The Valle di Cordoba, owned by Navigazione Montanari SpA (the respondent), loaded 33,460 mt of oil at Abidjan, Ivory Coast, for carriage to Lagos, Nigeria. Some 5,291 mt of the oil (the transferred cargo) was lost because 15 armed pirates took control of the vessel and transferred the oil to an unknown lightering vessel. The transferred cargo was never seen again.

The vessel was chartered by Trafigura Beheer BV (the appellant). The charterparty provided for the application of the Beepeevoy 3 form and Trafigura terms as amended. Clause 4 of the Trafigura terms contained an 'In-Transit Loss Clause' (ITL clause) and provided:

In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% and Charterers shall have the right to claim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.

Clause 46 of the Beepeevoy 3 form provided, against the side note 'Exceptions', that:

The provisions of Article III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom (Hague-Visby Rules) shall apply to this Charter and shall be deemed to be inserted in extenso herein.

The appellant brought a claim against the respondent under the ITL clause, seeking to recover the FOB port of loading value of any proven difference between the net vessel volumes after loading at the loading port and the net vessel volumes before unloading at the discharge port, plus freight and insurance. The appellant contended that the transferred cargo constituted 'in-transit loss' and that the ITL clause imposed strict liability on the respondent in respect of the transferred cargo.

The first instance Court held that the transferred cargo was not 'in-transit loss' on the ground that the ITL clause was concerned with loss that was incidental to the carriage of oil products and did not extend to losses caused by the actions of the pirates. The appellant appealed.

Held: Appeal dismissed.

The ITL clause only applied to shortage claims arising from a normal voyage. The fact that 'in transit loss' was defined for the purposes of the clause as the difference between the volumes after loading and before unloading supported the conclusion that the clause was looking only to a short delivery loss of a kind encountered in a normal voyage. The result of the appellant's argument was to make the respondent liable for losses to a greater extent even than that of a common carrier because a common carrier was exempted from loss or damage caused by the act of the Queen's enemies. In addition, even if the appellant was right about the construction of the ITL clause, cl 46 would apply the Hague-Visby Rules, which would exempt the respondent from liability for loss by piracy under arts 4.2.c, 4.2.f and 4.2.q of the Rules.