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Cargo has been discharged at the port of discharge without presentation of the original bill of lading — against the receiver’s LOI. The originals stayed with you because the intermediate buyer in the chain did not pay. What you hold are originals of a Congenbill 1994 bill of lading; you do not have the charter party, you do not have the sale contracts down the chain, and you do not have the text of the LOI.
This situation has two interconnected problems. The first — whom to sue: the bill of lading was issued under a charter party, there is usually more than one charter above the vessel, and which participant in that chain is liable under this particular bill is a separate legal question. The second — where to sue: the bill of lading incorporates the arbitration clause from the charter, but you do not have the charter party, and the shipowner is unlikely to volunteer it.
This article is a practical roadmap for that situation.
Typical scenario: seller holds the originals, cargo has already been discharged under LOI
A Ukrainian exporter sells a parcel of sunflower oil FOB Chornomorsk to an offshore trader. The trader on-sells the cargo down the chain — to a multinational receiver in Rotterdam. The contract between the exporter and the trader is on FOSFA 53, payment cash against documents through a Swiss bank.
The cargo is loaded; the master issues three originals of a Congenbill 1994 bill of lading — to order, notify party the multinational. Documents are presented to the trader’s bank. The payment window — two banking days from presentation — passes; no money. In parallel, the vessel arrives in Rotterdam and discharges into the receiving terminal against the multinational’s LOI, without presentation of any original bill of lading to the shipowner. The cargo is physically pumped into the terminal tanks; control over it rests with the multinational. The multinational had earlier paid its contractual price to the offshore trader; the trader did not pass that money up the chain.
What the exporter holds is three originals of the bill of lading. He has no charter party (he is an FOB seller, not party to the charter); no sale contract between the trader and the multinational; no text of the LOI. Nothing beyond the bills of lading and the usual shipping documentation.
From this point, two parallel disputes unfold for the exporter. The first is obvious — against the trader, under the sale contract, for non-payment; that goes to FOSFA arbitration under the contract. The second is against the shipowner, who released the cargo without presentation of the originals. The rest of this article is about that second front: who exactly the “shipowner” is in the charter chain above the vessel, on what basis to bring the claim, and where — what court or arbitration.
Who is the carrier under a bill of lading issued under a charter party
There is exactly one carrier — English law identifies it objectively, from the construction of the bill of lading. The claimant cannot “choose” which participant in the charter chain to sue.
Registered owner or bareboat charterer
The key distinction is between the registered owner and the bareboat charterer.
A vessel always has a registered owner — the company in whose name the vessel is registered under the flag. That owner may either operate the vessel itself (with its own crew and master) or charter it out on a bareboat charter (charter by demise) — a particular form of chartering in which the charterer takes the vessel “bare”, without crew, and hires its own master and crew. During the bareboat charter it is the bareboat charterer who legally controls the vessel and is the master’s employer. English law treats it as “owner pro hac vice” — owner for this purpose — for the purposes of the contract of carriage.
Time charter and voyage charter do not do this. Under a time charter and a voyage charter, possession of the vessel and the crew remain with the owner (or with the bareboat charterer, if one is in place); the time or voyage charterer pays for the use of the vessel but the master and crew are not its servants. Accordingly, the chain of time and voyage charters above the vessel (head charter + sub-charters) by itself does not affect the identification of the carrier under a bill of lading signed by the master — the master remains the servant of the person in whose possession the vessel is.
A master’s signature binds his employer
When the bill of lading is signed by the master of the vessel, the rule is direct: the master’s signature is a contract with his employer. If there is no bareboat charter — it is the registered owner. If there is a bareboat charter — it is the bareboat charterer.
The principle has been embedded in English law since the late nineteenth century in Baumwoll Manufactur von Carl Scheibler v Furness [1893] AC 8: under a demise charter the master is the servant of the demise charterer, and his signature binds the demise charterer, not the registered owner. If there is no bareboat charter — even where time and voyage charters sit above the vessel — the master remains the registered owner’s servant, and his signature binds the owner. The presumption in that direction is strong and well established.
