10.6092/issn.2531-6133/12881
Loss of, or damage to goods is a frequent occurrence in the shipping industry, which may often occur as a result of improper cargo-handling operations during loading, discharging or even stowing. This highly concerns cargo interests, as they will seek to reimburse their loss from their carriers under bills of lading. Often, the bill of lading may well contain terms of a charterparty by way of incorporation that allow the carrier to contract out their cargo-related operations. Once this is the case, the cargo interest is unjustly left without a remedy for loss of, or damage to his goods vis-à-vis the carrier under English law. This paper, instead of challenging the correctness of the law firmly established concerning the transfer of these obligations via Free In and Out Stowed and Trimmed (FIOST) clauses, rather, aims to propose ideas to tackle the impact arising out of the status quo under English law. Finally, it offers some plausible suggestions for cargo interests to surmount this undesired outcome.
application/pdf
2531-6133
12881
1
en
Ahmet Gelgec
https://creativecommons.org/licenses/by/4.0
University of Bologna Law Review
Charterers
Challenging the Undesired Outcome of FIOST Clauses on Cargo Interests
Text.Serial.Journal
https://bolognalawreview.unibo.it/
6
Articles & Essays
2021-05-11
2021-05-03
2021-03-27
2021-05-11
29-47
UBLR
Ahmet Gelgec
2021/05/11
10.6092/issn.2531-6133/12881
29
 Istanbul Medeniyet University
2531-6133
1
Charterers
en
47
Challenging the Undesired Outcome of FIOST Clauses on Cargo Interests
https://bolognalawreview.unibo.it/article/download/12881/12557
6
llVOLUME 6                                     llISSUE 1                                             ARTICLES & ESSAYS



                            UNIVERSITY OF BOLOGNA LAW REVIEW
                            https://doi.org/10.6092/issn.2531‐6133/12881

            Received: 26 Sep. 2020 | Accepted: 30 Nov. 2020 | Published: 10 May 2021

                                                    A

  Challenging the Impact of FIOST Clauses on Cargo Interests


                                            AHMET GELGEC
Ahmet Gelgec is a Lecturer in Maritime and Commercial Law at Istanbul Medeniyet University
(Turkey).

  @ ahmet.gelgec@medeniyet.edu.tr
  ID
       0000-0002-6075-7211


                                               ABSTRACT

Loss of, or damage to goods is a frequent occurrence in the shipping industry, which may often
occur as a result of improper cargo-handling operations during loading, discharging or even
stowing. This highly concerns cargo interests, as they will seek to reimburse their loss from their
carriers under bills of lading. Often, the bill of lading may well contain terms of a charterparty by
way of incorporation that allow the carrier to contract out their cargo-related operations. Once
this is the case, the cargo interest is unjustly left without a remedy for loss of, or damage to his
goods vis-à-vis the carrier under English law. This paper, instead of challenging the correctness
of the law firmly established concerning the transfer of these obligations via Free In and Out
Stowed and Trimmed (FIOST) clauses, rather, aims to propose ideas to tackle the impact arising
out of the status quo under English law. Finally, it offers some plausible suggestions for cargo
interests to surmount this undesired outcome.

                                               KEYWORDS
                  Fiost clauses; The Hague Rules; Cargo Interests; Shipowners; Charterers


                                         TABLE OF CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   30
1. Fiost Clauses and Their Incorporation Into Bills of Lading        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   31
2. Contention Between Fiost Clauses and the Hague Rules .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   32
3. The Approach Taken by Other Jurisdictions . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   34
4. Quest for Re-Striking the Balance . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   36
         4.1. Intervening Act of the Shipowner . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   37
         4.2. Action in Tort . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   38
         4.3. Implied Contract and Agency Principle . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   39
            4.3.1. Agency Principle . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   39
            4.3.2. Implication of a Contract . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   39
            4.3.2.1. Terms of the Implied Contract . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   42
         4.4. Analogy with Transhipment Cases . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   45
5. Concluding Remarks . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   47


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              CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


     INTRODUCTION

The International Convention for the Unification of Certain Rules of Law relating to Bills
of Lading, and Protocol of Signature [hereinafter Hague Rules] or the Hague-Visby Rules1
as amended by the Protocol to Amend the International Convention for the Unification
of Certain Rules of Law Relating to Bills of Lading signed at Brussels in 1968 apply either
by way of paramount clause agreed in or compulsorily, by force of law to the contracts
contained or evidenced in bills of lading. The Rules prescribe the rights and liabilities
arising out of the desired voyage starting from loading to discharge operations, including
the core obligations of the carrier, like providing a seaworthy vessel2 and other
responsibilities caring for the cargo such as loading, handling, discharging and stowage
operations.3 Hence, when failing to deliver one of these responsibilities, the carrier may
become subject to liabilities against cargo interests under the bill of lading.
         However, sometimes the shipowner may not be willing to undertake some of these
obligations that would normally fall upon him as defined under the Rules. Accordingly, as
a result of freedom of contract, when drafting charter party terms, by virtue of free-in and
free-out clauses, these responsibilities may have been shifted to charterers who often are
not the bill of lading holders. Sometimes even a term may have been inserted into the bill
of lading transferring these responsibilities to cargo interests, like shippers or receivers.
And it is not uncommon in practice that some germane terms of the charterparty may have
as well been incorporated into the bill of lading by general words of incorporation. When
this is the case, under English law, as it will be shown below, cargo interests’ claims vis-à-
vis carriers arising out of breach of these obligations appear to be falling short of success,
as they are allowed to contract out them. It is, however, submitted that this undermines
the balance that is struck out by the Rules between cargo interests and carriers, making
the former weaker and the latter even stronger, as the former are left without a remedy,
whereas the faulty party escapes liability.
         It is worth noting that by no means, does this paper seek to challenge the
correctness of the law firmly established concerning the transfer of these obligations via
Free In and Out Stowed and Trimmed [hereinafter FIOST] clauses, but rather aims to
1
  The Hague Rules of 1924 are not in force in the UK. The Hague-Visby Rules as amended by the Brussels
  Protocol 1968 are in force in the UK by the Carriage of Goods by Sea Act 1971. Unless otherwise stated, the
  arguments are to cover both the Hague and the Hague-Visby Rules, as the relevant provisions on the subject
  of this paper bear no difference under both the Hague and the Hague-Visby Rules.
2
  Art.III(1) of the Rules prescribes an obligation that requires the carrier to exercise due diligence before
  or at the beginning of the voyage to make the vessel seaworthy to undertake the intended voyage.
  “Seaworthiness” covers all aspects that put the vessel in a condition to perform properly the contractual
  voyage. For detailed explanations on seaworthiness, see The Eurasian Dream [2002] EWHC 118; [2002] 1 Lloyd’s
  Rep 719, 735.
3
  Art.III(2).


