Marine Cargo Claims in the UAE
- Date: 30/01/2000
- Source: Afridi & Angel
1(1) The United Arab Emirates (“UAE) was established as a federation of seven different Emirates in 1971. Each Emirate has a Ruler who is a hereditary sovereign exercising sovereign authority and power over the concerned Emirate, subject only to the constitutional restrictions under the UAE Constitution. The Union is governed by a Constitution. The Constitution was originally adopted as a Provisional Constitution for a transitional period of five years. This period was renewed every five years until, pursuant to an amendment in 1996, it was adopted as a permanent Constitution.
1(2) The Constitution, inter alia, provides that:
- the Union shall exercise sovereignty in all matters assigned to it in accordance with the Constitution, whilst member Emirates shall exercise sovereignty over their own territories and territorial waters in all matters which are not within the jurisdiction of the Union as assigned in the Constitution; (Articles 2 and 3, Constitution)
- Islam is the official religion of the Union, Islamic Sharia shall be a main source of legislation in the Union. The official language of the Union is Arabic; (Article 7, Constitution)
- The Emirates shall form an economic and customs entity. Union laws shall regulate the progressive stages appropriate for the achievement of this entity; (Article 11, Constitution)
- The free movement of capital and goods between the Emirates is guaranteed and may not be restricted except by a Union law; (Article 11, Constitution)
- Private property shall be protected and no one shall be deprived of private property except in circumstances dictated by the public benefit in accordance with the provisions of law and on payment of just compensation; (Article 21, Constitution)
- The natural resources and wealth (i.e. petroleum and mineral resources) in each Emirate shall be the public property of that Emirate; (Article 23, Constitution)
1(3) The Constitution also sets out provisions regarding the roles of various Union authorities, the manner in which Union legislation and decrees may be passed, the distribution of jurisdiction between the Union and the Emirates, and the finances of the Union and the armed forces. The Union exercises sovereignty in all matters assigned to it under the Constitution, whilst the Emirates have residual powers in respect of matters which are not assigned to the Union. Union Law prevails over Emirate Law.
1(4) The Federal Judiciary comprises of Courts of First Instance, Courts of Appeal and the Federal Supreme Court. The Emirates of Dubai and Ras al Khaimah have not acceded to the Federal Judiciary and maintain their own court systems. In the Emirate of Dubai also there are three tiers of courts viz. the Court of First Instance, the Court of Appeal and the Court of Cassation; these are regulated and governed by decrees of the Ruler of Dubai. The Courts are in turn divided into Civil Courts and Shariah Courts – the latter dealing mainly with personal matters. There are no Commercial or Admiralty Courts in any of the Emirates.
II GOVERNING LAWS
II(1) In the field of marine cargo claims there are three main international regimes that determines responsibility, viz.
1. The Brussels Convention – 1924 (The Hague Rules)’
2(a) The Brussels Protocol – 1968 (The Visby Rules);
2(b) The Brussels Protocol – 1979 (S.D.R.);
2. The Hamburg Rules 1978.
We will not be considering any of the above regimes today as the provisions of the Federal Maritime Law No. 26 of 1981 would govern all matters relating to marine cargo claims in the Emirates. This is a Federal Law which is mainly based on the 1980 Maritime Code of Kuwait. The Kuwaiti Code was initially drafted from diverse sources which, inter alia, included maritime customs and practices and legislation in neighbouring Arab countries, and international conventions.
II(2) The only Emirate that had a Maritime Code prior to the promulgation of the Federal Maritime Law was the Emirate of Sharjah. The Maritime Law of Sharjah was issued in 1970 prior to independence and was based on English Law. This was an excellent piece of coherent legislation which unfortunately was not followed by the Federal draftsman in 1981.
II(3) As stated earlier, the position in the U.A.E. is statutory and the relevant provisions relating to carriage of goods by sea are primarily set out in Articles 256 to 287 of the Federal Maritime Law. Suffice to add that they embody principles set out in the Hague Visby Rules. However, there are significant differences in the drafting; these differences and the interpretation of these statutory provisions by the courts have resulted in a situation where the responsibility of a carrier has been very widely construed. The position prevailing in the UAE does not therefore accord with that prevailing in most international jurisdictions.
