Recent events have caused significant disruption to the transportation of goods. For days, a trucker convoy ground two-way traffic to a halt across the Ambassador Bridge, a corridor which accounts for 25% of all trade between the United States and Canada. Meanwhile, the ongoing conflict in Ukraine has devastated trade in the Black Sea and Europe, resulting in hundreds of cargo ships being stranded in the world’s second largest grain exporting region with cargo containers piling up at European ports. On the other side of the world in Asia, the spectre of fresh city lockdowns due to Omicron in China brings renewed risks of supply chain shocks and disruption.
These disruptions may trigger in-house legal and risk teams for cargo interests to pay closer attention to loss exposure and available recourse. Where Hague or Hague Visby Rules are incorporated into the bill of lading and terms, the carrier may avail itself of the defences set out in Article IV r 2. These defences include rule (j) for strikes, or lockouts or stoppage or restraint of labour from whatever cause, whether partial or general, the restraint of princes set out in rule (g), quarantine restrictions stated in rule (h), and the catch-all in rule (q).
Standard bills of lading may also contain a liberty clause with protective wording (“or so near thereto as she may safely get”). This is potentially significant for voyage charterers with interests in Europe at the moment, as vessel owners may discharge the cargo at some other port if the designated port is not deemed safe. Cargo interests should carefully review the bill of lading or charterparty terms to see if any other protective clauses – another example being an “infectious or contagious diseases” clause – permit vessel interests to deviate from the planned voyage.
As well, voyage charterers should be aware that delays, for example at a load or discharge port, can count as laytime and/or demurrage. If the delay arises after a Notice of Readiness is tendered, charterers’ liability for laytime may depend on the wording of the charterparty and if any protective clauses are incorporated.
Meanwhile, additional risks can arise in transactional chains. Contracts frequently operate in an interconnected context. Intermediate interests may be left exposed if protective clauses in their contracts are not consistent with the protective clauses found in the contracts of entities whose performance the intermediate interests rely upon to satisfy their own contractual obligations. Intermediate commodity traders, for example, face risk if a seller at the top of the contractual chain has stronger force majeure wording vis-à-vis the trader than the trader has vis-à-vis its client. In these circumstances, in-house legal teams may want to consider wording a force majeure clause more consistently with the other interests in the transactional chain, rather than simply using standard boilerplate language.
If you have any questions about navigating the current challenging environment, David Fung and Kim Wigmore of Whitelaw Twining’s Transportation Group would be happy to assist you.
