Delivering cargo against a lost/stolen/destroyed bill of lading

Charterers (maybe the shipper or consignee) sometimes requests the owners to deliver cargoagainst a lost, stolen, destroyed bill of lading. If the owners agree to do so,which largely mirrors delivering cargo without production of the original bill of lading, the owners will face huge commercial risks. In the shipping practice, the owners are likely to accept the charterers’ LOU to deliver cargo due to the commercial reasons. We need to point out when the original bill of lading is lost, stolen or destroyed, for the owners, there is another method to tackle with this matter besides accepting a LOU. The Club is aware of some instances where the owners have been asked to deliver cargo against a lost, stolen, destroyed bill of lading recently and we will introduce how to handle this type of cases in this article.

 

A Chinese Law

 

Under Chinese law, how to deal with this type of problems is clear. According to the Article 100 in the Special Maritime Procedure Law of the People’s Republic of China, a holder of a bill of lading or similar documents for taking delivery of cargo may apply for public exigence to the maritime court of the place where the cargo is located in case such documents are out of control or lost. To distinguish the procedure above mentioned from the general public exigence procedure in the Chapter 18 of the Civil Procedure Law and the procedure for exigence of maritime lien in the Chapter 11 of the Special Maritime ProcedureLaw, the maritime law scholars also call it maritime public exigence procedure.

 

If a straight bill of lading were lost or stolen, whether the lawful holder of a bill of lading is entitled to apply for public exigence procedure? Our answer is yes. The reasons are as following:

 

(1)  the Maritime Code of the People’s Republic of China does not specialized the straight bill of lading; the straight bill of lading is one kind of the bill of lading in accordance with the Article 71 in the Maritime Code.

 

(2)  in 2009, the Supreme People’s Court of the People’s Republic of China issued the judicial interpretation on delivering cargo without production of the original bill of lading; in the Article 1 of this judicial interpretation, the Supreme People’s Court classifies the bill of lading into the straight bill of lading, the order bill of lading and the bearer bill of lading. Meanwhile, the carrier who delivers cargo without production of the original bill of lading and causesdamages to the lawful holder of a bill of lading, the latter is entitled toraise a claim against the carrier according to the Article 2, which does notspecialized the straight bill of lading as well. Hence, even for a straight bill of lading, the carrier will face the claim if they do not retrieve the original bill of lading. Under these circumstances (the original bill of ladingis lost, stolen or destroyed), the carrier had better act in compliance with the Article 100 in the Special Maritime Procedure Law to require the cargo receiver or the holder of a bill of lading to apply for public exigence to the maritime court and follow the court’s order to fulfil the obligation of delivery.

 

Additionally, for the electronic bill of lading, public exigence procedure is also applicable. Of course, the electronic bill of lading will not be stolen or destroyed physically; nevertheless, it may be ‘out of control’ like the traditional bill of lading due to the breakdown of the electronic data system or the pin code is falsified or deciphered. From this point of view, the wordings of ‘out ofcontrol’ in the Special Maritime Procedure Law are forward-looking. As for the seaway bill, there is no room to apply for public exigence procedure because the consignee only need to show to take delivery is poof of his identity.

 

Finally, we talk about the issue of the period of exigence under Chinese law. According to the Article 72 in the judicial interpretation of the Special Maritime Procedure Law published by the Supreme People’s Court, if the maritime court accepts the application and commences the exigence procedure, the court shall order the carrier, the carrier’s agent and/or the persons who preserve the cargo not to deliver the cargo; and issue the announcement within 3 days to demand the concerned parties to assert the rights promptly. The period of exigence is determined by the maritime court, but the period shall not be less than 30 days. According to the Article 219 in the Civil Procedure Law, the period of general public exigence is 60 days; and the period of exigence of maritime lienis also 60 days in accordance with Article 124 in the Special Maritime Procedure Law. Obviously, the period of maritime public exigence is short. Furthermore, the period can be shortened in light of Article 75 in the judicial interpretation above mentioned: Where the cargo is used in the state key construction project; relief; or difficult to preserve and seasonal cargo, the applicant may apply for an earlier delivery before the maritime court basing on they have provided reliable and sufficient security.

