Governing Law of the Bill of Lading
Interlink編集部What Is the Governing Law of the B/L?
The governing law of the B/L determines which country's legal system applies to the carriage contract and cargo claims based on the Bill of Lading.
In international transport, parties such as shippers, consignees, NVOCCs, shipping lines, overseas agents, and insurers may be located across multiple countries. Therefore, when cargo incidents occur, it becomes an issue whether the case is governed by Japanese law, English law, U.S. law, Singaporean law, Hong Kong law, or other foreign laws.
The standard terms and conditions on the back of the B/L often include a governing law clause. This clause affects liability determination, liability limitations, exemptions, filing deadlines, jurisdiction, arbitration, and subrogation claims.
In this article, “carrier” is used as a general legal term for the party whose liability is considered under the relevant B/L. “Shipping line” refers more specifically to the ocean carrier or vessel-operating carrier typically appearing under the Master B/L or Ocean B/L. Where necessary, “Actual Carrier” is used to distinguish the performing carrier from the Contracting Carrier.
This article organizes the topic of B/L governing law from the NVOCC and freight forwarder practical perspective, covering the difference from jurisdiction, variations between House B/L and Master B/L governing law, cautions when foreign laws apply, and the impact on liability limits, exemptions, time limits for claims, and subrogation.
For Japan-bound cargo handled by overseas or ASEAN freight forwarders, this issue often arises when a Japanese NVOCC’s House B/L is combined with a foreign shipping line’s Master B/L. In such cases, communication with the Japanese cargo owner, recovery against the shipping line, and insurance subrogation may each require separate legal review.
Scope Covered in This Article
This article focuses on the governing law clauses on the reverse side of the B/L and addresses which country's law is assumed when determining liability in cargo incidents or claims. Detailed readings of the entire B/L reverse terms, court jurisdiction itself, and filing deadlines are covered in related articles.
| Item | Content Covered in This Article | Content Covered in Other Articles |
|---|---|---|
| Meaning of Governing Law | Which country's law applies to liability judgments based on the B/L | How to read the entire B/L reverse terms is covered in “What Are B/L Reverse Terms” |
| Difference from Court Jurisdiction | Concept of distinguishing governing law from court jurisdiction | Selection of courts or arbitration forums is covered in “What Is B/L Court Jurisdiction” |
| House B/L and Master B/L | Clarification when governing law differs between the cargo owner relationship and recourse claims against the shipping line | Liability relations of the Contracting Carrier and Actual Carrier are detailed in another article |
| Liability Limitation | Impact of governing law on Package Limitation and Weight Limitation | Calculation of liability limits is covered in “What Is Carrier's Liability Limitation” |
| Exemption Grounds | Approach to verifying exemption claims based on governing law and B/L terms | Specific exemption grounds are discussed in “What Are Carrier's Exemption Grounds” |
| Filing Deadlines | Need to confirm governing law and Time Bar Clause | Deadline calculations and extensions are covered in “What Is B/L Time Bar” |
| Subrogation Claims | Which B/L governing law to refer to when receiving recourse claims from insurance companies | Details on insurance claims and subrogation are discussed in marine cargo insurance-related articles |
Purpose and Background of the Choice of Law System
The purpose of the choice of law clause is to predefine which country's laws will serve as the standard for determining liability relationships in international transportation contracts and cargo claims.
In international maritime transport, multiple parties such as the shipper, consignee, NVOCC, shipping line, Actual Carrier, overseas agents, insurance companies, and P&I Clubs often span several countries. When a cargo incident occurs, if it is unclear which country's laws apply, determination of liability limits, exemptions, filing deadlines, jurisdiction, and subrogation claims becomes uncertain.
The choice of law is not merely a formal clause in the terms and conditions. For high-value cargo incidents, claims against foreign shipping lines, subrogation demands from insurers, or cases involving overlapping House B/L and Master B/L, confirming the applicable law at the initial stage is essential.
