Journal of Maritime Law & Commerce, Vol. 39, No. 4, October, 2008

Judicial Decree to Terminate the Validity of
Lost Bills of Lading—Usefulness andJurisdiction
Koji Takahashi*

When a bill of lading has been lost, there is a risk that it may be acquired
bona fide and for value. In such cases,1 a judicial decree is available in Japanto render bills of lading null and void. The decree (hereafter “the invalidating decree”) is available generally for negotiable instruments,2 which in thiscontext mean instruments embodying rights. Bills of lading are among themsince the right to claim the delivery of goods is embodied in them. The
decree has been sought and issued more often in respect of share certificates,3 promissory notes and bills of exchange. But it was also issued in
respect of bills of lading in no less than 440 cases in the past 60 years,4 a sufficient number to merit attention.5 A petition for the invalidating decree in*Professor, Doshisha University Law School, Japan. In preparing this article, I received materials andadvice from Mr. Michael Marks Cohen, Mr. Hidenori Hirano, Mr. Masao Komichimaru, Mr. Takayuki
Matsui, Ms. Marie Meling, Prof. Erik Røsæg, Prof. Takao Tateishi, Prof. Hugo Tiberg, Mr. Shuji
Yamaguchi, Mr. Riki Yamamoto, Mr. Yoshiaki Yamamoto, and Prof. Dai Yokomizo (in alphabeticalorder). I also received useful comments from audience members when I presented a paper on this topic
at a seminar of the Japan Shipping Exchange (28 November 2007, Tokyo) and at a meeting of the Kansai
Study Group of Private International Law (26 January 2008, Kyoto). I would like to record my gratitude
to all those people.
1
As well as the cases where bills of lading have been destroyed or stolen or where it is not clear whichof those has happened.
2Part 3, Chapter 2 of Hisho Jiken Tetsuzuki Ho (hereafter “Non-Contentious Procedure Act”).
3
The invalidating decree ceased to be available in respect of share certificates with the law reform in2002 which introduced the system of registration of their loss with the issuing company.
4
The invalidating decree must be announced in the official gazette (Article 149 of Non-Contentious
Procedure Act). With the help of his student assistant, Ms Asuka Noda, the present author has counted
the number of the announcements in the gazette.
5
The problems discussed in this article which arise from the loss of bills of lading will not arise withelectronic bills of lading. Numerous attempts of expanding the use of electronic bills have been madeover the past few decades, dating back at least to the SeaDocs Experiment in mid-1980s. But the trading
community is still slow to embrace them on a global scale. A range of reasons from the market inertia to
the remaining legal uncertainty has been suggested. Given the past record, unless there is a catalyst forchange, paper bills of lading will stay put along with the problems discussed in this article for some moreconsiderable time.

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the event of the loss of a bill of lading is recommended by the JETRO (Japan
External Trade Organization).6
Generally, no similar decree is available in the common law countries.7 In
some of the civil law countries where a similar decree is available,8 it does
not seem to be sought or issued often in practice in respect of bills of lading.9 The use to which the invalidating decree in Japan is put may therefore
be of interest.
This article will first outline the procedure to obtain the decree andexplain its legal effects before proceeding to examine the purposes for which
it is sought in practice and consider its usefulness to achieve the intended
purposes. As the usefulness of the decree is not confined within the boundary of Japan, this article will also consider in what circumstances theJapanese courts have jurisdiction to issue the decree.
I
PROCEDURE FOR OBTAINING THE INVALIDATING DECREE

