Bright Shipping Co Ltd (Bright Shipping), a Korean corporation, agreed to transport 89 packages of equipment and materials for the consignor, Daelim Industrial Co Ltd (Daelim Industrial) from Laem Chabang, Thailand, to Jubail, Saudi Arabia, to be delivered to the consignee, Alwaha Petrochemical Co. A bill of lading was issued to cover this transport. Meanwhile, on 30 May 2007, Bright Shipping signed a charterparty for the relevant vessel with Heavy Lift Korea Co Ltd (Heavy Lift), who was commissioned by Daelim Industrial to undertake the maritime transportation of the cargo. The charterparty provided that on deck shipping was permitted. The cargo was found to be damaged on arrival in Saudi Arabia.

The plaintiffs (the cargo interests and their underwriters) brought claims against the defendants for cargo damage. The plaintiffs claimed that they had a direct claim against the defendants' liability insurers under Korean law, rather than English law, and that art 724.2 of the Korean Commercial Act (the KCA), which stipulates the right to make a direct claim, falls under art 7 of the Act on Private International Law as 'mandatory provisions which must be applied regardless of the applicable law'. In the alternative, the plaintiffs argued that even if it was considered that English law applied, the claim in this case met all the requirements for a direct claim under English law.

The defendants argued that according to the provisions of the law governing the bill of lading in this case, and relevant Supreme Court precedent, the applicable law for the interpretation of the bill of lading and the standard for the filing period is the KCA, which provides that the debt of the carrier to the charterer, shipper, or consignee shall be extinguished if there is no claim within one year from the date the carrier delivers the shipment to the consignee or the specified date of delivery. However, this period may be extended by agreement of the parties. [Although Korea is not a party to the Hague-Visby Rules, the KCA largely reflects their provisions.] Therefore, the plaintiffs were required to file their claim within one year from 20 July 2007, when the cargo was delivered. Since this lawsuit was filed on 20 October 2009, it was inappropriate because the filing period was exceeded. Even if English law is the governing law, the period of one year for filing a complaint in accordance with art 3.6 of the Hague-Visby Rules, to which the United Kingdom is a contracting State, applies equally. The agreement to extend the filing period claimed by the plaintiffs was concluded only between the reinsurers of the cargo insurance in this case and Bright Shipping.

Alternatively, even if the defendants were held liable for compensation, the accident in this case was due to perils of the sea under art 789.2.1 of the KCA, or force majeure under art 789.2.2, or the fault of the shipper or the owner of the goods under art 789.2.6. The carrier is also exempted from liability for incidents arising from insufficient packaging of the goods under art 789.2.9, or accidents due to negligence in navigation under art 788.2.

Alternatively, even if the defendants were not exempted from liability, according to art 789.2 of the KCA, the carrier's limit of liability per package is 500 SDRs per package. Bright Shipping's liability limit for the accident is thus 13,500 SDRs (500 SDRs × 27 packages).

The applicable law as to whether the plaintiffs' right to claim is recognised is English law, which is the governing law of the insurance contract in this case. According to the Third Parties (Rights against Insurers) Act 1930 (UK), the plaintiffs are not entitled to direct claims.

The District Court held in favour of the defendants. The plaintiffs appealed.

Held: The plaintiffs' appeals are dismissed.

According to art 25.2 of the Act on Private International Law, the parties may also choose the applicable law with respect to their contracts. Clause 3 of the bill of lading provides:

This contract includes the Hague-Visby Rules enacted in the shipping country. If there is no law enacted in the country of shipment, the Hague-Visby Rules enacted in the country of destination apply. If there is no law enacting the Hague-Visby Rules in the country of origin or destination, the Hague Rules enacted in the country of shipment (or, if there is no law enacted in the country of destination, the Hague Rules enacted in the country of destination) shall be enforced. Except as otherwise provided, the Hague-Visby Rules apply to this contract.

Clause 4 of the bill of lading (Governing Law and Jurisdiction) states that '[i]n respect of any dispute arising out of or related to the Bill of Lading in this case, the law of the country where the carrier's principal place of business is located shall apply, and the courts of that country have exclusive jurisdiction'.

In this case, since there is no data stating that the country of shipment (Thailand) or the destination country (Saudi Arabia) have enacted the Hague Rules or the Hague-Visby Rules, the carrier's responsibilities and obligations and the limitations thereof cannot be established under cl 3. The Hague-Visby Rules contractually incorporated into the bill of lading apply, and for other matters not stipulated in the Rules, it should be considered that the law of the Republic of Korea where the head office of the carrier is located applies.

Korean law and art 3.6 of the Hague-Visby Rules stipulate that any claims must be brought against the carrier within one year of delivery. The fact that the cargo in this case arrived at Jubail, Saudi Arabia, the port of discharge on 20 July 2007, and the fact that the case was filed on 20 October 2009, more than one year after that, is clear from the record. However, Bright Shipping extended the filing period five times, and finally extended it until 20 October 2009. The notice regarding the extension of the period was delivered to all defendants, who did not object to the extension. Therefore, it is difficult to accept the defendant's main defence regarding limitation of actions.

Even if there was an 'on deck' agreement between the shipper and the carrier, an agreement to relieve or reduce the carrier's liability under the Hague-Visby Rules is null and void under art 3.8, unless it is expressly stated in the bill of lading. Therefore, even if, as claimed by the defendant, Bright Shipping had an agreement with Heavy Lift Korea, who was entrusted with the transportation of the cargo by Daelim Industrial, to transport the cargo on deck, it cannot be deemed that the requirements for issuance of the bill of lading are satisfied by such circumstances alone. The wording in the bill of lading itself is a phrase to the effect of allowing deck carriage ('carrier can load on deck'). This is insufficient to find that there was a deck carriage agreement. Also, there is no reason to consider that the provisions of the charterparty were incorporated into the bill of lading. The bill of lading cannot be regarded as an 'on deck' bill of lading. Therefore, the accident in this case falls within the scope of coverage of the insurance contract.

The defendants have argued that the accident in this case was due to exempted causes under art 4.2 of the Hague-Visby Rules. In general, deck transport has a greater risk of loss or destruction of containers or cargo by strong waves, wetness by seawater, rainwater, or decay by solar heat, compared to loading below deck. Due to such risks, unless there is an express agreement to load the cargo on deck, the above exemption provisions applying to the case of loss or damage to cargo due to perils of the sea, etc, cannot be applied.

The defendants further assert that the carrier's per-package liability is limited. Liability for damages borne by the maritime carrier in relation to the receipt, shipment, loading, and transportation of the goods can be limited to 500 SDRs for each package of the goods. However, if the damage to the cargo is caused by the carrier's own intentional or reckless act or omission while recognising that damage may occur, limitation of liability is not permitted. Bright Shipping's deck transport in this case was due to the carrier's reckless loading of the cargo on the deck while recognising that there was a risk of damage. There is thus no limitation on liability for damages.

Unlike Korean commercial law, English law does not generally afford a third party victim a right to bring a direct claim against the insurer, but only in exceptional cases under the Third Parties (Rights against Insurers) Act 1930 (UK). In this case, Bright Shipping, the insured, is currently in a state of 'de facto' bankruptcy, because bankruptcy or rehabilitation procedures have been started, but the company has not been wound up. Bright Shipping therefore does not meet the requirements of s 1 of the UK Act, and the plaintiffs cannot therefore, as third parties, exercise a right to claim directly against the defendant liability insurers.