1. Introduction[1]
1.1. Overview
Norway has long traditions as a maritime nation. Due to the country's proximity to the sea, many Norwegian exporting industries are strategically situated along the coastline and use ships as the primary means of transporting goods. It should therefore come as no surprise that carriage of goods by sea is a key issue in Norwegian maritime law.
In this article we will examine Norwegian law regulations pertaining to the carrier's liability for cargo damage under contracts of carriage by sea, concentrating on main liability rules relating to damage to general cargo.
The core legal provisions on carriage of general cargo by sea are found in the Norwegian Maritime Code of 1994 ("NMC") Chapter 13. The quoted passages of the NMC in this article are from the translation prepared at the request of the Ministry of Justice.[2] Quotes from Norwegian case law are our translations.
1.2. Background
The NMC and the former Norwegian Maritime Code of 1893 are the result of collaborative legislative efforts by Denmark, Sweden and Norway. In so far as carriage of general cargo is concerned, Norway is a signatory to the Bills of Larding Convention of 1924 (the "Hague Rules") as well as the Protocol of Amendments of 1968 (the convention in its amended form (the "Hague-Visby Rules").
Norway has also signed the United Nations Convention on the Carriage of Goods by Sea of 1978 (the "Hamburg Rules"), but has not ratified the convention. When drafting the NMC, it was, however, recognized that cargo interests ought to be better protected and therefore decided to align Chapter 13 as far as possible with the Hamburg Rules without coming into conflict with the Hague-Visby Rules. As noted by Supreme Court justice Bergljot Webster in her commentaries to the NMC Chapter 13, "the rules are adjusted so that they reflect the legislative technique of the Hamburg Rules and their substantive contents. Where necessary due to Norway's obligations according to the Hague-Visby Rules, the rules reflect the Hague-Visby Rules".[3]
The consequence of this alignment is that the rules of the NMC Chapter 13 are more favourable to the cargo interests than what is set out in the Hague-Visby Rules, inter alia, replacing the tackle-to-tackle principle with an extended liability period so that the carrier is liable from such time and place he or she comes into possession of the cargo.
Norway is also a signatory to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the "Rotterdam Rules"), but has not yet ratified the convention. The Norwegian Maritime Law Commission has recommended to await ratification until either the United States or the larger EU-states ratify the Convention.
1.3. The mandatory nature of the rules
As a point of departure, the rules on general cargo in the NMC Chapter 13 are mandatory and cannot be deviated from to the detriment of the cargo interests. This creates a certain degree of uniformity in the rules. On the other hand, issues inevitably arise with respect to the scope of Chapter 13 and the extent to which freedom of contract is curtailed.
With respect to the scope of Chapter 13, the rules apply to general cargo and we see from time to time that issues arise as to whether the claim in question is raised pursuant to a bill of lading or sea waybill as opposed to under a charter party. It is explicitly stated in the NMC that Chapter 13 does apply to charter party agreements, except where the issued bill of lading is considered to establish the legal relationship between the holder of the bill of lading and the carrier in which case Chapter 13 applies notwithstanding the existence of the charter party.
