II. ADVANTAGES TO BE GAINED BY CARRIERS

1. Unseaworthiness.-There will be no gain from the proposed act to shipowners as respects the duty of making their vessels seaworthy. Section 3 (1) imposes upon the carrier the duty of exercising due diligence to make the ship seaworthy, properly man, equip, and supply the ship, and make the holds, refrigerating, and cooling chambers and other parts of the ship in which the goods are carried fit and safe for their carriage and preservation.

The duty imposed by the bill is to exercise due diligence. This is a modification of existing law, where the effect of it has not been changed by contract. Under present law the shipowner warrants the seaworthiness of the vessel at the beginning of the voyage. (The Edwin I. Morrison, 153 U. S. 199, 210). This warranty, however, may be modified by contract. (The Carib Prince, 170 U. S. 655; The Prussia, 93 Fed. 837).

Thus there has grown up the universal practice of inserting in all bills of lading a provision to the effect that if a shipowner exercises due diligence to make his vessel seaworthy, he shall not be liable for losses resulting from unseaworthiness. In other words, the rights which shipowners now enjoy by contract would by the enactment of the bill be confirmed to them by sections 3 (1) and 4 (1) of the bill.

2. Care and custody of cargo.-Section 3 (2) imposes upon the carrier the duty to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried. These are substantially the same obligations as now exist under sections 1 and 2 of the Harter Act. So that these provisions are neither advantageous to shippers, nor disadvantageous to shipowners as compared with existing law.

3. Specific exemptions from liability.-Section 4 (2) (a) to (p) grant a carrier exemptions from certain enumerated causes. It is these provisions, and these alone, under the bill which grant the shipowner substantially his only advantage from the legislation. Of the exemptions, 11 are contained in the Harter Act (passed in 1893), but with this modification:

Under the Harter Act, in order to enjoy the benefits of the exemptions, the shipowner is under the burden of establishing that he has exercised due diligence to make the vessel in all respects seaworthy and properly manned, equipped, and supplied. If he sustains that burden, then he will be entitled to exemption from liability for losses resulting from the causes enumerated in paragraphs (a), (c), (d), (f), (g), (m) and (n).

Thus the burden as to which the shipowner is relieved is that of showing that he exercised due diligence to make his vessel seaworthy. However, the shipowner will not be relieved in the above respect if his failure to use due diligence to make the vessel seaworthy, or negligence in the care and custody of the cargo, contribute to the loss.

The principal gain to the carrier under the bill, therefore, would be the exemption from loss or damage from the enumerated causes, such as negligence in navigation, without being required to show, as a condition precedent, that due diligence was exercised to make the vessel seaworthy, unless unseaworthness contributed to the loss. If it does so contribute, then the carrier will not receive any advantage not enjoyed under existing law and right of contract.

This slight change in the law would admittedly be advantageous to shipowners, because they would be relieved from the effects of the recent decision of the United States Supreme Court in the case of May v. Hamburg American Line (290 U. S. 333). There the Supreme Court, interpreting the Harter Act, held, in effect, that a shipowner was not entitled to an exemption from liability for loss caused through error in navigation, if he failed to use due diligence to make the vessel seaworthy in all respects whatsoever, and whether or not unseaworthiness had any casual connection with the loss.

Unseaworthiness, particularly in a modern ship, may consist in some trifling defect which is relatively unimportant unless it actually leads to loss. For instance, one or more of the thousands of rivets in a vessel's hull may be loose or missing, but unless sea water obtains access to the cargo through such defect, it is inconsequential and the vessel is quite capable of carrying her cargo safely. A vessel making a daylight run may have a defect in the electrical connections of a navigation light, and thus be technically unseaworthy, although there would not be any actual use for the light. Another vessel might have a small tear in a tarpaulin covering one of her hatches. Yet, in any one of

these cases, if the defect could have been discovered before sailing by the exercise of due diligence, the shipowner would be precluded from obtaining exemption from liability in case the vessel should be in a collision by reason of some error in navigation on the part of a competent master, which was entirely unconnected with technical unseaworthiness.