Key Situations Where the Governing Law of the B/L Becomes an Issue
The governing law of the B/L is relevant not only after an incident occurs but also before the contract is concluded, at the time of B/L issuance, when receiving claims, and during insurance handling.
| Situation | Reason Governing Law is an Issue | Documents to Check | Practical Notes |
|---|---|---|---|
| At B/L Issuance | To confirm which country’s law the issued B/L terms are based on | House B/L, standard terms, Contracting Carrier terms | Understand your own B/L’s governing law and jurisdiction |
| When a Cargo Incident Occurs | Because it affects the basis for liability determination and claims of exemption | House B/L, Master B/L, Ocean B/L | Do not determine liability based solely on damage photos |
| Upon Receipt of a Claim Letter | It influences whom to claim against, the legal grounds, and deadlines | Claim Letter, B/L, survey report | Separate acknowledgment of receipt from liability acceptance |
| When Seeking Recourse from the Shipping Line | Governing law, jurisdiction, and deadlines on the Master B/L side are relevant | Master B/L, booking, correspondence with P&I Club | Do not judge recourse potential based only on the House B/L |
| When Subrogation Claims Are Received | Because insurance payment and carrier liability are separate issues | Insurance company’s claim documents, B/L, incident materials | Confirm which B/L the claim is based on |
| When Legal Filing Deadlines Are Approaching | Responses vary depending on governing law, jurisdiction, and Time Bar Clause | B/L back terms, deadline extension documents, negotiation records | Deadlines may not be suspended even during ongoing negotiations |
Conditions for Application and Matters to Be Excluded
When confirming the governing law, it is important to clearly distinguish which legal relationships the governing law clause applies to, and which matters cannot be resolved solely by the governing law.
| Category | Points to Confirm | Issues Typically Determined by Governing Law | Issues Not Determined by Governing Law Alone |
|---|---|---|---|
| Carrier Liability under the Transport Contract | Carrier liability, exemptions, and liability limits stated in the B/L | Interpretation of clauses, liability limits, grounds for exemption | Proof of actual cause of incident and damage amount |
| Jurisdiction | Which court will hear disputes | May be set by the same clause as the governing law clause | How the courts treat the jurisdiction clause |
| Arbitration | Whether disputes are resolved through arbitration instead of litigation | May affect the interpretation of arbitration clauses | Practical concerns such as arbitration institution, venue, costs, language |
| Mandatory Laws and Regulations | Legal regulations that apply regardless of parties’ agreement | May influence interpretation of the governing law | Whether mandatory laws apply must be confirmed separately |
| Insurance Contracts | Coverage availability and insurance claims for cargo insurance | Carrier liability judgments under the B/L may impact subrogation | Governing law and coverage terms of the insurance contract itself |
| Fact Finding | Cause of damage, location of incident, damage amount | May affect the framework for evaluating evidence | Contents of evidence such as photos, survey reports, PODs, temperature records |
Where to Check in the B/L Terms on the Back
The first practical task is to locate the clause or clauses that define the governing law. In many B/L forms, the relevant wording appears under headings such as “Governing Law,” “Applicable Law,” “Proper Law,” “Law and Jurisdiction,” or “Jurisdiction and Law.”
This section is about where to look in the B/L terms. The legal meaning and practical effect of each related clause are organized in the following comparison table.
| Where to Look | Typical Heading or Wording | What to Check First | Practical Note |
|---|---|---|---|
| Governing law clause | Governing Law / Applicable Law / Proper Law | Which country’s law is selected | Confirm whether it applies to all disputes or only certain claims |
| Combined law and jurisdiction clause | Law and Jurisdiction / Jurisdiction and Law | Whether law and forum are stated together | Do not assume that governing law and jurisdiction are the same concept |
| Nearby dispute resolution clauses | Jurisdiction Clause / Arbitration Clause | Whether disputes must be filed in court or arbitration | Forum, language, cost, and filing procedure may change |
| Nearby carrier liability clauses | Paramount Clause / Himalaya Clause / Time Bar Clause | Whether related clauses affect liability, defenses, or deadlines | Read these clauses together with the governing law clause |
| House B/L and Master B/L comparison | Different terms on each B/L form | Whether the governing law differs between the two B/Ls | Separate cargo owner claims from recourse against the shipping line |
Applicable Law, Jurisdiction, and Related Clauses
Applicable law and jurisdiction are similar but distinct concepts. Applicable law determines which country's law will be used to assess liability. Jurisdiction concerns which court will hear the dispute. Related clauses such as arbitration, Paramount Clause, Himalaya Clause, and Time Bar Clause should be read together because they may affect the same claim-handling strategy.