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propose ideas to tackle the undesired outcome arising out of the status quo. To do so,
first, it shall set out in brief, the purpose of FIOST clauses and its impact between carriers
and cargo interests under the bill of lading contract. Secondly, and more importantly, it
shall seek to surmount the undesired outcome for cargo interests by offering plausible
suggestions.




      1. FIOST CLAUSES AND THEIR INCORPORATION INTO BILLS OF
      LADING

Cargo-related obligations such as loading, stowing and discharging, in the absence of an
express provision, fall upon the shipowner rather than the charterer in common law.
Though, this is hardly the case in practice, in most cases, parties are not silent on this
matter in their contracts. Under charter parties, the shipowner and the charterer are
free to draft or negotiate any term in allocating their respective responsibilities among
themselves, such as these cargo-related operations for the manner in which they are to
be carried out.
          Free In and Out Stowed [hereinafter FIOS] or FIOST clauses or other variations are
often drafted in charterparties.4 Depending on the wording used, these clauses might have
different impact on the rights and responsibilities of the parties. In an unqualified form
of FIOS or FIOST clause, “free” only indicates that it is free of cost.5 This is to say, such
a clause is not capable of transferring the risk of these operations, and therefore it does
not discharge the shipowner from responsibility against cargo interests.6 Although, an
effectively drafted clause may transfer the risk of these operations, making the shipowner
relieved of responsibility.7 Whereas the latter type enables the shipowner to contract out
these obligations and hence the responsibility, the former type does not offer shipowners
4
  FIO (free in and out), FIOS (free in and out stowed), FIOST (free in and out stowed trimmed), FILO (free in
  liner out), FISLO (free in stowed liner out), etc. On FIOS or FIOST clauses in general see, RICHARD AIKENS ET AL.,
  BILLS OF LADING 338-9 (2nd ed. 2016) ;BERNARD EDER ET AL., SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING
  344-5 (23rd ed. 2015) ; 3h PAUL TODD, PRINCIPLES OF THE CARRIAGE OF GOODS BY SEA 261-2, 319-22 (1st ed. 2016)
  ;JULIAN COOKE ET AL., VOYAGE CHARTERS 14.36-14.45 (4th ed. 2014) ; SIMON BAUGHEN, SHIPPING LAW 106-9 (7th ed
  2019). For more detailed analysis of the nature and scope of FIOST clauses see, ILIAN DJADJEV, THE OBLIGATION
  OF THE CARRIER REGARDING THE CARGO 101-47 (2017).
5
  Jindal Iron and Steel Co Ltd v. Islamic Solidarity Shipping Co Jordan Inc (The Jordan II) [2003] [2003] EWCA Civ 144;
  2 Lloyd’s Rep 87, 103. See also, The Mohave Maiden [2015] EWHC 1747 (Comm).
6
  For an example such a clause, see clause 8 of the NYPE, “…and Charterers are to load, stow, and trim the
  cargo at their expense under the supervision of the Captain…” See also Sea Master Shipping Inc. v. Arab Bank
  (Switzerland) Ltd [2020] EWHC 2030 (Comm).
7
  See, clause 5 of the GENCON charter party, “the cargo shall be brought into the holds, loaded, stowed and/or
  trimmed, tallied, lashed and/or secured by the Charterers, free of any risk, liability and expense whatsoever
  to the Owners”.


                                                         31
                 CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


a way out from responsibilities against cargo interests. It thus appears that there is no
invariable general outcome from these clauses and accordingly cargo interests’ right of
recourse against carriers is highly dependent upon the wording of each clause.
           Although FIOST clauses are sometimes inserted into bills of lading, they might
often be incorporated from a charterparty. Use of general words of incorporation clause
in the bill of lading is not uncommon, such as “all terms and conditions, liberties and
exceptions of the charterparty . . . ”.8 The general rule is that as long as clauses are
germane to the subject matter of the bill of lading (ie., carriage or delivery of the goods
or the payment of freight and demurrage), those germane terms of the charterparty
would be treated as incorporated into the bill of lading.9 As for incorporation of FIOST
clauses, in the Eems Solar, general words of incorporation were held to be successfully
incorporated into a FIOST clause of a charterparty into the bill of lading.10 Sometimes
such incorporated clauses may require a degree of manipulation of the words so as to fit
exactly the bill of lading. However, it must be said that the English courts have shown no
reluctance in manipulating such incorporated clauses that are considered germane to fit
them into bills of lading.11 In supporting this argument, in the Eems Solar, manipulation
was found to be unnecessary for a FIOST clause – which was assumed to be germane -
relieving the shipowner of the cargo-handling obligations, where the charterers had
them imposed on.12 Though, this does not necessarily mean that an incorporated FIOST
clause always sits well with the other terms of the bill of lading, which will be discussed
below.




       2. CONTENTION BETWEEN FIOST CLAUSES AND THE HAGUE RULES

As stated above, FIOST clauses can be successfully incorporated into bills of lading by the
use of general words. If the incorporated clause did not only transfer of cost but also the
risk of cargo-related operations to the shipper, the receiver or even to the charterer, a

8
   For examples of general words of incorporation clauses, see, Skips A/S Nordheim v. Syrian Petroleum Co and
   Petrofina SA (The Varenna) [1984] Q.B. 599; Federal Bulk Carriers Inc v. C Itoh & Co Ltd (The Federal Bulker) [1989] 1
   Lloyd’s Rep. 103.
 9
   TW Thomas & Co Ltd v. Portsea SS Co Ltd (The Portsmouth) [1912] AC 1; Yuzhny Zavod Metall Profil LLC v. Eems
   Beheerder BV (The Eems Solar) [2013] 2 Lloyd’s Rep 487.
10
   Yuzhny Zavod Metall Profil LLC v. Eems Beheerder BV (The Eems Solar) [2013] 2 Lloyd’s Rep. 487, [94-95]. For
   a detailed commentary on this case see, Paul Todd, Hague Rules and Stowage, LLOYD’S MAR.& COM. L Q. 139
   (2014).
11
   Though where manipulation was not possible for a demurrage clause, see Miramar Maritime Corp v. Holborn
   Oil Trading (The Miramar) [1984] A.C. 676.
12
   The Eems Solar [2013] 2 Lloyd’s Rep 487, [94-95].