Another practical issue that we often see in terms of scope, is related to the role of the freight forwarder. The freight forwarder can act as contracting carrier where he undertakes responsibilities according to the mandatory provisions of Chapter 13, or as an intermediary, avoiding the liability of a carrier under Chapter 13. We see many cases where the freight forwarder seeks to avoid the mandatory rules in Chapter 13 by arguing that he or her merely acted as an intermediary. The General Conditions of the Nordic Association of freight forwarders (NSAB 2015) which are commonly used by freight forwarders in Norway and the Nordic countries, seek to clarify the role of the freight forwarder by setting out as an assumption that the freight forwarder is a contracting carrier unless “the freight forwarder specifies to the customer that the services are undertaken solely as intermediary”.[4] An illustration of the assessment can be found in the Court of Appeal judgment LF-2023-63371, concerning the former version of the conditions (NSAB 2000), where the roles of the freight forwarder was not as clearly specified as in the latest version. The court held, inter alia, that the fact that a freight forwarder had offered an "all in price" for the transport and collected payment, does not automatically imply that the freight forwarder had undertaken to transport the goods thereby assuming the role as contracting carrier. The assessment was, however, based on case specific facts and the transactional aspects remain an important factor when assessing whether the freight forwarder actually acted as an intermediary or not, see e.g. Oslo District Court judgement TOSL-2022-97485 concerning NSAB 2015.[5]
As to the extent of the mandatory effect, a debated issue is whether it is possible for the parties to limit the scope of the carrier's liability by agreeing to specific allocation of responsibility and tasks, e.g. by way of a FIO-clause. There is no uniform opinion in Norwegian legal theory, but leading maritime law scholar Erling Selvig has held that it follows directly form the NMC section 274 first paragraph that FIO-clauses do not contravene with the rules of the NMC Chapter 13.[6]
2. The main rules pertaining to the carrier's liability for cargo damage
2.1. General
The core rules pertaining to the carrier's liability for general cargo damage are found in the NMC sections 274 to 276. The NMC section 274 sets out the liability period, i.e. that the carrier is liable for the goods whilst in his or her care in the port of loading, during carriage and at the port of discharge.
The NMC section 275 first paragraph, reflecting the Hamburg Rules Article 5 paragraph 1, sets out the basis for liability:
"The carrier is liable for losses resulting from the goods being lost of or damaged while in his or her custody on board or ashore, unless the carrier demonstrates that the loss was not due to his or her personal fault or neglect or that of anyone for whom he or she is responsible."
The NMC section 276 sets out exemptions for nautical fault and fire. The exemptions are based on the Hague-Visby Rules Article IV, however so, that the exemption catalogue in Article IV paragraph 2 was considered partly superfluous as the exemptions in letter (c) to (q) were deemed to be covered by letters (a), (b) and the NMC § 275.
2.2. The basis of liability – the implications of reverse burden of proof
The basis of liability in the NMC § 275 is negligence or culpa, with a reversed burden of proof. It can be characterized as a custody-, professional- and employer liability.
The starting point under Norwegian law when considering whether the carrier has acted negligently, is to ask whether he or she ought to and could have acted differently. When considering what could be expected by the carrier, one must take into account the role and responsibility of the carrier. By way of illustration, the Supreme Court stated in the judgment ND-2019-9 (Norrland I) paragraph (71) that:
"…[i]t is the maritime carrier who is the expert in maritime transport and it is therefore the carrier’s task – including in cases where the goods are delivered completely unsecured – to ensure that the goods are secured as required for that purpose, once the cargo is taken on board".
Perfection will, however, never be required from the carrier and not every mishap qualify as negligence.
A defence commonly invoked by the carrier, is that the damage was caused by heavy weather as a peril of the sea.[7] Norwegian Courts expect that the carrier takes into account rough weather conditions and adjust the plans for carriage accordingly. In a few cases, however, Norwegian courts have exempted the carrier from liability on the basis of extreme and unexpected weather conditions. The last example from case law is the Court of Appeal judgment ND-1993-268 (Kronprins Harald), where the Court of Appeal held that the cargo damage was not caused by improper securing of the cargo, but was a result of extreme weather conditions.
The carrier will often be considered negligent if the damage is caused by breach of routines such as manuals for securing of cargo, see e.g. the Supreme Court judgment ND-2019-9 (Norrland I), breach of the vessel’s safety management system/ISM-code regarding bridge watch duties, see e.g. the Supreme Court judgment ND-2011-260 (Sunna) or breach of international public law regulations such as the IMSBC-code, see e.g. the Court of Appeal judgment ND-2021-14 (Cheshire).