To obtain the invalidating decree, the petitioner must make a prima facie
showing that he was the last holder or the last endorsee of the bill of lading
which has been lost, destroyed or stolen.10 After examining the evidence, the6
http://www.jetro.go.jp/jpn/regulations/import_04/04A-A10837 (in Japanese). JETRO is a semi-government body advising Japanese business on various trade issues.
7
The courts in those countries may instead have power to order the carrier to deliver the goods or not
to set up the loss of bills of lading as a defence upon furnishing of a sufficient security by the consignee.
See e.g. The Houda [1994] 2 Lloyd’s Rep. 541, 553 (CA); Motis Exports Ltd. v. Dampskibsselskabet[1999] 1 Lloyd’s Rep. 837, 842; the Federal Bills of Lading Act, 49 U.S.C. 80114; Art 7-601 of the
Uniform Commercial Code adopted by all constituent states. It must be noted, though, that the lost billof lading remains valid and at risk of being acquired bona fide and for value under those common law
procedures, unlike the invalidating decrees of the civil law countries.
8e.g. Germany, Italy, the Nordic countries, the People’s Republic of China, and the Republic of China.
The Nordic countries and the People’s Republic of China have specific provisions confirming the availability of an invalidating decree for bills of lading: Art. 100 of the Maritime Procedure Law 1999 of theP. R. China, Art. 305 of the Danish/Norwegian Maritime Code and Ch. 13, sect. 55 of theSwedish/Finnish Maritime Code (The Nordic countries collaborated in the preparation of their maritime
codes, which resulted in similar provisions).
9
Ms Marie Meling, a research assistant of the Scandinavian Institute of Maritime Law at the
University of Oslo, has kindly carried out a thorough survey in 2007 for the present author and ascertained that in Norway no announcement of a decree cancelling bills of lading was made in the official
gazette for the past seven years despite that such an announcement is mandatory and that the publishersof the gazette and the Oslo City Court had no recollection of such cases. Likewise, Professor Hugo Tiberg
of the Institute for Maritime and Transport Law of the University of Stockholm has informed the present author in his correspondence in the autumn of 2007 that he had no recollection of any reported cases
in which the Swedish decree was used for bills of lading, though he did not rule out the possibility of
unreported cases.
10
Article 158(2) of the Non-Contentious Procedure Act.

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Invalidating Lost Bills of Lading553

court may decide to post a public notice on the bulletin board of the court
and publish it in the official gazette11 for a period of at least two months,12
urging any lawful holder of the bill to come forward and present the bill.13 If
somebody comes forward and the petitioner of the invalidating decree disputes the identity of the bill presented, the court will hold inter parte proceedings to examine which party has the right.14 If, on the other hand,
nobody comes forward, the court will issue the invalidating decree to cancel
the bill.15 This procedure admittedly has weakness in that it relies on the public notice16 which in practice often goes unnoticed by the lawful holder.17 So
the whole procedure is based on the legal fiction that the public notice ischecked by all concerned.
II
EFFECTS OF THE INVALIDATING DECREE

The invalidating decree has the following two effects.

A. Rendering the Instrument Invalid

The invalidating decree has the effect of terminating the validity of thelost negotiable instrument in respect of which it is issued. It means that there
will no longer be the risk of the instrument being acquired bona fide and forvalue. It also follows that if there is a lawful holder of the instrument, he isdeprived of the status as the holder. The lawful holders include a holder indue course who has acquired the instrument before the invalidating decree11
Article 144(1) of the Non-Contentious Procedure Act. The official gazette can be accessed fromanywhere in the world via internet (http://kanpou.npb.go.jp/) but it is published only in Japanese. The
court may, if it sees fit, also order the petitioner to publish an announcement in daily newspapers (Article
144(2) of the Non-Contentious Procedure Act).
12
Article 145 of the Non-Contentious Procedure Act.
13
Article 159(1)(iii) of the Non-Contentious Procedure Act.
14
Article 147(2) of the Non-Contentious Procedure Act.
15
Article 160(1) of the Non-Contentious Procedure Act.
16
The decree invalidating negotiable instruments is not the only purpose for which public notice isused. Thus, some legal systems, including Japanese law, have a decree pronouncing a missing person as
dead after a period of public notice. See the Convention on the Declaration of Death of Missing Persons,which remained in force until 1972 (On this convention, see D. St. L. Kelly, J. Varsanyi “Declarations of
Death: Reappearance and Status” 20 (1971) ICLQ 535).
17
It may be interesting to note in this regard that the United Nations Convention on International Billsof Exchange and International Promissory Notes does not provide for a decree terminating the validityof lost bills of exchange or promissory notes because the public notice was thought to be insufficient. See
the Report of the Secretary-General: Commentary on Draft Convention on International Bills of
Exchange and International Promissory Notes (A/CN.9/213) p. 182.