III FEDERAL MARITIME LAW (“FML”)
We now proceed to consider the main provisions of the FML. Translations of the relevant Articles of the FML referred to herein are set out in an Annex.
III(1) Article 257(2) sets out, inter alia, the particulars that a bill of lading must contain. Article 264 also sets out details relating to the issuance of the bill of lading. Article 278 provides that any condition in a bill of lading which attempts to exempt or reduce the carrier’s responsibility for loss or damage, contrary to the provisions in the FML, are void.
III(2) Article 259 provides that any clausing of a bill of lading must be set out in express words on the face of bill of lading. Familiar standard type clausings like “Said to Contain”; “Shippers Load Stow and Count” have been held to be invalid, to protect the carrier. If the carrier has reasonable grounds to believe that the goods shipped do not accord with the description set out in the bill of lading, the carrier must clause the bill of lading expressly. The reasons for any reservations it make shall also be set out.
III(3) Article 259 provides that the shipper shall remain responsible to the carrier for any inaccuracy in the particulars concerning the cargo provided by it to the carrier. The carrier may not rely on any inaccuracy in the said particulars as against third parties. Article 266 provides that as between carrier and bona fide third parties the carrier is precluded from establishing anything contrary to what is stated in the bill of lading. It is these provisions which have considerably widened the responsibility of a carrier under UAE Law and we shall examine the consequences in greater detail later.
III(4) Article 282 provides that the provisions relating to liability shall be applicable until the cargo is delivered to the consignee and any provision to the contrary is invalid. In this context Article 256(2) also provides that the provisions contained in the FML dealing with carriage goods shall apply from the time the carrier takes delivery of the goods until they are delivered to the consignee.
III(5) Article 286 provides that in a through bill of lading where the carriage is undertaken in successive stages, the carrier that issues the bill of lading is responsible for all damage to cargo unless it is established that the damages occurred when a successive carrier was transporting the goods.
III(6) The well known rule of due diligence set out in Article 3 of the Hague Rules is recognised in Article 272. The obligation set out under Article 272 is more onerous in that the carrier is required not merely to exercise due diligence but to ensure that the vessel is seaworthy before it sails. In other words the vessel must in fact be seaworthy. The exercise of due diligence alone would not suffice.
III(7) Having set out the rule of due diligence in Article 272, the FML proceeds to recognise the well known exceptions to liability set out in Article 4 of the Hague Rules in Article 275 with one significant difference. The burden of proving that the damage or destruction arose due to one of the exceptions set out in Article 275 is on the carrier. We shall deal in the manner in which these exceptions have been construed and to what extent they in fact afford protection to the carrier later.
III(8) Article 276 deals with package limitation. It provides for ten thousand dirhams for each packet or unit or thirty dirhams per kilogram per gross weight of the goods, whichever is the higher limit. It specifically provides that if there are a number of packages or units inside a container, each package or unit will be considered as a separate package. Package limitation provisions do not apply to ad valorem goods.
III(9) Although Article 281 requires notice of damage to be provided to the carrier by the consignee within seventy two hours of delivery of cargo and Article 270 provides that delivery of an original bill of lading to the carrier is proof that the goods were delivered as set out in the bill of lading, in fact the court have not construed these provisions in favor of the carrier to significantly limit the liability of a carrier.
IV DISCUSSIONS REGARDING LEGAL RESPONSIBILITY.
I now proceeds to consider the manner in which the foregoing provisions have been interpreted by the courts in the Emirates.
