The appellant bank, a Swiss banking corporation, sued the two principal respondents, Polish shipping companies, for breach of a contract for carriage of goods by sea from Poland to Israel. The District Court dismissed the claim outright on the ground of the substantive statute of limitations. Hence the appeal. The contract involved a cargo of iron ingots, purchased from a Polish supplier, and sent by the supplier via the carriers from Poland to the port of Ashdod. The cargo, intended for use by Ram Metal Industries & Construction Ltd (Ram), was purchased for Ram by the English company Metec Steel Trading Ltd (Metec). To finance this purchase, the bank issued, at the request of Metec, a documentary letter of credit in excess of USD 1.7 million. According to the terms of the letter of credit, the bank was named as the consignee in the eight bills of lading issued by the carriers and transferred to the bank. In accordance with the agreement, and in accordance with the normal course of events, the carriers were to deliver the cargo at the port of Ashdod, against the original bills of lading, to the bank's authorised representative. The bank was supposed to transfer the cargo into the hands of Ram, after which Metec would repay its debt in accordance with the credit contract. But in practice this did not happen. On 15 December 1991, the ship docked in the port of Ashdod and the carriers unloaded about a third of the cargo. After that - and not in accordance with what was required according to the bills of lading - the ship continued on its way to the port of Haifa, where the balance of the cargo was unloaded on 20 December 1991. In both Ashdod and Haifa, the cargo was not delivered, as required, to an authorised representative of the bank against the original bills of lading. Instead, the cargo was released from the ports and handed over, at times and circumstances that were not clear, to Ram, which used the iron ingots for its needs in a way that they could no longer be located. The bills of lading remained in the hands of the bank, while the loan given by the bank to Metec - at least for the most part - was not repaid.

Until August 1992 - that is, about nine months from the date of the ship's voyage from Poland to Israel, and about eight months from the time of unloading cargo in Ashdod and Haifa - the bank sat idle and did not bother to find out what had happened to the cargo. This is despite the fact that the (substantive) limitation period on the carriers' liability according to the bills of lading is only one year, and begins on the date that the cargo was - or was supposed to be - delivered to the person entitled to receive it. In August 1992, the bank learned that a group of companies, which included Ram, and which were controlled by businessman Reuven Asa, had collapsed and become insolvent, and that Asa himself had left the country. It also became clear to the bank that Metec was also a company controlled, directly or indirectly, by Asa. The bank now checked and discovered that upon unloading from the ship, the cargo was delivered to Ram, and not against the bills of lading. Following this, and in preparation for a lawsuit against them, the bank searched in various countries for assets owned by the carriers. Finding that the carriers has assets in Luxembourg, the bank applied there for an interim seizure of their assets. This application was submitted on 28 January 1993, ie more than 13 months from the dates of the unloading of the cargo; and after the expiration of the limitation period stipulated in the bills of lading. The bank's claim against the carriers was rejected due to the statute of limitations. It should be noted that, according to the bank, there was no explanation for its long delay in resolving the fate of the cargo. As for the additional delay - from the date of discovery until its application to the court in Luxembourg - the bank claimed that locating the carriers' international assets required time. However, the bank offered no explanation why it did not file its lawsuit against the carriers in Poland, which, in addition to having a close connection to the transaction, is also the place of establishment of the carriers and the natural forum.

To complete the picture, the Luxembourg court granted the application for a temporary seizure of assets. On 8 April 1994, the bank filed a major lawsuit against the carriers. On 10 February 1995, the Luxembourg court decided to strike out the bank's claim due to the lack of international jurisdiction (since Luxembourg had no substantive affiliation to the claim), but upheld the temporary seizure order. On 10 June 1995, the bank filed - this time in Israel - the action that is the subject of this appeal, which was directed against the carriers as well as against other defendants who, according to the bank, were involved in releasing the cargo. The District Court held that, for reasons of efficiency, the issue of limitation of the carriers' actions should be discussed and decided first, before the Court was required to hear the claim itself. The District Court then ruled to accept the statute of limitations defence raised by the carriers and to dismiss outright the lawsuit against them. The bank appeals both decisions. On 27 November 1996, the court in Luxembourg decided to remove the temporary seizure of the carrier's assets.

Held: Appeal dismissed.

The bills of lading issued by the carriers in this case were on the Congenbill form. The bills contain the details of the specific transaction, while on the reverse is found a version of a short uniform contract detailing the 'Conditions of Carriage'. All eight bills of lading noted the name of the Polish supplier, designated the bank as consignee, and named Ram as notify party. The port of Ashdod was described as the 'port of discharge'. The bills contained the following clause 2:

General Paramount Clause.

The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills 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 in force 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 considered incorporated in this Bill of Lading. The Carrier takes all reservations possible under such applicable legislation, relating to the period before loading and after discharging and while the goods are in charge of another Carrier, and to deck cargo and live animals.