The Chesire illustrates well how a Norwegian court generally would assess liability. The case concerned the total loss of the vessel "Cheshire" and her cargo due to a decomposition incident. The Court of Appeal held in paragraph (107) that:
"[The carriers] have acknowledged that the crew was negligent in letting the lamp remain on in cargo hold 4, contrary to clear instructions. Under the circumstances, this alone is sufficient to result in liability for the entire damage to the cargo. The damage would undoubtedly have been avoided if we assume that this cause did not exist.
Furthermore, the crew was negligent in not immediately taking actions, making further investigations, and notifying the [carrier] and [the cargo interests] when they discovered that there was something unexpected and irregular going on in cargo hold 4, although one could not expect them to immediately understand exactly what was happening or the seriousness of the problem. If the crew had acted with reasonable speed, the extent of the damage would probably have been significantly less.
In the opinion of the Court of Appeal, the degree of culpa is in no way in the lower tier of the negligence norm."
The cargo interest will have to substantiate that the cargo was damaged whilst in the care of the carrier, but does not have to prove negligence on the part of the carrier or his servants. If the carrier cannot prove that he acted with due care or that the damage was caused by one of the exemptions named in sections 275 or 276, the carrier is liable. The reasoning for the application of a reverse burden of proof, is that in most cases only the carrier has the possibility to ascertain what actually happened during the voyage. For cases decided by Norwegian courts, the practical effect of this evidence rule is that the carrier is often held liable, which in effect implies a stricter liability for the carrier than what would follow from ordinary negligence.
Leading Norwegian maritime law scholars, professors Thor Falkanger and Hans Jacob Bull, take the position in their book Scandinavian Maritime Law that the strictness of the liability lies “somewhere on the spectrum between the usual fault-based liability and strict liability".[8] The position has been recognized by the Court of Appeal in judgment ND-2021-14 (Cheshire) paragraph (45), referring to the District Court's account of the applicable legal framework.
There are two main reasons that can explain why Norwegian courts in practice apply a stricter liability.
First, pursuant to the NMC section 275 the carrier must "demonstrate" what the cause of damage is, and further that this cause of damage is due to other circumstances than errors and omissions for which the carrier is responsible. It was held by the Court of Appeal in judgment ND-2003-374 (Pergamos), that the term "demonstrates" means that it requires something more than “on a balance of probabilities” for the carrier not to be held liable. The position was confirmed by the Court of Appeal in judgment ND-2021-14 (Cheshire) paragraph (45).
Secondly, the reversed burden of proof also implies a duty to secure evidence. Doubts in respect to the assessment of evidence will commonly fall on the carrier if the carrier has failed to secure evidence. This means that Norwegian courts will place emphasis on the carrier’s failure to take reasonable and timely measures that could clarify the cause of damage. The Supreme Court stated in judgment ND-1997-302 (Lys-Line), in respect to the issue of whether the cargo was properly secured, that:
"Significant doubts arise regarding the evaluation of evidence in this case. However, the burden of proof rests with the carrier, and it is incumbent upon them to secure evidence demonstrating how the cargo was secured. That liability was involved was clear from an early stage. In this case, evidence preservation should have been undertaken sooner and in a more effective manner than what was executed. Any arising doubts concerning the chains and their attachment points, under these circumstances, must adversely affect the carrier.”
The same principle was applied by Oslo District Court in judgment ND-2021-6 (Spar Gemini), where the carrier presented new theories about the cause of damage late in the proceedings and well after investigation of real evidence was possible. Such new theories did not impress the presiding judge who stated that:
"The corrosion theory was first proposed long after the event. The court believes that the corrosion theory is not consistent with the contemporaneous observations and expert evaluations conducted on the rudder stock following the accident. As far as the court understands, it is also not possible to conduct a metallurgical examination of the rudder stock retrospectively. Any possible doubt regarding the condition of the rudder stock must, in any case, be to the detriment of the carrier, who failed to secure and analyse it."
The assumption is that it is the carrier who is the expert on sea transports and has both access and is closest to the evidence in time and space if there is an incident during the voyage. As stated by the Court of Appeal in ND-2003-374 (Pergamos) in relation to the reverse burden of proof rule:
"Such a rule is reasonable taking into account that the cargo owner has little or no possibility at all to monitor the carrier and those for whom the carrier is responsible. The cargo has been in the care of the carrier, and he [the carrier] is the one who have had access to the relevant information."