| Item | Meaning | Matters Affected | Practical Considerations |
|---|---|---|---|
| Applicable Law | Which country's laws apply for judgment | Liability limits, exemptions, limitation periods, clause interpretation | Confirm separately from the court location |
| Jurisdiction | Which court will hear the dispute | Venue, language, costs, procedures, handling burden | Japanese law may apply even if the jurisdiction is foreign |
| Arbitration Clause | Provision to resolve disputes through arbitration rather than court | Arbitration location, arbitration body, language, costs | Arbitration procedures may be required instead of court |
| Paramount Clause | Clause incorporating specific international maritime transport rules | Liability limits, exemptions, carrier liability framework | Should be read together with the applicable law clause |
| Himalaya Clause | Clause extending protections and liability limits to subcontractors, agents, and employees | Claims against subcontractors, freight forwarder liability, recourse relationships | Verify who is covered under the contractual protections |
| Time Bar Clause | Clause requiring claims or lawsuits be initiated within a set period | Exercise of claims, extension of time limits, decision on filing suit | Issuing a Claim Letter does not automatically suspend the deadline |
Cases of Japanese Law Governing
When the B/L terms specify Japanese law as the governing law, it is necessary to consider its relationship with Japan’s International Maritime Transport Act, Commercial Code, Civil Code, and other relevant legislation. House B/Ls issued by Japanese NVOCCs may specify Japanese law as governing and designate Japanese courts as having jurisdiction.
In these cases, matters such as liability limits for cargo incidents, exemptions, limitation periods for claims, damage notifications, and subrogation are addressed based on Japanese law and the B/L terms.
However, even when Japanese law governs, not all issues become straightforward. For example, while the House B/L may specify Japanese law, the Master B/L could be governed by foreign law, potentially leading to differing legal frameworks in dealings with the cargo owner and in claims against the shipping line.
Cases Governed by Foreign Law
Master B/Ls issued by shipping lines and B/Ls from overseas NVOCCs sometimes specify that foreign law governs the contract. The applicable law could be that of the United Kingdom, the United States, Singapore, Hong Kong, or other countries.
When a contract is governed by foreign law, it is risky to assess it solely from the perspective of Japanese domestic practices. Issues such as liability limits, exemptions, filing deadlines, jurisdiction, evidence submission, litigation procedures, legal fees, and dealings with the P&I Club may differ from those under Japanese law.
For example, even if negotiations with the shipper or insurer take place within Japan, the Master B/L may stipulate foreign law and foreign jurisdiction. In such cases, to claim recourse against the shipping line, it is essential to confirm the liability limits, exemptions, filing deadlines, and jurisdiction clauses under the foreign law specified in the B/L terms.
Different Governing Laws for House B/L and Master B/L
In shipments involving NVOCCs, the governing law for the House B/L and the Master B/L may differ. When claims are made from the shipper to the NVOCC, the governing law of the House B/L issued by the NVOCC becomes relevant. Conversely, when the NVOCC seeks recourse against the shipping line or Actual Carrier, the governing law of the Master B/L or Ocean B/L applies.
In other words, Japanese law may govern the relationship with the shipper, while foreign law may apply to the relationship with the Actual Carrier. In such cases, the NVOCC or freight forwarder could bear certain liabilities toward the shipper, whereas limitations of liability or exemptions under foreign law might restrict full recovery from the shipping line.
Impact of Governing Law on Liability Limits, Exemptions, and Action Deadlines
The governing law directly affects the amount of cargo claims, defenses, and deadline management. For cases involving significant damages, it is important not only to confirm the cause of the incident but also to verify liability limits and exemptions based on the governing law.
