LIEN ON CARGO

1. LIEN ON CARGO by Zeynep Özkan Özeren ÖZKAN Law Office

2. LIEN ON CARGO 1-) Which debts are covered? a) Contractual Liens: depends on the construction of the lien clause of the c/p eg. Gencon (94) “Owners shall have a lien on the cargo and on all subfreights payable in respect of the cargo for freight, deadfreight, demurrage, claims for damages and all other amounts due under the charterparty including the costs of recovering the same.”

3. a) Contractual liens eg. Gencon (76) “…damages for detention” eg. Scancon “the owners shall have a lien on the cargo for any amountdueunder this contract and the necessary costs of recovering the same.” “charter-party sub-freights”

4. b) Statutory liens under Turkish law • freight, deadfreight, distance freight, demurrage • general average contribution of the cargo • salvage renumeration, masters transactions

5. 2-) What is subject/scope of the cargo lien? • Entire consignment of cargo carried under the same contract of carriage even though only a part of the freight is outstanding • Once different bills of lading are issued covering different parts of the cargo, lien may be exercised on that part of the cargo, the outstanding freight is related

6. 3-) What rights over the cargo does the lien give? • a) Contractual liens: • merely right to retain possession as security for payment, no right of resale • Possible to provide for the right of resale in the contractual clause

7. 3-) What rights over the cargo does the lien give? • eg. Cl.14 of P&O Nedlloyd bill of lading: “….In any event any lien shall extend to cover the costs recovering the sums due and for that purpose the Carrier shall have the right to sell the Goods by public auction or private treaty, without notice to the Merchant at any time and at any place at the sole discretion of the Carrier”

8. 3-) What rights over the cargo does the lien give? • b) Statutory liens under Turkish law • Right to retain possession, • Right to have the cargo sold by public auction

9. 4-) When can the lien be exercised? • Requirements: • Shipowner must have taken the possession of cargo • Freight or other rights must be due • eg. Tamvaco v Simpson (1866) LR 1 CP: not able to exercise lien when the contract provided for the payment of freight at a later date than the fixed delivery of cargo

10. 5-) Against which parties can the lien be exercised? • a) Contractual liens: • only against the contractual party to the contract of carriage • so a lien incorporated in a time charter to provide security for unpaid hire is not enforceable against cargo of third parties shipped under a bill of lading • The Chrysovalandou Dyo [1981] 1 Lloyd’s Rep 159

11. 5-) Against which parties can the lien be exercised? • The Chrysovalandou Dyo [1981] 1 Lloyd’s Rep • it was held that such a clause did not “entitle the shipowners to a lien on the goods of persons who have come under no contract with them…A right to seize one person’s goods for another person’s debt must be clearly and distinctly conferred before a court of justice can be expected to recognize it.”

12. 5-) Against which parties can the lien be exercised? existence of the right of lien over cargo in the cp will not entitle owners to exercise a lien under the bill of lading unless a-) charterer is the owner of the cargo b) the bill of lading gives the owners a specific contractual right of lien over cargo as against the consignees for sums due under the cp

13. 5-) Against which parties can the lien be exercised? • b) Statutory liens • Enforceable against the third party receivers: owner can exercise his right of statutory lien for outstanding freight due under the head charterparty against cargo shipped by a sub-charterer

14. 6-) Where should the lien be exercised? • Is it necessary to be at the port of discharge in order to exercise the lien or is it possible for owners to exercise a lien by halting a laden ship en route to the port of discharge?The Mihalios Xilas [1978] 2 Lloyd’s Rep 186 • The Chrysovalandou Dyo [1981] Lloyd’s Rep 159 • unless there are exceptional circumstances, the owners have to exercise their right of lien at the discharge port

15. 7-) Can the lien be exercised after discharge? • a) Contractual liens • Owner must keep possession of the cargo • Accordingly, owners must arrange warehousing at their own risk and expense or lose their right of lien • May be insecure or expensive

16. 7-) Can the lien be exercised after discharge? • b) Statutory liens • Lien can be exercised on board or after discharge or even after delivery to the receivers provided that it is enforced within 30 days and the receivers still keeps possession of the cargo • An example: Gemlik Court of First Instance File No: 2010/10D.İs

17. 8-)What are the formalities for enforcing a lien? • a) Contractual liens • exercised by retaining the possession and the shipowner does not have to obtain any court order before doing so • not necessary to notify the interested parties although advisable to do so

18. 8-)What are the formalities for enforcing a lien? • It is possible to provide detailed provisions about the enforcement of lien procedures in the contract of carriage. See for example P&O Nedlloyd Bill of Lading Cl.14: • “….for that purpose the Carrier shall have the right to sell the Goods by public auction or private treaty without notice to the Merchant at any time and at any place at the sole discretion of the Carrier”

19. 8-)What are the formalities for enforcing a lien? b) Under Turkish law • a court order is required • not required to notify the interested parties before applying to the court • the owner may apply to the court and obtain an ex-parte arrest order and start proceedings for the enforcement of the right of lien and having the cargo sold through the public auction

20. 9-) Contractual vs Turkish statutory liens • the law of contract shall be applicable to evaluate as to whether there is an outstanding receivable • However, Turkish law shall be applicable to the issue as to whether such receivable would give a right of lien. • Turkish law shall be applicable to the enforcement procedures as well

21. 9-) Contractual vs Turkish statutory liens • The provisions of the contract of carriage on cargo liens shall be valid as long as they are not in breach of the mandatory provisions of Turkish law. Examples to invalid provisions: • “the owner shall have right of lien on the cargo even if he has not had the possession” • “the owner would have title to liened cargo if the debt is not paid”

22. Özkan Law Office Hüsrev Gerede Cad. Ömer Rüştü Paşa Sok. No 12, Teşvikiye, Istanbul, Turkey Tel: +90 212 3276940 Fax: +90 212 3276943 E-mail: info@ozkan.av.tr www.ozkan.av.tr