Third Party Protection in Shipping

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Background of third party protection in shipping

The key point

1.1 This book revolves around the protection of third parties in shipping.1 Frequently, the central issue in third party disputes is whether or not someone who is not party to the contract should be allowed to benefit from the protection of the contract. More specifically, should someone who is neither the carrier nor the shipper be entitled to benefit from a protection provision in a carriage of goods by sea contract? 1.2 Consider the following scenario: Shipper (X) contracts with carrier (Y), a shipowner or a charterer. Y then carries X’s goods from port A to port B. In the contract, there is a provision that Z (someone who is not X or Y but who could, for instance, work at port A or B) will not be liable and will benefit from a limitation of liability if sued. The problem is that, strictly speaking, Z has a contract only with Y and has nothing to do with X. Moreover, in the carriage of goods by sea, Z does not fall into only one category; there are usually different categories of parties that, although in the same commercial position as Z, might not be mentioned specifically in the contract. Ultimately, the aim is to determine the extent to which such parties are entitled to the same protection enjoyed by Z.

The outcome thus far

1.3 The complexity of third party protection has long been present in maritime law. Originally, the problem centred on certain categories of third party, such as the shipowner in the Elder Dempster case,2 or the master and boatswain in the Himalaya case.3 Over time, however, the issue has grown to include other categories of third party such as independent contractors.4 Furthermore, the situation has recently become more complex: vessels are now being sued as third parties5 and relying on protection clauses in a contract, and sometimes the third

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parties in question operate completely outside the maritime world (see the inland carrier in the Kirby case).6 This usually happens because it is in the interest of one of the parties to the contract to avoid the limitation of liability that the other party has under the contract; the third party therefore becomes the target of a suit. Though it seems unfair, this is what actually happens in practice. The claimant cannot sue the carrier in tort to circumvent the contract, since the carrier will be able to rely on a contract and on its legal protection:

When the act is done in the course of rendering the very services provided for in the bill of lading, the limitation on liability therein contained must attach, whatever the form of the action and whether owner or charterer be sued. It would be absurd that the owner of the goods could get rid of the protective clauses of the bill of lading, in respect of all stowage, by suing the owner of the ship in tort.7

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