| Issue | Aspect Influenced by Governing Law | Documents and Information to Check | Practical Points |
|---|---|---|---|
| Liability Limits | Calculation of limits per package, per weight unit, etc. | B/L, cargo weight, number of packages, presence of Declared Value | The full cargo value is not necessarily recoverable |
| Exemption Grounds | Handling of perils of the voyage, fire, natural disasters, improper packing, inherent nature of cargo, etc. | Clauses, survey reports, photos, temperature records, stowage records | Exemption claims require contractual and factual support |
| Action Deadlines | Time limits for filing lawsuits or arbitration claims | Time Bar Clauses, delivery dates, written deadline extensions | Claim letters or negotiations do not automatically suspend deadlines |
| Jurisdiction | Which court has authority to adjudicate | Jurisdiction Clause, Law and Jurisdiction provisions | Foreign court jurisdiction may involve issues of cost, language, and local counsel |
| Arbitration | Whether arbitration procedures are required instead of court litigation | Arbitration Clause, arbitration venue, arbitration institution | Deadlines and costs may differ from domestic litigation |
| Subrogation | Scope of insurer’s right to recover from the carrier | Insurer’s claim documents, B/L, incident records | Insurance payouts may not match carrier liability amounts |
Legal Application Flow
When confirming the governing law of a B/L, do not immediately determine liability. Instead, verify in the following order: claim parties, relevant B/L, governing law, jurisdiction, liability limits, exemptions, and deadlines.
| Step | What to Confirm | Main Reference Documents | Next Actions |
|---|---|---|---|
| 1 | Clarify who is claiming against whom | Claim Letter, notification emails, insurance company subrogation documents | Distinguish between shipper claims, recourse against the shipping line, and insurer subrogation |
| 2 | Identify which B/L the claim is based on | House B/L, Master B/L, Ocean B/L, Sea Waybill | Specify the applicable terms and conditions to review |
| 3 | Check the governing law clause | Governing Law, Applicable Law, Law and Jurisdiction clauses | Determine whether Japanese law or foreign law applies |
| 4 | Verify jurisdiction and arbitration clauses | Jurisdiction Clause, Arbitration Clause | Confirm venue for litigation or arbitration and associated responsibilities |
| 5 | Review liability limits, exemptions, and claim deadlines | Limitation Clause, Exemption Clause, Time Bar Clause | Organize liability amounts, defenses, and deadline risks |
| 6 | Consult necessary parties | Communications with insurance company, lawyers, P&I Club, overseas agents | Establish response policy while avoiding liability admission |
Typical Situations Where the Governing Law Becomes an Issue
The governing law is not just a matter of reading the clauses; it directly affects the initial handling of cargo claims, deadline management, subrogation rights, and dealings with insurance companies.
| Typical Situation | Reason It Becomes an Issue | Potential Disadvantages | Practical Measures |
|---|---|---|---|
| The House B/L is governed by Japanese law, but the Master B/L by foreign law | This creates different legal relationships between the cargo owner and recourse against the shipping line | Even after paying the cargo owner, there may be difficulty in recovering from the shipping line | Manage governing law and deadlines separately for House B/L and Master B/L |
| Thought deadlines were safe because negotiations were ongoing domestically | A foreign law filing deadline may still be running separately | Deadlines may expire even after submitting the Claim Letter | Verify if there is a Time Bar Clause and whether deadline extensions apply |
| Received subrogation claim from an insurance company | Payment of insurance and carrier liability are separate matters | Admitting liability before confirming governing law can weaken your defense | Confirm which B/L the claim is based on and review liability limits and exemptions |
| Foreign court jurisdiction was stipulated | This affects location, language, attorney costs, and procedures of litigation | Handling based on domestic assumptions could delay response | Coordinate promptly with overseas lawyers, P&I Club, and insurance company |
| Overlooked an arbitration clause | Arbitration procedures may be required instead of litigation | Deadlines may be mismanaged based on incorrect procedural assumptions | Check for presence of Arbitration Clause, arbitration venue, and filing deadlines |
| Negotiated on the assumption of full compensation without confirming liability limits | Compensation amounts could be limited by governing law and B/L clauses | Internal decisions may exceed the recoverable amount | Check Package Limitation, Weight Limitation, and Declared Value |
| Asserted exemptions without linking them to governing law | Exemptions require positioning within both clauses and governing law | Claims may appear as mere factual statements without persuasive power | Connect surveys, photos, temperature records, and stowage records with the contractual clauses |
| Based judgment solely on overseas agent’s explanation | Agent explanations and the legal effect of B/L clauses are separate | May overlook the governing law, jurisdiction, or deadlines stated in the clauses | Always verify against the original B/L or the clause text |
Comparison Table of NVOCC and Freight Forwarder Involvement Scope
NVOCCs and freight forwarders can assist with organizing documentation and coordinating stakeholders to confirm the governing law. However, they should avoid making unilateral determinations regarding foreign law liability, jurisdiction, arbitration, deadline extensions, or insurance claim payment eligibility.
