out of them; during the same period, however, he himself had heard at least 20 cases depending upon the interpretation of the "unreformed" bill of lading. Such concrete evidence of the "workability" of the Hague Rules would seem to justify their adoption.

The Hague Rules convention, while admittedly a compromise, endeavors to secure an international agreement unifying the various laws of the world's maritime nations, no two of which have the same law applicable to the lengthy and cumbersome provisions of manifold types of bills of lading which are received and negotiated by importers, exporters, and bankers throughout the world. The Hague Rules are a long step in the right direction. They eliminate most of the objectionable exceptions and objections commonly found in bills of lading. The rules are complete and self-contained, and do not assume or depend on the law of any particular country to provide the basis of liability. They impose certain minimum responsibilities on carriers, and, more important, once they are universally adopted, international uniformity is assured. All parties concerned will know definitely where they stand, and what their responsibilities and rights are.

The uniform adoption of this convention, coupled with suitable legislation, would materially simplify and standardize present-day bills of lading and in the accomplishment of such constructive work the United States should take a leading part. The resulting uniformity would be of inestimable service to all users of bills of lading, and, what is perhaps of greater concern to our shippers and bankers, would strengthen the value of ocean bills of lading as collateral, and furnish that feeling of protection and security, which, unfortunately is now wholly lacking. With a uniform law, even if it were not an altogether satisfactory one, the doubt and uncertainty now prevailing would be eliminated. After the Hague Rules are adopted, it is probable that the International Chamber of Commerce, which has done so much to secure their approval, will undertake the problem of securing uniform forms of bills of lading; with different laws, such as we have today, any attempt to adopt uniform forms is useless.

WHAT TO DO ABOUT THE QUESTION

Mark Twain is frequently quoted as saying that while everybody talked about the weather nobody did anything about it. In fairness to the worthy activities of certain individuals and associations, this is not literally true as far as the Hague Rules are concerned. It is a fact, however, that while resolutions have been passed supporting the project, comparatively little enthusiasm has been aroused, due possibly to lack of appreciation by bankers, shippers,and other parties at interest, of the advantage of the rules. It is hoped that this paper may serve to help in spreading "the good word" and lead to definite action on the part of the United States and the other countries which have not yet ratified the convention, although their diplomatic representatives signed it years ago. British bankers have been instrumental in securing the ratification of the Hague Rules convention in their country, as they realize better security is afforded thereby, and that a Hague Rules bill of lading is better collateral Similarly it is hoped that bankers and shippers in this country will take active steps to demand Hague Rules bills of lading from their steamship companies. It is felt that once American shippers are aware of the added protection afforded by a Hague Rules bill of lading, they will be as insistent as our British friends in demanding such a document.

Experience has unfortunately shown that some people cannot be coaxed, but must be driven. This is entirely true with this important subject, for, while some steamship companies have voluntarily adopted the suggested bill of lading, others have not fallen into line, probably because shippe's have failed to exert the required pressure All interested parties are accordingly urged to take this matter up immediately with the steamship companies in their respective cities and elsewhere. In addition, it is hoped that suitable action will be initiated and carried out through various associations and organizations of which they may be members. More important still, it is highly desirable that the Hague Rules convention be ratified and appropriate legislation passed at the coming session of Congress. Letters and association resolutions should be accordingly be directed to our Senators and Representatives. In the meantime a general discussion of the proposal among bankers, shippers, and carriers will be a most valuable aid toward securing the adoption of the Hague Rules, governing the ocean transportation of goods in foreign

commerce.

The CHAIRMAN. The situation now, as I understand it, Mr. Paton, is that if a man comes in and wants to discount his bill of lading for a shipment of goods, you have to examine very closely and to scrutinize that bill of lading, to see what exceptions there are in it and what exemptions there are in it and just how far you are protected when you do give the credit?

Mr. PATON. That is exactly the case.

The CHAIRMAN. Just explain the minutes to the committee.

Mr. PATON. Well, the shipper sends his goods abroad, for which there is a market, and under this bill the carrier is required to issue a definite type of bill of lading. With that bill of lading, the shipper draws a draft, with bill of lading attached as collateral security, and he takes that to the bank and discounts it.

Now the protection of the banker depends on what the liability of the carrier is to the owner of the goods. The bill of lading document defines just what those liabilities are, in accordance with this bill, which would be part of the contract, and it makes it a safe, bankable instrument upon which the shipper can borrow money and use it as a collateral security for discount purposes.

Mr. HAMLIN. You are claiming that this bill makes it a more definite contract?

Mr. PATON. Exactly.

