Ford Motor Co (Ford) and its cargo insurer, Royal Insurance Co of America (the appellant), brought this action against Orient Overseas Container Line Ltd (the respondent), an ocean carrier, for damages arising from damage and loss of cargo during a transatlantic voyage. In February 2003, Ford and the respondent entered into a transportation services main agreement (TSM) for the multimodal transport of Ford's auto-transmission racks from Blanquefort, France, to various cities in the United States. The TSM provided for transportation of the goods by land from the inland city of Blanquefort to the French port of Le Havre, by sea to Montreal, Canada, and then by land to inland cities in the United States. The respondent loaded the cargoes on the MV Canmar Pride at the port of Le Havre. The respondent issued bills of lading for the cargoes, showing Blanquefort as the 'Place of Receipt', Le Havre as the 'Port of Loading', Montreal as the 'Port of Discharge', and multiple US inland cities as the 'Place of Delivery'. During the voyage, the vessel encountered stormy weather that washed some of the containers overboard and flooded others, damaging their contents. The appellant alleged that the storm resulted in the loss of 4,387 auto transmissions and 840 damaged transmission units. The appellant subsequently reimbursed Ford USD 5,700,299.20 for the lost and damaged transmissions pursuant to Ford's marine insurance policy.

On 2 July 2003, Ford and the appellant filed suit against the respondent in the United States District Court for the Eastern District of Michigan, seeking to recover the value of the lost and damaged transmissions. The respondent asserted the USD 500 per package liability limitation in 46 USC § 30701 (COGSA) as an affirmative defence. The respondent moved for partial summary judgment on the applicable liability limitation and the definition of a 'package' for limitation purposes, arguing that each rack of transmissions, and not each individual transmission, constituted a COGSA package. On 29 September 2005, the District Court granted partial summary judgment for the respondent, ruling that the appellant's claims were subject to the USD 500 per package liability limitation. Both the District Court and this Court authorised an interlocutory appeal of that ruling, and the appellant argued that the District Court's ruling should be reversed.

Held: Appeal allowed.

This case requires this Court to consider, first, whether COGSA or the Hague-Visby Rules or both apply as a matter of law to the ocean voyage between Le Havre, France, and Montreal, Canada. Second, having determined which law applies ex proprio vigore, this Court must examine a complex bill of lading to determine whether Ford and the respondent contracted for the liability limits set forth in COGSA or the Hague-Visby Rules.

After considering relevant case law such as Schramm Inc v Shipco Transport Inc 364 F3d 560 (4th Cir 2004) (CMI1541) and principles of admiralty law, this Court concludes that the Hague-Visby Rules apply ex proprio vigore to the ocean carriage in question between Le Havre and Montreal. This Court also concludes that COGSA does not apply ex proprio vigore to an ocean voyage between two foreign ports, even though the ultimate destination of a through bill of lading may be a city in the United States.

The Court holds that as a matter of federal common law, COGSA liability rules apply to a multimodal maritime contract with an ultimate destination in the United States, regardless of whether the contract provides for an intermediary stop en route during the sea stage of transport or between the sea and land legs.

However, in this case, the parties were free to contract to apply the liability limits set forth in either the Hague-Visby Rules or COGSA. The convoluted and contradictory nature of the contract at issue has led this Court to apply the doctrine of contra proferentem and to construe the bill of lading against its drafter, the respondent. This Court holds that the respondent and Ford contracted for application of the liability limits set forth in the Hague-Visby Rules.

Since the bill of lading binds the respondent to Hague-Visby and not COGSA liability limits, one should turn to the bill of lading to assess the number of units listed by the respondent. France has adopted the Hague-Visby Rules and the SDR Protocol. Thus, when the SDR Protocol is applicable, as in the current case, this Court should limit the carrier's liability to the higher of 666.67 SDR per package or two units of account per kilogram of the gross weight of the goods at issue.

Because the District Court erroneously interpreted the bill of lading to apply COGSA instead of the Hague-Visby Rules, and because additional briefing and fact-finding may be required before the liability limits may be appropriately applied, this Court reverses the District Court's judgment.