Notes on the exercise of a lien on cargo


Checklist:

• What is the amount claimed, is it due and owing and what does it represent?

• What lien is to be invoked?

• Has anything been done that amounts to a waiver of the lien or which extinguishes the lien?

• Where is the lien to be exercised?

• Do local laws or port regulations at the place of exercise of the lien impose any conditions, restrictions or obligations upon the exercise of the lien?

• Do local laws or port regulations at the place of exercise of the lien impose any conditions, restrictions or obligations upon the exercise of the lien?

• Are there any other applicable preconditions, restrictions or obligations?

• Is there a better place to exercise the lien?

• Would the cargo be at risk of perishing or deteriorating during exercise of the lien? Who would be held liable for the loss?

• Would the loss of time to the ship resulting from exercise of lien be recoverable and from whom?

• Should notice of exercise of lien be given, if so to whom?

• Could the cargo be discharged ashore while still preserving the lien?

• Would exercise of the lien result in a claim being asserted against the shipowner by any person?

Supplementary Comments:

1. Usually the amount claimed must have fallen due and owing. But a lien can sometimes be exercised even though the amount payable has not been quantified, for example for General Average even though the adjustment has not been published.

2. Where the shipowner seeks to rely upon a lien clause in a charterparty then the enforceability of the lien is likely to depend on whether the charterer owns the cargo or not and what is stipulated in bills of lading and other documents. Even if the bills of lading incorporate the lien clause, a lien for amounts due under a charterparty may not be exercisable against a bill of lading holder (other than the charterer) to the extent that the lien would be inconsistent with the bill of lading. For example, if the bill of lading is marked “Freight Prepaid” then the lien might not be exercisable for freight but might be exercisable for demurrage.

3. The lien is a right to retain possession, it is exercised by retaining possession and the shipowner does not have to obtain any court order before doing so. But if the validity of the lien is in any doubt then the shipowner may wish to consider obtaining a court order as this may provide some protection against a claim for wrongful exercise of the lien.

4. Local law and port regulations at the place where the lien is to be exercised are relevant even when the charterparty or bills of lading are expressed to be subject to English law or to other laws. In some jurisdictions the local law grants the shipowner a right of lien. English law treats such local rights as being additional to contractual rights. On the other hand, a lien cannot validly be exercised in a way that conflicts with local laws or regulations.

5. Local law and port regulations at the place where the lien is to be exercised are also relevant when deciding how to exercise a lien. At some ports the shipowner may be able to retain effective possession of cargo after discharge. The advantage of discharging and exercising the lien ashore (thereby enabling the vessel to depart) may outweigh considerations such as the cost of storage ashore.

6. The lien is waived by parting with possession and so, in many instances, will be waived by discharging the cargo. Exercise of the lien by retaining the cargo on board the vessel invariably results in delay to the vessel. Recovery of compensation for that delay is not straightforward. If the shipowner acts in an unreasonable way then he may be unable to recover for delay, notwithstanding that he was exercising a valid lien.

7. The exercise of a lien by retaining cargo on board the vessel may have other implications. If the vessel is already at a berth it may be ordered off the berth. Some port regulations may not permit exercise of a lien. The presence of the vessel at the port may enable receivers to obtain an order from the local court forcing the vessel to discharge. These are all factors that the shipowner may wish to consider before the vessel arrives at the port. Where a lien cannot be exercised effectively at the discharge port, English law may permit the shipowner to exercise a lien while waiting off the port.

8. It is often advisable to notify interested parties of the exercise of the lien as this may assist in obtaining payment or security. But English law does not impose any requirement to give formal notice of the exercise of the lien. A failure to give notice of the exercise of a lien would only invalidate the lien if the contract were to contain an express stipulation that notice be given or, possibly, if local law (at the place of exercise of the lien) required notice to be given.

These notes reflect the author's opinion at the date of publication of the typical issues relevant to this topic from an English law perspective. The notes are only a general guide, they are not comprehensive. These notes do not contain or constitute any representation of fact. Individual circumstances vary and other features of English law may be relevant. It is recommended that you contact us and take detailed advice before taking any decisions. If you would like to be added to the mailing list for these notes then please write to us with your name and mailing address. Comments and suggestions for further topics are welcome. Contact: info@morgans-law.com Copyright © 2006 Morgans. Pursuant to s.78 Copyright Designs & Patents Act 1988, Morgans asserts the right to be identified as author of this work.