                                                           32
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tension would be deemed to arise between that clause and art.III(2) of the Rules in
principle, as it imposes the obligations to load, stow and discharge onto the carrier13
under the bill of lading. Therefore, a question arises at this point: would an incorporated
FIOST clause lowering the carrier’s cargo-handling responsibilities prevail over art.III(2)?
           The Hague or the Hague-Visby Rules were created to strike a balance between the
weak party (the cargo interest) and the party that would enjoy upper bargaining power
(the carrier). In order to find a balance between them, the Rules therefore lay out standard
liabilities of the carrier vis-à-vis the cargo interest. So as to protect cargo interests as the
weaker party, thus art.III(8) of the Rules reads:

             Any clause, covenant, or agreement in a contract of carriage relieving the
             carrier or the ship from liability for loss or damage to, or in connection with,
             goods arising from negligence, fault, or failure in the duties and obligations
             provided in this article or lessening such liability otherwise than as provided
             in these Rules, shall be null and void and of no effect. A benefit of insurance in
             favour of the carrier or similar clause shall be deemed to be a clause relieving
             the carrier from liability.

The provision goes to the root of the underlying reason that caused the creation of the
Rules; where the carrier seeks to lower his liability provided in the Rules by other
contractual terms drafted or incorporated, these terms would be rendered void and of no
effect hereunder. As for FIOST clauses, although it might seem plausible at first sight
that they should be struck out by art.III(8), once the carrier seeks to relieve himself of
responsibilities under art.III(2), such as for loss or damage to goods arising from
improper stowage, the approach taken by the English courts may prove this wrong.
           Devlin J in Pyrene v Scindia held that art.III(2) does not define the scope of the
carriage contract, but the terms upon which the service is to be performed.14 This is to
say, art.III(2) by no means is to be construed to override freedom of contract that the
parties may enjoy under the bill of lading, when reallocating the cargo-related
operations. The proposition of Devlin J was later affirmed by the House of Lords in Renton
v Palmyra.15 Thus, the terms incorporated shifting these responsibilities to a third party
are construed as the terms merely defining the scope of the contract, and therefore they
appear to be not falling within the ambit of art.III(8). This was the case both in the Jordan
13
   It is assumed that the shipowner is the contracting carrier under the bill of lading (shipowner’s bill), which is
   signed, by the master or other person as agent for the shipowner. If the contracting carrier is the charterer
   who is also the performing party of the cargo-related operations via FIOST clauses, the cargo interest will
   then be able to sue the charterer/contracting carrier for the breach of art.III(2) under the bill of lading. On
   identification of the carrier under the bill of lading see, Eder, supra note 4, at 115-118.
14
   Pyrene Co Ltd v. Scindia Steam Navigation Co Ltd [1954] 2 Q.B. 402, 418.
15
   GH Renton & Co Ltd v. Palmyra Trading Corp of Panama (The Caspiana) [1957] AC 149, 170, 173, 174 and 176.


                                                        33
                CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


II16 and the Eems Solar.17 In the former, the charterparty contained a FIOST clause and
another clause reading “Shipper/Charterers/Receivers to put the cargo on board, trim
and discharge cargo free of expense to the vessel . . . ” and the bill of lading incorporated
the terms of this charterparty. Following the discharge, the cargo was found to be
damaged. The issue revolved around whether the shipowner was liable for damage
occurred during loading, stowing or discharge. Whilst the charterers brought a claim
against the shipowner under the charterparty incorporating the Hague Rules, the
shipper and the consignee sued under the bills of lading. Having followed the ratio
decidendi of Renton v Palmyra and Pyrene v Scindia, in the House of Lords held that the
terms transferring cargo-related responsibilities such as loading, stowing or discharging
from shipowners to shippers, consignees, charterers were not caught by art. III (8).18
           In the Eems Solar, the shipowners were sued under the bill of lading, which
incorporated terms of the charterparty including a FIOST clause transferring the
cargo-related responsibilities from the shipowner to the charterer by the cargo owners
for damage caused to a cargo of steel sheets by adverse weather. The cargo owners
submitted that the shipowners were in breach of art.III(1) and (2), as the cargo was
improperly stowed to protect it from damage during voyage. They further argued that
the incorporated FIOST clause would be rendered null and void under art.III(8), as it
would discharge the shipowner from responsibility under the Rules. First, it was found
that the damage to the cargo was caused by improper stowage and not
unseaworthiness. Though, having followed Renton v Palymyra and the Jordan II, the court
eventually held that the shipowner was entitled to contract out the cargo-related
operations, and equally the shipowner was relieved of responsibilities arising from these
operations. It is therefore safe to assume that a FIOST clause may not be invalidated by
art.III(8) under English law, accordingly it is considered consistent with the relevant
provisions of the Rules.




       3. THE APPROACH TAKEN BY OTHER JURISDICTIONS

Under English law, as the authorities cited above illustrate, cargo interests appear to be
destined arguing without success that FIOST clauses are caught by art.III(8), as
shipowners are entitled to freely negotiate their contract including reallocation of

16
   The Jordan II [2005] 1 W.L.R. 1363; [2005] 1 Lloyd’s Rep. 57, [14].
17
   [2013] 2 Lloyd’s Rep 487, [68], [100].
18
   The Jordan II [2005] 1 W.L.R. 1363; [2005] 1 Lloyd’s Rep 57, [12].


                                                          34
2021]                              UNIVERSITY OF BOLOGNA LAW REVIEW                                          [Vol. 6:1


cargo-related operations under bills of lading. Though the author opines that it is
necessary to re-strike the balance between those parties, as the standard protection
provided by the Rules for cargo interests to this extent are undermined by English case
law. Scrutinising other jurisdictions might provide some assistance to see if there is any
useful solution for this purpose.
           To start with the Commonwealth countries, the approach taken by the English
courts seems to have been followed by Australia,19 New Zealand,20 India21 and Pakistan.22
Italian law can also be said to show similarities to the English approach.23 On the other
hand, in South Africa, it was held that cargo-handling operations are non-delegable duties
of the carrier and accordingly, cargo interests are not denied redress against carriers in
that respect.24 As for French law, the view adopted is that FIOST clauses are only capable
of transferring the risk of cost for cargo-handling operations such as loading, trimming,
discharging, stowing etc., meaning that the carrier will not be entitled to contract out
the risk of these operations, and accordingly may not be relieved of liability arising from
damage done to goods resulting from these operations.25
           In respect of Dutch law, it is safe to contend that FIOST clauses are capable of
transferring the risk and responsibilities of these operations along with the cost.26 On
the other hand, there is no predominant view adopted by the courts in the United States.
           Whereas some circuits evidently favoured the view that unless the carrier
supervises or takes no part in these operations, he might contract out of responsibility
for these duties by FIOST clauses,27 the US Court of Appeals for the Second and Fifth
Circuits held that cargo-related operations were inalienable, and as a consequence a
FIOST clause was rendered null and void under art.III(8) of the Rules.28



