Thursday, October 15, 2009

Carriage of Goods by Sea

For a country with a significant sea-faring tradition and a substantial number of merchant fleets, Malaysia's maritime laws can appear to be anachronistic. The Malaysian Carriage of Goods by Sea Act ("MCOGSA") and Merchant Shipping Ordinance have hardly been reviewed since their respective enactments many decades ago. Moreover, by virtue of the Malaysian Civil Law Act, the English Bill of Lading Act (which dates back to the 19th century!) applies to Malaysia even though the United Kingdom has abandoned that statute in 1992.

Some pertinent issues involving international trade and, specifically, carriage of goods by sea, include:-

Bills of Lading ("B/L")

B/Ls are issued by the carrier/shipowner. They are usually signed by ship’s master.

B/Ls have 3 principal characteristics. First, it is evidence of receipt of goods by carrier.Second, it is a contract of carriage: s.4 MCOGSA. Third, it is prima facie document of title to goods (this is a defeasible title only because the buyer still has the right to reject goods under the Malaysian Sale of Goods Act ("SOGA").

A “Clean” B/L means goods received in perfect condition. A “Claused” B/L means goods may have defects as specified.

Bills of Lading Act (UK)

Repealed in UK (by the Carriage of Goods Act 1992 ("UKCOGSA") but still valid for Peninsular Malaysia under s.5(1) Civil Law Act. The Bill of Lading Act may not be applicable to the states of Sabah and Sarawak due to the operation of s.5(2) Civil Law Act.

The Bill of Lading Act is disadvantageous to the position of the buyer for the following reasons. First, the buyer has no privity of contract with carrier. Second, the buyer only assumes risk to goods. This enables the buyer can insure the goods but the buyer has no contractual standing to sue carrier. There is no privity of contract since the privity is between the vendor and the carrier. Third, the buyer can only sue after receiving the B/L. This is disdvantageous in the FOB delivery situation.

If the transport document is not a B/L e.g. a document called a Mate’s Receipt, the buyer cannot rely on the Bill of Lading Act for protection.

Comparison between the Hague, Hague-Visby & Hamburg Rules

Before 1924, the Common Law regime imposed ABSOLUTE liability for carriers, making carriers liable for the vessels' seaworthiness throughout the voyage. Unfortunately, during the deliberations to establish the Hague Rules, the merchant marine used their superior bargaining power to lobby for provisions that enabled carriers to contract out of common law liability. This was a set-back for international trade. This weakness was reflected in the Hague Rules (1924).

The Hague Rules were modified by amendments that became known as the Hague-Visby Rules which increased carrier's liability.

The most recent revamp was the Hamburg Rules that increased carriers' liabilities even further.

Readers should note that MCOGSA adopts Hague Rules while the UKCOGSA adopts Hague-Visby Rules. Countries like Singapore and Australia has adopted the Hamburg Rules.

Contracting out of liability of carriers – Hague (may be possible to contract out), Hague-Visby & Hamburg does not allow. In Hollandia Denning LJ said carriers cannot contract out of liability under H-V Rules.

  • Duration of liability – Hague & Hague-Visby (only at time of commencement of voyage), Hamburg (throughout voyage – returns to common law position).
  • Liability for deviation from route – Hague & Hague-Visby (no liability), Hamburg (liability).
  • Liability of cargo-owner to inform about dangerous goods – Hague & Hague-Visby (no liability), Hamburg (cargo-owner liable for non-disclosure).
  • Limitation period – Hague (1 year), Hague-Visby (1 year but can be extended by mutual agreement – must be clear, Hamburg (2 years).
  • Liability of cargo-owner for freight & demurrage – Hague & Hague-Visby (cargo-owner liable even if B/L silent on this), Hamburg (cargo-owner not liable if B/L silent).
  • Application to documents other than Bills of Lading – Hague (does not apply to non-bills of lading), Hague-Visby (can apply to any non-negotiable receipt but document must expressly say that H-V Rules apply), Hamburg (applies to any transport document for carriage of goods by sea).
  • Particulars of goods in B/L – Hague (minimum requirements), Hague-Visby (more details than Hague), Hamburg (most number of particulars).


Malaysia’s reliance on the Hague Rules may be because it wants to protect the local merchant fleet. But if Malaysia aspires to be a modern maritime nation it must review the MCOGSA to adopt, at least, the Hague-Visby Rules. This will make Malaysian merchant fleet more attractive to foreign shippers/cargo-owners.

Since the Hamburg Rules protects the shippers/cargo-owners most countries with merchant fleet that adopt the Hamburg Rules may be the most attractive to shippers.

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