| Category | Support Easily Provided | Matters Not to Decide Unilaterally | Practical Approach |
|---|---|---|---|
| B/L Verification | Collection and organization of House B/L, Master B/L, and Ocean B/L | Determining liability relations based on only one B/L | Separate which B/L applies according to each claim case |
| Clause Verification | Confirming the location of Governing Law, Jurisdiction, and Time Bar clauses | Concluding foreign law content without expert review | Consult insurers, lawyers, or experts when necessary |
| Initial Response | Notifying receipt of claim, requesting documents, and confirming clause review is in progress | Statements that could be interpreted as admitting liability or promising payment | Make clear the without prejudice nature, maintaining liability as undetermined |
| Deadline Management | Organizing notification dates, delivery dates, Claim Letter receipt dates, and potential deadlines | Explaining that deadlines are suspended due to ongoing negotiations | Confirm deadline extensions in writing |
| Shipping Line and P&I Club Coordination | Confirming contacts, issuing notifications, sending required documents | Early determination of success or failure of recovery claims | Notify early and document based on Master B/L clauses |
| Insurer Coordination | Organizing accident reports, B/Ls, survey reports, POD, and Claim Letters | Deciding on insurance claim payment or subrogation liability | Respond to insurer inquiries based on B/L clauses and governing law review |
Practical Scenario 1: House B/L Governed by Japanese Law, Master B/L Governed by UK Law
For example, a Japanese NVOCC issues a House B/L governed by Japanese law and subject to Japanese jurisdiction in its relationship with the shipper, while the shipping line’s Master B/L is governed by UK law and subject to foreign jurisdiction.
When a cargo incident occurs, the shipper files a claim against the Japanese NVOCC. In this situation, the NVOCC's liability, limitation of liability, and filing deadlines are confirmed based on the governing law and terms of the House B/L.
However, when the NVOCC seeks recourse from the shipping line, the governing law, jurisdiction, limitation of liability, exemptions, and filing deadlines of the Master B/L become relevant. Even if the NVOCC may be liable to the shipper, it is not guaranteed that the same amount will be recoverable from the shipping line.
In such cases, while handling claims with the shipper, it is also necessary to review the governing law and jurisdiction under the Master B/L, notify the P&I Club if applicable, and determine whether an extension of time limits is required.
Practical Scenario 2: Managing Deadlines Domestically Without Awareness of Foreign Law Governing the B/L
For example, regarding damage to imported cargo bound for Japan, the shipper, freight forwarder, and insurer may continue communications within Japan. In such cases, personnel might manage deadlines based on Japanese law or domestic practice.
However, upon reviewing the actual Master B/L, it may specify foreign law as governing, designate foreign judicial jurisdiction, and include unique time limits for filing claims. In these situations, ongoing negotiations within Japan alone do not resolve issues related to foreign law deadlines or jurisdiction.
Even if a Claim Letter has been submitted or the other party continues to respond, the limitation period under foreign law may not be automatically paused. It is necessary, as appropriate, to coordinate with the shipping line, P&I Club, overseas legal counsel, and insurer to consider deadline extensions or decisions on litigation.
Practical Scenario 3: When Subrogation Is Claimed but Liability Appears Admitted Before Confirming Governing Law
After a marine cargo insurance company has paid a claim, it may pursue subrogation against the NVOCC or freight forwarder.
At this time, the person in charge might respond as if liability is admitted, reasoning that “since we have an official claim from the insurer, our company should pay,” without thoroughly checking the cargo segment involved or the B/L terms.
However, the insurer’s payment of the claim and the NVOCC’s or freight forwarder’s liability to pay the same amount are separate issues. It is necessary first to verify which B/L the claim is based on, what the governing law is, where the incident occurred, whether liability limits or exemptions apply, and if notification deadlines or filing deadlines have been observed.
