The Containerisation Phenomenon

The speaker briefly outlined the history of container shipping, racing it back to the so-called “container revolution” of 1956, when the founding father of containerisation, the American businessman Malcolm McLean, tested the container ship he had designed. The introduction of standardised containers into international trade substantially transformed the carriage of goods: today, approximately 90 per cent of global freight is transported by containers. Mustafa Yilmaz noted that, although containerisation reduced loading costs, it also gave rise to a number of legal problems, most notably the uncertain basis of the carrier’s liability and the gap between the legal framework in theory and the realities of carriage in practice.

The Legal Regulation of Container Carriage

The Hague-Visby Rules apply to container carriage, although they were not originally drafted with that field in mind: the text of the Rules contains no reference to containers at all. In this regard, when dealing with cases arising from the container carriage of goods by sea, the English courts interpret and apply the 1924 International Convention for the Unification of Certain Rules of Law relating to Bills of Lading and the 1968 Visby Protocol in the light of their provisions on liability for cargo loss and damage. Given the shortcomings of existing container carriage regulations, private lawmaking is gaining ground (as evidenced, for example, by BIMCO standard clauses). As the expert noted, the use of standard-form bill of lading clauses has made the regulation of container carriage highly model-driven. Criticising that model-based approach, he called instead for a more objective form of regulation, in which the focus in determining the applicable law shifts away from the mode of carriage (by sea, rail, road and so forth) towards the loss caused by damage to, or loss of, the cargo.

In relation to damage, the speaker identified three principal factors requiring legal analysis: (1) the type of contract; (2) the party by whom the containers were provided; and (3) the moment at which the loss arose. The difficulty of proving when the cargo was damaged is bound up with the nature of the “sealed container.”

Most disputes arising out of container carriage, however, are resolved in arbitration rather than before the state courts. As a result, there are very few publicly available authorities shedding light on the evidential framework applied in such proceedings. Nevertheless, the general pattern in such cases is that the loss is more often attributable to defects in the container than to the vessel itself. In this context, the legal status of the container becomes a matter of particular relevance. The case law on this point is inconsistent. Some courts treat the container as a separate unit supplied by the carrier, with the result that liability for loss of or damage to the cargo falls on the carrier (the approach developed in NDS Provider BV v Kustvaartbedrijf Moerman BV (2008)), while others regard the container as part of the ship’s equipment, thereby placing responsibility on the shipper (as in Houlden & Co LLC v S.S. Red Jacket (1977)). The latter approach is followed in a number of European jurisdictions, including the Netherlands.

Mustafa Yilmaz, however, questions the soundness of this legal reasoning. He argues that a container is not, in fact, part of the vessel and that treating it as such as a matter of law would give unduly expansive scope to the carrier’s continuing duty under Article III, rule 2 of the Hague-Visby Rules to care for the cargo. English courts have accordingly tended towards a more proportionate allocation of loss between shipper and carrier (JP Klausen & Co A/S v Mediterranean Shipping Co SA (2013), known as the Sky Jupiter case).

Inconsistent Case Law

In addition to the uncertainty surrounding the basis of the carrier’s liability, the speaker drew attention to the differing interpretations of the treaty terms “loading” and “discharge” in the Hague-Visby Rules. This has led national jurisdictions to adopt different approaches to the carrier’s liability at various stages of the maritime venture. Thus, in Volcafe Ltd v Compania Sud Americana de Vapores SA (2018), cargo carried in containers (coffee beans) was damaged by condensation. The containers had been supplied by the carrier. The court held the carrier liable for the damage to the cargo on the ground that it had failed properly to discharge its duty to keep the cargo safe at the stage when the containers were being stuffed at the port of loading. The placing of the cargo in the containers was treated as part of a single, continuing process of loading, notwithstanding the lapse of time between the stuffing of the container and its subsequent loading on board the vessel. By contrast, in the recent case of JB Cocoa Sdn Bhd v Maersk Line A/S (The Maersk Chennai) (2023), the carrier was relieved of liability for cargo damage sustained after discharge. The dispute concerned coffee beans stored in the port for two months following discharge. The court found that the carrier’s responsibility ceased at the point of discharge, with the consequence that the cargo’s storage in the port terminal fell outside the relevant period of liability. Having analysed the case law, Mustafa Yilmaz concluded that, notwithstanding the broad reading given to loading, the courts tend to construe discharge narrowly. The pre-loading and post-discharge stages, meanwhile, remain a grey area in the legal framework.

Bill of Lading Clauses in Container Carriage

The speaker addressed the particularities of the carrier’s liability under contracts providing for FCL (Full Container Load) and LCL (Less than Container Load) terms. Contrary to the broader tendency towards an expansion of the carrier’s liability, under an FCL clause that liability does not extend to discharge, while the carrier’s control over the cargo remains limited. Under an LCL clause, where the shipper fills the container, the carrier’s liability is confined to the general duty imposed by Article III, rule 2 of the Hague-Visby Rules. As for sealed containers carried on an STC (said to contain) basis, the carrier is responsible for the safekeeping of the container, but not for the quantity or quality of the cargo.

Addressing the carrier’s exemption from liability for cargo loss or damage resulting from nautical error, Mustafa Yilmaz also turned to the subject of autonomous shipping. The speaker noted that it was unlikely that the nautical-fault exception would be extended to shore-based personnel responsible for the operation of an autonomous vessel, since that would require an unduly broad interpretation of the rule.

In conclusion, the speaker identified the steps that need to be taken to reduce legal uncertainty in container carriage: clearly defining the period of the carrier’s liability, regulating the “onshore” stages in the movement of containers, clarifying the evidential criteria for establishing loss, and incorporating provisions on smart containers into the modern legal framework. ■