Paramount clause
Updated: Sep 6
When Bill of Lading Becomes the Instrument for Choosing Applicable Legal Regime
In maritime law, Paramount Clause occupies a particular place in the contract of carriage by sea. But what exactly does it mean?
Put simply, an international convention does not necessarily apply automatically to every contract of carriage, particularly with regard to carrier’s liability. The parties may, however, agree to subject their contract to a specific international legal regime (generally the Hague Rules, Hague-Visby Rules or, in certain cases, Hamburg Rules).
The clause by which this intention is expressed is commonly inserted into Bill of Lading under the heading “Paramount Clause.”
But this raises an important question: Can parties, simply by inserting a Paramount Clause in the Bill of Lading, make an international convention applicable to their contract when that convention would not otherwise apply by operation of law?
The answer differs depending on legal system:
Under French law, case law has recognized, subject to certain conditions, that a Paramount Clause may lead to contractual application of Hague or Hague-Visby Rules, even where those Rules would not otherwise apply directly to the carriage.
Thus, in SMB c. SECAM, 13 June 1989, No. 87-10.796, French Cour de cassation accepted the use of a Paramount Clause to determine applicable international regime. More recently, in PALM TER c. CMA CGM, 16 January 2019, No. 17-17.314, the same Court confirmed, in the circumstances of that case, application of the 1924 Brussels Convention on the basis of Paramount Clause contained in the Bill of Lading.
In Canada, however, situation is different. Hague-Visby Rules have force of law under conditions set out in section 43 of Marine Liability Act. Paramount Clause therefore serves primarily to clarify and identify the applicable legal regime, rather than constituting, in situations falling within section 43, the necessary legal basis for its application.
But there is an important limitation: Paramount Clause is not all-powerful. It cannot allow parties to contract out of mandatory rules forming part of legal regime applicable to the carriage. This is precisely where the difficulty lies. Paramount Clause sits at the intersection of two fundamental principles of international trade: parties’ freedom of contract; and mandatory nature of certain rules governing the carriage of goods by sea.
Paramount Clause is therefore far more than a mere “standard” provision in a Bill of Lading. It may help determine carrier’s liability regime, available defences, limitations of liability and, indirectly, even the outcome of maritime litigation.
A little complicated, isn’t it?
That is precisely why careful review of the Bill of Lading and its contractual clauses is essential before any international shipment. G.Pac Consulting can assist businesses with specialized matters relating to maritime law, international transportation and international trade. www.gpacconsulting.ca
Example of a CMA CGM Paramount Clause:
6. CARRIER’S RESPONSIBILITY AND CLAUSE PARAMOUNT
“Port-to-Port Shipment – When loss or damage has occurred between the time of loading of the Goods by the Carrier, or any Underlying Carrier, at the Port of Loading and the time of discharge by the Carrier, or any Underlying Carrier, at the Port of Discharge, the responsibility of the Carrier shall be determined in accordance with the Hague Rules or any national law making the Hague Rules, or any amendments thereto, compulsorily applicable to this Bill of Lading.”
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