Bills of Lading Disputes in the UAE: Legal Framework and Remedies

Introduction

The bill of lading (as the “B/L”) is the central document for all international carriage of goods by sea. It operates simultaneously as a receipt for cargo, evidence of the contract of carriage, and, a negotiable document of title. Given its multi-faceted role, disputes concerning bills of lading is commercially significant. Typical disputes include cargo damage, delay, misdelivery, and claims between shippers, consignees, and carriers.

In the United Arab Emirates, the legal regime governing such disputes is Federal Decree-Law No. 43 of 2023 (as the “New Maritime Law”), which replaced the former legislation dating back to 1981. The New Maritime Law provides a more sophisticated framework aligned with international practice, while also addressing emerging issues such as electronic bills of lading.

While the UAE has not ratified international conventions such as the Hague-Visby Rules or the Hamburg Rules, its domestic law has been drafted to reflect many of the principles embedded in the New Maritime Law. As such, the UAE legal position is broadly consistent with global norms but remains distinct in certain respects.

Nature and Effect of Bills of Lading

A bill of lading is more than a commercial document, it establishes legal rights and obligations. It records the shipment of goods, identifies the consignee, and specifies the port of loading and discharge. The B/L also determines who is entitled to demand delivery at the port of discharge and who possesses standing to sue or be sued in respect of the cargo. The New Maritime Law further provides that the delivery against a valid B/L discharges the carrier, unless the carrier has acted in bad faith. Consequently, precise drafting and careful handling of bills are essential to mitigate disputes.

A notable development in the New Maritime Law is the recognition of electronic bills of lading (as the “e-B/Ls”). Article 163 confirms that e-B/Ls carry the same legal effect as paper originals, provided that the electronic system ensures the valid designation of the holder, guarantees authenticity, and demonstrates possession. While this advance promotes efficiency in trade, it also raises potential disputes concerning system integrity, cybersecurity, and proof of electronic endorsement. Parties adopting e-B/Ls must therefore ensure compliance with the statutory requirements to avoid enforceability challenges.

Choice of Law and Jurisdiction Clauses

Dispute resolution clauses are of paramount importance in bills of lading. Many B/Ls incorporate arbitration clauses, often by reference to underlying charterparties. New Maritime Law recognises and enforces such clauses, provided they are clearly drafted and validly incorporated.

Nevertheless, UAE courts remain highly relevant, particularly in relation to urgent relief such as injunctions, arrest of vessels, and interim custody of cargo. In practice, parties often pursue urgent measures before the courts while referring the substantive dispute to arbitration under rules of institutions such as DIAC or ADGM.

Time Bars to Cargo Disputes

Time limits under UAE maritime law are short and strictly applied. Article 187 of the Maritime Law provides that claims arising from contracts of carriage, including claims under bills of lading, are extinguished if not brought within one year from the date of delivery or the date on which delivery should have occurred. This prescription period is absolute unless an admissible exception applies. Other maritime claims, such as those relating to collisions or salvage, have their own limitation regimes, but the one-year bar is the most relevant to cargo disputes. Parties must therefore act with urgency to preserve their rights.

Jurisdiction Clauses and Third-Party Holders

Bills of lading often include clauses selecting foreign law or jurisdiction. UAE courts generally uphold such provisions, provided they are not contrary to public policy. Complexity arises, however, when the bill is transferred to new holders. An arbitration or jurisdiction clause will only bind such parties if clearly incorporated into the B/L. Where incorporation is absent or ambiguous, courts may decline to enforce the clause, leaving disputes subject to local jurisdiction. Careful drafting is therefore indispensable, particularly when negotiable B/L are issued.

Non-Signatories and the Transfer of Bills

The bills of lading are negotiable in many cases, therefore, the rights and obligations can pass to third parties who were not original signatories. For instance, a consignee receiving an endorsed B/L may acquire both the right to sue for damage and the duty to comply with an arbitration clause. UAE courts and arbitral tribunals examine the wording of the B/L closely, if the arbitration clause is explicitly incorporated, it can bind later holders. If not, disputes may need to be litigated instead. This area is particularly complex and often litigated, making careful drafting and legal review critical.

Carrier Defences and Limitation of Liability

The Maritime Law grants carriers statutory protections by recognising specific circumstances in which the carriers are exempt from liability and by imposing monetary limits on the compensation payable even where liability is established. However, contractual provisions attempting to exclude liability entirely, or to reduce it below statutory thresholds, are void and unenforceable. This framework strikes a balance by safeguarding the rights of cargo interests while providing carriers with predictable exposure.

Arresting Vessels and Cargo

One of the most effective remedies in the New Maritime Law is the ability to arrest a ship. The New Maritime law streamlines arrest procedures, allowing claimants to secure their position early. Arrest is particularly relevant in bill of lading disputes where the carrier’s liability is clear but assets may be moved out of jurisdiction. Similarly, cargo can be detained or sold under judicial supervision where freight or charges remain unpaid. These remedies give parties leverage in negotiations and often drive early settlements.

Conclusion

The enactment of the 2023 Maritime Law has modernised the UAE’s regime for bills of lading, introducing provisions for electronic documentation, refining interim remedies, and clarifying limitation periods. The New Maritime Law brings the UAE closer to international practice while maintaining distinctive domestic features, particularly in its approach to incorporation of arbitration clauses and recognition of e-B/Ls. As trade volumes through the UAE continue to grow, the incidence of disputes under bills of lading is likely to increase, making the clarity and efficiency of the legal framework especially significant.

Contributed by – Anakha Ajay