Rímac Internacional Compañía de Seguros y Reaseguro (the plaintiff), an insurance company acting under an assignment of rights, claimed damage to a ship engine carried on the MV Madeleine from Port Everglades (USA) to El Callao (Peru) in door to door transportation. The lawsuit was filed against Interocean Lines Inc (Interocean), the issuer of the bill of lading; Bronco Container Lines (BCL), the contractual carrier; Unitrans SAC, as the consignee and as the agent of Natural Freight Ltd, the freight forwarder and shipper in the bill of lading; Unimar SA, as the agent of the vessel and of Bangor Castle Shipping Co Ltd (BCS); Reederei Alnwick Harmstorf (RAH); Reederei Alnwick Harmstorf & Co GmbH & Co KG (RAH Co); and Trinity Shipping Lines SA (TSL), the actual carriers/charterers/shipowners.

Interocean alleged that the plaintiff and the insured were not parties to the contract of carriage as their names did not appear in the bill of lading. Hence, the plaintiff lacked legal standing to sue. The liability for damage to or loss of the cargo before third parties lies only on the shipowner or carrier. Interocean was neither. Only Bronco Container Lines (BCL) was the contractual carrier. Similarly, Unimar SA alleged that the plaintiff was not entitled to rights under the contract of carriage, as opposed to Unitrans SA, and that the damage occurred when the cargo was at the port of origin under the custody of Florida Transportation Services. Trinity Shipping Lines SA alleged that the plaintiff, the insured, the shipper, and the other companies responsible for the shipment knew that they had an absolute duty of care in respect of the cargo. This obligation was only transferred to the carrier once the cargo was placed in perfect condition on the vessel’s deck. The ship’s first officer reported that the wooden box containing the engine slipped off the slings and fell over the containers during the loading operation at the port of origin.

The first instance Court dismissed these defences and declared that the damage occurred during the stowage operation on the vessel, which constitutes the commencement of the carrier’s responsibility, according to art 632 of the Code of Commerce (CCom). The defendants did not demonstrate a different agreement to delay the period of responsibility. They also failed to prove that the shipper or the consignee contracted separately for the loading and stowage operation, creating the assumption that the carrier would undertook such operations. The issuing of a bill of lading implies that the carrier received the cargo in good state and condition unless notice of the contrary appears in that document, which was not the case. It is assumed that the shipment was received in good condition and, having reported that the damage occurred before its unloading, it was during the carrier’s period of responsibility. Hence the Court held liable BCL, BCS, RAH, RAH Co and Interocean, ordering them, jointly and severally, to pay compensation in full, and exonerated the other defendants.

On appeal, the High Court (HC) reduced the quantum of the compensation. The HC agreed with the lower Court on the period of the carriers' responsibility. Article 3.2 of the Hague Rules indicates that this period does not start when the cargo is placed on board the ship, but before, with the stowage of the box containing the engine. The defendants did not prove that the shipper was in charge of the stowage and the bill of lading did not contain any reservation reporting damage. That made the carrier responsible for the cargo since before its stowage on the ship. However, the HC applied art 4.5 of the Hague Rules, establishing the carrier's limitation of liability to GBP 100 per package or unit, unless the value of the cargo is declared before the loading and appears in the bill of lading. The value was not declared. As it was one single package, the Rules set the compensation in that amount. Both parties invoked the Hague Rules' application, and it is a special law with prevalence over general legal rules. The plaintiff recurred the decision in cassation before the Supreme Court (SC). The plaintiff alleged infraction of the second paragraph of art 5 of the Hague Rules, which establishes that the Rules do not apply with respect to transport performed under a charterparty. This application meant that four of the defendants that acted under a charterparty, and not under a bill of lading, benefited from the limitation of liability established in the Convention while they were not entitled to that right. The plaintiff also submitted that the CA did not consider that the Hague Rules do not apply to shipments that are carried on deck (art 1.c).

Held: The SC admitted the recourse, declared the HC decision null and void, and ordered the HC to issue a new judgment.

The SC held that the HC did not take into account that, even if both parties invoked the application of the Hague Rules, the relevant bill of lading contained cl 6, establishing not only the applicable limitation of liability, but also the applicable law according to the places of shipment and destination. The HC failed to analyse the bill of lading to determine the applicable rules to set the quantum of compensation. The HC must decide if the Hague Rules or the US COGSA 1936 was the applicable law, and if there was any other term agreed upon in the bill of lading establishing an exception for applying the referred norms. Furthermore, the HC must determine whether there was a charterparty between the liable parties, only to determine the quantum of the compensation, not their liability, which was established in the proceedings without the objection of the defendants.