19
   See Shipping Corporation of India v Gamlen Chemical Co A/Asia Pty Ltd [1980] 147 CLR. 142 (Austl.); Hunter Grain
   Pty Ltd v Hyundai Merchant Marine Co Ltd [1993] 117 ALR 507 (Austl.); Nikolay Malakhov Shipping Co Ltd v SEAS
   Sapfor Ltd [1998] 44 NSWLR 371 (Austl.).
20
   See BJ Ball New Zealand v. Federal Steam Navigation [1950] NZLR 954 (N.Z.); International Ore & Fertilizer Corporation
   v. East Coast Fertilizer Co Ltd [1987] 1 NZLR 9 (N.Z.); Dairy Containers v. The Ship (The Tasman Discoverer) [2003] 3
   NZLR 353 (N.Z.).
21
   See The New India Assurance Co Ltd v. M/S Splosna Plovba [1986] AIR Ker 176 (India).
22
   See East and West Steamship Co v. Hossain Brothers (1968) 20 PLD SC 15 (Pak.).
23
   The Saudi Prince (No 2) [1988] 1 Lloyd’s Rep 1.
24
   The Sea Joy [1998] 1 SA 487 (S. Afr.).
25
   WILLIAM TETLEY, MARINE CARGO CLAIMS 1297-300 (YVON BLAIS, 4th ed. 2008)
26
   De Atlantic Coast [1991] Nr 15 34. For a detailed analysis of the Dutch approach on the matter see, DJADJEV,
   supra note 4, at 107-110.
27
   See Sumitomo Corp of America v. M/V Sie Kim (1985) 632 FSupp 824, (United States District Court); Atlas Assurance
   Co v. Harper Robinson Shipping Co (1975) 508 F2d 1381 (9th Circuit); Sigri Carbon Corp v. Lykes Bros Steamship Co
   (1987) 655 FSupp 1435, (United States District Court).
28
   See Associated Metals Minerals v. MV Arktis Sky (1992) 978 F2d 47 (2nd Circuit) and Tubacex v. MV Risan (1995)
   45 F3d 951 (5th Circuit).


                                                           35
            CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


As for the propositions adopted by South African and French and, to some extent, by the
US law, as much as they might seem favourable, they do not suggest any mechanism in
reinstating the balance between cargo interests and shipowners under the Rules in this
sense, as carriers are not allowed to contract out of responsibility at all in the first place.
        As regards the other jurisdictions favouring the English approach where carriers
may be relieved of liability pursuant to a FIOST clause, the author is not aware of any
reported case that has sought to alter the position of cargo interests. That is to say, the laws
of these jurisdictions appear to fall short of providing assistance in altering the impact of
these clauses.




     4. QUEST FOR RE‐STRIKING THE BALANCE

By a FIOST clause inserted or incorporated into bills of lading, as is shown in the above
sections, it would not be wrong to note that carriers are able to surpass any claim against
cargo interests concerning loss arising during cargo-handling operations, which they
have taken no part in. It is thought that this bears an undesired outcome that needs
revision. Assume that a receiver took delivery of a cargo, which was damaged as a result
of improper stowage.        Also suppose that a shipper delivered his goods to the
shipowner/carrier for shipment, which was also damaged due to bad stowage. Also
suppose that in both cases, there was a FIOST clause of a charterparty incorporated into
bills of lading, transferring responsibilities to a third party. First, in both scenarios, both
the receiver and the shipper could bring a claim against their carriers/shipowners for
their respective losses, as it is their carriers that they both had direct contractual
proximity with under the bills of lading.
        As for the first scenario, the shipowner could relieve himself of responsibility in
the light of a FIOST clause incorporated, as the loss in question would result from a third
party’s, namely the shipper’s or the charterer’s, actions or negligence. Second, the
receiver’s recourse vis-à-vis the shipper or the charterer would be destined for failure
too, as his contractual partner was the shipowner/carrier under the bill of lading rather
than the shipper or the charterer. The very same can be said for the second scenario for
the shipper against the charterer. In the first scenario, if the shipper or the charterer is a
free on board [hereinafter FOB] or a cost, insurance and freight [hereinafter CIF] seller
–unless there is a string sale-, the cargo interest as a buyer, indeed might have a direct
contractual proximity with either of these parties under the sale contract, and


                                              36
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depending on its terms, he could be able to claim his loss under the sale contract, but not
under the carriage contract. This may not be always the case though, as cargo interests
often can be said to have been left without a remedy for the matter in question under
English law. The status quo proves that loss arising from these operations does not fall
upon the party that undertakes to perform these obligations, as he is allowed to walk
away without liability.29 It is hence opined that the end result is highly unsatisfactory for
cargo interests, and they should therefore have a means of recourse directly or indirectly
against the faulty party.



     4.1. INTERVENING ACT OF THE SHIPOWNER

The very first question at this point needs answering is whether the shipowner/carrier
would be subject to liability, in case he intervened or took some role in the stowage, where
these operations were transferred to the charterer via a FIOST clause. It is trite law that
regardless of whether it is the charterer who is to perform cargo-handling operations, the
shipowner “is practically bound to play some part in”30 in these operations and the master,
to some extent, is under a duty to exercise supervision and control over the charterer’s
performance of these services.31 If this is the case, then it is plausible to argue that the
charterer’s responsibility should be limited to the extent of the shipowner’s contribution
to the loss arising from cargo-related operations. Put simply, if the shipowner intervened
with these operations, which contributed to it being improper, he should be liable to a
corresponding degree against the bill of lading holder. This argument was embraced in the
Eems Solar by the learned judge and he subsequently opined that the shipowner should not
be relieved of liability for improper stowage, had the stowage plan made by the master and
the mate –which failed to provide for the necessary precaution in the case- been followed
by the stevedores and their employers. Though he went on to note that there was no
evidence showing that the stevedores relied on or paid any attention to this plan in the
case. On this ground, it was thus held that the entire responsibility for stowage rested with
the charterers via their stevedores and accordingly the damage resulting from the failure
to stow the cargo properly could not lead to hold the shipowner responsible.
           In the Eems Solar, the cargo interests’ attempt led to a failure. It was nonetheless
only on the ground that there was no evidence that the shipowner intervened with the

29
   For similar criticisms see Todd, supra note 10. Simon Baughen, Tripartite Contracts and the Missing Link, 2004
   LLOYD’S MAR.& COM. L Q. 129 . Simon Baughen, Defining the Limits of the Carrier’s Responsibilities, 2005 LLOYD’S
   MAR.& COM. L Q. 153
30
   Pyrene v. Scindia [1954] 2 Q.B. 402, 418.
31
   See generally Court Line Ltd v. Canadian Transport Co Ltd [1940] AC 934, 944.


