INTRODUCTION Contributed by: Yoav Harris, John Harris (1940-2023) and Domiana Abboud, Harris & Co Maritime Law Office
parted with its cargo without presentation of the original bills of lading and was confronted with a claim from the financing bank and (ultimately) the holder of the bills, following the collapse of Hin Leong Trading (HLT). In this case, following the seller’s and charter - er’s (Winston) orders to discharge the cargo of 752,870 barrels of gasoil without presentation of the original bills of lading in return for the usual indemnities, the carrier (Maersk) discharged the cargo on 28–29 February 2020. On 3 March 2020, HLT applied to the claiming bank – United Overseas Bank (UOB) – for a letter of credit to finance the purchase of the cargo. This appli - cation was made pursuant to various lines of credit provided by UOB to HLT in April 2018, with a total amount of USD250 million. On 4 March 2020, UOB issued the required letter of credit and, on 27 March, UOB remitted USD43 mil - lion to HLT’s receiving bank (Credit Suisse) after taking receipt of the original payment letter of intent (LOI) and commercial invoice, along with copies of the letter of credit (L/C) documents sent by e-mail. After HLT announced its insolvency on 14 April 2020, UOB required the original bills of lading from Winston on 15 July 2020. As holder of the original bills, UOB filed a lawsuit against Maersk claiming its liability for misde - livery, mainly in contract but also in negligence, bailment and conversion. The court held that by agreeing to the terms in charterparties obliging them to discharge the cargo without presentation of the original bills of lading, and against presentation of suitable indemnity, ship-owners effectively commit to breaching their primary obligation under the bills to deliver cargo only upon their presentation. In
fact, the indemnity provided to the ship-owners operates as an admission or acknowledgment of the ship-owners of the wrongfulness of the delivery of the cargo in such circumstances, and merely “relocates” the legal risk of the carrier’s unlawful conduct. The court denied the carrier’s argument as if, with the discharge and delivery of the cargo to HLT, the bills of lading were “spent”, in the sense that their possession by UOB “no longer gives a right (as against the carrier) to the possession of the goods to which the bills relate”, as governed by clause 2 of the UK Carriage of Goods by Sea Act (COGSA). Citing the joint expert’s memo - randum on English law, explaining that “where cargo is delivered against a discharge LOI, rather than upon surrender of the Bill of Lading, the legal status of the Bill of lading is not gener - ally spent: the lawful holder of the Bill of Lading retains the right to the immediate possession upon its surrender and is entitled to sue the car - rier for the breach of the contract”, the court held that no reasons were given for the “bold asserta - tion” that HLT was the party entitled to the cargo on 28–29 February; therefore, the bills of lading were not spent. This was also supported by the determination that the relevant “contractual or other arrangement” was the sale contract, which required the opening of the L/C, and the L/C pro - vided accordingly expressly contemplated that payment will be effected against presentation of the original bills of lading. Therefore, clause 2 (a) of the UK COGSA, entitling the right to pos - sessionto one who becomes the holder of the bill “by virtue of a transaction effected in pursu - ance of any contractual or other arrangement made when such a right to possession ceased to attach to possession of the bill”, has also been operated, another reason why the bills have not been spent.
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