Now, in order to avoid paying any part of this damage to the noncarrying ship, which he has been required to pay to the innocent cargo, the carrying ship has inserted this clause in its bill of lading, saying that it must be indemnified by the cargo which it carries against any such loss. That would result in reducing the cargo's recovery to one-half of its actual damage. That is not the law today and we do not think this present bill, S. 1152, would permit that clause; but, nevertheless, unless that provision is amended, we fear it will go to the Supreme Court to determine whether or not it does permit such a clause to be incorporated in the bill of lading. That is the only objection the institute has; but our institute does not wish to obstruct the passage of the bill if the amendment would not be acceptable to the committee; but they instructed me to bring it to the committee's attention so that we would reserve our privilege to appear before you again to amend this act should the court say that this section does not protect us along the lines that we think it should.

I have here a statement prepared by Mr. Englar, which I would like to file with you and make a part of this record.

The CHAIRMAN. Without objection, it is so ordered. (The statement above referred to is as follows:)

STATEMENT TO BE SUBMITTED ON BEHALF OF THE AMERICAN INSTITUTE OF MARINE UNDERWRITERS

Hon. SCHUYLER OTIS BLAND,

Chairman, Committee on Merchant Marine and Fisheries,

House Office Building, Washington, D. C. SIR: I appear on behalf of the American Institute of Marine Underwriters. The institute includes in its membership almost all of the companies engaged in writing marine insurance in this country. Its members are, therefore, directly and vitally interested in matters affecting the responsibility of ocean carriers for goods entrusted to such carriers for transportation. More than 10 years ago the institute carefully considered the Hague rules and adopted a resolution approving the rules subject to a few necessary amendments. The institute has consistently adhered to that position and has maintained at all times a special committee charged with the duty of supporting the rules and endeavoring to bring about legislation to put the rules into effect in this country.

During the last year, however, a new situation has arisen owing to the adoption by certain steamship lines of a bill of lading clause which the institute considers highly objectionable.

This clause, which is commonly referred to as the both-to-blame collision clause, 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 said 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 claim against the carrying ship or shipowner." The clause requires the owner of the cargo to indemnify the shipowner against the shipowner's liability to a third party for the negligence of the shipowner's servants. Naturally, this clause is highly objectionable to the owners and underwriters of cargo, and they would not accept any code or set of rules under which such a clause was permissible.

A careful study of the above bill has satisfied the institute that the clause above quoted is prohibited by section 4 (3) of the bill, which reads as follows: "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."

The institute, therefore, supports the bill, but suggests that section 4 (3) be amended to read 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.” (New matter italic.)

In support of the suggested amendment, I am instructed to point out that the principal argument in favor of this legislation has been that, if it is enacted, it will no longer be necessary to make a detailed study of the voluminous provisions of ocean bills of lading, which now include hundreds of lines of small print. The argument has been that anything in the bill of lading which purported to modify the respective rights and liabilities of cargo and carrier, as set forth in the statute, would be invalid. That this is the intent of the statute appears from section 3 (8), which reads as follows:

"Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this act, shall be null and void and of no effect. A benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability."

The institute, therefore, considers that if it were permissible to use the so-called both-to-blame collision clause, after the adoption of the statute, the intent and, indeed, the main purpose of the statute would be defeated.

Under these circumstances it will naturally be argued that, if the statute in its present form is clear, no amendment is necessary. Our answer to this argument is that the objectionable clause has only recently been introduced, and it must be anticipated that the carriers will make a determined effort to sustain it. Its validity will undoubtedly be the subject of protracted litigation. The purpose of the rules is to avoid such litigation, and if the objectionable clause had been introduced at the time The Hague rules were formulated, it would undoubtedly have been prohibited by express reference. This was done in the case of a far less objectionable clause, i. e., the benefit of insurance clause, which is specifically referred to in section 3 (8). The institute, therefore, urges the amendment of 4 (3) above quoted, and, if this amendment is not adopted, the institute desires specifically to reserve the privilege of urging appropriate legislation dealing expressly with the objectionable both-to-blame collision clause. Respectfully submitted.

