Man Ferrostaal (Ferrostaal) arranged a shipment of steel pipes from China to New Orleans on board the M/V Akili. The Akili was owned by Akela Navigation Co (Akela) and managed by Almi Marine Management (Almi). Before the cargo was loaded on board, Akela time chartered Akili to Seyang Shipping (Seyang), and thereafter Seyang voyage chartered Akili to SM China Co Ltd (SM China) for the voyage from Shanghai to Houston and then to New Orleans. Upon arrival in New Orleans, it was discovered that the steel pipes were placed at the bottom of a cargo hold and were damaged by heavier pipes placed on top. Thereafter, Ferrostaal filed an action in rem against the Akili and in personam against Akela, Almi and SM China. The two issues before the court were: (i) whether an in rem proceeding rendering the Akili liable was unavailable in this matter because the vessel was not a ‘carrier’ within the meaning of COGSA and (ii) whether the free-in-and-out provision in the voyage charter party purportedly absolving the Akili of in rem liability was enforceable.

Held: The first issue was essentially irrelevant because the in rem liability of a vessel existed under the maritime common law, not COGSA/the Hague Rules. COGSA/the Hague Rules assumes the existence of the in rem proceeding, rather than creating it. In rem liability is derived from a pre-COGSA maritime law doctrine, to the effect that, once cargo is on board a vessel, the vessel is deemed to have impliedly ratified the underlying contract of affreightment and is answerable for non-performance. Even if a vessel is not a ‘carrier’ within the meaning of COGSA/the Hague Rules, maritime law renders vessels liable in rem for a carrier’s violations of its obligations. Therefore, while COGSA/the Hague Rules may affect or alter a carrier’s obligations and determine the outcome of an in rem proceeding against a carrier’s vessel, the in rem remedy is a creature of maritime law, not COGSA/the Hague Rules.

Regarding the second issue, the free-in-and-out provision in the voyage charterparty purportedly absolving the Akili of in rem liability was unenforceable, because the clause paramount of the voyage charterparty contractually incorporated Hague-Visby rules, prohibiting the carrier from contracting for waiver of its obligations regarding damage to cargo and superseding the free-in-and-out provision.