This decision was based upon the particular wording of the Harter Act, which stipulates, as a condition of exemption of liability for negligence in navigation, the exercise of due diligence to make the vessel in all respects seaworthy, irrespective of whether unseaworthiness contributes to the loss. This change in the law which the proposed act would create was commented upon by the Committee on Foreign Affairs of the Senate in its report to the Senate on March 28, 1935, on the international convention for the unification of certain rules relating to bills of lading (see Senate Executive Report No. 2, 74th Cong., 1st Sess.) as follows:

"This differs from the wording of the Harter Act (act of Feb. 13, 1893), which as recently construed by the Supreme Court (The Isis, 290 U. S. 333) subjects a steamship owner to liability for errors in navigation and in the management of the ship (which liability the act was designed to eliminate) if a ship is in any respect unseaworthy, even though the defect had no connection with the damage sued for. This construction results in the imposition upon carriers of a liability which is more onerous than that imposed by the law of any other country."

Of the exemptions enumerated in section 4 (2), as to which this change in law applies, the really important ones are those granting relief from liability for loss or damage resulting from an act, neglect, or fault of the master, mariner, pilot, or the servants of the carrier in the navigation or management of the ship; and from perils, dangers, and accidents of the sea or other navigable waters.

The bill will confer no advantage on the shipowner as respects losses by fire or by latent defects not discoverable by due diligence.

The foregoing, being substantially the only real advantages accruing to shipowning interests through the bill, it is obvious that they are more than counterbalanced by the many advantages now enjoyed which will be taken from the shipowners for the benefit of the shippers-so that the shipowners may rightfully feel that they are the ones who are making the_real sacrifices that uniformity in shipping documents and legislation may be established internationally.

The unanimous support accorded the bill by the many organizations representing shipper interests is for this reason readily understandable.

III. OBJECTIONS TO AMENDMENT PUT FORWARD BY CARGO UNDERWRITERS

The amendment proposed by cargo underwriters, who alone of the various interests concerned have not whole-heartedly accept S. 1152 as it passed the Senate, would prevent the inclusion in bills of lading of the so-called both-toblame collision clause.

Shipowning interests feel that the amendment would be highly unfair and prejudicial and should not be included. It will, as we shall point out, introduce a discordant element into the so-called Brussels Convention situation, and in a material way will nullify the principle of uniformity in shipping documents for the obtaining of which all interests are making every sacrifice.

Furthermore, as was stated in the recent hearing, other maritime nations are apparently preparing to ratify the Brussels Convention if the United States enacts the present bill, but if uniformity is to be mutilated by the proposed amendment, then it will be extremely doubtful whether it will not defeat the further adoption and ratification of the Brussels Convention.

While the situation attending the "both-to-blame" collision clause is a rather technical one, affecting principally cargo underwriters and shipowners, we shall do our best to make it clear to the committee so that they may have full appreciation as to the seriousness with which the proposed amendment is regarded by our association.

Congress, nearly 42 years ago, passed the Harter Act in which it provided in effect, among other things, that shipowners would not be liable for loss or damage to cargo resulting from negligence in the navigation of the carrying vessel, provided that due diligence had been exercised to make the vessel in all respects seaworthy and to have her properly manned, equipped, and supplied at the beginning of the voyage.

This relieved a shipowner from liability for damage to cargo by collision caused, for example, by negligence in navigation on the part of the master, provided the required diligence had been exercised. The statutory law for decades, therefore, has been that the shipowner was not liable for damage to cargo carried on his vessel resulting from negligent collision, if the vessel was seaworthy, or if due diligence to make her so had been exercised.

In 1893, the United States was the only great maritime nation which forbade a shipowner from contracting against such liability and it was to cure that situation, among other things, that the Harter Act was passed in that year. Collisions, however, may not only be caused by the negligence of the vessel which is carrying the cargo, but may be contributed to by the other vessel, that is to say, both vessels may be at fault. In such a situation, by reason of the provisions of the Harter Act, neither vessel could be held liable to the owner of the cargo which it carried, provided the vessels were seaworthy, or that due diligence had been exercised. However, the owner of cargo on each vessel would be able to sue and make a full recovery from the other vessel. Such a situation was present in the case of The Chattahoochee (173 U. S. 540). In that case, the Supreme Court held that the owners of the noncarrying vessel, who had been held liable for the full amount of the loss of cargo on the other vessel, could require the owners of the carrying vessel, because the latter vessel was also in fault, to contribute one-half the amount which the owners of the noncarrying vessel had to pay to cargo interets on the carrying vessel.

