This case illustrates the complex relationship that can exist between proceedings brought against two different sea carriers arising out of the same event. French Courts addressed the following question: how can judgments issued in one of the proceedings be used in the other proceedings? Ultimately, the handling of circular recourses between cargo interests, sea carriers and stevedore companies depends on the interpretation of privity of contract and res judicata.
A vessel loaded containers in a French port to be transported overseas under bills of lading issued by the vessel’s owners and charterers, respectively. The vessel encountered bad weather and a number of containers fell overboard and on to the deck. The court appointed expert in a pre-commencement expert process found that the collapse of the container stow resulted from the improper positioning of the containers by the stevedore company.
Cargo interests subsequently commenced proceedings before foreign and French Courts against owners (1) and charterers (2), as sea carriers, for compensation for the cargo losses arising under their respective bills of lading. Reed Smith’s Paris office defended the charterers in the French proceedings.
- Cargo claims under the Owners’ bills of lading
Cargo interests commenced a claim against Owners for compensation for their cargo losses. Owners then commenced two sets of proceedings as follows, seeking an indemnity for the cargo claims and compensation for the damage done to their vessel:
- Legal proceedings in France against the stevedore company based on negligence. In turn, the stevedore company claimed an indemnity from Charterers. The first Court of Appeal held the stevedore company and Owners liable for the cargo loss, with a liability apportionment of 60% (stevedore) and 40% (Owners) for their respective negligence in the positioning and control of the containers, excluding any liability of the Charterers (the “Judgment”).
- Arbitration proceedings abroad against Charterers under the charter party. The Arbitral Tribunal held that the Charterers were required to indemnify Owners for the cargo claims commenced against them, up to the contractual limit of liability, provided that the related claims were recoverable against the stevedore company (the “Award”).
2. Cargo claims under the Charterers’ bills of lading
Other cargo interests sued Charterers, as sea carrier, for compensation for the loss of cargo carried under the Charterers’ bills of lading. Charterers compensated cargo interests and their insurers pursuant to a settlement agreement. Charterers then commenced a recourse action against the stevedore company for full reimbursement of the settlement indemnity paid to the cargo interests. The parties raised the following arguments:
- The stevedore company notably opposed: (i) its 60% apportionment of liability as held by the Judgment and (ii) Charterers’ obligation to indemnify Owners in relation to cargo claims under the charter party as held by the tribunal in the Award.
- The Charterers challenged this defense on the basis of privity of contract and the limited res judicata effect of a judgment: (i) the Judgment ruling on the liability apportionment was not binding on Charterers as this decision had been issued in distinct proceedings in relation to different claims, namely the loss of cargo covered by Owner’s bills of lading and the damage to the vessel; (ii) the charter agreement and the Award were not binding on the stevedore company as a third-party.
The second Court of Appeal ordered the stevedore company to reimburse Charterers for the full amount of the settlement indemnity. The Court held that Charterers’ damages arose from the exclusive negligence of the stevedore company in its positioning the containers, regardless of: (i) the stevedore’s apportionment of liability as decided by the Judgment, which lacked res judicata effect in the second proceedings; and of (ii) Charterers’ obligation to indemnify Owners under the charter agreement as held by the tribunal in the Award, which could not be raised or relied upon by the stevedore company as a third-party.
In a recent judgment, the French Supreme Court dismissed the appeal filed by the stevedore company against the judgment of the second Court of Appeal, which is now final after two decades of proceedings.
Comments
This case illustrates the strict application of the principles of privity of contract and res judicata. The claim against the stevedore company for reimbursement of the settlement indemnity was a recourse and personal claim of Charterers. Under French law, a recourse claim against a stevedore is in principle streamlined and limited: it can only be initiated by the party which instructed the stevedore company, within a three-month limitation period. In the framework of such recourse claim, the stevedore company was not entitled to rely, as against Charterers, on (i) the Judgment ruling on the same incident, but on distinct claims based on bills of lading issued by another sea carrier or (ii) the charter party and the related Award as it was a third-party to this contract and these proceedings.
This restriction was not absolute. These apportionments, judgments and agreements could have been relied upon, but only in support of proper claims, between relevant parties. The apportionment and related Judgement were binding, but only between the stevedore company and Owners. The charter party and the related Award was binding, but only between Owners and Charterers. However, in this case, the stevedore company failed to sue Owners and broke the chain of recourse claims.
Summary and key takeaways
To summarize, cargo interests claimed and obtained full compensation from Charterers, as sea carrier. Charterers then claimed full recourse against the stevedore company. The stevedore company failed to initiate proceedings against the Owners to enforce their 40% of liability pursuant to the Judgment. Following such proceedings, Owners would likely have claimed reimbursement of this 40% liability against Charterers under the charter party. In the event, the stevedore company bore full liability for its procedural clumsiness. The lesson in this is that recourse claims must be strictly respected and pursued in maritime law