Reed Smith Client Alerts

On September 28, 2022, the English High Court handed down its decision in FIMBank v. KCH Shipping ([2022] EWHC 2400 (Comm)), confirming that the 12-month time bar in the Hague-Visby Rules applies to claims for misdelivery of cargo.

This point has not previously been decided in English law, and it brings welcome clarity to ocean carriers and commodities traders, who may be called on to indemnify carriers under letters of indemnity issued when bills of lading are not available at a discharge port.

This decision builds on the previous decision of the High Court in The Alhani ([2018] EWHC 1495 (Comm)) to confirm that the 12-month time bar applies to misdelivery claims, even where the delivery of the cargo occurs at some point in time after it is discharged from the vessel. This decision also confirms that the 12-month time limit applies when the commonly used CONGENBILL form of bill of lading is used.

Reed Smith acted on behalf of the carriers, KCH Shipping.

Background to the case

The cargo of coal was shipped on board the GIANT ACE in Indonesia in March 2018, under bills of lading on the CONGENBILL form. Original bills of lading were not available at the discharge ports, so the cargo was discharged into stockpiles at Indian ports in April 2018 against letters of indemnity issued to the carriers, KCH Shipping, by the vessel’s charterers.

Unbeknown to KCH Shipping, FIMBank had financed the purchase of the coal cargo by its customer and had been left unpaid under its financing arrangement. FIMBank therefore wanted to exercise what it considered to be its security for the financing by demanding delivery of the cargo under the bills of lading, of which it claimed to be the lawful holder. Unfortunately for FIMBank, by the time it tried to exercise its security, the cargo had already been discharged from the vessel and had been collected by local receivers. FIMBank therefore brought a claim in arbitration under the bills of lading. However, FIMBank only commenced arbitration against KCH Shipping on 24 April 2020, following an apparent misunderstanding over the identity of the carrier.