D. ROGER ENGLAR,

Counsel for the American Institute of Marine Underwriters.

STATEMENT OF IRA A. CAMPBELL ON BEHALF OF THE AMERICAN STEAMSHIP OWNERS' ASSOCIATION

Mr. CAMPBELL. Mr. Chairman and gentlemen, I appear here for the American Steamship Owners' Association. The gentleman who has just spoken has introduced into this situation a conflict and technical quarrel between cargo underwriters and ship owners.

The CHAIRMAN. Does it affect in any way the shipper?

Mr. CAMPBELL. It does not affect the shipper, Mr. Chairman, because of the fact that there is no cargo shipped, or, if it is, it is so small you never know of it-there is no cargo shipped by him that is not covered by marine insurance.

The CHAIRMAN. But the witness says that shippers themselves frequently carry a part of that insurance.

Mr. CAMPBELL. Well, the gentleman is simply mistaken. You notice that the opposition here, or the supporters of this proposed

amendment, are not cargo owners or shippers; it is a group of cargo underwriters who now seek to drag into this situation a discordant element.

The shipowners are the people who are giving up most that is being surrendered to secure the enactment of this legislation and we are prepared to do it. We favor this bill as it has passed the Senate; but, if the bill is now to be mutilated by new amendments to inure to the benefit of the cargo underwriters, then we are opposed to the legislation.

If you put that amendment into the bill, you are going to throw this measure into discord with the Brussels Convention. It is not going to conform to the international uniformity we are seeking, and you are putting the shipowners in a position where we must take a stand against the legislation.

We think for the sake of uniformity, and for the sake of the shippers themselves, that this bill ought to be passed; it certainly places the shipper in a much better position than he is today. But if now the cargo underwriters are going to come into this situation and seek to amend this bill, we have no other alternative than to stand upon our rights. And the very weakness of their position is shown by the fact they say, "We won't oppose this legislation, won't insist upon this amendment, if it is going to result in really preventing the enactment of this legislation."

Mr. HART. Do you think the proposed amendment, as read by the preceding witness, really changes the meaning of subsection 2? Mr. CAMPBELL. Yes, I do, sir.

The CHAIRMAN. I wish you would explain that and explain how it works a detriment to you.

Mr. CAMPBELL. I will endeavor to do it. By section 3 of this bill, you impose upon the shipowners due diligence to make the ship seaworthy, to properly man, equip, and supply the ship, and to make the holds, refrigerating and cooling chambers, and all of the parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation. And (2) you impose upon us, the shipowner, the burden of properly and carefully loading, handling, stowing, carrying, keeping, caring for, and discharging the goods carried, and so forth.

Those are certain obligations you impose with respect to bills of lading and, by section 4, you grant to the shipowner certain exemptions, in consideration thereof. By the first provision, you grant the exemption

Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence.

And so forth.

By paragraph 2, you expressly provide:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (a) act, neglect, nor default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.

That is what the shipowners get out of this bill, in exchange for the things that we surrender, namely, that we shall not be responsible for loss or damage arising from neglect in the navigation of the vessel. If that neglect is due to unseaworthiness, then we will not

escape unless we show we have exercised due diligence to make the vessel seaworthy; but if the fact of unseaworthiness does not enter into it, then we have by this bill an express grant of exemption from liability for negligence in the navigation of the vessel.

All right. Now, the cargo underwriter ships his cargo aboard my vessel. He is fully insured. If my vessel gets into a collision with another vessel, through negligence of my master, and the other vessel is not in fault, then I am not liable under this act to the shipper of the cargo or his insurer, and the shipper of the cargo will receive his full indemnity from his underwriter, and the underwriter will have no recourse against me. If it is fair that the shipowner should be exempted from liability for negligence in the navigation of the vessel where his ship is solely in fault, he certainly is entitled to the same exemption if the other vessel happens to be also in fault.