When the bill of lading is signed not by the master but by agents
It is more complex when the bill of lading is signed not by the master personally but by agents who, in the signature box, expressly name a participant in the charter chain (typically a time charterer running a liner service) as Carrier. Here the identification of the carrier is no longer automatic and becomes a question of construing the document as a whole.
Such a situation was considered in Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12. CPS, the time charterer of the vessel, ran a regular service between ports on its own Conline form bills of lading (a liner service, in shipping terms). Above the signature box on the face of the bill was printed: “In witness whereof the Master of the said vessel has signed…”; but the signature box itself was filled in with typewritten words: “As Agent for CPS (the Carrier)”, stamped by CPS’s agents at the loading port. On the reverse were the standard demise clause and identity-of-carrier clause, identifying the shipowner as carrier. The cargo was damaged in transit. By the time of trial CPS had become insolvent, and the cargo owners sued the registered owner, relying on the demise/identity clauses on the reverse. The House of Lords dismissed the claim: the contract of carriage in such a bill of lading is a contract with CPS, not with the registered owner; and since CPS was insolvent, there was no one to recover from.
The court’s logic: the direct identification in the signature box on the face (“As Agent for CPS (the Carrier)”) prevails over the demise and identity-of-carrier clauses on the reverse. A reasonable holder of the document first looks at the face, where the identification is direct, and only then at the standard provisions on the reverse.
What is on the reverse of a Congenbill 1994
On the reverse of a Congenbill 1994 there are five standard clauses: incorporation clause (cl. 1), Paramount Clause (cl. 2), General Average and New Jason Clause (cl. 3, 4), Both-to-Blame Collision Clause (cl. 5). There is neither a demise clause nor an identity-of-carrier clause on the reverse of a Congenbill 1994. If the master has signed personally — the carrier is his employer, with no competition from the reverse side.
The key clause for our situation is clause 1. Its formula — “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated” — directly incorporates the arbitration clause from the charter into the bill of lading. This means: a dispute with the carrier will go to the forum and under the law provided in the charter. But the FOB seller has not seen the charter; the shipowner under threat of claim is not in a hurry to disclose it voluntarily. The result is a paradox: you are bound by an arbitration clause whose precise wording you do not know, while the counterparty who could disclose it has reason to stay silent. There is a separate section on this below.
How to ascertain in practice whether there is a bareboat charter
The registered owner of the vessel and the flag can be found through Equasis. The bareboat charterer is a separate figure that public databases do not show directly. Sometimes the data on the ISM Manager in Equasis can be an indicator, if it differs from the registered owner. As an option, send a letter before claim to the registered owner and to the ISM Manager simultaneously, if they differ.
Misdelivery as the cause of action against the carrier
The carrier must deliver the cargo against presentation of the original bill of lading. Delivery without an original is misdelivery: a breach of the central obligation of the carrier under the bill of lading, attracting strict liability towards the person entitled to sue under the bill. Neither the carrier’s good faith, nor an LOI from the receiver, nor local port practice is a defence.
Strict liability for delivery without the original
The line of authority has been built since the nineteenth century: a shipowner who delivers cargo without presentation of the original does so “at his peril”. In the twentieth century the Privy Council affirmed the line in Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576. Bicycle parts were shipped from England to Singapore under an order bill of lading. The carrier’s agent in Singapore delivered the cargo to the notify party without presentation of an original, against a bank guarantee (LOI). The buyer did not pay for the goods, and the seller-holder of the bill of lading brought a claim. The carrier relied on a cesser-of-responsibility clause in the bill of lading providing that its responsibility ceased after discharge. The Privy Council rejected this: the clause could not be construed as releasing the carrier from the central obligation of the bill of lading — to deliver against the original. Otherwise the bill itself would lose its meaning.
The Court of Appeal confirmed the strictness of the standard in Motis Exports Ltd v Dampskibsselskabet AF 1912 [2000] 1 Lloyd’s Rep 211: a carrier who delivered cargo against a forged bill of lading, without knowledge of the forgery, was nonetheless held strictly liable. Good faith is no defence; releasing against a forgery is at the carrier’s peril.
