Hague-Visby Rules - Carrier Liability Limits and Why They Matter for Your Cargo

Hague-Visby Rules - Carrier Liability Limits and Why They Matter for Your Cargo

The Hague-Visby Rules are the dominant international convention governing a shipping line's liability for cargo loss or damage during ocean carriage. Under Article IV(5)(a), a carrier's liability is capped at 666.67 Special Drawing Rights (SDR) per package or unit, or 2 SDR per kilogram of gross weight, whichever is higher. At current exchange rates, this means a carrier's maximum liability for a lost container of finished goods worth USD 500,000 can be as low as USD 15,000 to USD 25,000. The gap between cargo value and carrier liability is the single most important reason exporters carry marine cargo insurance.

What the Hague-Visby Rules Are

The Hague-Visby Rules are the combination of three instruments:

• The Hague Rules - the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, signed at Brussels on 25 August 1924
• The Visby Amendments - the Protocol amending the Hague Rules, signed at Brussels on 23 February 1968
• The SDR Protocol - the Protocol amending the Hague-Visby Rules to convert the liability limits from gold francs to Special Drawing Rights, adopted on 21 December 1979

Malaysia's position: Peninsular Malaysia switched from the original Hague Rules 1924 to the Hague-Visby Rules 1968 (as amended by the SDR Protocol of 1979) with effect from 15 July 2021. Sabah and Sarawak continue to apply the original Hague Rules 1924.

The Carrier Liability Limit in Detail

What "Package" Means - The Container Debate

Article IV(5)(c) provides: where the bill of lading enumerates the number of packages inside the container, each enumerated package is treated as a separate package for limitation purposes. Where the bill simply states "1 x 40ft container STC", the container itself is typically treated as the single package.

The One-Year Time Bar

Under Article III Rule 6, any claim against the carrier must be brought within one year from the date the goods were delivered (or should have been delivered). This is a hard limit.

The Carrier's 17 Defences

Article IV(2) gives the carrier seventeen separate defences, including perils of the sea, act of God, act of war, inherent vice, insufficient packing, latent defects, and the "nautical fault" defence (negligence of crew in navigating or managing the ship).

FAQ

What is the carrier's liability limit? 666.67 SDR per package or 2 SDR per kilogram, whichever is higher.

Does Malaysia apply Hague-Visby? Peninsular Malaysia since 15 July 2021. Sabah and Sarawak still apply the original Hague Rules 1924.

What is the time bar? One year from delivery (Article III Rule 6).

What is the nautical fault defence? A defence allowing the carrier to avoid liability for crew error in navigating or managing the ship.

Official Source

• Hague Rules (Brussels Convention) 1924
• Visby Protocol 1968 / SDR Protocol 1979
• Related: Hamburg Rules | Rotterdam Rules | US COGSA