2.3. Exemptions from liability
The NMC section 276 sets out exemptions from liability in certain situations stating that:
"The carrier shall not be liable if he or she can demonstrate that the loss resulted from:
- fault or neglect in the navigation or management of the ship, on the part of the master, crew, pilot or tug or others performing work in the service of the ship, or
- fire not caused by the fault or neglect of the carrier personally."
An example of the nautical error exemption is found in the Supreme Court judgment ND-2011-260 (Sunna) where the vessel grounded after the first officer fell asleep on watch. The exemption did, however, not apply as the vessel was considered unseaworthy at the commencement of the voyage (see below on the concept of original unseaworthiness).
An example of error in the management of the vessel is the Court of Appeal judgment ND-1987-229 (Ulla Dorte). In this case, the cargo suffered water damage due to the improper wedging of the cargo holds. Based on the prevailing circumstances, the Court of Appeal held that the wedging of the cargo holds at sea was essential for the safety of the vessel and consequently undertaken as part of the management of the vessel. The exemption was therefore applicable. The fact that the wedging of the holds also protected the cargo from water ingress was not decisive. The judgment illustrates the important distinction between faults in the management of the vessel which may lead to exemption from liability, and faults in the management of the cargo which is not a basis for exemption from liability.
As to the fire-exemption, it is held by leading scholars Falkanger and Bull that open flames and smouldering qualify as fire, and further that once a fire has ignited, “damage caused by smoke and by attempts to extinguish it will be treated in the same way as direct fire damage”.[9] In Court of Appeal judgment ND-2021-14 (Cheshire), the carrier argued before the court of first instance that decomposition in a cargo of fertilizer, causing total loss of the vessel and her cargo, qualified as “fire” in the meaning of the NMC section 276. The District Court did not consider the contention as the vessel in any event was deemed to be unseaworthy at the commencement of the voyage. The carrier did not maintain the argument before the Court of Appeal, and in our view a chemical process such as decomposition does not qualify as “fire” under the NMC section 276.
The NMC section 276 second paragraph provides a qualification of the exemptions relating to the seaworthiness of the vessel, stating that:
"The carrier shall nevertheless be liable for losses in consequence of unseaworthiness because the carrier personally or a person for whom the carrier is responsible failed to take proper care to make the ship seaworthy at the commencement of the voyage. The burden of proving that proper care was taken rests on the carrier."
The provision regulates so-called “original unseaworthiness”. It is clear that faults linked to the condition of the vessel, crew failures and insufficient planning of the voyage can lead to the vessel being considered unseaworthy at the commencement of the voyage. Consequently, if the vessel is deemed unseaworthy at the commencement of the voyage it is irrelevant whether the cargo damage was caused by a nautical error or faulty management.
The Supreme Court judgement ND-2011-260 (Sunna) serves to illustrate the issue of original unseaworthiness. As mentioned above, the cargo vessel MV "Sunna" grounded after the first officer fell asleep whilst on watch on the bridge. The Supreme Court considered that the immediate cause of the grounding, i.e. that the first officer fell asleep whilst on watch, undoubtedly fell within the exemption "error in navigation". However, the Supreme Court considered further the vessel's watch routines, and held that as a result of the Master's practice of keeping only one officer on watch during the night, the vessel was deemed to be originally unseaworthy at the commencement of the voyage. The Supreme Court stated that:
"According to the NMC, section 131, the Master must, before the voyage commences, ensure that the ship is in seaworthy condition, and en route he must do whatever is in his power to maintain this condition. When it is clear in advance – due to the Master's arrangements for the crew – that the ship will consistently be unseaworthy during the nights, then there also exists - in my opinion - original unseaworthiness. In such a case, the voyage must be assessed a whole, and it is irrelevant whether there were no errors in respect to the crewing of the bridge at the moment the ship left the quay. A prudent shipowner would – if he had been aware of the circumstances – not allowed the ship to commence its voyage with a watchkeeping arrangement that exposed the cargo to a significantly increased risk."