IV(1) In providing a description of the goods in the bill of lading, the carrier represents to all third parties that it has received the goods described in the bill of lading in good condition, (unless there are express specific reservations) and the carrier has a duty in law to deliver the goods described in the bill of lading to the consignees. Unfortunately this need not necessarily be the goods entrusted to the carrier by the shipper and in the case of shipper’s fraud indeed the goods described in the bill of lading have in fact not been entrusted to the carrier. Even if the goods are containerised the carrier’s duty in law is not in any manner diminished. In one case involving a contract to purchase motor spare parts, well packed goods were sent by container by the shipper. Unfortunately the goods turned out to be tools of much lower value and not motor spare parts and as is usual in such cases the shipper vanished in thin air. It was established that the consignee ordered the goods from an unknown seller without making proper enquiries, and at a price which was well below the prevailing market price. It was also established that the shipper was fraudulent and was no longer traceable. The container was delivered with the seals intact. But the courts however held that the carrier is liable as the description of the goods in the bill of lading did not in fact match the goods inside container, although the goods were neatly packed and were similar to the goods that could have been purchased (i.e., tools and not motor spare parts). This virtually enforces an additional duty on the carrier viz. not only to carry the goods to its intended destination but virtually supervise the sale of goods contract entered into between the shipper and the consignee and ensure that the terms in the sale of goods contract are duly complied with. This is an onerous obligation imposed on the carrier and does not accord with the practice of the trade the world over. In fact in international practice the container is loaded at the shipper’s warehouse and sealed there and the carrier has no role to play in the loading and stowing of goods inside the container. The carrier’s duty is to load and stow the container properly on board the vessel and this duty is deemed to be discharged if the container is delivered with seals intact. If the consignee requires to ensure due compliance with the sale of goods contract it should bear the expenses associated with this exercise and appoint a specially qualified person to undertake a pre-loading inspection survey and/or tally. The current responsibility imposed on the carrier viz. that the contents on the bill of lading are sacro sanct, and that the carrier has a duty to load and stow the goods described in the bill of lading inside the container and deliver the goods described in the bill of lading to the consignee in unduly onerous and does not accord with international practice. The ordinary duty imposed on the carrier in containerised cargo is to ensure that the containers are loaded and stowed properly on board the vessel. In the UAE this responsibility has been substantially extended in that a carrier is required to load and stow the goods described in the bill of lading inside the container.
IV(2) I now proceed to deal with what constitutes delivery of the goods to the consignee. The mere delivery of a Delivery Order to a consignee upon the surrender of the original bill of lading does not constitute delivery of the goods. Under the laws prevailing here the cargo must in fact be physically delivered to the consignee. In one case where a delivery order was provided to the consignee of the cargo of sugar and the consignee stored the concerned sugar at the port premises at its costs and expense for a period of six months and removed the consignments from the port in small parcels, on delivery orders issued by the consignee, the Court of Cassation in Abu Dhabi held that the cargo was not delivered to the consignee until the entirety of the cargo was cleared by the consignee. Accordingly, it was construed that time limitation was extended for the actual period that the consignee had stored the goods in the Port premises. The carrier unfortunately also became liable for damages to the cargo of sugar which occurred while it was stored in the port premises, throughout the extended period. If delivery of general cargo is involved in order to ensure that you are protected you should set out in specific words in the Delivery Order that the cargo was delivered and accepted on the date of the Delivery Order and all subsequent arrangements made with the port of storage are at the risk and responsibility of the consignee. The consignee should also be required to confirm this in writing.
IV(3) The carrier is also responsible for all damages caused by the port authority in stevedoring operations. Notwithstanding INCO terms, the carrier has a duty to deliver the goods to the consignee in the Emirates and the port authority functions on behalf of the carrier. Whilst it is usually extremely difficult to establish the defences set out in Article 275 of the FML, the courts in Dubai have upheld the fire exception. Defences relating to errors in the management and navigation of the vessel, inherent vice and poor packaging, have proved to be extremely difficult to establish. The defence of Perils of Seas has been upheld.
V. OTHER MATTERS
V(1) One should be extremely careful in issuing bills of lading. A bill of lading is a negotiable instrument and is indeed a document of title to the goods. You should ensure that “Shipped on Board” bills of lading are issued only after the Mates Receipt has been duly signed. Accommodation bill of lading and Accommodation letter of credit are merely reputable garbs for disreputable conduct. Any one dabbling in these is only accommodating fraud.
