’s risk.
If you have any questions about the assessment of damages or particular charterparty terms, please get in touch with our Marine or Transport & Logistics Teams or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
[1] [2026] EWCA Civ 1158.
[2] Timberwest Forest Ltd v Gearbulk Pool Ltd [2003] BCCA 39; Gearbulk Pool Ltd v Seaboard Shipping Co [2006] BCCA 552.
