Bills of Lading History

A contract of affreightment is normally evidenced by a bill of lading when the goods to be shipped form only part of the cargo which the ship is to carry. This situation will arise when a shipowner, or other person authorised to act on his behalf, employs his vessel as a general ship by advertising that he is willing to accept cargo from allcomers for a particular voyage. Such carriage forms part of the liner trade in cases where vessels of a particular shipping line regularly ply an advertised route, year in year out. Once cargo has been accepted and shipped by such a carrier, a bill of lading will be issued on his behalf acknowledging that the goods have been received for carriage or shipped, as the case may be. The bill of lading originated around the fourteenth century as a non-negotiable receipt issued by a shipowner, for cargo received, to a merchant who did not intend to travel with his goods. It would contain statements as to the type and quantity of goods shipped and the condition in which they were received. Subsequent experience led to the incorporation into the document of the terms of the contract of carriage in order to resolve the disputes which inevitably arose between cargo owners and carrier. Finally by the eighteenth century the bill of lading had acquired its third characteristic, that of being negotiable by indorsement in order to meet the needs of those merchants who wished to dispose of their goods before the vessel reached its destination. Historically the liability of the carrier under a bill of lading contract to transport the cargo safely to its destination was strict, subject only to what were known as the common law exceptions, namely, act of God, public enemies, or inherent vice. Even though the loss was covered by one of these exceptions, the carrier remained liable if his negligence or other fault had contributed to it. In this respect it is important to note that the carrier’s liability under a bill of lading contract for safe custody of the cargo was identical with the shipowner’s corresponding liability under a charterparty. With the development of the concept of freedom of contract during the nineteenth century, however, the bill of lading carrier was able to take advantage of his superior bargaining power by introducing clauses into the contract of carriage which, to an increasing extent, excluded his common law liability. The ultimate point in this development was reached when some carriers sought to exempt themselves from liability even for loss resulting from their own negligence in the care of cargo. The resultant combined resistance from shippers, bankers and underwriters led to the production in some countries of model bills of lading to cover certain trades, while in others it led to the introduction of legislation designed to curb the excesses of an unbridled laissez faire. A typical example of such legislation is provided by the Harter Act 1893 in the USA, which in essence sought to ban the exclusion of carrier liability for loss resulting from fault in the care and custody of cargo, while similar legislation was passed in some Commonwealth countries. Eventually it came to be recognised that such piecemeal legislation was insufficient, but many shipowning countries feared that an abandonment of a policy of freedom of contract would inevitably lead to an increase in freight rates which would place their carriers at a disadvantage. Clearly any solution, if it was to be of practical value in international trade, would have to be based on international agreement. Discussions were initiated between representatives of shipowners, shippers, underwriters and bankers drawn from the major maritime nations, which finally led to the drafting of a set of rules by the Maritime Law Committee of the International Law Association at a meeting held in the Hague in 1921. These draft rules (henceforth known as the ‘Hague Rules’) were the subject of negotiation and amendment which culminated in them being incorporated in an international convention which was signed in Brussels on 25 August 1924 by the major trading nations.
The declared objective of the Convention was to unify certain rules relating to bills of lad- ing and to establish a minimum degree of protection for the cargo owner. The Rules were not intended to provide a comprehensive and self-sufficient code regulating the carriage of goods by sea, but were designed merely to define the basic obligations of the carrier and to prescribe the maximum protection he could derive from the insertion of exception and limitation clauses in the contract of carriage. The parties retained the power to negotiate their own terms as regards those aspects of the contract not specifically covered by the Rules. The major maritime nations introduced legislation to give effect to the Hague Rules which, in the case of the United Kingdom, took the form of the Carriage of Goods by Sea Act 1924. Over the years dissatisfaction grew at the limited nature of the protection afforded to cargo owners by the Hague Rules. Criticism mainly centred on the narrow area of operation of the Rules, since in the majority of countries they only applied to outward bills, and covered only the tackle-to-tackle period. Again, they were only applicable to certain aspects of the contract of carriage rather than providing a comprehensive code, and cargo owners alleged that their underlying philosophy was still biased in favour of the carrier.
Opinions were, however, divided as to how progress could be achieved. On the one hand, the major shipowning nations were opposed to any radical change in the regime and favoured selective adjustments to the Hague Rules in order to remove the most obvious blemishes. This approach resulted in a series of draft amendments to the Rules which were incorporated into a document known as the Brussels Protocol, the text of which was agreed at an international conference held in Brussels in February 1968. The revised rules incorporating the amendments contained in the Brussels Protocol are known as the ‘Hague/ Visby Rules’. On the other hand, more radical reform was advocated by some leading cargo-providing countries, the majority of whom are drawn from the so-called Developing Nations. Under their sponsorship lengthy negotiations were conducted through UNCTAD and a specialised UNCITRAL Working Party, which resulted in the drafting of a new comprehensive code covering all aspects of the contract of carriage by sea. This code was incorporated in a Convention (known as the ‘Hamburg Rules’) which was signed at an international conference held in Hamburg in March 1978. This new code finally came into force on 1 November 1992 having collected the required total of 20 ratifications and accessions from different states, irrespective of tonnage. In the meantime, the United Kingdom and a number of other western European govern- ments decided to adopt the Hague/ Visby approach and consequently implemented legisla- tion to give effect to the Convention. In the case of the United Kingdom this took the form of the Carriage of Goods by Sea Act 1971 which did not, however, become effective until 23 June 1977, by which date the Convention had collected the required number of accessions and ratifications. While 30 states have so far formally adopted the Hague/ Visby Rules, their provisions have been incorporated into the maritime codes of several other states where they tend to be applied in international trade on a reciprocal basis. The consequence is that the overall international situation with regard to contracts of carriage by sea exhibits a certain degree of complexity. While many states still remain loyal to the original Hague Rules, 30 have adopted the Hague / Visby amendments, a further 32 have adopted the Hamburg code, while a fourth group has implemented, or is in the course of implementing, hybrid systems based on a combination of provisions drawn from both the Hague/ Visby and Hamburg regimes.7 The position is further complicated by the application of varying conflict of laws principles with the result that a decision as to which Convention is applicable may well depend on the choice of country in which the action is brought. Such legal complexity hardly encourages the development of international trade and a greater degree of uniformity would be desirable.