The vessel may be deemed seaworthy even if there are circumstances at the commencement of the voyage which could amount to unseaworthiness, if those circumstances are known and planned to be addressed during the course of the voyage. The classic example is when the vessel leaves a calm port with the hatches open but with a plan of closing them before entering rougher waters. However, if there is no awareness of the circumstances that may render the vessel unseaworthy, and thus no plan at the commencement of the voyage to ensure that the vessel will be seaworthy as and when required during the voyage, the vessel cannot be considered seaworthy at the commencement of the voyage, see e.g. the Supreme Court judgment Rt-1920-131 (Urd II).
3) The liability for, and of, sub-carriers
Pursuant to the NMC section 275, the carrier is vicariously liable for his agents and servants. In terms of sub-carriers, the NMC section 285 specifically sets out that the carrier is liable for any sub-carrier(s) used during the voyage, unless it has been expressly agreed that a certain part of the carriage shall be performed by a named sub-carrier and further that the carrier shall be exempted from liability for that part of the carriage. As an additional requirement, such exemption cannot be invoked if it is not possible to bring legal action against the sub-carrier before a court competent according to the NMC section 310, see below on this section. The provisions in the NMC pertaining to sub-carriers are based on the Hamburg Rules Articles 10 and 11.
According to the NMC section 286, each sub-carrier is liable for the part of the carriage that the sub-carrier performs, according to the same mandatory liability rules that apply to the contracting carrier. The sub-carrier's liability is not depended on the issuance of a bill of lading, sea waybill or another form of contract, and arise as a matter of law when accepting the cargo, creating a quasi-contractual relationship between the cargo owner and the sub-carrier regardless of the chain of contract.
Furthermore, the carrier and the sub-carrier in which custody the cargo is when damaged, are jointly and severally liable for damage to the cargo, see the NMC section 287. The joint liability of the carrier and sub-carrier(s) will never exceed the limitations of liability set out in Chapter 13 unless otherwise stated therein.
When making claims for cargo damage in Norway, such claims are, for the reasons set out above, routinely directed against both the contracting carrier and the actual carrier, i.e. the sub-carrier in which the custody the goods were at the time of damage. It is our experience that this from time to time is overseen by international cargo interests before instructing Norwegian lawyers. Furthermore, it is important to note that the claims, procedurally are considered individual and separate, and thus need to be dealt with as such, inter alia, when interrupting the time-bar period or commencing legal actions before the Norwegian courts.
4) Limitations
The NMC Chapter 13 contains rules on limitation of liability in sections 280-283 reflecting the limitations set out in the Hague-Visby Rules. Accordingly, the carrier's liability is limited to the highest amount of either i) SDR 667 for each unit lost or damaged, or ii) 2 SDR for each kilogram of the gross weight of the goods lost or damaged. What constitutes a "unit" is a frequently discussed issue, see e.g. the Supreme Court judgment ND-1970-281 (Lyngenfjord) concerning carriage of copper wire transported in bundles each comprising seven smaller rolls, and where it was held by the Supreme Court, based on a concrete assessment and expressing doubt, that the bundle as opposed to each roll constituted the "unit" in the meaning of the NMC section 280.
There are different limitation rules for carriage of goods by road, which from time to time leads to disputes as to whether the NMC or the Norwegian Road Carriage Act apply to a particular cargo damage in a multimodal transport, see e.g. Supreme Court judgment ND-2019-9 (Norrland I).
The NMC section 282 sets out that the limitations in Chapter 13 apply regardless of the basis of liability, thereby preventing the cargo interests from circumventing the limitations of liability by making a claim in tort. The provision reflects the Hamburg Rules Article 7.
