CANADA

FEDERAL COURT
TRIAL DIVISION
 
Nov. 29, 1999
 
____________________

 
THE "EBN AL WALEED".
 
Before Mr. Justice HUGESSEN
 
Bill of lading - Limitation of liability - Hague Rules - Damage to cargo - Carriage of goods from
Turkey to Canada - Bills of lading subject to Hague Rules - Value of cargo not inserted in bills of
lading - Limit of liability per package or unit applicable in Turkey.
 
Statement of agreed facts and issues
 
On or about Oct. 31, 1995 Ekinciler Dis Ticaret A.S., a Turkish corporation shipped 5,244,42868 (sic)
tonnes of hot rolled deformed reinforcing steel bars in 2626 bundles on board the vessel Ebn Al
Waleed at Iskenderun Turkey for carriage to, discharge at and delivery at Sorel, Canada.
 
The shipment was evidenced by bill of lading No. 1. The value of the cargo was not inserted in the bill
of lading, and the bill of lading was subject to the Hague Rules. The bill of lading was negotiated to the
plaintiffs.
 
Some of the cargo was delivered to the plaintiffs in a damaged condition and the plaintiffs estimated its
damages at Can.$570,000 plus interest and costs.
 
Although it was common ground that Turkey had given effect to the Hague Rules the parties had a
different understanding of the law as in force in Turkey as applied to a bill of shipment from a Turkish
port to a port outside Turkey.
 
The plaintiffs submitted that Turkey acceded to the Hague Rules on Feb. 22, 1955 but did not reserve
to itself the right of translating the package or unit limitation expressed in pounds sterling into its own
monetary system. Therefore the limitation of liability in accordance with the laws in force in Turkey was
£100 gold value per package or unit and the plaintiffs claimed about Can.$12,498.28, calculated in
accordance with market value of gold as of the date of delivery of the cargo i.e. Jan. 3, 1996.
 
The defendants argued that although the Hague Rules were ratified by Turkey in 1955 it only became
an effective part of Turkish law as incorporated in the Turkish Commercial Code as from Jan. 4, 1956.
The package or unit limitation which was then set at 1500 Turkish lire was amended by art. 1114 to
100,000 Turkish lire; and the defendants contended that the per package or unit limitation on a bill of
lading shipment from a port in Turkey to a port outside Turkey was 100,000 Turkish lire.
 
The issues for decision were: (1) What was the applicable package or unit limitation in accordance with
the laws in force in Turkey? (2) If the shipment was subject to the provisions contained in the Turkish
Commercial Code, what was, under Turkish law, the limitation of liability if any available to the
defendants? (3) How should that per package or unit limitation be converted into Canadian currency?

 
-Held, by Can. Ct. (HUGESSEN, J.) that (1) the Hague Rules in their original form became part of the
domestic law of Turkey on Feb. 14, 1955 when the Turkish Parliament ratified and enacted the Hague
Rules; the following year, in 1956, the Turkish Parliament adopted the Turkish Commercial Code which
contained an adaptation of the substance of the Hague Rules but the original enactment of the Hague
Rules was never repealed and Turkish national law contained both a textual adoption of the Hague
Rules and a national adaptation thereof as permitted by the Protocol of Signature (see p. 273, col. 1);
 
(2) the evidence of the defendants’ expert to the effect that although the original 1955 Turkish
legislation had never been repealed it had effectively been displaced by the Turkish Commercial Code
at least with regard to the monetary amount of the limitation of liability which was 100,000 Turkish lire or
approximately Can.$2.30 per package or unit which was applicable to both national and international
trade, was to be preferred (see p. 273, col. 2);
 
(3) as a matter of interpretation of the Hague Rules themselves as well as the Protocol of Signature
the rights reserved to the contracting parties to translate the sum of 100 pounds sterling into their own
currency and to adopt or adapt the terms of the rules as best suited them was not a "once and for all"
matter; and as far as concerned the right to vary the currency units it would be counterproductive to hold
otherwise (see p. 274, col. 1);
 
(4) if the Hague Rules were to be properly effective in any country they must be cast in terms which
the legal system understood and applied; presumably that was why the rules were adapted by Turkey to
the form in which they appeared in the Commercial Code; under the Hague Rules as in force in Turkey
the limit of liability where no statement of value is entered in the bill of lading was 100,000 Turkish lire
per package or unit (see p. 274, cols. 1 and 2);
 
(5) the date of conversion of the limitation was the date of arrival of the ship in Canada and as of that
date the applicable limitations was Can.$2.30 per unit (see p. 274, col. 2).
 
