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IV SOME POSSIBLE WAYS TO GET AROUND THE NAUTICAL FAULT DEFENCE
A Contracting out of the Hague Rules.[58]
The Hague Rules gives a carrier mandatory immunity from the liability for the loss or damage to the cargo arising or resulting from the negligence in navigation or management of the ship of its servants. Because carriers were good at taking advantage of their bargaining power,[59] it was likely that carriers extended the application of immunities by incorporating more exception clauses into bills of lading. The Hague Rules lay down a provision to prevent them from the abuse of their position. It reads as follows:[60]
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.
Therefore, the immunities carriers enjoy are strictly limited within the Hague Rules. In contrast, the Hague Rules do not forbid parties to a contract of carriage of good by sea to bargain how to increase carriers’ liability or contract out the mandatory immunities enjoyed by carriers. In fact, the Rules expressly allow carriers to surrender in whole or in part all or any of their rights and immunities.[61] The significance of this provision means the nautical fault defence carriers enjoy under the Hague Rules can be contracted out. Here the freedom of contract is only in favour of cargo owners. If a cargo owner is familiar with the Hague Rules and powerful enough, it is possible for it to get a more advantageous position in the course of carriage of goods by sea. It seems that the Hague Rules encourage cargo owners to do that while it is very tough on the increase of immunities for carriers. In this sense, the bargaining power can only be exercised by cargo owners although basically they, due to many reasons, do not frequently use their exclusive power granted by the Hague Rules[62] .
One thing is worth noting that even if the bargaining power of a cargo owner is strong and the carrier therefore agrees to give up its mandatory immunities, in the bill of lading the surrender of certain immunities should be expressly embodied.[63] This principle was also proven by the Touraine case[64] , Hill.J held that the surrender of the statutory immunity should be clearly stated in the bill of lading and this was not something which could be inferred from other matters.
An interesting question here is raised. Can the liability regime in the Hamburg Rules be contracted out? Can the carrier gain the nautical fault defence by incorporating such a clause in the bill of lading? The answer is negative.[65] The article 5.1 clearly provides that the carrier is basically liable for the loss of the goods and there is special provision that the carrier can retain the nautical fault defence.
B Nautical Fault Defence is Destroyed by the Joint and Several Liability Regime in Case of the Both to Blame Collision.
Under the US liability regime, both parties who were guilty of being negligent are jointly and severally liable towards the third party. As a result, in case of a collision between two ships where both the carrier and noncarrying vessel were at fault, the cargo owner could recover its whole loss from the noncarrying vessel. The noncarrying vessel bears only his proportionate liability and can bring a separate suit against the carrier for recovery of what he paid to the cargo owner by virtue of contribution. It looks ironic that the carrier is not liable for his full negligence in the navigation under the Hague Rules while he eventually has to pay if he is not negligent enough under the US liability regime.
In order to avoid the application of joint and several` liability in case of the “both to blame” collision, carriers introduced a “both to claim” clause[66] into bills of lading by which the cargo owner indemnifies its carrier for any payment to non-carrying vessel which the non-carrying vessel is supposed to pay to the cargo owner for joint and several liability. It seems fair enough and the District Court did affirm the validity of such a clause.[67] However, both the Court of Appeals (the Second Circuit) [68] and the Supreme Court [69] held the clause of this kind was not valid according to the U.S. law.
Justice Black held that it was a general rule that common carriers could not relieve themselves from liability for their or their agents’ negligence via contracts. [70] Although the Harter Act and COGSA 1936 granted the carrier the nautical fault defence, they did not go so far as to deprive the cargo owner of his tort action against the non-carrying vessel, nor did they exonerate the carrier from the liability to non-carrying vessel for loss or damage caused partly by the carrier’s servants or agents. [71] In his judgement, he thought that the nautical fault defence should be tightly interpreted and therefore only applies in cases where negligence is solely on the part of the carrier’s servants and agents.[72] This principle was also accepted by US v Atlantic Mut. Ins. Co.[73] As a response to this claim that it was anomalous to invalidate the “both to blame” clause, Justice Black contended that it would be “anomalous” if he held against the carrier’s right to recover what he was legally entitled to. Finally he emphasised that[74]
We think that legislative consideration and action can best bring about a fair accommodation of the diverse but related interests”[75] of the varied deviated from the controlling rule that without congressional authority they cannot stipulate against their own negligence or that of their agents or servants. If that rule is to be changed, the Congress, not the shipowners, should change it.
As a result, the nautical fault defence does not make any sense for a carrier in case of a both to blame collision under American jurisdiction. However, this case makes US’ liability regime at odds with International Convention for the Unification of Certain Rules of Law with Respect to Collision Between Vessels (1910) and therefore different from many other countries’. According to the Convention, there is no joint and several liabilities of both parties of a collision towards the third party unless in case of the damage arising out of the death and personal injury.[76] Britain does follow this rule.[77] Under the British jurisdiction, the non-carrying vessel is only reliable for his own proportionate share of the payment for the damage or loss to cargo. Due to the nautical fault defence, the carrier is exculpated from such liability and therefore the cargo owner can only recover its loss from the non-carrying vessel. The root of the difference in this issue between U.S and U.K. lies in whether the joint and several liabilities are applicable.
C Avoid Nautical Fault Defence by Suing in Tort.
Elder, Dempster & Co., Ltd., and Others v. Paterson, Zochonis & Co., Ltd.,[78] was deemed to have established a principle that exception clauses in a bill of lading not only protect the carrier from certain liability, but also protect its master, servants, stevedores or any other person who may participate in the implementation of the carriage of goods. Such persons are not the party to the contract of carriage. If they are guilty of negligence which caused the loss or damage to goods, they are entitled to the immunities provided for in the bill of lading enjoyed by the carrier[79] . Behind the entitlement is that there were some collateral contracts between the cargo owner and the various persons relating to the carriage.[80] Viscount Finlay said “it would be absurd that the owner of the goods could get rid of the protective clauses of the bill of lading---by suing---in tort”. [81]
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