Maritime liens: practical challenges for the modern marine market

In most commercial contexts, it would be unthinkable for property owned by an unrelated third party to be seized as security for another’s debt. Maritime law, however, allows for this possibility. Shipowners may, in certain circumstances, exercise a lien over cargo, even if that cargo belongs to a third-party.

A maritime lien gives the shipowner a right to detain cargo pending payment of outstanding debts. Such liens may arise contractually (through incorporation of a charterparty clause into a bill of lading) or at common law (e.g., implied liens for freight and general average). Crucially, these liens can sometimes bind third-party cargo interests, exposing cargo owners, consignees, and insurers to significant commercial and legal risks.

Here we look at how maritime liens operate, and the practical challenges they pose for the modern marine market.

Contractual liens

Lien clauses are standard in most charterparties. For example, the GENCON 2022 voyage charterparty form includes the following clause:

The Owners shall have a lien on the Cargo and on all sub-freights payable in respect of the Cargo for freight, dead freight, demurrage, general average contributions, salvage, claims for compensation or damages and for all other amounts due under or pursuant to this Charter Party and all costs of recovering same, including legal costs.

For a shipowner to be entitled to exercise a lien over the cargo that belongs to a third-party, the lien clause from the charterparty must be properly incorporated into the relevant bill of lading, expressly or by reference.

This generally requires:

1. Express incorporation of the charterparty terms into the bill of lading; and
2. Drafting of the lien clause to extend to both charterers and bill of lading holders.

While determining whether or not a charterparty term is validly incorporated could be the subject of its own article, some factors to keep in mind are that in order to be incorporated, the term must a) actually exist at the time of incorporation and, b) the clause to be incorporated must be consistent with other terms in the bill of lading.

If a bill of lading is issued by the charterer, rather than the shipowner, the lien may be ineffective against third-party cargo interests (Wehner v Dene Steamship Co [1905]).  Moreover, certain jurisdictions restrict the exercise of such liens, regardless of contractual drafting.

Common law liens

Under English common law, shipowners have an implied lien on cargo for freight and general average. This lien may, in principle, bind third-party cargo interests.

How are maritime liens exercised in practice?

Liens for general average and salvage

Shipowners may exercise liens for salvage and general average.  If, as will often be the case, a carrier does not own the vessel, then it is to be expected that the third party owner will exercise the lien over the cargo. 

This means there is a significant risk that general average and salvage situations may give rise to a lien in favour of a third party who is not the contractual carrier. Whilst, strictly speaking, it may be possible to contractually agree that no such a lien should apply, it will be very difficult to persuade shipowners to give up such a well established legal right. 

Freight prepaid bills

Many bills of lading state “freight prepaid” even where freight has yet to be paid. If a bill is marked “freight prepaid”, the consignees may argue estoppel against the shipowner’s right to exercise a lien because the contract of carriage states that they have already been paid for the debt that they are seeking to claim.

However, in “The Lord Hassan” [2024] the Court did allow the shipowner to exercise a lien over the cargo despite the bills of lading being marked “freight pre-paid” because the shipowner still had possession of the bills of lading. In that case, the shipowner had not released the bills to the receiver and instead commenced arbitration against charterers to recover the unpaid freight. As the shipowners had possession of the bills of lading, they had legal title to the goods and could validly exercise a lien over the cargo.

It will be interesting to see how the courts approach the requirement for ‘possession’ of the bills of lading against the use of electronic bills of lading as these become more commonly used, particularly as they are now legally recognised in the UK by virtue of the Electronic Trade Documents Act 2023.

Practical constraints

Even where legally valid, exercising a lien may prove commercially unattractive. Shipowners risk:

• Incurring demurrage at the discharge port
• Losing employment opportunities for the vessel
• Depreciation of the cargo while it remains on board.

Nevertheless, in cases of charterer’s insolvency, a lien may represent the shipowner’s only avenue for recovery.

Key takeaways

The concept of maritime liens is surrounded in complexities and confusion; largely due to the historic nature of such liens making very little practical sense in a modern shipping world.  However, liens cannot be simply ignored and the best way forward is to get to grips with any exposure to liens and mitigate the effects as far as possible.

• Cargo interests/insurers: If a lien is exercised over goods you or your insured own, check whether a lien clause is validly incorporated into the bills of lading and is enforceable. Wrongful detention may give rise to a claim of damages.
• Shipowners: Ensure lien clauses are carefully drafted, incorporated into the bills of lading, and enforceable under local law before exercising rights.
• Brokers and advisors: Consider lien enforceability when negotiating carriage agreements.

Related items: The new BIFA Standard Trading Terms and Conditions 2025 – key changes