 

B English Law

 

Under English law,there is no concept of ‘public exigence’ like Chinese law. However, there is authority that the contractual carrier may deliver cargo when the original billof lading has been lost, stolen or destroyed. In SA SUCRE EXPORT v. NORTHERN RIVER SHIPPING LTD（TheSormovskiy 3068）[1994] 2 Lloyd’s Rep. 266, Clark J pointed out that the simple rule to which he has referred does requiresome exceptions because the bill of lading might have been lost or stolen. Of course, the party who requests delivery against the lost, stolen or destroyedbill of lading shall be able to prove to the Master’s/carrier’s reasonable satisfaction:

 

(1)  The person seeking delivery of the goods is entitled to possession;

 

(2)  What has become of the bill of lading (the loss or theft did not involve the faultof the party claiming possession).

 

But Clark J admitted that the precise nature of the exceptions (the bill of lading might have been lost or stolen) will no doubt require further consideration in the future. And there is also a body of English case law which appears to indicate that a reasonable explanation as to what happened to the bill of lading is not enough to effect the delivery.

 

In the same year,the Court of Appeals gave the different answer: in KUWAIT PETROLEUM CORPORATION v. I & D OIL CARRIERS LTD.（TheHouda）[1994] 2 Lloyd’s Rep. 541,the court held where a bill of lading is lost, the remedy, in default of agreement,is to obtain an order of the court that on tending a sufficient indemnity the loss of the bill of lading is not to be set up as a defence. Compared with The Sormovskiy 3068, we are of opinion that The Houda has more practical significance. This case involves a series of disputes arising from a lost bill of lading during Iraq invaded Kuwait in 1990. At that time, the M.V. Houda was loading crude oil cargo at the port of MinaAl Almandi. In all, when the original bill of lading is lost, stolen ordestroyed, the owners can request the court to take lead the delivering cargo, Chines law and English case law hold the similar views on this topic.

 

In the meantime, for a straight bill of lading, under English case law (The Rafaela S), the owners are obliged to deliver cargo with the presentation of the original bill lading as well. If the straight bill of lading is lost or stolen and there is no reliable security or LOU, the best choice for the owners is to request the court to issue an order in relation to delivering cargo.

 

C Our Practice

 

We introduce a related case occurred in April, 2017 handled by us briefly:

 

One of our entered vessels carried a shipment of steel cargoes from Lianyungang, China to Durban,South Africa. At the loading port of Lianyungang, the owners issued a set of straight bill of lading. Unfortunately, the original bill of lading was lost when it was posted to the consignee. The charterers then requested the owners to deliver the cargo to the consignee against the lost bill of lading and would provide a LOU to the owners accordingly. Considering the short-term cooperationwith the charterers, the owners were not willing to accept the LOU, so they chased us for our comments or suggestions. We suggested to let the charterersapply for a delivery order before the High Court of South Africa if thecharterers were not able to provide the owners with a bank guarantee or thecash deposit. On 13th April, the consignee applied for an order ofdelivering cargo before the KWAZULU-NATAL district court. The owners received the order of instructing the local ship agent to deliver cargo to the applicant/consignee. Eventually, this case was solved smoothly and it took less than one week.

 

In addition, South Africa has no independent maritime court; the first instance maritime actions shall be under the jurisdiction of the district courts of the High Court of South Africa and apply the summary procedure, only one judge. Most of the first instance maritime actions will be heard before the district courts located in Durban or Cape Town geographically.

 

D The Conclusion

 

If theowners/carriers find the original bill of lading is lost, stolen or destroyed, in our view, in principle, applying for exigence procedure or the court’s order of delivering is the best measure to deal with this kind of matters. Taking this measure can provide relatively comprehensive protection to the owners/carriers and eliminate the uncertainty and the potential risks as much as possible. However,when the owners/carriers consider to do so, they are possibly facing the following situations:

 

(1)  The period of exigence procedure or applying for a court’s order depends on the jurisdictions. It may take long time and which is unacceptable.

 

(2)Different jurisdictions have different regulations/acts/requirements. For example, in the U.S. the carrier can deliver cargo without production of a straight bill of lading according to Bills of Lading Act of 1916/1994. Hence, if a straight bill of lading is lost, stolen or destroyed, it is no necessary for the owners/carrier to apply for an order or similar procedure, identifying the consignee’s identity is enough.

 

(3)  The commercial pressure/reasons.

 

(4)  The special clause in the governing C/P and so on.

 

Thus, whether applying for exigence procedure or the court’s order of delivering is feasible in a specific case, it is on the basis of case by case.

 

Finally, we have to emphasize that delivering cargo against a lost/stolen/destroyed bill oflading is likely to have the same effect of delivering cargo without production of the original bill of lading, which may prejudice to the owners’ P&I insurance’s cover. Hence, prior to make the final decision, we suggest the owners to chase the Club for the recommendations firstly in such a case.

 

Source:炳科海事,王彦斌 

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