The issue in this case was which law governed a carriage contract evidenced by a bill of lading. The Court below held that the provision stipulating the law of the United Kingdom as the governing law under the maritime transport agreement in question was incorporated into the bill of lading. As such, UK law was held to be the general and overall law governing the bill of lading. The latter part of the bill expressly provided that the scope of liability of the carrier shall be governed by the US Carriage of Goods by Sea Act (US COGSA). Where the law of a specific country is applied to the limitation on a carrier’s liability despite there being a general governing law clause, applying US COGSA as the law that governs the same should be deemed to be the party’s intent. In as much as the Port of Freeport was the port for loading the cargo, and US COGSA provides that it applies when 'any port of loading or port of discharge located in the US shall be named on contracts for international carriage of goods by sea', US COGSA is the law governing the limitation of the carrier's liability. In such a case, no other requirements are called for, such as applying the law of a forum State where a port of loading is located, or broadening the scope of limitation liability under US COGSA. In applying the legal doctrine of the Carriage of Goods by Sea Act 1971 (UK) to a carrier’s contractual liability based on the bill of lading, given that the cargo in question was delivered without defect from the shipper to the carrier, but was damaged due to having become either loose or unfastened while shipments were on the way, the carrier is liable to compensate the bill of lading holders, barring any extenuating circumstances. The carrier's liability is limited to USD 500 per ton according to US COGSA, which is the applicable law on the limitation of liability. The Court below also applied this analysis to tortious claims brought against the carrier. The carrier appealed.

Held: Appeal dismissed.

The principle of party autonomy serves as the basis for permitting the designation of laws governing international contracts. Whether a 'paramount clause' - a clause preferentially incorporating the law of a specific country that legislated an international Convention on a carrier's liability limitation despite the stipulation of a general governing law clause under a bill of lading - constitutes partial designation of a governing law or inclusion under relevant international Conventions or foreign statutes is a matter that pertains to the interpretation of a party's expression of intent. Even if a governing law clause is already incorporated into a bill of lading, a provision on complying with the law of a specific country that enacted an international Convention on the limitation of a carrier’s liability is stipulated thereunder and that provision satisfies the application requirements of that country's statute, preferentially applying the law of that country in governing a carrier's liability limitation accords with the party’s intent, barring special circumstances. The lower Court did not err in so finding.

Article 32(1) of the Act on International Private Law stipulates that a 'tort shall be governed by the law of the place where it occurred' and art 32(3) provides that '[i]n case the legal relations existing between the tortfeasor and the injured party are violated by the tort, the applicable law of such legal relations shall govern'. As a matter of principle, the legal relationship between the bill of lading holders and the carrier ought to be governed by the law that applies to the bill of lading; furthermore, in the event that this legal relationship is infringed due to the carrier's tort, the applicable law should also be the law governing the bill of lading. As seen above, UK law is the law that generally and comprehensively applies to the bill of lading, and US COGSA is the law governing the limitation of the instant carrier’s liability. Thus, the same legal doctrine holds true in a claim for damages arising from a tort. Therefore, the carrier's liability to pay the damages caused by its tort is the same as that of a contractual obligation.

The lower Court held that the claim for damages arising from the carrier's tortious act shall be governed by the law of the place where the tort occurred, namely, the law of the Republic of Korea. Yet, the lower Court did not separately determine the establishment of tort liability on the grounds that: (a) the limitation of liability clause under US COGSA is likewise applicable to tort liability claims; and (b) even if one applies Korean law to damages for delay, it is the same as damages due to delay in the performance of a contractual obligation. While there was some degree of inadequacy in the reasoning of the lower judgment related to governing law, the lower Court was justified to have determined as above. In so doing, it did not adversely affect the conclusion of the judgment.