                                                        37
                CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


stowage or that the stevedores relied on their plan. However, it would not be wrong to
argue that the Eems Solar left the door ajar for cargo interests’ favour; as long as they can
prove that the shipowner’s intervention has contributed to the loss arising from these
operations, shipowners can be held liable for a corresponding degree under the bills of
lading. That being said, it might still prove to be difficult to show the intervening actions
of the shipowner and their contribution to damage.



     4.2. ACTION IN TORT

As shown above, it may not be often easy to prove the shipowner’s intervention in these
operations, as was the case in the Eems Solar. They therefore may need alternative means
to fend off this undesired result. As for a claim in tort, the claimant must prove that he
had the property in the goods when the damage occurred.32                                 The vast majority of
commercial vessels carry the goods sold under sale contracts on shipment terms –FOB and
CIF sales– title to the goods will often pass after shipment such as on delivery or during
transit. It is unusual for these sales that property in the goods pass prior to shipment.
Therefore, the receiver would have a difficulty in proving that he had proprietary
interest in the goods during loading, stowing or trimming operations causing damage to
the goods, whereas, the shipper might have a better chance to claim in tort against the
charterer performing these operations. On the other hand, for a loss arising during
discharge, unless it is undertaken by the receiver, perhaps he might have an arguable
claim against the faulty party provided that he establishes that he had the title to the
goods at the time damage occurred. However, as the Starsin33 proves, it may not always
be encouraged to claim in tort actions, as it could be really challenging and difficult to
show that they had the property in the goods at the time the goods were damaged.34
           Even if shown, they may not be able to recover purely economical losses, which are
not loss consequential upon physical damage, which might fall short of the actual damage
borne by cargo interests.35 In order to provide a right of recourse for cargo interests it
is therefore important to scrutinise other potential legal devices, which will be examined
below.
32
   See Candlewood Navigation Corporation Ltd v. Mitsui OSK Lines Ltd [1986] AC 1; Leigh & Sillivan Ltd v. Aliakmon
   Shipping Co Ltd (The Aliakmon) [1986] A.C. 785; [1986] 2 Lloyd’s Rep. 1.
33
   Homburg Houtimport BV v. Agrosin Private Ltd (The Starsin) [2003] UKHL 12; [2004] 1 AC 715; [2003] 1 Lloyd’s
   Rep. 571.
34
   Id.
35
   See also Candlewood Navigation Corporation Ltd v. Mitsui OSK Lines Ltd [1986] AC 1; Leigh & Sillivan Ltd v. Aliakmon
   Shipping Co Ltd (The Aliakmon) [1986] AC 785; [1986] 2 Lloyd’s Rep. 1. For the application and approval of
   this principle see, Losinjska Plovidba v. Transco Overseas Ltd (The Orjula) [1995] 2 Lloyd’s Rep. 395 and Virgo
   Steamship Co SA v Skaarup Shipping Corp (The Kapetan Georgis) [1988] 1 Lloyd’s Rep. 352. For a detailed analysis
   on the Orjula see also, Andrew Tettenborn, Dangerous Cargo: Tort Liability and Environmental Responsibility, 1996
   LLOYD’S MAR. & COM. L. Q. 6, 8.
                                                          38
2021]                            UNIVERSITY OF BOLOGNA LAW REVIEW                                      [Vol. 6:1


     4.3. IMPLIED CONTRACT AND AGENCY PRINCIPLE

Since a claim in tort is challenging and the argument for the shipowner’s intervention is
not waterproof, a question arises immediately at this point: Is there an alternative means
of solution favouring the cargo interest to reverse this undesired outcome? The short
answer may not be affirmative, as the English courts have not issued a decision in this
context favouring the cargo interest. Nevertheless the Court of Appeal in the Coral36 ,
suggested two propositions to address this issue based on the decision in Pyrene v Scindia;
first, that the charterer could be deemed as having a contract with the shipper through
the agency of the shipowner, and second that an implied contract might come into
existence between the charterer and the shipper, once the goods are delivered by the
shipper and they accepted by the charterer to perform the operations of loading and
stowing.37 Though the court did not go beyond noting these suggestions, nor did it
explain how they would be applicable to the matter in question. The courts so far have
not developed any solution in this context. These propositions, therefore, need to be
explored and examined to see whether any of them could be a remedy for cargo
interests.



     4.3.1. AGENCY PRINCIPLE

To start with the agency principle, it would be safe to say that it is no longer considered as
good law in the light of the decision of the House of Lords in the Midland Silicones38 and the
decision of the Court of Appeal in the Kapetan Markos39 where the agency principle allowing
a third party to participate in a contract was laid to rest.40 It is, therefore, highly doubtful
that the agency principle would prove a fruitful solution for cargo interests on the matter.



     4.3.2. IMPLICATION OF A CONTRACT

As it is evident from the rulings in Midland Silicones and the Kapetan Markos, the first
proposition made in the Coral seems not feasible, as a third party is unable to participate
in a contract that was not concluded by him. However, both Midland Silicones and the
Kapetan Markos went on to explain Pyrene v Scindia on the grounds of the doctrine of
implied contract. It is trite law that the implication of a contract is a matter of fact to be

36
   Balli Trading Ltd v. Afalona Shipping Co Ltd (The Coral) [1993] 1 Lloyd’s Rep. 1, 7.
37
   Id.
38
   See, e.g. [1962] AC 446, 471.
39
   See generally The Kapetan Markos (No 2) [1987] 2 Lloyd’s Rep. 321, 331.
40
   See also Only parties to the contract can sue or to be sued thereunder; Adler v. Dickinson (The Himalaya) [1955]
   1 Q.B. 158, 161, 162. See also, AIKENS, supra note 4, at 276; EDER, supra note 4, at 69.
                                                        39
                 CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


determined depending on the circumstances of each case.41 The Court of Appeal in the
Coral found the implied contract established in Pyrene v Scindia between the FOB seller
and the shipowner could be analogous to the relationship between the charterer and the
shipper. Devlin J in Pyrene v Scindia explained the implied contract “by delivering the
goods alongside the seller impliedly invited the shipowner to load them, and the
shipowner by lifting the goods impliedly accepted that invitation. The implied contract
so created . . .” .42 By way of analogy, it is submitted that a contract can be implied on
the ground that the shipper by delivering the goods, could be regarded as inviting the
charterer to load and stow them - as these operations are transferred to him by a FIOST
clause- and the charterer could also be deemed to be accepting this invitation.
           Under English law, a contract can be created as a result of parties’ conduct,
which could be deemed as offer and acceptance.43 As was the case in Pyrene v Scindia, it is
arguable that the shipper’s offer of the goods to the charterer and the charterer’s
acceptance of them for loading, in return may be considered as offer and acceptance.
Though in order to infer a contract, alongside offer and acceptance, contractual
intention is also a necessary tool.44 Considering the issue in question, indeed these
parties can be said to be acting under another contract and it is not always easy to
establish a contractual intention for an implied contract in the light of ordinary
contractual principles. Though in Pyrene v Scindia, a contract was successfully implied
from the conduct of the parties and the implied contract in Pyrene v Scindia was embraced
by the House of Lords in Midland Silicones notwithstanding the lack of contractual
intention.45 In supporting this, case law appears to be proving that a contract could be
created, although it was not possible to support its formation in the light of standard
offer and acceptance analysis,46 and that the existence of the implied contract was
accepted, even regardless of the actual intention of the parties.47 Also many learned
scholars, like Treitel,48 Debattista,49 Lorenzon,50 as well as the editors of Chitty on