Points to Note Regarding Subrogation Claims
When receiving a subrogation claim from a cargo insurance company, it is important to confirm the governing law of the B/L. The fact that the insurer has paid the claim does not necessarily mean the NVOCC or freight forwarder assumes the same amount of liability.
| Item to Confirm | Reason for Confirmation | Main Documents | Points of Caution |
|---|---|---|---|
| Which B/L the claim is based on | Because the governing law differs between House B/L and Master B/L | Invoice, B/L, insurer’s subrogation documents | Do not respond without clarifying the claim relationship |
| Governing law of the House B/L | To determine the relationship between the shipper and the NVOCC | House B/L front and back terms | Verify the terms of the House B/L issued by your company |
| Governing law of the Master B/L | To assess the possibility of claiming against the shipping line | Master B/L front and back terms | Check for the possibility of foreign law or foreign jurisdiction |
| Liability limitation | The insurer's payout and the carrier’s liability amount may not match | B/L, invoice, packing list, weight certificates | Do not assume full recovery as a given |
| Exemption clauses | The carrier’s liability could be denied depending on the cause of the incident | Survey report, photos, POD, temperature records | Relate factual circumstances to exemptions in the terms |
| Notification and filing deadlines | Missed deadlines may affect defensive or subrogation rights | Notification emails, Claim Letters, deadline extension documents | Ongoing negotiations alone do not manage deadlines |
4-Column Decision Checklist
When confirming the governing law of a B/L, manage the process by separating the confirmation scenario, the party to confirm with, the items to verify, and the response actions if issues arise.
| Confirmation Scenario | Party to Confirm With | Items to Verify | Response Actions if Issues Arise |
|---|---|---|---|
| Upon Receiving Cargo Claim | Shipper, insurance company, claimant | Which B/L the claim is based on, claimed amount, accident segment | Do not admit liability; respond after checking B/L clauses |
| When Verifying House B/L | NVOCC, internal staff, shipper | Governing law, jurisdiction, liability limitations, filing deadlines | Organize separately from the Master B/L terms |
| When Verifying Master B/L | Shipping line, overseas agent, NVOCC | Foreign applicable law, foreign jurisdiction, arbitration clause, P&I Club notification contacts | Notify the shipping line and P&I Club early and monitor deadlines |
| When Confirming Liability Limits | Shipper, insurance company, shipping line, lawyer | Package limitation, weight limitation, declared value | Avoid responding on the assumption of full damage amount |
| When Confirming Exemptions | Surveyor, warehouse, shipping line, insurance company | Cause of accident, packing condition, stowage, temperature control, cargo-specific nature | Link exemption clauses with supporting evidence |
| When Confirming Filing Deadlines | Shipping line, insurance company, lawyer, P&I Club | Delivery date, time bar, deadline extensions, need for litigation or arbitration | Confirm deadline extensions in writing and continue monitoring deadlines even during negotiations |
| During Subrogation Handling | Insurance company, shipper, NVOCC, lawyer | Insurance payout amount, basis for subrogation, governing law, liability limits, exemptions | Separate responses on insurance payment and indemnity liability |
| When Drafting Initial Response | Claimant, overseas agent, shipping line, insurance company | Presence of liability admission language, meaning of “without prejudice,” document requests | Limit to acknowledgment of receipt and clearly state that liability is not yet determined |
Precautions for Initial Responses
When receiving cargo claims or subrogation demands, avoid admitting liability before confirming the applicable governing law. In the early stages, details such as the accident location, applicable B/L, governing law, jurisdiction, liability limitations, exemptions, notice deadlines, and filing deadlines are often not yet clear.
Especially in communications with foreign carriers, overseas agents, insurers, shipping lines, or P&I Clubs, the governing law applied may later become a point of contention. Care should be taken so that courteous apologies or explanations given domestically are not construed as admissions of liability under foreign law.
In initial responses, clearly acknowledge receipt of the claim or notification, state that the B/L terms, governing law, and jurisdiction will be confirmed, affirm that liability is currently undetermined, indicate that limits of liability, exemptions, and deadlines will also be reviewed, and clarify that the response does not constitute an admission of liability.
Documents to Check
When an NVOCC or freight forwarder receives a cargo claim, they should organize the following documents to verify the applicable law.
