Photo: Wathit Kettap

The Eems Solar: A lesson to be learned about stowage responsibility

9 April 2018

The Eems Solar is a leading legal authority concerning the allocation of responsibility for stowage of cargo as between owners and charterers when such responsibility has been contractually shifted from one to the other [1].

The case involves a claim for damaged steel coils and investigations revealed that the steel coils had shifted due to the absence of locking coils. Thus, it was sufficiently clear that bad stowage caused the damage.

The claimant, who was both charterer and receiver, as holder of the bill of lading, made a claim against the owners. The charterparty was on Gencon 1994 terms, and the cargo was shipped under a Congenbill 1994 bill of lading. The Hague rules and the charterparty were both incorporated in the bill of lading.

The main issues in focus were whether owners had exercised due diligence in ensuring that the vessel was seaworthy and whether the owners had passed responsibility for stowage onto charterers.

The claimants argued that the owners were contractually liable for the stowage of the cargo. They further argued that the loss occurred was a breach of owner's contractual duty by virtue of Art. III, rule 2 of The Hague Rules, namely that "...the carrier shall properly and carefully load, handle stow, carry, keep, care for and discharge the goods carried.".

The defendants, being the owners of the vessel, argued that they had successfully shifted the responsibility of stowage through cl. 5a of the Gencon form 1994 [2].

The claimant dismissed the defendant's argument by asserting that Art III, rule 2 took precedence and that Art III rule 8 effectively made contradictory contractual agreements null and void. Furthermore, the claimant submitted that in any event the clause was not properly incorporated, since it was inconsistent with the express wording of the bill of lading.

The court dismissed the claimant's case and ruled in favour of the shipowner.

With support from the established principles in The Jordan II [3], the court dismissed the claimant's arguments that The Hague Rules, art III, rule 2 should take precedence over contradictory contractual provisions. The court ruled that, provided that the intentions of the parties were sufficiently expressed in the contract. Art III, rule 2 is not meant as a provision superior to the agreements between the parties. Rule 2 is to be construed as a specification of the terms on which the service is be performed if that obligation is undertaken. In this instance clause 5 of the charterparty, which purported to shift the legal responsibility from the owner to charterers, was sufficiently clear and effective [4].

It was concluded that the vessel was not unseaworthy and that any unseaworthiness was a result of a failure to properly stow the cargo, for which the charterer was liable [5]. Whilst the owner could still be held liable if it can be established that the bad stowage was caused by a "significant intervention" by the shipowner or their servants [6] this was not the case in the matter at hand.

The Eems Solar has strengthened the contractual certainty with respect to allocation of responsibility in the charterparty. The judgement has made it clear that the court will adhere and give precedence to clear contractual provisions which diverge responsibility for cargo stowage from owners to charterers, even if the vessel was rendered unseaworthy due to bad stowage. The chain of causation could however be breached by significant intervention by the shipowner or his servant [7].

From a practical and loss perspective, it is important that the parties' contract is in clear and unequivocal terms when distributing responsibility and that the charterparty is duly incorporated into the bills of lading.

[1] Yuzhny Zavod Metall Profil LLC v Eems Beheerder BV (The Eems Solar) [2013] 2 Lloyd's Rep 487
[2] "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"
[3] The Jordan II [2003] 2 Lloyd's Rep 87 and Pyrene Co Ltd v Scindia Steam Navigation [1954] 1 Lloyd's Rep. 321
[4] At [97-98]
[5] At [103] litra c
[6] At [99]
[7] At [99]