The M/V Arktis Sky case (Docket No. 92-7219) recently decided by the 2nd Circuit Court of Appeals in New York raises a point of some importance to those engaged in international shipping with the United States.
The central issue on appeal was whether the Carriage of Goods by Sea Act (Cogsa) prohibited an ocean common carrier from contracting away its responsibility for loading and stowing cargo.
By was of background, Cogsa provides that every bill of lading that is evidence of a contract for the carriage of goods by sea to or from the United States, in foreign trade, shall have effect subject to the act’s provisions. Under Cogsa, the ocean carrier “shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.” The statutory duty makes the carrier liable for the negligent acts of its master, crew, stevedores and agents that relate to cargo.
It should be emphasized that Cogsa is not applicable to charter party contracts (private carriage). Parties entering into charter parties for private carriage of goods by sea are free to allocate risks contractually with the result that the responsibility for cargo loss falls on the party who agreed to perform the duty involved.
In private carriage, charter parties are commonly fixed on a “Free In-Out Stowed” basis (FIOS). The cargo will be loaded, stowed and discharged by the charterer or its stevedore, free of risks and expense to the shipowner. However, if bills of lading are issued by a ship under charter, the bills must comply with the terms of Cogsa.
The M/V Arktis Sky case was commenced in New York district court by a consignee against an ocean carrier for cargo damage caused by a shift in stow. The shipowner defended on the ground that stowage was performed by stevedores hired by the cargo shipper. The shipowner argued that it had protected itself from the responsibility of poor stowage by utilizing an FIOS clause in the negotiable bill of lading.
Two decades ago the 2nd circuit proclaimed that Cogsa creates a non-delegable duty on behalf of the common carrier to load and stow cargo properly. However, the district court in the M/V Arktis case found this proclamation to be dictum (a mere assertion) and that the carrier’s duty was not genuinely non-delegable. Thus, the district court helf “that a carrier is not responsible for the consequences of improper stowage by agents of the shipper pursuant to an FIOS bill of lading.”
The appeals court found the district court’s holding directly contrary to Cogsa:
“Any clause . . . . in a contract of carriage relieving the carrier . . . from liability for loss or damage to . . . goods arising from negligence, fault or failure in the duties and obligations provided (to Cogsa), shall be null and void and of no effect.”
It held the FIOS agreement was “null and void” under Cogsa because it purported to relieve a carrier of liability for negligence in one of its duties, the stowage of cargo.
“There should be little doubt that the purpose of Cogsa is to place primary responsibility for the safety of the cargo upon the vessel, its operators and owners. The parties cannot by private agreement circumvent the legislative purpose of (Cogsa).”
The M/V Arktis Sky case now makes it patently clear that Cogsa prohibits an ocean common carrier from delegating its responsibility for properly loading and stowing cargo.