The effect of this amendment is going to be to penalize a shipowner, not for the negligence of his own ship, but for the negligence of the other vessel. For example, we have two ships, ship "A" and ship "B." A shipper ships cargo on ship "A" and the two ships come into collision and ship "A" is sunk and the cargo is lost. The cargo owner and his underwriter-because in 99 percent of the cases it is the underwriter, although he appears in the clothing of the shipper-will sue the other ship and will collect 100 percent from the other ship. He cannot sue the ship and collect from the ship on which he is transporting his cargo, because of this exemption in the bill. The ship on which he transports his cargo is not liable to him for the negligence of her master, so that the shipper will sue the other vessel.

The CHAIRMAN. Is that true now?

Mr. CAMPBELL. Yes, sir, that is true now; that is true under the Harter Act today. He sues the other ship, and the underwriter recovers from the other ship. Then that shipowner turns around and charges one-half of the liability against the other shipowner and thereby imposes upon the carrying ship one-half the liability to the

cargo.

What we are seeking and what we hope we will be able to do under the language of this bill if enacted, and by this clause, is to protect the carrying ship in its exemption under this act against liability for negligence in navigation. This situation has been well known. You are going to defeat it by this amendment; you are not going to bring this act into uniformity with the Brussels Convention and what is going to be international law, but you are going to introduce discord into the whole situation.

We submit it is not fair; it is not proper. We have been struggling for this legislation now for years and years, trying to get it through. Conferences have been held under the guidance of the United States Chamber of Commerce. We have met; we have discussed these things; the shippers and shipowners have agreed; each has surrendered something in the situation. But now we have a cargo underwriter come forward, and what does he want? Why, he wants to collect his premium from the shipper, because the shipper does not dare to go uninsured, and, if the ship on which he ships his cargo is alone at fault, he has to look to his underwriter for his

indemnity and the only recovery he can obtain; therefore, he cannot afford to go uninsured for that risk. And what is going to be the effect of this amendment upon the position of the shipper? The shipowner will know, if a collision happens and there is a heavy loss of cargo on board his ship, that he will not be held liable under this act if his ship alone is at fault for the collision. He knows his shippers have already been paid by the cargo underwriters, for which they have been paid a premium for their insurance; but he does know that if he, the shipowner, conducting this litigation, succeeds in holding the other vessel at fault, he thereby penalizes himself to the extent of 50 percent, possibly, of the value of the cargo on board his own vessel.

Now, is it going to be in the shipowner's interest to establish the fault of the other vessel when it will penalize him? No. His own selfish interest will dictate and he will attempt to secure a finding of fault on the part of his own ship alone. And we will have that situation.

Supposing you had a ship lost with a million dollars' worth of cargo on board, and the shipowner knows that if his ship alone is to blame, under this act, he will not be answerable to the cargo, because that is the law you are enacting here-you are giving that much to the carrying ship.

The CHAIRMAN. I want to make clear if that is the existing law Is it?

now.

Mr. CAMPBELL. It is the existing law now. The Harter Act says. if the shipowner exercises due diligence in all respects to make the ship seaworthy, he shall not be liable for loss or damage due to the negligent navigation or operation of the vessel.

If the shipowner has a million dollar cargo in his vessel and it is lost and he knows that if the other ship is also held to blame it may cost him half a million dollars which is going back into the pocket of the underwriter who has received a premium, do you think it will be human nature for him to prosecute that litigation so as to establish fault on the part of the other vessel? No; not in any case. Is it to the interest of the cargo shipper to have the law so written that it is always going to be in the interest of the shipowner to have his vessel alone found in fault? No. Because, if that is the law, then the cost of insurance is going to go up to the cargo owner.

The effect of this amendment would not be to compel the cargoowner to give back to the carrying ship all that he recovers, but only to give back 50 percent in one instance, and, if the carrying ship is alone held to blame, the cargo owner makes no recovery. If both ships are to blame, he may make a 50-percent recovery against the other vessel.

So I say to you that amendment is an amendment which is going to prejudice the cargo interests themselves; it is bound to increase the cost of insurance to the shipper from the cargo underwriters and that probably is the very reason why you do not see before you the cargo interests asking for this amendment.

It would be foolish for them to come forward and ask for that amendment, because the effect of it is going to be to give the cargo underwriter an excuse for increasing his premium on cargo.