The Right of Lien Over Cargo

The Right of Lien Over Cargo

Under customary law, the shipowner has a possessory lien over cargo, but not over unused freight space, prepaid freight, or freight payable after delivery of the goods.

This right applies to contributions to general average payable by the cargo owner and to amounts expended for the preservation and protection of the cargo.

Customary law grants the right of lien to two parties:

• The shipowner.
• The loading agent acts as a representative who arranges the carriage of goods on behalf of the shipper, namely an intermediary or broker.

The Shipowner’s Right of Lien Over Cargo

The shipowner may take any lawful action necessary to exercise these lien rights. It must be noted that these rights are possessory in nature, meaning that they may be exercised only where the shipowner has actual possession of the cargo or retains it pursuant to an order, for example, by placing it in lawful storage. The shipowner may, of course, waive this right at discretion.

The shipowner may exercise the right of lien over all goods shipped by a single consignor during the same voyage, even if the goods were shipped under separate bills of lading. However, this right cannot be extended to cargoes carried on other voyages under different contracts.

Furthermore, under customary law, the right of lien over freight is not excluded unless the contract provides otherwise. Where freight is payable upon delivery of the goods, the right of lien exists regardless of whether it is expressly stipulated in the contract. Conversely, where freight is payable at a time other than delivery, the right of lien does not arise unless it is expressly provided for in the contract.

The Right of Lien Over Cargo for the Loading Agent or Broker

Under customary law, a loading agent has a right of lien over cargo based on the bill of lading in respect of expenses incurred in arranging and facilitating the carriage of goods.

If the lien is enforced before the cargo reaches its destination, the agent may return the cargo to the port of origin in order to exercise the lien, without incurring liability.

On the other hand, if the intermediary has merely arranged the carriage under the bill of lading and the brokerage fee is contingent upon the performance of the charter party, no right of lien arises in favor of the intermediary. In such circumstances, the intermediary cannot take action under the charter party for non-payment of the brokerage fee, as the intermediary is not a party to that contract. This issue may be resolved by pursuing the shipowner through the charterer, who acts as trustee for the intermediary.

The Right of Lien Over Cargo by Express Agreement

In cases where customary law does not recognize a right of lien, such as liens for unused freight space, demurrage, or detention damages, or even for all categories of expenses, a right of lien may nevertheless be created by express contractual agreement.

With respect to the holder of a bill of lading obtained by endorsement, the term “expenses” does not include costs not expressly stated in the charter party. However, as far as the charterer is concerned, it appears permissible to grant the shipowner a contractual right of lien over cargo for freight, demurrage, and similar charges, as well as for expenses lawfully incurred for warehousing the cargo in order to prevent demurrage becoming payable by the charterer.

If a clause grants a lien in broad terms for all sums owed by the shipper or consignee to the carrier, such a lien does not take priority over the seller’s lien for the unpaid purchase price of the goods during transit.

Maritime Privileged Lien

Maritime privileged liens differ fundamentally from the liens discussed above and are exercised in a distinct manner.

One such maritime privilege is the right of priority to bring an action against a vessel, its cargo, or either of them, together with freight, arising from services rendered to them or damage caused by them.

A maritime privileged lien does not exist in respect of vessels owned by a foreign state or vessels requisitioned and employed by a sovereign state for public purposes. However, where a vessel owned by a foreign state is engaged in ordinary commercial activities, it does not enjoy such immunity.

A maritime privileged lien follows the property to which it attaches, regardless of changes in ownership. This right is entirely independent of possession or control.

Frequently Asked Questions About the Right of Lien Over Cargo