The Hague Rules, followed by the Hague-Visby Rules (ie the Hague Rules as amended, in 1968, as part of the Visby Protocol), are enshrined in legislation in both Poland and Israel. In Israel, the (original) Hague rules were adopted in the Maritime Goods Ordinance of 1926, later the Transport of Goods by Sea Ordinance. In art 3.6 of the original Hague Rules it is determined, among others, as follows (the Hebrew translation is taken from the addendum to the Ordinance for the Transport of Goods by Sea): 'The carrier and the ship will always be exempt from any liability for any loss or damage unless a trial is filed one year after the delivery of the goods or after the day on which the goods were to be delivered.' And in the English version: 'In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.'

This provision was amended in a Visby Amendment, and is now stated in art 3.6 of the Hague-Visby rules (the Hebrew translation is taken from the Appendix to the Ordinance for the Transport of Goods by Sea): 'Subject to the provisions of Article 6A, the carrier and the vessels will be exempt, in any case, from any liability with respect to the goods, unless a claim has been filed in court within one year. However, the said period may be extended, if the parties have agreed to it after the cause of action has arisen.' And in the English version: 'Subject to paragraph 6 bis the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. This period may, however, be extended if the parties so agree after the cause of action has arisen.'

The Hague Rules and, likewise, the Hague-Visby Rules, therefore stipulate a limitation period of one year, which begins on the date on which the cargo was actually delivered or on the date on which the cargo had to be delivered. This is a 'substantive' (as opposed to 'procedural') statute of limitations, which expropriates the carrier's responsibility at the level of substantive law, and not only blocks the possibility of litigation. Needless to say, although the statute of limitations set forth in the Rules is, on the face of it, short, in setting it the Rules adversely changed the situation of maritime carriers, who before the Hague Convention was executed used to limit their liability under much shorter contracts, such as one or two months.

Considerable effort has been made by the bank in its attempt to convince the Court that the general substantive law applicable to its claim (as opposed to the specific maritime law to which section 2 refers to the conditions of carriage) is Israeli law and not Polish law. The District Court did not accept this contention. This question is not of importance for the purpose of deciding this case. For the purpose of hearing the appeal, it is assumed, without deciding the issue, that the general law applicable to the bank's claim is indeed Israeli law.

From the application of Israeli law, the Bank sought to conclude that the statute of limitations relevant to the claim is that set forth in the Statute of Limitations Law and not that set forth in the Hague and Hague-Visby Rules. There is no basis for this position. As the carriers argued, since the parties agreed to accept, within the framework of a contractual term, the provisions of a recognised international treaty, which stipulates a special substantive limitation period of one year, it does not mean that general law (ie the statute of limitations) applies. The bank is not a 'vulnerable party' to the transaction, but (according to its own statement) is a banking institution experienced in financing transactions of international trade that is assisted in all of its decisions by legal advice. There is therefore no reason to doubt that in entering into a transaction with the carriers, the bank accepted, with full understanding and agreement, the conditions of carriage specified in the bills of lading, including the stipulation of the shortened substantive limitation period. The bills of lading were drawn up in a common and accepted standard form, and the condition regarding the limitation period included in them (by way of reference) adopted the provisions of an international treaty that is widely recognised and enshrined in the enacted laws of many countries. This is sufficient to lead to the rejection of two of the bank's additional claims, namely that the interpretation against the drafter should be applied to the carriers, and that the provision of section 2 of the conditions of carriage should be disqualified because it is a discriminatory condition in a uniform contract.

In the earlier Polska case (Polska Morska v Banque National de Paris, New York (CMI1073)), art 3.6 of the Hague-Visby Rules was applied in a case of misdelivery. This means that the ruling in the Polska case contradicts the bank's claims that the statute of limitations set forth in art 3.6 of the Hague-Visby Rules do not apply in the circumstances of this case. It should be mentioned that the circumstances of this case are almost identical to the circumstances that existed in the earlier Polska case, which also involved Congenbill bills of lading. There, too, the shipment arrived from Poland (from the same supplier) to Israel. There, too, the cargo was delivered to a company from the Ram group, but not against the presentation of the original bill of lading. The judgment in the Polska case is therefore sufficient to lead to the rejection of the bank's three additional arguments that: (1) the statute of limitations does not apply to events after the discharge of the cargo; (2) the carriers, having committed a fundamental breach and in aggravated circumstances, were denied their right to rely on the terms of the statute of limitations; (3) cl 2 of the Conditions of Carriage does not apply the Hague-Visby Rules, but only the original Hague Rules.

A review of the travaux préparatoires to the Visby Amendment reveals that the express intention of the drafters of the Amendment was to apply art 3.6 also to cases in which the cargo was delivered to a person who was not entitled to receive it (Explanatory Notes of the Subcommittee regarding Bills of Lading to amend art 3.6 of the Hague Rules, which were presented on 14 June 1963 before the plenary session of the CMI).

