CHARTERERS’ DEFAULT LIEN OVER CARGO
BY IAN GOULSON
INTRODUCTION
• A lien is the right to hold the property of another as
security for the performance of an obligation.
• Purpose of lien – Security for sums due and owing
under the charter.
• Types of lien
a)
b)
Lien over cargo
Lien over sub - freights / sub – hire
INTRODUCTION (CONTINUED)
• Lien over cargo:
Rights of lien created under time charter parties
 Other relevant contracts – bills of lading / sub-charter
 Other relevant considerations
 Where to exercise the lien

• Liening cargo in India
RIGHTS OF LIEN CREATED
UNDER A TIME CHARTER
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER
• Clause 18 NYPE 46 form
“That the Owners shall have a lien upon all cargoes, and all
sub-freights for any amounts due under this Charter......”
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
• Clause 18 appears to create:
A right of lien over cargo
 A right of lien over sub-freights

• Is it that simple ?
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
• First point to check is whether there are sums actually
due and owing under the relevant charterparty.
• If not, a lien cannot be exercised.
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
• A lien is possessory in nature
• Clause 18 invokes a contractual right of lien over cargo
• Effect of contractual lien – it creates rights only as
between the parties to the contract in which it is
contained (i.e. Owners and the time charterers).
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
• Over what cargo can the lien be exercised?
Two Scenarios:
a) Where the lien clause is not incorporated in the
relevant bill of lading;
b) Where the lien clause is incorporated in the relevant
bill of lading.
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
a) Lien clause not incorporated in the bill of lading.

Do Owners have the right (as between themselves and
the time charterers) to detain cargo which is not owned
by the time charterers?

NYPE 46 form: Probably not
RIGHTS OF LIEN CREATED UNDER A
TIME CHARTER (CONTINUED)
b) Lien clause is incorporated in the bill of lading
•
Do Owners have a contractual right to lien the cargo
even if it is not owned by the charterers?
•
NYPE 46 Form – yes
OTHER RELEVANT CONTRACTS
OTHER RELEVANT CONTRACTS
Bill of Lading:
• Is there a right of lien incorporated in the bills?
• General words of incorporation of the relevant charter will
probably suffice.
• CONGEN 94 Bill of lading provides:
“All terms and conditions, liberties and exceptions of the
Charter Party, dated overleaf including the Law and
Arbitration clause, are herewith incorporated”
• However;
OTHER RELEVANT CONTRACTS
(CONTINUED)
• Is the head charter containing Owners’ right of lien clause
(clause 18) identified on the face of the bill?
• If not, does the sub-charter which is most proximate to the
bill of lading incorporate a lien clause?
• Is the lien clause relevant to the receipt, carriage or delivery
of the bill of lading cargo?
• Is the lien clause regarded as out of place in the bill of
lading?
OTHER RELEVANT CONTRACTS
(CONTINUED)
• If there is no effective incorporation of the right of lien
under the bills, receivers may (legitimately) arrest the
vessel if discharge is delayed.
• Impact on P&I Cover.
• Consequently, even if there is a right of lien under the
charter, the bills must also be checked before exercising
a lien.
OTHER RELEVANT
CONSIDERATIONS
OTHER RELEVANT CONSIDERATIONS
• Advice must be taken in the jurisdiction where the lien is to
be exercised to ensure that under local law it is permissible
to exercise the lien and that all procedural requirements are
satisfied.
 If bills are marked “freight pre-paid” this may prejudice any
contractual right of lien as a matter of local law.
 Port regulations?
 Is it necessary to apply for a Court order to exercise a lien?
OTHER RELEVANT CONSIDERATIONS
(CONTINUED)
 Is counter-security required?
• How much is the cargo on board worth and to what
extent must a lien be exercised over this as security for
Owners’ claim?
WHERE TO EXERCISE A LIEN?
WHERE TO EXERCISE A LIEN?
• Normally at the port of discharge, but this probably
includes anchoring off the declared port of discharge
• It is not permissible for an Owner to exercise a lien over
the cargo by stopping the ship mid-voyage
• Impact on P&I Cover – deviation
WHERE TO EXERCISE A LIEN?
• Aim is to retain actual or constructive possession –
storage in bonded warehouse?

Availability?

Ventilation?

Costs?

Duties as bailee of cargo
EXERCISING A LIEN IN INDIA
EXERCISING A LIEN IN INDIA
• Indian law recognises Owners’ right to exercise a lien
over cargo for amounts due under the charter.
• Owners will have a possessory lien over the cargo if the
right of lien is recognised in the charter and in the bill of
lading.
• Indian law allows for exercise of a lien over cargo even
after discharge, if discharging at a major port.
EXERCISING A LIEN IN INDIA
(CONTINUED)
• Where discharging at major ports need to serve a notice
of lien upon the discharge port authorities before or at
the time of discharging the cargo from the vessel.
• Need to serve a notice of lien on cargo receivers.
• Port Trust is required to retain the cargo until the lien is
released.
CONCLUSION
CONCLUSION
• Where sums under the charter are due and owing,
Owners may be able to exercise a lien over the cargo.
• However, the position under the charter, the bill of
lading and as a matter of local law must be checked on
each occasion.
• Alternative methods of obtaining security or which may
be exercised in parallel are, liening sub-freights and subhire.
THE END