This was an appeal from the District Court for the Eastern District of Louisiana. Foster Wheeler Energy Corp (the appellant) brought an action in rem against the An Ning Jiang, and in personam against Industrial Maritime Carriers (Bahamas) (the defendants), for damage to cargo on a voyage from Spain to China. The appellant had arranged the carriage of the cargo by charterparty and the defendants' agent (Intermarine) issued three identical CONLINEBILL form bills of lading. The cargo was loaded in good order and condition but the ship encountered heavy weather on the voyage, causing the cargo to shift and be damaged. The appellant claimed USD 228,576.73.

The District Court held that the defendants were liable to the appellant, but that the defendants were entitled to limit their liability to USD 500 per package under the Carriage of Goods by Sea Act (COGSA). The Court thus limited recovery to USD 39,453.74.

Held: Appeal allowed. The District Court's finding on liability is affirmed and its finding on limitation is reversed.

The bills of lading did not contain any reference to limitation of liability, but contained a general paramount clause which provided:

THE HAGUE RULES CONTAINED IN THE INTERNATIONAL CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING TO BILLS OF LADING, DATED BRUSSELS THE 25TH OF 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 IN 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 23, 1968 - the Hague Visby Rules apply compulsorily, the provisions of the respective legislation shall be considered incorporated into 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 bills of lading contained a jurisdiction clause naming the Eastern District of Louisiana and stated that US law applied.

The Hague-Visby Rules apply by force of law in Spain (the country of shipment). The appellants submitted that because the Hague-Visby Rules apply compulsorily to the contract of carriage, art 3.8 of the Hague-Visby Rules invalidates the jurisdiction clause to the extent that it incorporates COGSA's lower limit of liability.

The Hague-Visby Rules compulsorily govern a carriage from the time the ship's tackle is hooked onto the cargo at the port of loading until the time the cargo is released from the tackle at the port of discharge (tackle-to-tackle) whenever either: (1) the bill of lading is issued in a signatory nation; (2) carriage is from a port in a signatory nation; or (3) the bill of lading references the Hague–Visby Rules. In this case, the bills of lading were issued in Germany and the carriage was from a port in Spain. In both countries, the Hague-Visby Rules apply compulsorily.

The appellant asserted that as a simple matter of contractual interpretation, a reading of the contract as a whole reveals that COGSA and its lower USD 500 limit applies only during periods and to claims not governed by the Hague-Visby Rules referenced in the general paramount clause. This argument is correct. Pursuant to the general paramount clause, the Hague–Visby Rules as enacted in Spain govern claims involving cargo damage occurring during the tackle-to-tackle period, whereas US law applies under the jurisdiction clause to the litany of non-cargo maritime claims that may be brought as well as to cargo claims stemming from damage outside the tackle-to-tackle period.

As the Court finds that the Hague-Visby Rules apply to the claim it is not necessary to consider whether, when the Hague-Visby Rules apply compulsorily, art 3.8 nullifies a clause invoking the lower limit of COGSA as an impermissible lessening of liability in cases where COGSA applies contractually.