Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Shipping & International Trade Law: Liability Regimes And Lien Rights.

10 February, 2015

 
 

Liability Regimes

 
1. Which cargo convention applies – Hague Rules/Hague Visby Rules/ Hamburg Rules? If such convention does not apply, what, in summary, is the legal regime?
 
Hong Kong applies the Hague Rules as amended by the Visby Protocol (the ‘HVR’).
The HVR are given the force of law in Hong Kong by way of legislation, namely the Carriage of Goods by Sea Ordinance (Cap. 462, ‘COGSO’).
 
2. Have the Rotterdam Rules been ratified?
 
Hong Kong has not ratified the Rotterdam Rules. The People’s Republic of China has however given its verbal support for the Rotterdam Rules.
 
Under Article 153 of the Basic Law, treaties to which the People’s Republic of China is or becomes a party do not automatically apply to Hong Kong, but the Central People’s Government can decide whether or not an international agreement shall apply to Hong Kong ‘in accordance with the circumstances and needs of the Region, and after seeking the views of the government of the Region’.
 
The Hong Kong Special Administrative Region has, so far as the authors are aware, not expressed any view regarding the Rotterdam Rules.
 
3. Do the Hague/Hague Visby Rules apply to straight bills of lading?
 
The HVR are applicable to straight bills of lading under Hong Kong law. Put another way, straight bills are treated as ‘similar documents of title’ for the purpose of applying Article I(b) of the HVR. See Carewins Development (China) Ltd v Bright Fortune Shipping Ltd [2007] 3 HKLRD 396, in which the Hong Kong Court of Final Appeal followed the English House of Lords’ decision in The Rafaela S [2005] 2 AC 423 
.
4. Are any such rules compulsorily applicable to shipments either from your jurisdiction or to it (or both)?
 
Hong Kong’s COGSO gives the HVR the force of law. Article X of the HVR has also been adopted without modification. Accordingly, the HVR will apply compulsorily to every bill of lading relating to the carriage of goods between ports if:
  • the bill of lading is issued in a contracting state; or
  • the carriage is from a port in a contracting state; or
  • the contract contained in or evidenced by the bill of lading provides that the HVR or legislation of any state giving effect to them are to govern the contract
 
regardless of the nationality of the ship, carrier, shipper, consignee or any other interested person.
 
Therefore the HVR will be applied to: all bills of lading issued in Hong Kong/any contracting state to the HVR; all bills of lading for the carriage of goods ex any port of Hong Kong/any contracting state to the HVR; and any bill of lading containing a clause paramount in favour of the HVR.
 

Lien Rights

 
1. To what extent will a lien on cargo be recognised? Specifically:
 
There is no Hong Kong case law authority analysing the nature of the lien on cargo in detail.
 
That is not to say, however, that the concept is unknown to Hong Kong shipping practice and the Hong Kong courts. There have been a few cases in which a carrier purported to exercise a lien over cargo to secure the charterer’s liabilities (for freight and other liabilities) under the charterparty, resulting in the consignee of the cargo having to put up a guarantee,under protest, to obtain delivery/release of their cargo – see The Jalagopal (Unreported, 31 March 1987, Court of Appeal, Kepmster JA & Power J, 1987 No. 10 (Civil), [1987] HKEC 283; and The Thorscan [1998] 4 HKC 536. The Jalagopal involved an alleged common law lien, while The Thorscan involved an alleged contractual lien as per the terms of the charterparty. In both of these cases, the consignee then sued the carrying vessel in rem, in Hong Kong, for wrongful exercise of a lien on their cargo, claiming a refund for sums paid under the guarantee and damages. The issue of whether the carrier’s exercise of a lien over cargo was wrongful or not as a matter of Hong Kong law, was not ultimately addressed by the courts as both cases were disposed of on jurisdictional/procedural grounds.
 
It is submitted that if the topic of lien on cargo were to be determined by the Hong Kong courts, it is likely that reliance will be placed on the existing, well-developed, body of English case law dealing with matters such as:
 
  • the ambit of the common law lien on cargo;
  • the ambit of the contractual lien on cargo; and
  • when the shipper’s liabilities under the bill of lading would be enforceable against the consignee of the cargo.
 
2. Will liens arising out of obligations under the bill of lading contract be enforceable as against the receiver for, eg, freight, deadfreight, demurrage, general average and any shipper’s liabilities in respect of the cargo?
 
See 1. above.
 
3. Can the Owner lien cargo for time charter hire? If so, is this limited to hire payable by the cargo owners?
 
See 1. above.
 
4. Is it necessary for the owners to register its right to lien subfreights as a charge against a charterer incorporated in your jurisdiction for that lien to be recognised in the event of the charterer’s insolvency?
 
Hong Kong’s legislative provisions on securities over personal property, as distinct from real property, is essentially the same as the position in England & Wales (cf the reforms in Canada, Australia and New Zealand). A lien over sub-freights must therefore be registered as a charge with the Hong Kong Companies Registry against the charterer (sections 334-336 of the Companies Ordinance, Cap. 622).
 
Failure to register the lien as a charge would result in the security interest being void as against any liquidator and creditor of the charterer in the event of the charterer’s insolvency.
 
In most cases, the lien would be a floating charge as the charterer would essentially be promising to make sub-freights (ie, a future receivable/book debt) a collateral in favour of the owner. The owner should thus be mindful of crystallisation issues surrounding the floating charge. In this connection, an automatic crystallisation provision in the charterparty may be of utility.

This material was first published by Sweet & Maxwell in 2014 in “Shipping and International Trade Law – International Comparisons” (and is reproduced here by agreement with the Publishers)

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For further information, please contact:

 

Damien Laracy, Partner, Laracy & Co in association with Hill Dickinson Hong Kong LLP

damienlaracy@laracyco.com

 

Mike Mallin, Partner, Hill Dickinson Hong Kong LLP in association with Laracy & Co

michael.mallin@hilldickinson.com

 

Michael Ng, Solicitor, Laracy & Co in association with Hill Dickinson Hong Kong LLP

michaelng@laracyco.com

 

Hill Dickinson Hong Kong LLP In Association With Laracy & Co Shipping Maritime & Aviation Practice Profile in Hong Kong

 

 

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