- House B/L front
- House B/L terms and conditions on reverse
- Master B/L front
- Master B/L terms and conditions on reverse
- Ocean B/L or Sea Waybill
- Transport-related documents such as FCR
- Booking confirmation documents
- Shipping Instructions
- Invoice, Packing List
- Claim Letter
- Survey Report
- Photos, receipt records, POD
- Subrogation claim documents
- Insurance policy, notifications from insurance company
- Correspondence with shipping line, P&I Club, overseas agents
- Emails or documents regarding extension of deadlines
Common Misunderstandings
| Common Misunderstanding | Actual Concept | Practical Notes |
|---|---|---|
| The governing law and jurisdiction are the same | The governing law determines which country’s laws apply, while jurisdiction decides where disputes are settled; these are separate issues. | Always differentiate and confirm Governing Law and Jurisdiction clauses. |
| If a Japanese shipper is involved, Japanese law will apply | Master B/Ls and B/Ls from foreign NVOCCs may specify foreign governing laws. | Check the B/L clauses rather than relying on the shipper’s location. |
| It is sufficient to look only at the House B/L | When seeking indemnity from the shipping line, the governing law of the Master B/L or Ocean B/L is the key issue. | Separate shipper communication from claims against the Actual Carrier for clarity. |
| Submitting a Claim Letter automatically stops the filing deadline | Simply submitting a Claim Letter does not necessarily suspend or extend the claim period. | Confirm the Time Bar Clause and any documents that extend deadlines separately. |
| If the insurer pays a claim, the carrier should pay the same amount | Insurance payouts and the carrier’s liability are separate matters. | Check liability limits, exemptions, the segment of the incident, and governing law. |
| Even if foreign law governs, domestic negotiations solve the issues, so there is no problem | Deadlines and jurisdictional matters under foreign law may still proceed during negotiations. | For high-value claims or urgent deadlines, consult experts promptly. |
| Judgment can be made by looking only at the governing law clause | In addition to governing law, jurisdiction, arbitration, Paramount Clause, Himalaya Clause, and Time Bar Clause are also relevant. | Review the entire B/L terms and conditions holistically, not clause-by-clause. |
Practical Points for Confirmation
- Confirm which B/L the claim is based on.
- Separate confirmation of House B/L and Master B/L.
- Do not confuse governing law with jurisdiction.
- Check for the presence of arbitration clauses.
- Verify the relationship with liability limits, exemptions, and litigation deadlines.
- Do not respond immediately based on domestic perspectives when foreign law applies.
- In subrogation claims, consider insurance payments and compensation liability separately.
- Avoid expressions in initial responses that may be interpreted as acceptance of liability.
Practical Points to Note
The governing law of the B/L is a critical clause that determines which country's laws apply when assessing liability in cargo claims. In cargo incidents, it is necessary not only to examine the extent of the damage and cause of the incident but also to review the governing law in the B/L's back terms. This helps clarify the limitations of liability, exemption clauses, time limits for filing claims, and their relationship with jurisdiction.
Especially in shipments involving NVOCCs, the governing law may differ between the House B/L and the Master B/L. It is important to separately verify the legal relationships with the shipper, the Actual Carrier, and regarding subrogation claims from insurance companies.
Admitting liability before confirming the governing law could disadvantage negotiations and subrogation procedures later. In initial responses, it is prudent to acknowledge receipt of the claim while clearly expressing the intention to review the B/L terms, governing law, and jurisdiction clauses.
Summary
The governing law of the B/L determines which country's laws apply to the carriage contract and cargo claims based on the Bill of Lading.
The governing law affects liability limits, exemptions, filing deadlines, jurisdiction, arbitration, and subrogation rights. In cargo incidents, it is necessary to review not only the extent of damage and the survey report but also the terms on the back of the B/L.
If the governing law differs between the House B/L and the Master B/L, separate legal relationships may arise regarding claims against the shipper and recourse against the shipping line. Relying on only one of the B/Ls when making judgments can increase the risk of irrecoverable losses or expired deadlines.
The governing law of the B/L is a fundamental prerequisite for cargo claim handling. After an incident occurs, it is important to promptly confirm which B/L the claim is based on, which country’s laws apply, and which court or arbitration forum will have jurisdiction before acknowledging liability.
Marine cargo insurance conditions vary more significantly than premiums. For the selection of coverage terms and interpretation of policy wording, please consult specialized insurance companies or brokers.