NVOCCs should ensure that adequate contractual arrangements subsist or adequate P&I cover is available to protect them from cargo claim as most bills of lading issued by main line operators under slot charter arrangements do not describe the contents of the goods. The master bill of lading usually sets out only the container numbers – not the contents within.
V(2) Production of the original bill of lading is usually imperative to release the cargo. As an exception, you may consider releasing the cargo against appropriate bank guarantees. You should always bear in mind that losses arising from release of cargo without the surrender of the original bill of lading will not be covered by the P&I Club. If the indemnity is issued by a bank other than that set out in the bill of lading, you should query it and inform the bank set out in the bill of lading before accepting the indemnity.
V(3) A ship or a sistership may be arrested for a marine cargo claim and arrest per se appears to confer jurisdiction on the courts of UAE to determine the substantive merits of the matter. Accordingly even in cases where Dubai has no factual connection, the courts in Dubai have exercised jurisdiction to determine cargo claims. The carrier is generally deemed to be the entity that issues the bill of lading and not necessarily the owner of the vessel. If the vessel is chartered the carrier would prima facie be the charterer.
V(4) The consignee is not bound by the terms in the charter party unless the charter party terms are expressly incorporated in the bill of lading. Should there be delay by the consignee in taking delivery of the goods, an application should be made to the courts for appropriate relief.
V(5) As reports of surveyors are accepted in courts routinely, without the concerned surveyors required to give oral evidence, arrangements should be made to ensure that a proper survey is undertaken and surveyors acting on behalf of carriers accompany the surveyors representing cargo interests.
Carriers have also found themselves in difficulties in certain neighbouring countries when
there was an attempt to contravene the customs laws of the concerned country. Restricted goods viz. cigarettes were imported without an import permit. They were concealed in cheap TV sets. The authorities imposed a huge fine on the carrier and lengthy legal proceedings had to be taken at great cost and expense to the carrier to have the penalty minimised.
V(6) Foreign arbitration clauses have been recognised. Notwithstanding such clauses the court have exercised jurisdiction to grant provisional reliefs. The courts do also issue urgent orders for inspection of a ship even if there is no jurisdiction to look into the merits of the matter. Carriers have virtually no relief for wrongful arrest of the vessel as carriers are required to establish that the arrest was malicious and without any legal right whatever. This is virtually impossible to prove.
V(7) In order to institute and/or defend a suit a notarized power of attorney in favour of counsel is necessary. If the power of attorney originates from outside the Emirate such power of attorney must be duly attested, authenticated and consularised upto the UAE Consulate in the place of origin. Difficulties in procuring a power of attorney and therefore not unknown.
V(8) An agent is not responsible for cargo claims in the UAE. Agents should ensure that they do not accept summons which are meant for a party they do not represent. The court process server should be asked to clarify as to whom the summons is meant for. The concerned officer dealing with this matter should ensure that the agents have the necessary authority to accept summons on behalf of the concerned carrier. It would be prudent to treat court papers with respect and responsibility rather than deal with them casually and in routine manner.
As soon as any paper is received from the courts, the agents have a duty to communicate this to their principals. Time is of utmost importance as difficulties may arise in providing a Power of Attorney to enable counsel to represent the concerned party in court.
VI(1a) Carriers should endeavour to make minimum representations regarding the cargo on the bill of lading and the particulars set out therein should be ascertained to the best of the carriers abilities. If a carrier is suddenly called upon to deal with large volumes by someone who has either no track record or whose track record does not justify such large volumes, the carrier should consider being cautious and arrange for pre-loading surveyors, if this is deemed necessary or appropriate.
VI(1b) Incorporate a foreign arbitration clause on the face of the bill of lading in prominent letters and require the shipper to sign the bill of lading which sets out this clause. The arbitration clause should expressly state that the remedy of arbitration should be exhausted before an action may be instituted.