As a result of this decision, the anomalous and unfair situation arose that an owner of a carrying vessel, which had only been partly at fault for a collision, was worse off than if his vessel had been solely to blame for the collision, because in the latter case he would have been excused entirely from liability by the Harter Act for the loss of cargo on his vessel. However, under that decision, the owner, only partially at fault, was held for half the damages to his own cargo.

This anomalous and absurd situation did not then, and does not now, exist under the law of England. The Milan (1861, Lush. 338); Roscoe on the Measure of Damages in Maritime Collision (3d Ed., pp. 20, 21). So far as we know, the situation does not exist under the law of any other nation than the United States. If the proposed amendment is now enacted as the statutory law of the United States then American law will not be uniform with international law as established by the Brussels Convention.

The so-called "both-to-blame" collision clause was inserted in bills of lading in an effort to correct this anomalous and unjust situation in the United States by providing that if the carrying vessel collides with another vessel as a result of negligent navigation of both vessels, the owner of the cargo on the carrying vessel will indemnify the shipowner against all liability to the other, or noncarrying vessel, insofar as such liability represents loss or damage to the cargo on the carrying vessel recovered against the noncarrying vessel and set-off or recouped, or recovered, by the noncarrying vessel as part of its claim against the carrying vessel.

The fact is that these controversies arise in nearly every instance between cargo underwriters and shipowners, for it is common knowledge that it is a rare case where cargo is shipped in foreign trade without adequate marine insurance. The correctness of this statement can be corroborated by the Committee through the Department of Commerce.

While the "both-to-blame" collision clause is stated in terms as requiring an idemnity from the cargo owner, its practical effect is merely to preclude the underwriters of the cargo on the carrying vessel from recovering indirectly against that vessel what they could not recover directly, and to prevent them from being put in a better position because the carrying vessel is only partially at fault than they would be in if the carrying vessel were solely to blame for the collision.

The fact that the cargo underwriter interests are the ones really affected by the clause, and not the cargo owners, is manifested by the fact that the opposition to the clause comes from the underwriters and not the shippers. There is nothing unfair or improper in the clause. Obviously, it requires no argument to sustain the proposition that if the carrying vessel should not be held liable to her cargo for a collision where she was solely at fault, the vessel should not be held liable where she is only partially at fault and the collision was equally caused by the other vessel. The purpose of the clause is solely to prevent that anomalous and unfair situation.

The clause does not require the cargo owner or his underwriter to bear any loss which should fall on the shipowner. In a "both-to-blame" collision, the cargo owner or underwriter may still recover 100 percent of his damages from the other (noncarrying) vessel, but will be required to indemnify the owner of the carrying vessel to the extent of 50 percent of this recovery in order to offset the claim of the noncarrying vessel against the carrying vessel arising out of the cargo damage. This will leave the underwriter with a 50 percent recovery, which is all he should have under the principles of the Harter Act and the laws and practice of maritime nations generally, where both vessels are to blame.

The purpose sought by the introduction of the clause is perfectly analagous to what was done with respect to general-average contributions by cargo interests. It had long been a principle of maritime law that a cargo owner could not be compelled to contribute to voluntary general-average sacrifices made by the shipowner to save ship and cargo if the disaster resulted from negligence in the navigation of the carrying vessel. When the Harter Act was passed, however, exonerating the carrying vessel from liability for damage to its cargo resulting from negligent navigation, it was first thought and urged that the law of contribution in general average had been changed by the Harter Act and that, inasmuch as the carrying vessel was exempted from liability for damage to its cargo, the cargo owner could also be compelled to contribute to the voluntary general-average sacrifices of the shipowner for the common benefit.

4

However, the Supreme Court decided otherwise in The Irrawaddy (171 U. S. 187), wherein it pointed out that the Harter Act in terms merely protected the shipowner from liability and did not deal with the question of general average.

Thereupon, the famous Jason clause was drafted and inserted in bills of lading. This clause, in effect, provided that if the shipowner exercised due diligence to make the vessel in all respects seaworthy, the cargo owner should contribute to general average, even if arising out of the negligence in the navigation of the vessel. Obviously this was in accord with the policy of the Harter Act and the clause was upheld as reasonable by the Supreme Court in The Jason (225 U. S. 32).