41
   The Elli 2 [1985] 1 Lloyd’s Rep. 107, 111.
42
   [1954] 2 Q.B. 402, 426.
43
   See Hart v. Mills (1846) 15 LJ Ex 200; Steven v. Bromley & Son [1919] 2 K.B. 722; see Greenmast Shipping Co SA v. Jean
   Lion et Cie SA (The Saronikos) [1986] 2 Lloyd’s Rep. 277; see also Confetti Records v. Warner Music UK Ltd [2003]
   EWHC 1274 [2003] EMLR 35.
44
   See e.g., The Aramis [1989] 1 Lloyd’s Rep. 213, 224.
45
   [1962] AC 446, 471.
46
   See, The Satanita [1895] P 248; Clarke v. Dunraven [1897] AC 59; The Eurymedon [1975] AC 154. See also Butler
   Machine Tool Co Ltd v. Ex-Cell-O Corp (England) Ltd [1979] 1 W.L.R. 401.
47
   See Cremer v. General Carriers SA (The Dona Mari) [1974] 1 W.L.R. 341.
48
   See generally G.H. Treitel, Bills of Lading and Implied Contracts, 1989 LLOYD’S MAR. & COM. L. Q. 162, 168-72.
49
   See CHARLES DEBATTISTA, BILLS OF LADING IN EXPORT TRADE 10 (3rd ed. 2008).
50
   See FILIPPO LORENZON ET AL., SASSOON ON C.I.F. AND F.O.B. CONTRACTS 10-52 (6th ed. 2016).


                                                           40
2021]                             UNIVERSITY OF BOLOGNA LAW REVIEW                                        [Vol. 6:1


Contracts51 and Carver on Bills of Lading,52 consider that a Pyrene type implied contract is
still alive.
           The courts, when explaining the underlying ratio for the implication of a
contract, have taken a pragmatic approach in order to satisfy commercial expectations.53
Regardless of the actual intention of the parties, contracts have so far been implied by
the courts, when it was necessary to do so54 and when business efficacy55 required it.
Thus, when a relationship between two parties is not entirely efficacious without the
implication of a contract between them, the courts have shown readiness to imply a
contract, when other requirements are satisfied.
           FIOST clauses arguably have a detrimental impact on the business efficacy, which
requires that a party should not be substantially deprived of the benefit that the parties
intended him to receive, under the contract.56 When shippers or consignees are not the
charterers, the only document in their hand that provides contractual nexus with the
carrier is the bill of lading and they hardly have a say on drafting its terms including the
terms that are incorporated from a charterparty in relation to the obligations to load,
discharge, stow etc. On the other hand, third party bill of lading holders are usually
buyers under CIF and often FOB contracts57 or sometimes banks who hold those bills as
pledge or security in letter of credit transactions. These parties, as consignees, do not
conclude the carriage contract contained in the bills of lading, never negotiate or draft
its terms or never see the bill of lading until it is transferred, but only purchase the
carriage contract which includes the terms that are incorporated from a charterparty.
Therefore, they purchase a carriage contract under which they may not be able to
recover their losses from the shipowner as a result of a clause permitting the shipowner
to reallocate the obligations of art.III(2). Loss or damage to the cargo is not uncommon in
practice, and art.III(2) is one of the most frequently resorted provisions of the Rules by
51
   See e.g., HUGH BEALE, CHITTY ON CONTRACTS 190 (32d ed. 2017).
52
   TREITEL, supra note 48, at 314.
53
   See The Satanita [1895] P 248; Clarke v. Dunraven [1897] AC 59; The Eurymedon [1975] AC 154. See also Butler
   Machine Tool Co Ltd v. Ex-Cell-O Corp (England) Ltd [1979] 1 W.L.R. 401.
54
   See The Aramis [1989] 1 Lloyd’s Rep. 213, 224.
55
   Id.
56
   See Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha [1962] 2 Q.B. 26, 70.
57
   Particularly under the second and third type of FOB contracts, where the buyer is not considered the shipper
   of the goods; see Pyrene & Co. v. Scindia Navigation Co [1954] 2 Q.B. 402; Wimble v. Rosenberg & Sons [1913] 3
   KB 743; The El Amria and The El Minia [1982] 2 Lloyd’s Rep 28; Concordia Trading BV v. Richco International Ltd
   [1991] 1 Lloyd’s Rep 475; Scottish & Newcastle Int Ltd v. Othon Ghalanos Ltd [2008] UKHL 11; [2008] 1 Lloyd’s Rep
   462. For more detailed analysis on FOB contracts see e.g., Guenter Treitel, C.I.F. Contracts, in BENJAMIN’S SALE OF
   GOODS, ch. 19 (10th ed. 2017); LORENZON, supra note 50, at 247; DEBATTISTA, supra note 49, at 8; MICHAEL BRIDGE,
   THE INTERNATIONAL SALE OF GOODS 89 (4th ed. 2017); PAUL TODD, CASES AND MATERIALS ON INTERNATIONAL TRADE
   LAW 94 (1st ed. 2003); CAROLE MURRAY ET. AL., SCHMITTHOFF: THE LAW AND PRACTICE OF INTERNATIONAL TRADE
   21 (12th ed. 2012); ANDREA LISTA, INTERNATIONAL COMMERCIAL SALES: THE SALE OF GOODS ON SHIPMENT TERMS 23
   (2018).


                                                         41
                 CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


cargo interests. Under these circumstances, cargo interests can be said to have been
deprived of its business effect, as the protection provided by art.III(8) is also undermined.
           As explained above, cargo interests appear to be left without a right of recourse
unjustly, as a result of a FIOST clause incorporated into the bill of lading shifting the
responsibility of the cargo-related operations to the charterer. It is submitted that it is
entirely unsatisfactory and commercially inconvenient, since the charterer as the source
of defect is allowed to escape liability and cargo interests are substantially deprived of
the benefit that they are intended to receive under the contract. The author by no means
proposes challenging the law that the shipowner is entitled to contract out these
responsibilities. The problem is however concentrated on the loophole created as a
result of FIOST clauses that the party who transferred these duties enjoys lack of liability,
while he should also face consequences of these responsibilities. On this ground, the
relationship between the charterer and the cargo interest is not entirely efficacious
without the existence of an implied contract. Therefore, based on the principles of
commercial necessity and business efficacy, the author promotes that a contract should
be implied as analogous to Pyrene and used as a legal device in order to establish a right
of recourse for cargo interests.



