Supreme Court issues decision concerning Brussels Convention and FILO clause

Facts
Supreme Court decision


The Supreme Court recently issued a decision concerning the interpretation of Article 3.2 of the Brussels Convention 1924 and a free in liner out (FILO) clause contained in a bill of lading.

Facts

The claimants (the cargo receivers) brought proceedings against various defendants, including the terminal operator at the port of loading which dealt with loading and stowing operations, for compensation for the loss and damages suffered by the transported cargo (steel coils) during a sea voyage. The claimants agreed out-of-court settlements with the other defendants and proceedings continued against the loading terminal operator.

The case focused on whether the terminal operator had acted as a servant of the carrier or the shipper and, as a consequence, on the limitation period applicable to the action brought against the terminal operator. According to the claimants, the terminal operator had acted as a servant of the shipper and therefore the limitation period applicable was that applicable to service contracts (ie, two years). The terminal operator argued that by having acted as a servant of the carrier, the Brussels Convention limitation period was applicable to the action (ie, one year after the delivery of goods at the port of destination).

The first-instance court (the Genoa Tribunal) decided in favour of the terminal operator and declared the claim time barred. The Genoa Court of Appeal reversed the decision and found that the two-year time limit was applicable.

Supreme Court decision

According to the Supreme Court, loading and stowing operations rest with the shipowners and cannot be transferred by agreement to cargo interests. For the court the words "shall properly and carefully load, handle, stow, carry, keep care for, and discharge the goods carried" should be interpreted to mean that the carrier must properly carry out such actions, thus defining the scope of the contract of transport.

The Supreme Court interpretation clashes with the trend in English case law, which interprets Article 3.2 of the Brussels Convention as a rule that aims to define the terms on which a service is to be performed rather than the scope of the contracted service.(1)

As a result of the Supreme Court interpretation, any agreements purporting to shift responsibility for loading, stowing and discharge operations from the carrier to the shipper (or its servants) are invalid.

The Supreme Court also analysed the meaning of the FILO clause under the Code of Navigation. According to the court, Article 422 of the code allows the shifting of responsibility from the carrier for operations such as loading and stowing. However, a FILO clause cannot be interpreted as defining responsibilities; the scope of such a clause is to allocate economic risks and not responsibility. This interpretation mirrors previous Supreme Court decisions (Decision 5565 of October 25 1982 and Decision 5158 of May 11 1995).

The Supreme Court concluded that the terminal operator acted as a servant of the carrier and that the limitation period applicable to the terminal was one year as under the Brussels Convention. It therefore dismissed the claim for time bar reasons.

For further information on this topic please contact Marco Manzone at Dardani Studio Legale by telephone (+39 010 576 1816) or email (marco.manzone@genoachambers.it). The Dardani Studio Legale website can be accessed at www.dardani.it.

Endnotes

(1) See for example Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402, 418 and the House of Lords decision GH Renton & Co Ltd v Palmyra Trading Corporation of Panama (The Caspiana) [1957] AC 149, the rationale of which was reaffirmed in the House of Lords decision in Jordan II).