____________________

 
This was the trial of certain issues ordered in the action between the defendants, the owners of the
vessel Ebn Al Waleed and the plaintiff cargo-owners Barzelex Inc. concerning the limitation of liability of
the defendants in respect of damage to the cargo which was carried pursuant to a bill of lading subject
to the Hague Rules.
 
Mr. Richard Desgagnes (Solicitor) (Ogilvy Renault, Montreal) for the plaintiff; Mr. Sean Harrington
(Solicitor) (McMaster Gervais, Montreal) for the defendants.
The further facts are stated in the judgment of Mr. Justice Hugessen.
 
REASONS FOR JUDGMENT
 
Mr. Justice HUGESSEN:
 
Introduction
 
[1] This is the separate trial of certain issues ordered in accordance with the provisions of r. 107 of the
Federal Court Rules, 1998.1 The issues to be determined may be compendiously described as the
correct method of calculating the limit of liability which a carrier is entitled to claim under a paramount
clause incorporating the provisions of the Hague Rules into the terms of the bill of lading for the carriage
of goods by sea between Turkey and Canada.
 
[2] The applicable part of the general paramount clause reads as follows:
 
The Hague Rules contained in the International Convention for the Unification of certain rules relating
to Bills of Lading, Brussels dated the 25th August 1924 as enacted in the country of shipment shall
apply to this contract.
 
[3] The parties have filed a "Statement of agreed facts and issues" in the following terms:
 
 For the purposes of determining the per package or unit limitation of liability of the Hague Rules
contained in the International Convention for the Unification of certain rules relating to Bills of Lading
dated Brussels, the 25th August, 1924 as in force in Turkey, for a voyage from Turkey to Canada, and
for no other purpose whatsoever, the parties agree as follows:
 
1. On or about October 31st, 1995, Ekinciler Dis Ticaret A.S., a Turkish corporation, shipped
5,244,42868 [sic] metric tons of hot rolled deformed reinforcing steel bars in 2626 bundles onboard the
motor vessel Ebn Al Waleed at Iskenderun, Turkey for carriage to, discharge at and delivery at Sorel.
 
2. The shipment was evidenced by Bill of Lading No. 1 signed on behalf of the owners of Ebn Al
Waleed at Istanbul October 31st, 1995, attached hereto as Schedule "A". The value of the cargo was
not inserted in the Bill of lading.
 
3. At all times material hereto, the motor vessel Ebn Al Waleed was owned by Egyptian Navigation Co.
of Alexandria, Egypt.
 
4. The Bill of Lading was negotiated to the Plaintiff, Barzelex Inc.

5. Some of the cargo was delivered to Barzelex Inc. in a damaged condition, and Barzelex Inc.
estimates its damages at Cdn $570,000.00 plus interest and costs.
 
6. The Defendant, Egyptian Navigation Co., examined a representative of the Plaintiff for discovery
before filing its Statement of Defence. Some undertakings are still outstanding from that examination for
discovery, and the Defendant, Egyptian Navigation Co., has not yet filed a Statement of Defence.
 
7. The Defendant, Egyptian Navigation Co. takes the position that even if it is liable to the Plaintiff,
which it does not admit, its liability is limited to 100,000 Turkish Lire per package or unit, the Canadian
equivalent of which may be $2.30.
 
8. On July 10th, 1997, the Defendant, Egyptian Navigation Co. made a formal offer to settle the matter
for Cdn $5,000.00 in principal, interest and costs, reserving the right to bring the offer to the attention of
the Court.
 
9. The Plaintiff, Barzelex Inc., rejected the offer, but admits that if the per package or unit limitation
applicable on the voyage is 100,000 Turkish Lira, then the offer may be sufficient to discharge the
Defendant, Egyptian Navigation Co.’s liability in principal and interest, subject to obtaining a
confirmation as to the precise exchange rate applicable in this instance . . .
 
Articles 4(5) and 9 of the Brussels Convention 1924 provide:
 
4(5) Neither the carrier nor the ship shall in any event be or become liable for any loss of damage to or
in connection with goods in an amount exceeding 100 pounds sterling per package or unit, or the
equivalent of that sum in other currency unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in the bill of lading.
 