VI(1c) Consider obtaining an indemnity from the shipper particularly if you are dealing with reefer cargo.
In suggesting these measures, I am mindful that some may be onerous and others not commercially feasible or practicable. But since there is a requirement under the laws prevailing here that the goods described in the bill of lading be delivered, there is good reason to be cautious.
VI(2) With Indian buyers re-emerging as leading purchasers of second hand tonnage ahead of the Greeks, Dubai is perhaps best placed to host this conference as an offshore centre for Indian buyers. While Dubai offers excellent infra-structure in the field of communication and is a modern business environment with an extremely efficient banking system, the legal system is still in its nascent stage of development and from a commercial point of view, the legal environment has not been able to keep pace with the commercial and economic progress made by Dubai in the other sectors. There is undoubtedly a dire need for changes in the legal environment to accommodate the tremendous strides Dubai has made in the past and continues to make in the millennium in all other fields.
2. The provisions of this Part shall apply as from the time the carrier or his representative takes delivery of the goods until such time as they are delivered to the consignee.
2. The bill of lading must state the following matters:
(a) The name and address of the carrier, the shipper and the consignee
(b) Particulars of the goods delivered to the carrier and the date of delivery thereof;
(c) Port of loading and port of arrival;
(d) Name and nationality of the vessel;
(e) The amount of the freight and the manner of calculation thereof;
(f) The place and date of issue of the bill;
(g) The number of copies of the bill which have been made;
(h) The signature of the manner and the shipper.
1. The carrier or his representative may express reservations against the particulars given by the shipper in connection with the marks on the goods, the number, quantity or weight, if he has serious reasons to doubt the accuracy thereof or if he doe not have available to him the ordinary means of verifying the same.
2. The reasons for the reservations must be stated on the particulars on the bill of lading, together with the bases which are being relied on.
3. The shipper or person delivering the goods shall have the right to prove the accuracy of those particulars
4. The shipper shall be responsible to the carrier for any inaccuracy in the particulars provided by him concerning the goods and which have been written on the bill of lading. It shall not be permissible for the carrier to rely on any inaccuracy in the said particulars in the bill of lading as against any third party other than the consignor.
1. The bill of lading shall be deemed to be evidence of the particulars contained therein as between the carrier and the shipper and with regard to third parties.
2. In the relationship between the carrier and the shipper it shall be permissible to prove the contrary of what is stated in the bill of lading, but so far as third parties acting in good faith are concerned it shall not be permissible of the carrier to prove the contrary of what is stated in the bill, but is shall be open to the third party to do so, and the consignee in whose name or to whose order the bill of lading was issued shall be deemed to be a third party within the meaning of this Article unless he is also the shipper.
The delivery of the original copy of the bill of lading to the carrier or his representative is good proof of delivery of the goods to the person having the right to take delivery of the same in the condition set out in the bill of lading unless the contrary is proved
1. The carrier must before setting sail upon the commencement of a voyage use the necessary care to put the vessel in a seaworthy condition and to fit it out, man it and provision it properly. He must prepare the holds and cold rooms and other parts of the vessel to receive, carry and preserve the goods.
2. The carrier must also use the necessary care in loading, stowing, stacking, carrying, protecting, discharging and delivering the goods.