A receiver’s LOI does not release the carrier vis-à-vis the holder of the original
The carrier’s standard objection — “the cargo was delivered against the receiver’s LOI, and that release was permitted by the charter party”. The English court rejected that argument squarely in SA Sucre Export v Northern River Shipping (The Sormovskiy 3068) [1994] 2 Lloyd’s Rep 266. The carrier allowed a port organisation engaged by the receiver to discharge and take the cargo without presentation of an original. The charter party expressly permitted delivery against a bank guarantee (the commercial logic is the same as an LOI) where the originals had not arrived in time for discharge, and that provision was incorporated into the bill of lading. Clarke J: even incorporated into the bill of lading, such a clause does not bind the holder of the original, who was not a party to the charter. An LOI or a bank guarantee creates an indemnity obligation between the issuer and the carrier — and a right of recourse for the carrier against the issuer — but it does not divest the holder of the original of any rights.
A master is not obliged to comply with a charterer’s order to deliver without the bill of lading
Under a time charter the master is obliged to comply with “lawful orders” of the charterer. The Court of Appeal in Kuwait Petroleum Corp v I & D Oil Carriers (The Houda) [1994] 2 Lloyd’s Rep 541 clearly limited that rule: an order to deliver cargo without presentation of the original bill of lading is not a lawful order. The master is not bound by such an order, and a refusal is not a breach of the charter. On the other side of the same coin: if the shipowner did comply with such an instruction from the time charterer, an implied right of recourse to the charterer arises (The Sagona [1984] 1 Lloyd’s Rep 194).
This combination explains the commercial dynamic of misdelivery disputes. A shipowner facing a claim has an incentive to “settle” with the claimant and then pass the loss up to the time charterer who issued the instruction — who in turn turns to the entity that issued the LOI. The recourse chain works, and the shipowner is usually the first link willing to come to the table.
Where and how to bring the claim, if you do not have the charter
Back to the second problem. Congenbill 1994 cl. 1 incorporates the charter’s “Law and Arbitration Clause” into the bill of lading. That means: the applicable law and the arbitration clause from the charter are part of the contract of carriage in the bill of lading. If the charter is English law + London arbitration — that is where the dispute with the carrier will go. The holder of the bill of lading does not have the charter itself.
What wording in the bill of lading incorporates the arbitration clause
The English approach to the incorporation of a charter party arbitration clause into a bill of lading is strict. General words — “all terms, conditions and exceptions of the charter party” — do not incorporate the arbitration clause; for it to be carried into the bill of lading specific words expressly referencing the law and arbitration clause are required. The logic is that the arbitration clause is collateral to the carriage (it does not relate directly to shipment, carriage and discharge), and apt language is required for its incorporation; in cases of doubt the clause does not carry over.
Congenbill 1994 cl. 1 satisfies that requirement: the formula “including the Law and Arbitration Clause” is a direct reference. The arbitration clause of the charter is in your bill of lading.
Vessel arrest — first lever, and often the way to get the charter
In practice, before the holder of the bill of lading even begins to choose between court and arbitration, there is a far more effective instrument — vessel arrest.
Misdelivery is normally treated as a maritime claim — as a claim arising out of an agreement relating to the carriage of goods under Article 1(1)(e) of the Arrest Convention 1952 (“any … agreement relating to the carriage of goods in any ship whether by charter-party or otherwise”), and, depending on the framing of the claim, as a claim for loss of cargo under Article 1(1)(f) (“loss of or damage to goods including baggage carried in any ship”).
The availability of arrest is always tested under the law of the specific jurisdiction: whether it applies the 1952 Arrest Convention, the newer 1999 Arrest Convention, or its own national regime; who is the person liable on the claim; who owns the vessel at the time the claim arose and at the time of arrest; whether sister-ship arrest is available; and whether counter-security is required. Among the parties to the 1952 Convention are the UK, France, Germany, Greece, Italy, Spain, Portugal, Ireland, Belgium, the Netherlands and many other major European jurisdictions.