     4.3.2.1. TERMS OF THE IMPLIED CONTRACT

Existence of an implied contract between these parties does not suffice to make the
charterer responsible though. The question, therefore, remains as to what are the terms
of this contract so as to see whether the charterer could be subject to liability. In general
terms, it is trite law that although it is implied as a separate contract, it is accepted that
it comes into existence on the bill of lading terms.58 In Pyrene v Scindia, Devlin J noted
“[t]he implied contract so created must incorporate the shipowner’s usual terms . . . ”59
He went on to find that “they enter into upon . . . which they know or expect the bill of
lading to contain” and the Hague Rules were considered “usual in the trade”.60 Eventually,
Devlin J held that the implied contract was assumed to incorporate the Rules and
accordingly the carrier was entitled to trigger the package limitation provisions vis-à-vis
the seller. As for the issue in question, assuming that a contract is implied between the
shipper and the charterer, a question therefore arises immediately at this point: would

58
   See Brandt v. Liverpool, Brazil & River Plate Steam Navigation Co [1924] 1 K.B. 575; See also Pyrene v. Scindia [1954]
   2 Q.B. 402; The Elli 2 [1985] 1 Lloyd’s Rep. 107.
59
   [1954] 2 Q.B. 402, 426.
60
   Id. Provided that the Hague or the Hague Visby Rules are incorporated by a paramount clause in the bill of
   lading.


                                                           42
2021]                                UNIVERSITY OF BOLOGNA LAW REVIEW                 [Vol. 6:1


the shipper be able to trigger art.III(2) which reads “. . . the carrier shall properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods carried”?
             The Rules were found applicable in Pyrene v Scindia between the shipowner and
the FOB seller who was not the shipper in the bill of lading, despite the fact that art.I(a)
prescribes “ “Carrier” and includes the owner or the charterer who enters into a contract
of carriage with a shipper”. It was evident in Pyrene v Scindia that the carrier in fact entered
into a contract with the buyer who was the real shipper, not with the seller. It is not easy
to accommodate the terms of the implied contract between its parties. As was the case in
Pyrene v Scindia, the courts however showed some readiness to read its terms with more
flexible approach and equally applied some verbal manipulation to give proper effect to
the Rules thereunder. On this ground with some verbal manipulation, it would not be
entirely implausible to argue that art.III(2) would be triggered by the shipper against the
charterer under the implied contract, particularly with the support of art.I(a) in which it
reads; “ “Carrier” includes [. . .] the charterer[. . .]”. Indeed, the charterer is not the real
carrier under the bill of lading in respect of the matter in question. Although the seller
in Pyrene v Scindia was not the real shipper under the bill of lading either, the Hague Rules
applied between them regardless.
             Some additional support -perhaps surprisingly- could be found in FIOST clauses.
As stated above, it is common ground that the implied contract is on the bill of lading
terms. A question arises at this point as to whether a FIOST clause that is incorporated
into the bill of lading from a charterparty transferring the cargo-related responsibilities
to a third party, such as the charterer, would be incorporated into the implied contract.
In The Elli 2, there was a bill of lading incorporating charterparty terms including
demurrage clauses. In the Court of Appeal, it was held that the contract implied was on
the bill of lading terms which also included the incorporated clauses from the
charterparty, accordingly, the shipowner was found entitled to demurrage under the
implied contract.61 On the basis of The Elli 2, provided that there is an incorporation
clause in the bill, there is no reason why a FIOST clause of a charterparty should not be
incorporated into the implied contract. If this proposition is correct, then a clause that
deprives the cargo interest of having a recourse under the bill of lading contract might
arguably give rise to a right to recovery under the implied contract against the charterer
who is the source of defect. Assuming that a bill of lading incorporated a widely used
FIOST clause, such as clause 5 of the Gencon 1994 Charterparty which reads:




61
     See The Elli 2 [1985] 1 Lloyd’s Rep. 107, 112 and 116.


                                                              43
                CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


             5. Loading/Discharging (a) Costs/Risks

             The cargo shall be brought into the holds, loaded, stowed and/or trimmed,
             tallied, lashed and/or secured by the Charterers, free of any risk, liability and
             expense whatsoever to the Owners. The Charterer shall provide and lay all
             dunnaged material as required for the stowage and protection of the cargo
             onboard, the Owners allowing the use of all dunnaged available on board.

Once successfully incorporated into the implied contract on the basis of The Elli 2,
without applying art.III(2), perhaps it might be argued that the shipper would put such a
FIOST clause in use in his favour against the charterer, as it makes it clear that the risk of
these operations and responsibilities fall on the “charterer”. On the other hand, as for
the receiver, it is submitted that it is doubtful whether the implication of a contract
would provide any assistance. By virtue of the Carriage of Goods by Sea Act 1992,
contractual rights and liabilities under the bill of lading62 are transferred to receivers.
           However, it does only transfer rights and liabilities of the original contract
contained in the bill of lading. It is not plausible to argue that the Act also transfers
rights and liabilities under a separate implied contract to a receiver. There is no reported
case supporting this inference either. One argument would be through suggesting a
similar proposition that a contract could be implied between the receiver and the
charterer63 by way of analogy with Brandt v Liverpool.
           For a couple of reasons, it is however unlikely that a contract can be implied
between the receiver and the charterer. First, it is often the receiver that undertakes to
perform discharge, not the charterer. Once this is the case, if the fault during discharge
lies with the receiver causing damage to his own goods, the charterer will not be subject
to any liability. Second, even if the entire cargo-handling operations are performed by
the charterer, it is doubtful whether a Brandt v Liverpool type implied contract would arise
between the receiver and the charterer, particularly on the basis that its application is
restricted by some authorities.64 In Brandt v Liverpool, a contract was successfully implied
between the carrier and the receiver on delivery of the goods against production of the
bills of lading. Although, to imply such a contract there should also be a financial
consideration moving from the receiver such as payment of freight or demurrage etc.
Even if these operations are to be carried out by the charterer, pursuant to a FIOST
clause, the receiver will be technically considered as demanding his goods from the

62
   As well as under seaway bills and delivery orders by virtue of Section 1 (b) and (c).
63
   Or the shipper depending on the wording of FIOST clause.
64
   See The Owners of Cargo Iately Laden on Board the Ship Aramis v. Aramis Maritime Corp (The Aramis) [1989] 1 Lloyd’s
   Rep. 213; See, e.g., Mitsui & Co Ltd v. Novorossiysk Shipping Co (The Gudermes) [1993] 1 Lloyd’s Rep. 311. Seealso
   The Aliakmon [1986] 2 W.L.R. 902.