This declaration if embodied in the bill of lading shall be prima facie evidence, but shall not be binding
or conclusive on the carrier.
 
By the agreement between the carrier, master or agent of the carrier and the shipper another
maximum amount than that mentioned in this paragraph may be fixed, provided that such maximum
shall not be less than the figure above named.
 
Neither the carrier nor the ship shall be responsible in any event for loss or damage to, or in
connection with, goods if the nature or value thereof has been knowingly misstated by the shipper in the
bill of lading.
 9. The monetary units mentioned in this Convention are to be taken to be gold value.
 
Those contracting States in which the pound sterling is not a monetary unit reserve to themselves the
right of translating the sums indicated in this Convention in terms of pound sterling into terms of their
own monetary system in round figures.
 
The national laws may reserve to the debtor the right of discharging his debt in national currency
according to the rate of exchange prevailing on the day of the arrival of the ship at the port of discharge
of the goods concerned.
 
10. Although it is common ground that Turkey has given effect to the said Brussels Convention, the
parties have a different understanding of the law as in force in Turkey as applied to a bill of lading
shipment from a Turkish port to a port outside Turkey.
 
(a) the Plaintiff submits that Turkey acceded to the said Brussels Convention on February 22, 1955
and did not at that time reserve to itself the right of translating the package or unit limitation expressed in
pound sterling into its own monetary system. Therefore, the limitation of liability in accordance with the
laws in force in Turkey is £100, gold value, per package or unit.
 
(b) The Defendant submits that although the Brussels Convention (Hague Rules) was ratified by
Turkey in 1955, it only became an effective part of Turkish law, as incorporated in the Turkish
Commercial Code, as from January 4, 1956. The package or unit limitation was then set at Turkish lire
1,500. In 1983, the Commercial Code was amended and by Article 1114, the package or unit limitation
was increased to Turkish lire 100,000. Thus, it is the position of the Defendant that the per package or
unit limitation in accordance with the laws in force in Turkey on a bill of lading shipment from a port in
Turkey to a port outside Turkey is Turkish lire 100,000.
 
(c) The Plaintiff submits that the per package or unit limitation of Art. 1114 of the Turkish Commercial
Code only applies to shipments within Turkey and not, in any event, to the facts of the present case.
 
11. In the event this Honourable Court decides that the monetary units mentioned in the Hague Rules
as in force in Turkey are to be taken as gold value, the parties agree that the gold content of £100
sterling when the Brussels Convention was agreed in 1924 is equivalent to 732.238 grams of fine gold.

12. The Plaintiff submits that the value of £100 sterling, gold value as of the date of the delivery of the
cargo, January 3, 1996 is about $12,498.28 calculated in accordance with market value of gold.
 
13. The Defendant submits that if the Turkish per package or unit limitation is to be calculated with
respect to the value of gold, then that value has to be determined in accordance with the Canada
Shipping Act Gold Franc Conversion Regulations (SOR/78-73).
 
14. Attached hereto as Schedule "B" is a letter from the Bank of Canada indicating what were the
converting rate of the Turkish lire, the U.S. dollar and the Special Drawing Rights at the time of delivery
of the cargo.
 
QUESTIONS TO BE DETERMINED BY THE COURT
 
1. What is the applicable package or unit limitation in accordance with the laws in force in Turkey?
 
2. If the shipment is subject to the provisions contained in the Turkish Commercial Code, what is,
under Turkish law, the limitation of liability, if any, available to the Defendants?
 
3. How should that per package or unit limitation be converted into Canadian currency?
 
 4. If, pursuant to Turkish law, Article 1114 of the Turkish Commercial Code is deemed to apply and to
be given its full effect so as to limit the Defendants’ liability to about $2.30 a bundle, is there a principle
of law or equity which prevents a Canadian court to apply this foreign legislative provision?
 
[4] In addition to the above agreed statement, each party has called an expert practitioner in the field
of Turkish maritime law, Mr. Aybay for the plaintiff and Mr. Kavak for the defendant. The country from
which the goods were shipped being Turkey the task of the Court is accordingly to determine the
content of the Hague Rules "as enacted in" that country.
 
The Hague Rules
 
[5] The provisions of par. 4(5) and art. 9 of the Hague Rules are relevant and are reproduced in the
statement of agreed facts and issues above.
 