The effect of arrest is commercial, not legal. An arrested vessel is an insured asset, and every day of detention hits the shipowner directly — off-hire under a time charter, demurrage-style standstill under a voyage charter, insurance premiums, port dues. The shipowner himself is — first in line — interested in a quick resolution to return the vessel to commercial operation; his P&I Club steps in on his side (issuing a Letter of Undertaking or arranging security on the shipowner’s behalf). Release from arrest typically happens against the provision of a P&I Letter of Undertaking or a court deposit.
And this is the most important point for the second problem (where to bring the claim). During release negotiations the shipowner becomes materially more cooperative. It is often at this stage that he voluntarily provides a copy of the charter party — because without disclosing the charter it is impossible even to discuss in which forum the dispute will be heard. Sometimes the parties agree on the forum outright — London arbitration on LMAA Terms, an English court, occasionally an ad hoc arbitration — and that agreement is recorded either in the LOU itself or in the release agreement. Vessel arrest in our situation therefore works not only as a security measure but as a means of unlocking the second problem itself: getting the charter party, or at least the shipowner’s agreement on a specific forum.
If arrest did not work or is not available — two routes for filing
If arrest is not in the picture (the vessel is out of reach, no sister ship is available, or you have chosen not to pursue arrest), the holder of the bill of lading has two routes for filing.
First — a claim in the court of the shipowner’s place of registration. Under the general principle of international jurisdiction (forum rei — the defendant is sued where it is located) the holder of the bill of lading may bring the claim in the court of the country where the shipowner is registered. This is a national jurisdictional mechanism — in the EU it is enshrined in the Brussels Recast Regulation; in Singapore, the Marshall Islands, Liberia, Greece, Cyprus and most flags of convenience, it lives in domestic civil procedure.
The limitation here is significant. The bill of lading contains an incorporated arbitration clause — a binding agreement to arbitrate. Under Article II(3) of the New York Convention 1958 the court of any contracting state, on a party’s application, is bound to refer the parties to arbitration. So if the carrier in the country of the action, before submitting a defence on the merits, makes an application to stay in favour of arbitration — the court must send the parties to arbitration. The court route on the merits does not work in that situation. The route is genuinely useful only in niche scenarios — where the carrier misses the window to apply for a stay, has submitted to jurisdiction by defending on the merits, or where the arbitration clause has been improperly incorporated.
Second — commence arbitration on the best information available. A Notice of Arbitration referencing the charter party dated as on the face of the bill of lading (that field is usually filled in), expressly stating that the law and arbitration clause of the charter is incorporated into the bill of lading through cl. 1, and that the precise wording of the clause is unknown to the claimant because the shipowner has refused to disclose it. The claimant acts to the best of his knowledge — appoints his arbitrator, puts the respondent to the choice of either engaging or losing the chance to participate in the tribunal’s constitution, and depending on the respondent’s behaviour either proceeds or seeks the English court’s support through the statutory mechanisms of the Arbitration Act 1996.
The calculation here is that any objection from the respondent that “the arbitration was wrongly commenced” rebounds against him — he is the one who refused to disclose the clause on which he is objecting. Courts and tribunals tend not to reward that behaviour, and in the costs allocation it works in the claimant’s favour. But how exactly to close out this knot depends on the specifics: which respondent, what basis (contractual or statutory), readiness to apply for supporting orders to the court. There is no universal recipe here.
In the real-life story behind this article the case was resolved precisely through arrest: after the cargo was arrested in Rotterdam and the vessel was arrested in a Mediterranean jurisdiction, the multinational receiver paid the seller-holder of the originals directly — effectively a second time for the same cargo. In parallel, the seller continued the claim against the intermediate buyer in FOSFA arbitration — for non-payment and the resulting shortfall. The “blind” arbitration against the shipowner never had to be started — arrest resolved the matter at the release negotiation stage.
If you are facing delivery of cargo without an original bill of lading, and need help bringing the claim against the shipowner or arresting the vessel — get in touch:
