Associated Metals (the plaintiff) purchased 179 coiled rolls of steel from Finland. The rolls of steel were shipped by the defendants on the Star Skarven from Naantali, Finland, to Tampa, Florida, and discharged on 17 January 1990. The plaintiff claimed that the cargo was loaded in good order and condition, and was damaged when discharged.

The defendants asserted that if they were liable for the damage, their liability should be limited by 46 USC 1304(5) (COGSA) which limits a carrier’s liability to USD 500 per package or unit. The plaintiff claimed that the Hague-Visby Rules governed the contract, rather than COGSA.

The rolls of steel were shipped under five bills of lading, each of which contained a General Paramount Clause which provided:

The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bill of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is enforced in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply. Trades where Hague-Visby Rules apply. In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on February 23rd 1968 - the Hague-Visby Rules - apply compulsorily, the provisions of the respective legislation shall be incorporated into this bill of lading.

The plaintiff brought a motion for partial summary judgment.

Held: Motion granted.

The Hague Rules referred to provide for a package limitation of GBP 100. The Hague Rules were ratified in the United States in 1937 and given effect by COGSA with its modified USD 500 per package limitation. The 1968 Protocol mentioned in the bill of lading refers to the amendments to the Hague Rules (Hague-Visby Rules) drafted in 1968 and not adopted in the United States. The Hague-Visby Rules raised the per unit limitation of liability, using a limitation based on gold, to 30 Poincaré francs (XFO) per kilogram or 10,000 XFO per package, whichever is higher. In 1979 an additional Protocol to the Hague-Visby Rules changed the applicable standard to the Special Drawing Right (SDR) used by the International Monetary Fund, a fluctuating unit of account.

Finland adopted the Hague Rules in 1939 and the Hague-Visby Rules in 1985. The reference in the General Paramount Clause to the Hague Rules can be interpreted as incorporating the Hague-Visby Rules. In Ilva USA Inc v MV Botic 998 F 2d 1003 (3 Cir 1993) the Court held that rather than setting forth a complete codification of carriage by sea regulations, the Hague-Visby Rules merely make specific changes and additions to the pre-existing Hague Rules. Therefore any reference to the Hague Rules in a General Paramount Clause refer to the version of the Hague Rules enacted in the country of shipment.

Finland denounced the Hague Rules before adopting the Hague-Visby Rules and the 1979 SDR Protocol. Following the conclusion in Botic, by adopting the Hague-Visby Rules a country readopts the Hague Rules, and thus the limitation rules contained in the Hague-Visby Rules apply to this situation. Even if the Court were to find that the reference to the Hague Rules in the General Paramount Clause does not include the Hague-Visby Rules and the 1979 SDR Protocol, the limitation of liability provided in the Hague-Visby Rules applies to this action.

Assuming that the Hague Rules as referenced in the General Paramount Clause have not been enacted in Finland, under the General Paramount Clause, the corresponding legislation of the country of destination applies. In this case, the destination country is the United States where the Hague Rules apply. COGSA expressly permits the parties to stipulate by contract or agreement to an increase in a carrier’s liability to an amount exceeding the USD 500 per package limit provided by COGSA.

As the bill of lading paragraph provides:

In trades where the International Brussels Conventions of 1924 as amended by the Protocol at Brussels on February 23rd 1968 - The Hague-Visby Rules - apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading.

Therefore, while COGSA may apply, the bill of lading explicitly incorporates the Hague-Visby Rules and the higher limits of liability into the bill of lading if the Hague-Visby Rules apply compulsorily to this trade. The defendant argued that the Hague-Visby Rules do not compulsorily apply because while the Hague-Visby Rules have been enacted in the country of shipment (Finland) they have not been enacted in the country of destination (United States) and the claim has been brought in the United States. A similar argument was rejected in Francosteel Corp v MV Deppe Europe 1990 AMC 2962 (SDNY 1990), because parties to a contract should have the assurance of their potential liabilities at the time of contract ie at the time and place of issuance of the bill of lading. Accordingly, the application of the Hague-Visby Rules was intended. Further, the plaintiff submitted the affidavit of a Finnish lawyer stating that the Hague-Visby Rules are compulsorily applicable to a shipment from Finland to the United States in support of its motion for partial summary judgment.