The limitations of liability are set aside in the event of gross negligence or wilful misconduct on the part of the carrier with the knowledge that such loss would probably arise, see the NMC section 283. The provision is based on the Hamburg Rules Article 8. This raises issues both in respect to what constitutes gross negligence, knowledge pertaining to the loss and with which persons the carrier is identified with.
In order for a behaviour to be characterized as grossly negligent under Norwegian law, the Supreme Court held in its judgment Rt-1989-1318 on p. 1322 that the behaviour must "represent a marked deviation from normal, responsible behaviour (…) where the person concerned is therefore significantly more to blame than where it is a question of general negligence". This was later affirmed by the Supreme Court in judgment HR-2017-1977, where the Supreme Court in paragraph (45) emphasised that the "degree of deviation from the norms for responsible behaviour – the degree of blameworthiness – is thus what determines whether the negligence is gross". See also the Court of Appeal judgments LH-2011-15471 (Langfoss) and ND-2020-11 (Norrland II), where the carrier in both cases unsuccessfully argued that the limitations had to be set aside. The requirement that the carrier must have knowledge that loss would probably result from the grossly negligent action, implies that the threshold is particularly high, see e.g. assessment in the Court of Appeal judgment ND-2020-11 (Norrland II).
In terms of identification, the gross negligence or wilful misconduct must have been committed by someone with which the carrier can be identified. This includes the upper management of the carrier, as well as persons in senior position with particular responsibility for managing the part of the business with which the gross negligence is associated, see Court of Appeal judgment ND-2020-11 (Norrland II). The carrier will not be identified with its ordinary employees, including the master and crew. The issue will therefore commonly relate to whether the carrier has failed to implement proper routines in respect of for instance the ISM Code or of key importance to the security of the cargo, see e.g. the Court of Appeal judgment ND-2020-11 (Norrland II).
The global limitation rules in the NMC Chapter 9 also apply to cargo damage, albeit in practice only for special cargoes either of high weight or with a large number of units.
5) Jurisdiction and choice of law
The NMC Chapter 13 contains specific provisions on jurisdiction in section 310, similar to the Hamburg-Rules Article 21. Section 310 sets out that a claimant bringing a claim in respect to general cargo is entitled to commence legal action in a court of law either where (a) the principal place of business of the defendant/carrier, (b) the place where the contract was made provided that the defendant/carrier has a place of business or an agent there through whom the contract was concluded, (c) the place of receipt for carriage according to the contract or (d) the agreed or actual place of delivery according to the contract.
The NMC section 310 sets out that any agreement which purports to limit these rights shall be invalid in so far as such limitations are concerned.
The section contains several clarifications of scope and exemptions. One exemption of particular importance is that the provisions in the NMC section 310 do not apply if anything else follows from the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of 2007, which has been incorporated into Norwegian law.[10] Since Norway has not ratified the Hamburg Rules and the Hague-Visby Rules do not regulate jurisdiction, the issue of jurisdiction in cargo disputes between companies domiciled in EEA-states must be decided in accordance with the rules of the Lugano Convention.
Contributed by Partners Christian Bjørtuft Ellingsen and Børge Alsvik of Gjelsten Herlofsen Advokatfirma AS.
References
[1] Lawyers at GH law have acted in the several of the cases referred to in this article
[2] Norwegian Maritime Code.pdf (uio.no).
[3] Norsk lovkommentar, note (436), Sjøloven - Gyldendal Rettsdata
[4] The Nordic Association of freight forwarders (NSAB 2015) section 3 letter C)
[5] The case has reportedly been appealed and it is expected to be heard by the Court of Appeal in 2024
[6] Festskrift till Jan Ramberg (1996) p. 429 to 437
[7] See the Hague-Visby Rules Art. IV no. 2 letter c)
[8] Scandinavian Maritime Law, The Norwegian Perspective 4th ed. p. 346
[9] Scandinavian Maritime Law, The Norwegian Perspective 4th ed. p. 357.
[10] The Lugano Convention is comparable to Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels I Regulation)