The CHAIRMAN. Under the present system, I recall a telegram or letter from your association or somebody else, stating there were about 80 different forms of bill of lading in New York floating around there. What is your present system of discounting paper? You have to examine very closely each one, do you not?

Mr. PATON. You have to examine very closely each bill of lading to see what the liability of the carrier is, and the banker is in a situation where he has a handicap because of lack of certainty.

We have an analogous case with our present bills of lading under the uniform bills of lading acts of the various States. Ünder the State laws, the bills of lading issued under those acts are very clear and definite, and they are instruments upon which the banks can loan money with a reasonable degree of safety and certainty.

Now, this proposed bill will provide for the banker and for the shipper, who is the person who wants an accomodation, a uniform bill of lading which would be comparable to the form of the bill of lading now used in interstate commerce.

The CHAIRMAN. That would increase the possibility of his securing credit on his bill of lading?

Mr. PATON. Absolutely.

Mr. HAMLIN. Would this bill obviate the State laws that are nonuniform, we may say, throughout the United States?

Mr. PATON. There is nothing in this bill, as I understand

The CHAIRMAN. There are no State laws relating to ocean shipments.

Mr. HAMLIN. I understood the witness to state there were State laws.

The CHAIRMAN. He had reference to interstate shipments within the United States.

Mr. PATON. Yes.

The CHAIRMAN. That as to interstate shipments it is uniform, and consequently any paper issued for those shipments is more desirable

and does not require the close scrutiny that the ocean bill of lading does. I recall some ocean bills of lading introduced at our previous hearing, as I stated awhile ago, with rubber stamps on them and the lettering so fine that you would have to get a magnifying glass to read it. And there are all sorts of exemptions written in, sometimes, as I understand it; is that a fact?

Mr. PATON. That is true. There are no two bills of lading alike; the variety is as extensive as there are carriers that issue them. There should be some uniformity in the interest of international trade.

The CHAIRMAN. Had you finished your statement?

Mr. PATON. Yes, sir.

The CHAIRMAN. Are there any questions, gentlemen? If not, will call next Mr. Nunnally.

I

STATEMENT OF W. J. NUNNALLY, JR., REPRESENTING THE AMERICAN INSTITUTE OF MARINE UNDERWRITERS

Mr. NUNNALLY. My name is W. J. Nunnally, Jr., of the law firm of Bigham, Englar, Jones & Houston, 99 John Street, New York City, and I appear on behalf of the American Institute of Marine Underwriters. Mr. Englar was to appear before your committee, sir, but he was ill and I had to come in his stead.

This institute which I represent includes in its membership almost all of the companies engaged in writing marine insurance in this country. That insurance is principally insurance of cargo being carried as ocean freight. Its members are, therefore, directly and vitally interested in matters affecting the responsibility of ocean carriers for goods entrusted to such carriers for transportation.

For many years, this institute has carefully considered the Hague rules, and has adopted a resolution some 10 years ago approving their adoption with certain necessary amendments.

The CHAIRMAN. You are the people who write the insurance on ocean shipments?

Mr. NUNNALLY. Yes, sir; insurance on cargoes carried under these ocean bills of lading.

Mr. HART. About how many of such companies are there, Mr. Nunnally, in these United States?

Mr. NUNNALLY. Oh, I should say certainly over 50 that are members of this organization. That is the best estimate I can give you at the moment.

Mr. HART. They practically cover the whole field?

Mr. NUNNALLY. They practically cover the whole field of cargo insurance; yes, sir.

The CHAIRMAN. You are in practically the same position as the banker; you have got to know what is in the bill of lading when you undertake to insure the goods?

Mr. NUNNALLY. Yes, sir; very much the same as the banker's position. You might bear in mind in this connection that these shipments of cargo are often not fully insured, so that the shipper himself has the same interest in this matter, insofar as his uninsured interest is concerned, as does the insurance company.

Now, apparently we bring up the first discordant note on this bill. Since the hearing before the Senate committee, at least within

the last year, some steamship companies have added a new exemption clause to their bills of lading. This clause is commonly referred to as the "Both-to-blame-collision clause", and reads as follows:

If the shipowner shall have exercised due diligence to make the ship seaworthy and properly manned, equipped, and supplied, it is hereby agreed that in the event of the ship coming into collision with another ship as a result of the negligent navigation of both ships, the owners of the cargo carried under this bill of lading will indemnify the shipowner against all liability to the other ship or her owners insofar as such liability represents loss, damage, or claim of such cargo paid or payable by the other ship or her owners to the said cargo owners and set off, recouped, or recovered by the other ship or her owners as part of their claims against the carrying ship or shipowner.