That the Jason clause is a fair and proper one is recognized by the Brussels Convention and S. 1152. In the latter, section 5 provides: "Nothing in this act shall be held to prevent the insertion in a bill of lading of any lawful provision regarding general average." This contemplates the use of the Jason clause in bills of lading. In other words, the convention, and this legislation, will expressly recognize the fairness of providing by contract for generalaverage contributions by cargo interests even though the carrying vessel is alone at fault.

How much fairer, therefore, will it be to insert a clause which will provide that no greater liability will be imposed upon a shipowner where his vessel is only partially in fault than would be imposed upon him if his vessel were solely at fault.

For these reasons, shipping interests are strongly opposed to the cargo underwriters' proposed amendment.

The American Steamship Owners' Association respectfully recommends the enactment of S. 1152 as it passed the Senate. Respectfully submitted.

IRA A. CAMPBELL,
General Counsel.

STATEMENT OF W. J. NUNNALLY, JR.-Resumed

Mr. NUNNALLY. Mr. Chairman, I am rather put in an unfortunate light through careless statements as to what the law is today. The law today permits the cargo on a ship which is damaged as a result of a collision between two ships, both at fault, to collect the full amount of its damages, and has since the decision of the Supreme Court in the Chattahoochee case, some thirty-odd years or more ago. Our amendment is not changing any right, such as Mr. Campbell suggests. The present law permits the innocent cargo to collect 100

percent damages. The only effort to change the law is this recent clause that was devised in Mr. Campbell's office, this clause I have read, that would require cargo to indemnify or insure the carrying ship. We do not think that clause is legal; we do think that the carrying ship can require cargo to indemnify and insure it. But, as I say, it will have to go to the Supreme Court unless it is clarified. Now Mr. Campbell refers to the ship declining to bring suit against another ship, to prove it at fault, because it may have to contribute to the cargo damage. You can imagine how long a $10,000,000 ship which is damaged or totally destroyed would hold back in suing another ship simply because it has to contribute a million dollars, or half a million dollars, or whatever he has in mind, on cargo that is damaged. And these cases are mythical to which he refers. It might happen in one time out of a thousand that this damaged cargo exceeded the value of the vessel, but it does not occur in practice.

As I say, I was instructed to say we would not insist upon this amendment if it is going to defeat the passage of the bill. At the same time, they want to point out to the committee, unless it is put in, we are going to have to go to the courts to have it clarified. The CHAIRMAN. Gentlemen, as I stated, while we may possibly be able to go on, this afternoon, we will have very few members of the committee present and possibly there would be a greater opportunity for the matter to be fully considered by the committee if you could wait over and go on tomorrow morning.

Mr. HAIGHT. I would rather go on now, if I may, sir. I have with difficulty gotten here.

The CHAIRMAN. Very well; go ahead.

STATEMENT OF CHARLES S. HAIGHT, CHAIRMAN, BILLS OF LADING COMMITTEE, INTERNATIONAL CHAMBER OF COMMERCE

Mr. HAIGHT. Mr. Chairman and gentlemen of the committee, before I make the statement which I have in mind, I would like to discuss just for a moment this proposed amendment suggested by the cargo underwriters.

The amendment proposed by Mr. Nunnally does raise the only controversial point which came into this hearing. I hope you will accept his suggestion that he would rather see the bill go through as it is, without his amendment, than to introduce a controversial question which may defeat the bill.

The CHAIRMAN. The trouble is he has already introduced it. These hearings are public hearings.

Mr. HAIGHT. Right; but he has also said that if the committee feels it is better to disregard his suggestion, he has no objection to the passage of the bill without it.

The CHAIRMAN. But he cannot control the members on the floor. Mr. HAIGHT. Quite right. Now, the cargo underwriters get more benefit from this bill than any other interest alive. They have supported it from the start. They have the benefit of the limitation per package being raised to $500; they have the benefit of having the burden of proof shifted; they have the benefit of the change of law whereby 12 months is allowed in which to bring suit, and it is a great hardship upon the owners to be told of a claim they have