In its judgment of 14 March 2019 in Glencore Energy v. Freeport Holdings, the English Court of Appeal provided a useful guide to the interpretation of treaties, summarised below.
On 14 May 2015, the Aframax tanker ‘Lady M’ was on its way from Taman in Russia to Houston in the USA, carrying 62,000 tonnes of crude oil, when a fire started in the engine room. Lady M was towed to Las Palmas for repairs.
This case concerns a claim brought by Glencore (owner of the crude) against the owner of Lady M for losses caused by the fire. For the purposes of the proceedings, the fire was assumed to have been started deliberately by the Chief Engineer. The contracts of carriage were subject to the Hague-Visby Rules. The Court of Appeal looked at whether the Hague-Visby Rules can exempt a carrier from liability to the cargo owner for damage caused deliberately or barratrously. (The Court used the definition of barratry from the Marine Insurance Act 1906, to include every wrongful act wilfully committed by the master or crew to the prejudice of the owner).
Article IV.2(b) of the Rules reads:
2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(b) Fire, unless caused by the actual fault or privity of the carrier.
(q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier; but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents of the carrier contributed to the loss or damage.
The Court held that, on a plain meaning of the words, Article IV.2(b) of the Hague-Visby Rules exempts a carrier from liability where the loss results from fire, unless (a) it was caused by the actual fault or privity of the carrier, or (b) the carrier was in breach of its obligations set out in Article III.1 of the Rules to make the ship seaworthy and to properly man the ship.
The Court found that Glencore’s claim necessarily implies rewriting Article IV.2(b) so that it would read ‘Fire, unless caused by the actual fault or privity of the carrier, or the fault or neglect of the crew’ and that there was no basis for implying such words, either as a matter of ordinary meaning, nor on any other basis.
Summary of the Court’s approach to the interpretation of Article IV.2(b)
Vienna Convention on the Law of Treaties
The rules of interpretation of the Vienna Convention require words to be given their plain meaning in light of their object and purpose. If such interpretation leaves the meaning ambiguous or obscure or leads to a manifestly absurd or unreasonable result, supplementary means of interpretation are allowed, including preparatory work of the treaty.
In the UK, the Hague-Visby Rules took effect in 1971 and the Vienna Convention in 1980. The Court held that the rules of interpretation of the Vienna Convention are consistent with the approach to interpretation established before the Vienna Convention took effect and it was, therefore, unnecessary to consider how any inconsistency might be resolved.
English Law Precedent
The Court looked at pre-existing law (i.e. prior to the Hague-Visby Rules) submitted by Glencore but held that none of the cases supported Glencore’s argument. Lord Simon found that the cases may provide support for the broad proposition that exclusion of liability for damage caused by deliberate wrongs committed by the crew will require clear words.
The Court held that the interpretation of the Hague-Visby Rules, being an outcome of international conferences, is not controlled by English cases, which should not be paid excessive regard. Where terms of art have received judicial interpretation, they may be presumed to have been used in the Rules in accordance with such interpretation; but the words have to be given their plain meaning without concern as to whether that involves altering the previous law.
The Court looked at the travaux préparatoires of Article IV of the Hague-Visby Rules and found that they supported the plain meaning of the text. In any event, the Court doubted whether the threshold conditions for even considering the travaux préparatoires came close to being met. While the condition that the travaux be public and accessible was met, the other two conditions were not: (i) there was no truly feasible alternative interpretation of the words, (ii) this was not one of those rare cases where the travaux clearly and indisputably point to a definite legal intention.
Technically obiter, LJ Simon added a further potential objection to considering travaux préparatoires: it is possible that parties to an international convention may choose (or at least acquiesce in) imprecise language.
The Court found that there was no ambiguity in Article IV.2(b): ‘fire’ does not contain any implicit qualification as to how the fire is started, whether accidentally or deliberately, negligently or otherwise. Nor is there any implicit qualification depending on who may be responsible for the fire. It was common ground that an act of barratry occurs without the actual fault or privity of the carrier, which is unsurprising, as in barratry the crew acts against, rather than on behalf of the shipowner.
The Court of Appeal did not contrast Article IV.2(b) with Article IV.2(q), the latter expressly containing a reference to fault or neglect of the agents or servant of the carrier, while in IV.2(b) such language is absent and would, therefore, have to be implied. Nevertheless, the contrasting language does support the Court’s interpretation of Article IV.2(b) and had been previously noted in the High Court judgement.
The Court of Appeal found that its view of the ordinary meaning of Article IV.2(b) also gains support from a number of authoritative textbooks, including Aiken, Lord & Bools on Bills of Lading (2ndedition), Scrutton on Charterparties and Bills of Lading (23rdedition), Carver on Bills of Lading (4thedition), and Voyage Charters (4thedition).