The appellant carrier undertook to transport packaged frozen cod livers on 19 pallets from Hafnarfjörður, Iceland, to St Petersburg, Russia. A bill of lading was issued in triplicate on 22 September 2005. It was undisputed that the appellant delivered the goods without presentation of one of the three original copies of the bill of lading. The appellant was not permitted to do so according to the provisions recorded on the bill's front page. The respondent bill of lading holder proved its claim to the goods by its possession of all three copies of the bill of lading. The respondent claimed to have suffered damage because the balance of the payment for the goods, which was to be paid before the cargo was delivered, was not paid. The respondent's claim amounted to this balance.

The respondent's legal position was based on evidentiary effect of the bill of lading: see art 111 of the Shipping Act/Siglingalög No 34/1985 (the Act) [which gives domestic effect to art 3.4 of the Hague-Visby Rules], and the breach of the cargo contract on the part of the appellant by misdelivering the goods without a bill being presented.

The Reykjanes District Court held in favour of the respondent, ordering the appellant to pay the respondent USD 24,000. The appellant appealed to the Supreme Court, claiming that the respondent's claim was time-barred, and referred to cl 4 of its terms of carriage, which stated that all liability of the carrier lapsed unless it was summoned within nine months of the cargo being delivered. It is undisputed that the cargo was delivered on 23 October 2005, but the summons was only issued on 23 September 2006, or 11 months later.

The respondent, however, claimed that art 215.6 of the Act [which gives domestic effect to art 3.6 of the Hague-Visby Rules] set a 12-month limitation period which applied to the transaction, and that it was not permissible to deviate from that provision by agreement. When the Shipping Act was enacted, the aim was to bring Icelandic shipping law into line with international legal rules in the field of cargo transport by sea. Other Nordic countries ratified the Hague-Visby rules and adapted their legislation to them. Furthermore, international freight transport practices provided for a one-year statute of limitations when cargo was delivered without a bill of lading being presented.

Held: Appeal allowed.

The respondent's argument cannot be accepted. Article 215.6 of the Shipping Act states that a claim for damages arising from the return of goods without the presentation of a bill of lading shall lapse due to prescription 'within one year from the time the goods were due for delivery or from the time they were delivered, if later'. According to its wording, the rule in art 215.6 is not invariable, and no other provisions of the Shipping Act lead to that conclusion, contrary to eg arts 118, 149, 215.3, 215.4, 215.5, and 215.7 of the Shipping Act. The provisions of the Shipping Act therefore do not prevent the parties from agreeing on a different prescription period than that set out in art 215.6 of the Act. Furthermore, the respondent has not proven that in the field of maritime transport, there is a standard 12-month limitation period in similar cases that is binding on the parties.

The respondent also relies on the fact that the appellant was guilty of a material breach of contract by delivering the goods without a bill of lading being presented. The appellant cannot therefore rely on any limitation of liability, either with regard to default interest, or the limitation period under cl 4 of the bill, which is narrower than the rule in art 215.6 of the Act. A bill of lading is a commercial document, and the Court agrees with the respondent that delivering cargo without the presentation of a bill of lading constitutes a material breach of contract. Article 70.6 of the Shipping Act [which gives domestic effect to art 4.5.e of the Hague-Visby Rules] states:

The carrier may not invoke limitation of liability under this Article if it is proven that he himself caused the loss or damage intentionally or with gross negligence and he should have known that loss would probably result.

Article 70 otherwise deals with the value of goods or cargo and its assessment when determining damages, and para 2 deals with the limitation of the amount of compensation [ie arts 4.5.a and 4.5.b of the Hague-Visby Rules]. The issue here is not the limitation of the amount of compensation or the content of the right to compensation, but rather the length of the limitation period. The respondent's argument in this regard is therefore not accepted.