[6] Also of significance is the following paragraph to the Protocol of Signature:
 
The High Contracting Parties may give effect to this convention either by giving it the force of law or by
including in their national legislation in a form appropriate to that legislation the rules adopted under this
convention.

 
[7] As the bill of lading incorporates the terms of the Hague Rules "as enacted in" Turkey and as the
Hague Rules themselves make provision for possible different methods of their enactment into law in
the signatory states it becomes important to know how and in what manner the Hague Rules are in
force in Turkey. This of course requires an examination of Turkish law for while it is clear that the
general paramount clause is not a choice of law, making the contract generally subject to the laws of
Turkey, it is equally clear that the incorporation into the contract of the Hague Rules as enacted in
Turkey means the Hague Rules as they would be enforced by a Turkish Court.
 
[8] Somewhat unusually Turkey appears to have enacted the Hague Rules twice into its legislation.
Initially, on Feb. 14, 1955, the Turkish Parliament ratified and enacted the Hague Rules in the same
form as the latter had been adopted by the Brussels Convention of 1925. Both experts are in agreement
that such ratification and enactment was fully effective and that the Hague Rules in their original form
became part of the domestic law of Turkey on that date. The following year, 1956, however, the Turkish
Parliament adopted the Turkish Commercial Code. That code is described by the experts as a
"translation" of the German Commercial Code of 1937 and like the latter contains an adaptation of the
substance of the Hague Rules. That enactment was for Turkey, as was the enactment of its earlier
German counterpart for Germany, full compliance by that country with its obligation as a signatory of the
Brussels Convention to enact the terms of the Hague Rules into its national legislation. The original,
1955, enactment of the Hague Rules was never repealed however with the result that Turkish national
law now apparently contains both a textual adoption of the Hague Rules and a national adaptation
thereof as permitted by the Protocol of Signature.
 
[9] Article 1114 of the Turkish Commercial Code enacts that where the nature and value of the goods
have not been declared and inserted into the bill of lading the maximum liability of the carrier is 1500
Turkish lire per package or unit. The Commercial Code was later amended in 1983 and the amount of
such limitation was increased to 100,000 Turkish lire.
 
Analysis
 
[10] As appears from the statement of agreed facts and issues above, the parties take diametrically
opposed positions with regard to the effect of the Hague Rules as in force in Turkey and this opposition
is faithfully reflected in the evidence of the expert witnesses called by the parties. Mr. Aybay for the
plaintiff is of the view that the original Hague Rules as enacted in Turkey in 1955 were not modified
or affected by the enactment of the Turkish Commercial Code which in his view applies only to
internal Turkish shipping trade. International carriage such as is in issue here is governed by the
terms of the original Brussels Convention and the limit of liability is accordingly 100 pounds
sterling gold value which in today’s terms would amount to about Can.$12,500 per package or unit.
 
[11] Mr. Kavak on the other hand for the defendant is of the view that although the original 1955
Turkish legislation has never been repealed it has effectively been displaced by the Turkish
Commercial Code at least with regard to the monetary amount of the limitation of liability which
today is 100,000 Turkish lire or approximately Can.$2.30 per package or unit which is applicable to
both national and international trade.
 
[12] It may seem surprising that a question of such magnitude has not received more attention in
either the legislation or the jurisprudence of Turkey but such is apparently the case. Both witnesses
were eminently qualified but neither was able to produce an authority which showed that his view
was unquestionably the right one. Both referred to recent judgments of the Court of Appeal but such
judgments are apparently not binding precedents under the Turkish system.
 
[13] After consideration however, I have concluded that the evidence of Mr. Kavak should be
preferred. He cites a very recent decision of the Turkish Court of Appeal in the case of Toprak
Sigora that appears from the translation of the report which has been produced to be directly
relevant to the facts of this case. The judgment, delivered Apr. 12, 1999 relates to an international
shipment and holds that "since the value of the goods. . .had not been written on the bill of lading the
liability of the carrier is limited as per 1114 article of the Turkish Commercial Code".
 