In other words, here is a new clause that has been put in the bills of lading since this bill was first considered, and we now have a case pending in the court in Baltimore, which undoubtedly will go to the Supreme Court, to determine whether or not a carrying ship can require a cargo owner to indemnify the ship for its own negligence. Where the two ships are at fault, as the law now is, the cargo can recover in full from the noncarrying ship and that ship recoups against the carrying ship half of its damages.

Now this is to prevent that right to require the cargo, although free from any fault, to indemnify the carrying ship from those damages to be paid by the other ship.

The CHAIRMAN. Will not this bill meet that situation?

Mr. NUNNALLY. Probably it does meet that situation as it is; but, unfortunately, it is not as clear as it might be.

The CHAIRMAN Have you an amendment to propose?

Mr. NUNNALLY. Yes, sir; I refer now to page 9 of section 3. We think that section will cover it. It reads:

The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault, or neglect of the shipper, his agents, or his servants.

Now, the amendment we propose in that would be as follows:

The shipper or owner of the goods shall not be responsible for loss or damage sustained, or liability therefor incurred, by the carrier or the ship arising or resulting from any cause without the act, fault, or neglect of the shipper, his agents, or his servants. Any clause or stipulation which seeks to impose liability contrary to the foregoing shall be null and void, including any clause or stipulation requiring the owner of cargo to indemnify the ship or carrier against liability to a colliding vessel for any part of the collision damages paid or payable by such colliding vessel.

Now, it may well be, Mr. Chairman, that amendment will not change the intent of that section; but the fact remains, unless we do clarify it, as the gentleman has said in the case of the deviation clause, this section will go to the Supreme Court, at some time in the next 3 or 4 years, to determine whether or not it does preclude the ship owner putting in that "both-at-fault" clause.

We are instructed by the institute that I represent, however, not to oppose the passage of this bill even if the amendment is not accepted, but to bring to the attention of the committee that we will be more apt to escape litigation by making that section very specific and showing in so many words and by its terms that it excludes this recently incorporated provision in bills of lading.

The CHAIRMAN. What are the circumstances under which the shipper is held responsible for loss or damage sustained by the carrier?

Mr. NUNNALLY. There is a new provision in the bill of lading that is now pending in the courts. You refer to the rubber-stamp exemptions; this is one of the very finely printed exemptions that has recently been incorporated in bills of lading.

The CHAIRMAN. What does it mean-that the shipowner shall not be responsible for loss or damage sustained by the shipper, where goods are explosive, or anything of that kind?

Mr. NUNNALLY. No; if the goods are explosive, you are naturally responsible; but our amendment would mean that the shipper would not be responsible for any damages that the carrying ship has to pay as a result of a collision for which both ships are at fault.

Mr. KENNEDY. You say the shipper is responsible at present? Mr. NUNNALLY. Under the present law, the shipper is not; but under a recent exemption clause, that has been inserted in bills of lading of many steamship companies, there is an effort to make the shipper bear this damage, rather than the carrying ship through whose negligence the collision occurred.

The CHAIRMAN. This seems to be an attempt to throw the responsibility on the shipper to the carrier, or to the ship. I did not know that to be the case, unless there were some goods that would endanger other goods, or something of that kind.

Mr. NUNNALLY. Of course, there is that responsibility if goods are of such a nature that they cause damage to other goods. Then the shipper is responsible.

The CHAIRMAN. If he does not disclose the nature of the goods? Mr. NUNNALLY. Yes.

Mr. LEHLBACH. Let me ask a question to see if I understand it. This responsibility of the shipper to the ship is in the event that the shipper collects damages from the other ship, the party to the collision?

Mr. NUNNALLY. That is correct, sir.

Mr. LEHLBACH. And the rubber stamp or new provision in the bill of lading is in effect to subrogate the ship to the shipper for half of the damages collected from the other ship that was in the collision?

It

Mr. NUNNALLY. That is stated very accurately, sir. In other words, that clause would prevent a shipper from collecting full damages in any collision case where both vessels were at fault. is the rule that has been adopted in the Brussels convention of 1910, which this country rejected; but this is an effort to put it in. It is in bills of lading now.

Mr. HART. What is the reason behind that rule? You say there is a rule where the party admittedly negligent is allowed to be recompensed because of his negligence?

Mr. NUNNALLY. Well, he has an exemption in his bill of lading from paying damages to cargo he is carrying, if the negligence is that of his master or mariner. That is one of the exemptions he has in his bill of lading and the cargo cannot collect from him for the negligence of his master or mariner; but the cargo can collect from the noncarrying ship and, under the present law, can collect in full. Now, the noncarrying ship claims half of its damages against the carrying ship. In other words, they add the damage together and divide by two and say that each ship bears half of the loss resulting from a mutual-fault collision.