1. The carrier shall be responsible for loss or damage sustained by the goods during the period from the time he takes delivery of the goods at the port of loading to the time he delivers the same to the person having the right to them at the port of discharge unless it is proved that the said damage or destruction arose out of one of the following causes:
(a) Unseaworthiness of the ship, but on condition that the carrier proves that he discharged the obligations set out in Article 272;
(b) Errors of navigation or in the management of the vessel on the part of the captain, crew, pilots or other maritime workers;
(c) Fire, unless the same occurred through the act or default of the carrier;
(d) Perils of the sea or other navigable waters, or dangers or accidents thereof;
(e) Act of God;
(f) Perils of war;
(g) Acts of public enemies;
(h) Any detention or constraint by a power, state or people or judicial arrest;
(i) Quarantine restrictions;
(j) Any strikes or layoffs or any other obstacle such as to prevent continuance of the work in whole or in part;
(k) Civil unrest and commotions;
(l) Any act or omission on the part of the shipper or owner of the goods or his agent or representative;
(m) Shortfall in bulk or weight or any other shortfall arising out of a latent defect or from the particular nature of the goods or any defect inherent therein;
(n) Insufficiency of packaging;
(o) Insufficiency or imperfection of distinguishing marks for the goods;
(p) Rescue or attempted rescue of persons or property at sea;
(q) Latent defects not discoverable by ordinary examination;
(r) Any deviation from course in the course of rescuing or attempting to rescue persons or property at sea or any other deviation for reasonable cause;
(s) Any other cause which doe not arise out of the default of the carrier or those working under him or his representative. The burden of proof shall be upon the person alleging such cause to show that no default of such persons was instrumental in causing the loss or damage.
2. It shall be permissible for the shipper in the circumstances set out above to prove that the loss or damage arose out of the default of the carrier or the default of those working under him in a manner unconnected with the navigation or management of the vessel.
1. The liability of the carrier in all circumstances for loss or damage suffered by the goods shall be limited to a sum not exceeding ten thousand dirhams for each package or unit taken as a basis in computing the freight, or a sum not exceeding thirty dirhams per kilogram per gross weight of the goods, whichever is the higher limit.
2. If packages or units are grouped in cases, boxes or other containers and the bill of lading states the number of packages or units contained in each container, then each one shall be deemed to be a package or unit in connection with the fixing of the upper limit of liability and if the container is not owned or provided by the carrier and it is lost or destroyed it shall of itself be deemed to be an independent package or unit.
3. It shall not be permissible for the carrier to limit his liability as against the shipper if the shipper has provided particulars, before the loading takes place, of the nature and value of the goods and the particular importance attaching to the preservation thereof, and such particulars are set out on the bill of lading. The said particulars shall be deemed to be proof of the accuracy of the value set out by the shipper of the goods and it shall be permissible for the carrier to prove the contrary.
4. Special agreement may be reached between the shipper and the carrier or his representative to specify an upper limit of liability of the carrier different from the limit set out in this article but provided that it may not be less than it.
5. In no cases shall the carrier be responsible for loss or damage sustained by the goods if the shipper has deliberately stated false particulars on the bill of lading relating to the nature or value of the goods.
1. Any condition in the bill of lading or any other similar document of which the nature is to exempt the carrier from responsibility for loss or damage of the goods arising out of a breach of his obligations set out in this part or which reduces the said liability shall be deemed to be void.
2. Any condition containing an assignment to the carrier of rights arising out of insurance in the goods and any other similar condition shall be deemed to be in the nature of an exemption from liability.
1. In the event that part of the goods is lost or damaged the person taking delivery of the same must give written notice to the carrier or his representative in the port of discharge before or during delivery of the destruction or loss of the goods failing which it will be presumed that they have been delivered to him in the condition set out in the bill of lading until evidence to the contrary is forthcoming, but if the loss or damage are not apparent it shall be permissible to provide the said notification within a period of the three days following delivery of the goods. Public holidays shall not be calculated in the said period.
2. The submission of notice shall not be necessary if the goods have been inspected at the time of delivery in the presence of the carrier or his representative and the person taking delivery of the goods.
The provisions relating to liability set out above in this Part shall apply to carriage by sea under a bill of lading during the period from the time the carrier or his representative takes delivery of the goods until such time as they are delivered to the consignee and no contrary provisions shall have effect.
1. The carrier may issue a through bill of lading whereby he undertakes to transport the goods to a specified place in successive stages and in that event the carrier shall be responsible for all the obligations arising out of the bill until such time as the carriage is finished. He shall be responsible for the acts of carriers subsequent to him who take delivery of the goods.
2. No successive carrier shall be responsible save for damage which has occurred while he has been transporting the goods
The bill of lading shall be made out in the name of a specified person or to his order or to the bearer.
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