                                                         44
2021]                            UNIVERSITY OF BOLOGNA LAW REVIEW                                    [Vol. 6:1


carrier/the shipowner to whom the receiver will present the bill of lading. One may
argue against this, as there is some authority indicating that a contract can be implied,
even if no document is tendered in exchange for the discharge of the goods.65 Even in
case of this, it would be still doubtful that there could be any payment for freight or any
other charges made to the charterer by the receiver. Therefore, unlike the shipper, the
implication of a contract would unlikely be of any assistance to the receiver in creating a
right of recourse vis-à-vis the charterer. One practical solution could be that the shipper
might sue the charterer on behalf of the receiver under the implied contract that would
come into existence between him and the charterer on the grounds advocated above.



     4.4. ANALOGY WITH TRANSHIPMENT CASES

It is argued above that a Pyrene type implied contract could be a useful tool in providing
a right of recourse for shippers against charterers. To fend off the detrimental impact of
FIOST clauses on cargo interests, developing alternative legal devices might be necessary,
given that the suggestions put forward above have yet to be tested before the courts and
they may fall short in providing a right of recourse against the faulty party. Therefore, an
alternative suggestion is submitted by way of analogy with the cases where transhipment
occurred.
          When a cargo is shipped under a through bills of lading for an intercontinental
route, due to practical reasons, sometimes the contractual carrier may not undertake to
perform the entire voyage but transship the cargo on a vessel that is to complete the
remaining sea leg.66 When this is the case, the contractual carrier sub-contracts with a
carrier that is to perform the actual carriage. Though, this does not necessarily mean
that the contractual carrier would be able to disclaim any liability after transhipment,
for the remaining part of the voyage, which is to be carried out by the actual carrier, as
there is a dicta in the Holland Colombo suggesting otherwise.67 According to dicta of Privy
Council in the Holland Colombo, a clause relieving the contractual carrier of
responsibilities arising from loading, stowage, discharge after transhipment is of
doubtful validity. Therefore, a bill of lading holder will be entitled to bring an action
against the contractual carrier for the damage done to his cargo after transhipment


65
   Cf. The Elli 2 [1985] 1 Lloyd’s Rep. 107.
66
   The holder of the bill of lading will be able to have action vis-à-vis the contractual carrier for the entire
   voyage, as the bill will provide a continuous documentary cover; see Hansson v. Hamel & Horley [1922] AC 36,
   46 in which the House of Lords followed Landauer & Co v. Craven and Speeding Bros [1912] 2 K.B. 94. See also
   BENJAMIN, supra note 57, aT 19-027; DEBATTISTA, supra note 49, at 7.14.
67
   Cf. Holland Colombo Trading Society Ltd v. Alawdeen [1954] 2 Lloyd’s Rep. 45, 53-54.


                                                      45
                  CHALLENGING THE IMPACT OF FIOST CLAUSES ON CARGO INTERESTS


under a through bills of lading. The contractual carrier, however, will be able to claim
indemnity from the actual carrier.
             This might be of some assistance to the matter in question by way of analogy.
Suppose that a FIOST clause of a charterparty allowing the shipowner to contract out his
cargo-related obligations was incorporated into the bill of lading. He would be able to
disclaim any liability arising from these operations, as he successfully transferred them
to the charterer. Also, suppose that a contractual carrier sub-contracted for
transhipment with an actual carrier who would perform the remaining leg and the cargo
was damaged after transhipment due to improper stowage, which was undertaken by the
actual carrier.         In the latter example, in light of dicta in the Holland Colombo, the
contractual carrier would remain liable for the improper stowage performed by his
agent, the actual carrier after transhipment, even if there was a clause under the bill of
lading relieving the contractual carrier from any liability concerning cargo-related
operations, such as bad stowage. If this is the correct statement of the law, it is difficult
to see that the carrier in the former example would enjoy contracting out these
operations through a FIOST clause, and as a consequence would be relieved of liability,
whereas the carrier in the second example would not, regardless of the existence of a
similar clause disclaiming liabilities. Perhaps one plausible explanation would be that
the contractual carriers are entitled to indemnity from their agents, actual carriers, for
liabilities arising after transhipment, such as the ones arising from improper stowage. As
for the matter in question, it is submitted that by way of analogy with the dicta in the
Holland Colombo, once sued by the cargo interest, the shipowner could be allowed to claim
indemnity from the charterer, if the charterer was deemed as agent of the shipowner in
performing these operations, as is the case in transhipment cases. This would hardly do
any harm to the shipowner’s freedom of contract concerning the scope of the services
that he would want to undertake, and on the contrary, it would be lawfully and
commercially more convenient; first, because cargo interests would not be unjustly left
without a remedy; second the risk of these operations would ultimately stay with the
party that undertakes to perform them, namely the charterer.68




68
     Depending on the wording used in the FIOST clause, it could be the shipper as well.


                                                        46
2021]                      UNIVERSITY OF BOLOGNA LAW REVIEW                          [Vol. 6:1


     5. CONCLUDING REMARKS

The burden of this paper has been to suggest solutions in order to revise the undesired
outcome of FIOST clauses in the bill of lading over cargo interests under English law, not
to challenge the law established that the parties are free to negotiate or draft their own
terms under their contract. Having said that, such clauses, as argued throughout the
paper, might create a loophole in favour of the party that undertakes to carry out these
services, and as a consequence, allow them to escape liability. The outcome evidently
has a detrimental impact over the business efficacy of the bill of lading, which requires
that a party should not be deprived of substantially the benefit that the parties intended
him to receive thereunder.
        In an attempt to alter the impact of FIOST clauses, several propositions have been
discussed above. Among these propositions, it is eventually submitted by the author that
the two of them, -the implication of a contract and the analogy with transshipment- cases
appear to be the most plausible legal devices that could be successfully put in use before
the courts in order to establish a right of recourse for cargo interests. Indeed, these devices
have yet to be tested before the English courts.
        Nevertheless, it is thought that whoever is undertaking to carry out these
obligations should also bear the consequences. Therefore, it is strongly opined by the
author that the courts should show readiness to embrace these two devices to alter the
displeasing result borne by cargo interests, as these two advocated devices may produce
commercially and lawfully more convenient outcomes without confronting the freedom
to contract out these responsibilities via FIOST clauses.




                                              47
