Jindal Iron and Steel Co Limited and others v Islamic Solidarity Shipping Company Jordan Inc

The House of Lords considered the meaning and effect of Article III, rule 2 and Article III, rule 8 of the Hague and Hague-Visby Rules in the context of charterparty clauses (F.I.O.S.T.) allocating loading, stowage and discharge to shippers/charterers/receivers. The court reaffirmed the long-standing rule, derived from the decision in G H Renton & Co Ltd v Palmyra Trading Corporation of Panama (1957 AC 149), that Article III, rule 2 prescribes the standard or manner in which the carrier's obligations are to be performed rather than an irreducible scope of obligations which cannot be varied by contract. Accordingly clauses which transfer responsibility for loading, stowage and discharge to cargo interests are not invalidated by Article III, rule 8, provided they are properly incorporated into the contract of carriage (for example via a wide incorporating clause in the bill of lading).

The House refused to depart from Renton. Its reasons included the weight of authority since Renton, the commercial reliance on that decision, the absence of compelling evidence of manifest injustice or widespread mischief, and the fact that international law reform processes (UNCITRAL/UNCTAD) were addressing such matters. Although the court acknowledged persuasive textual and purposive arguments favouring Devlin J's interpretation in Pyrene v Scindia, the need for certainty and reliance, and the absence of a demonstrably unsatisfactory operation of Renton, justified maintaining the existing rule.

Background and parties:

• The appeal arose from loss to 435 steel coils shipped from Mumbai to Motril aboard the vessel Jordan II. The shipowners chartered the vessel under a Stemmor form charterparty and bills of lading on Congenbill form incorporated the charterparty terms. The charterparty contained an F.I.O.S.T. clause and an express provision that shippers/charterers/receivers were to load, stow, secure, dunnage and discharge the cargo free of expense to the vessel.
• The cargo owners (shippers and consignees) alleged damage caused by improper loading, stowage and discharge and sought to hold the carrier liable despite the charterparty allocation of those duties.

Procedural posture: The case came before the House of Lords on appeal from the Court of Appeal ([2003] EWCA Civ 144). A preliminary issue agreed by the parties and tried below was whether the charterparty agreement transferring loading, stowage and discharge to cargo interests was invalidated by Article III, rule 8 of the Hague/Hague-Visby Rules because Article III, rule 2 imposed an inescapable carrier obligation to perform those functions.

Issues framed:

1. Does Article III, rule 2 of the Hague/Hague-Visby Rules define an irreducible scope of carrier obligations (including loading, stowage and discharge) that cannot be contracted out?
2. If Article III, rule 2 does so, is an agreement such as the charterparty clauses here invalidated by Article III, rule 8?
3. Should the House depart from the earlier decision in Renton which held that such contractual allocation is permissible?

Court's reasoning:

• The House reviewed authority including Devlin J's reasoning in Pyrene v Scindia, the decision of the House in Renton, subsequent English authorities, the travaux préparatoires and foreign decisions. The linguistic and purposive arguments favouring Devlin J's construction were acknowledged as powerful; the French text and travaux support an interpretation that Article III, rule 2 may be read as imposing an undertaking to perform the functions listed.
• Despite that, the majority concluded that Renton represents a clear ratio decidendi and has been followed extensively, and that there was insufficient demonstration that Renton produced manifestly unjust results or had worked unsatisfactorily in practice to justify departure under the Practice Statement. The commercial importance of certainty, widespread reliance on the Renton rule in contractual practice, insurance and markets, and the existence of international review processes weighed strongly against overruling Renton.
• The House therefore refused to disturb the established law that parties may contractually allocate responsibility for loading, stowage and discharge and that Article III, rule 8 does not automatically invalidate such clauses when properly incorporated.

Relief sought: The cargo owners sought to hold the carrier liable for loss resulting from improper loading/stowage/discharge despite the charterparty provisions. The House denied that relief by dismissing the appeal on the preliminary issue.

Appeal dismissed. The House refused to depart from the decision in G H Renton & Co Ltd v Palmyra Trading Corporation of Panama and held that Article III, rule 2 of the Hague/Hague-Visby Rules prescribes the manner of performance of carrier obligations rather than an irreducible scope that cannot be varied by contract; accordingly a charterparty clause (such as F.I.O.S.T.) transferring loading, stowage and discharge to shippers/charterers/receivers is not invalidated by Article III, rule 8 when properly incorporated. The refusal to overrule Renton was motivated by precedent, commercial reliance and international law reform processes.

On appeal from the Court of Appeal: Jindal Iron & Steel Co Ltd & Others v Islamic Solidarity Shipping Company Jordan Inc (The Jordan II) [2003] EWCA Civ 144; first instance decision given by Nigel Teare QC sitting as Deputy High Court Judge (reported at [2003] 2 Lloyd's Rep 87). The House of Lords dismissed the appeal ([2004] UKHL 49).