As to the issue of fraud raised by the bank: fraud may, in appropriate circumstances, lead to the postponement of the commencement of the statute of limitations race. But before the Court is required to consider these possibilities in a given case, it is incumbent on the plaintiff to present to it a factual basis that substantiates the fraudulent claim. In this matter, general and trivial arguments are not enough. The bank argued that all the respondents, including the carriers, co-operated with Asa in committing fraudulent acts against it, and in assisting the cargo being handed over to Ram, which was not entitled to receive it. The impression that emerges from the bank's arguments is that it raised the fraud claim against the carriers only as a means by which it hoped to overcome the statute of limitations problem.

As to the question of the date from which the limitation period should be calculated in the event of a failure to deliver, as in this case, it makes a lot of sense to state that in the absence of contradictory evidence, the date on which the cargo had to be delivered would be considered as the date on which the actual unloading took place, and at the latest as the date on which the ship left port. The consignor (or holder) of the bill of lading is held to know the date of departure of the ship from the home port, and the approximate length of time required for it to reach the destination port and unload its cargo. Therefore, unless otherwise stipulated, he or she is held to agree that the cargo will be delivered at this estimated time; and so is the carrier. In the absence of evidence indicating that the actual discharge date was different, in the particular case in question, from the estimated date, an identity can be assumed between them. Hence, in the ordinary case the parties should be seen as agreeing in advance that the date of delivery of the cargo will be the date on which the actual unloading will take place. In the absence of accurate information on this date, it is possible to use - as an 'upper limit' - the date of the ship leaving the port after the unloading is completed. In this case, the dates of the unloading of the cargo in Ashdod and Haifa are known exactly according to the facts alleged in the bank's statement of claim. Hence, the question of the burden of proof of the hypothetical date of delivery, and even of the claim of limitation as a whole, does not arise at all. For this reason, the bank's claim that due to the factual nature of the decision required on the question of the hypothetical delivery date, it should have been postponed until after the hearing of the evidence in the lawsuit itself, should also be rejected. In any event, the bank did not set out the additional facts on which it seeks to base its claims as to the hypothetical date of delivery, and that the outright dismissal of its claim allegedly prevented it from proving it.

The bank further argued that a condition for the commencement of the statute of limitations race is that the carrier shall notify the consignor of the unloading of the cargo at the port. On the other hand, the carriers claimed - and the District Court accepted their claim - that the carrier has no such obligation and that the consignor (or holder) of the bill of lading is the one who must report to the port on his or her own initiative at the time of unloading to receive the cargo. It seems that nowadays, when the means of communication in the hands of all concerned are so sophisticated, considerations of efficiency and even fairness ostensibly oblige the carrier to notify the consignor of the date of unloading of the cargo. This obligation certainly exists when the bill of lading states 'notify party'. However, when the address for notification stated in the bill is not the address of the consignor but of another party, the carrier is obliged to notify that party, and is not obligated to deliver the notice at the same time to the consignor. In this case, the address for notification was not the bank but Ram, which actually received the cargo. The fact that Ram's name was mentioned in the bills of lading as 'notify party' was, without a doubt, known to the bank in advance.

The last unloading date of the cargo fell on 20 December 1991. The first proceeding taken by the bank against the carriers was filed by it in the court in Luxembourg more than 13 months after the last discharge date. It was found that the bank's claim was time-barred. There is therefore no need to discuss the bank’s arguments relating to the effect of the continuation of proceedings in Luxembourg - and in particular the erasure of its claim there due to a lack of international jurisdiction - on the statute of limitations.

Thus, only the bank's 'residual' claim remains; that considerations of justice and legal policy, arising from the need to protect its proprietary right, require that its position be accepted. This argument must also be rejected. We are concerned with an ordinary commercial transaction between maritime carriers and a bank, in which an agreement between them stipulated that the carriers' liability towards the bank would expire if the bank's claim against them was not filed within the agreed limitation period. The dismissal of this claim against the carriers will result in pecuniary damage to the bank, and perhaps even property damage, but that damage must be attributed to the bank's failure to file its claim in court before the agreed limitation period expires. In these circumstances, considerations of justice do not prevail over the reasons underlying the statute of limitations provision in the Hague-Visby Rules, which the bank agreed to accept under the contract of carriage with the carriers. As for considerations of legal policy, these questions actually support the encouragement of owners and security holders to go ahead and find out what happened to their cargoes, and to encourage potential plaintiffs to advance and assert their rights. In this way, it will be possible to prevent - or at least minimise - the type of malfunction that occurred in this case, as well as to promote the special purposes that underlie these customary and accepted arrangements in the field of international trade.