[14] On the other hand, the decision relied upon by Mr. Aybay, Assan Demir, rendered only months
earlier by the same Court does not seem to me to be directly relevant. From the report it appears that
the Court of First Instance had appointed an expert who had recommended that the limit of liability
should be 100 pounds sterling per package or unit and that this recommendation had been accepted
by the parties. While the judgment of the Court of Appeal gave effect to such agreement, the Court
did not in fact consider the question at all; it simply did as a Canadian Court would do and gave
effect to an agreed settlement as to damages. The question before the Court of Appeal in Assan
Demir was a completely different one, namely the liability of the shipping agent. Indeed, about the
only relevant matter that I can learn from the case is the rather obvious fact that some Turkish lawyers,
including the expert appointed by the Court of First Instance, share Mr. Aybay’s view of the effect of the
Hague Rules in Turkey.

 
[15] It also seems to me as a matter of interpretation of the Hague Rules themselves as well as the
Protocol of Signature that the rights reserved by the contracting parties to translate the sum of 100
pounds into their own currency and to adopt or adapt the terms of the rules as best suited them is not a
"once and for all" matter. Indeed, as far as concerns the right to vary the currency units it would be
highly counterproductive to hold otherwise. The circumstances of the present case give a striking
example of how the effects of inflation can cause a country to fall out of compliance with at least the
spirit, if not the letter, of the Brussels Convention. Of course, the issue here is not whether or not Turkey
is in compliance, but what are the terms of the Hague Rules in force in Turkey; but a continuing ability to
revise the currency unit is a prerequisite to a continuing compliance. It is likewise with the provision of
the Protocol of Signature: legal systems change and grow and most civilized countries undertake
periodic law reform. If the Hague Rules are to be properly effective in any country they must be cast in
terms which the legal system understands and applies. Presumably that is why the rules were adapted
by Turkey to the form in which they presently appear in the Commercial Code. In my view that
adaptation had the same effect in Turkey as it had had in Germany, from which the Turkish Code was
copied, namely that it became the Turkish embodiment of the rules.
 
[16] I conclude accordingly that under the Hague Rules as the latter are in force in Turkey the limit of
liability where there is no statement of value in the bill of lading is 100,000 Turkish lire per package or
unit.
 
Other issues
 
[17] There was a suggestion in the evidence of Mr. Aybay (somewhat at odds it may be noted to his
primary position) that the Turkish Courts occasionally attempt to mitigate the severity of the application
of the limit of liability in art. 1114 of the Commercial Code by holding that where there is a statement of
the nature and the quality of the goods in the bill of lading such statement is equivalent to a statement of
the value of the goods. Mr. Kavak is of the view that this is bad law and I agree. This is not a question of
determining in what manner and form Turkey has adopted or adapted the Hague Rules to its domestic
legislation; rather it is a question of determining the proper interpretation of the Hague Rules
themselves.2 Those rules constitute an international code and the interpretation suggested by Mr. Aybay
is one that has never been accepted; a statement of the nature and quality of goods is quite simply not a
statement of their value.

 
[18] Mr. Kavak has stated that the package or unit limitation in Turkey in a case such as this would be
the metric ton. I am very doubtful as to the correctness of this interpretation but since it has not been
contradicted, has been accepted by the defendant, and is more favourable to the plaintiff since the
bundles of steel rods in the present case each weighed more than one metric ton, I am prepared to
accept it for the purposes of the present decision.
 
[19] Finally the plaintiff asks that I should refuse to give effect to the Hague Rules as in force in Turkey
since a limitation of Can.$2.30 per package or unit is unconscionable. I decline to do so. Any limitation
on liability may give rise to a party, or his insurers, being obliged to accept some part of the loss which
would otherwise be borne by the other party. The limitation in the present case comes about as a result
of a contractual provision and the plaintiff was at liberty to declare the value of the goods or otherwise to
protect itself. The real gravamen of the plaintiff’s complaint is that it did not understand the operation of
the Hague Rules as in force in Turkey. That is simply a mistake by the plaintiff as to what the law was
and while the result may be unfortunate for it, it is certainly not unconscionable.3
 
Conclusion
 
[20] There would be judgment answering the questions put to the Court as follows:
 
1. The applicable unit of limitation is the metric ton.
 
2. The applicable limitation of liability is 100,000 Turkish lire per unit as provided in art. 1114 of the
Turkish Commercial Code.
 
3. The date of conversion of the limitation is the date of the arrival of the ship in Canada and as of that
date the applicable limitation was Can.$2.30 per unit.
 
4. There is no principle of law which would allow this Court not to apply the applicable limitation of the
Hague Rules as in force in Turkey.
 
5. Costs will be reserved.