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Journal of Maritime Law & CommerceVol. 39, No. 4

is issued and his assigns. Where the instrument is a bill of lading, the lawful
holders also include the consignor and its assigns if the petition for the invalidating decree is made fraudulently by the consignee who has not received
the bill for failing to pay to the consignor.
It must be noted, though, that the invalidating decree does not have theeffect of depriving the lawful holder of his right.18 As the decree deprives
him of his status as the holder of the instrument, he has to endure the inconvenience of adducing other evidence to prove his right, such as the factshowing that he has acquired the bill bona fide and for value before theissuance of the decree.
It is to safeguard the interests of the lawful holders or would-be holders
that the invalidating decree is issued only after the expiry of a period of public notice. Thus if somebody who is about to acquire the lost instrument
becomes aware of the public notice, he will avoid acquiring it. If a lawful
holder becomes aware of the public notice, he may present the instrument tothe court and dispute the right of the petitioner.
B. Restoring to the Petitioner the Status of the Holder

As well as cancelling the lost negotiable instrument, the invalidating
decree also has the effect of restoring to the petitioner the status of the holder of the instrument.19 It thus serves as the substitute for the lost instrument.
As a general rule, the right embodied in a negotiable instrument cannot be
asserted without the production of the instrument.20 By way of an exception,
the invalidating decree enables the petitioner to assert the right without actually possessing the instrument. Thus where the invalidating decree is issued
in respect of a bill of lading, the petitioner can claim the delivery of goods
without producing the bill. It must be noted, though, that the invalidating
decree restores to the petitioner only the status of the holder and does not go
so far as to confer on him the right embodied in the instrument.21
The Supreme Court confirmed this principle in its decision on 25 January 2001 (reported in 55-1
Minshu 1 in Japanese) involving a decree invalidating promissory notes, holding that if a holder in due
course were to be deprived of his right on the promissory note by the issuance of the decree, it could
undermine the general principle of negotiable instruments which is designed to facilitate the circulationof such instruments.
19
Article 160(2) of the Non-Contentious Procedure Act.
20
Thus Article 584 of the Commercial Code, which is also incorporated by reference into the Carriage
of Goods by Sea Act, provides that the delivery of goods cannot be demanded without the production ofbills of lading.
21
The Supreme Court confirmed this principle in the case of 19 February 1954 (reported in 8-2
Minshu 523 in Japanese) involving a decree invalidating share certificates.
18

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Invalidating Lost Bills of Lading

555

A further point to note is that under Article 518 of the JapaneseCommercial Code, a petitioner for the invalidating decree is entitled to exercise the right embodied in the lost negotiable instrument by putting up security. It thereby alleviates the inconvenience of having to wait for the invalidating decree to be issued under the procedure outlined above, which inpractice takes at least three months.22 By today’s means of maritime transport, three months would be enough to circle the globe. If the issuance of theinvalidating decree had to be awaited, the ship would sail away with thegoods on board, since warehousing would not be an appropriate solution in
many cases as, for example, where the security of goods at the port of discharge is doubtful. The petitioner would therefore find it helpful if, as underJapanese law, he did not have to wait for the invalidating decree to be actually issued. Under some of the other legal systems which make a similar
invalidating decree available, the exercise of the petitioner’s right is facilitated in the same way.23
III
EFFECTIVENESS OF THE INVALIDATING DECREE OUTSIDEJAPAN

Each country has its own rules determining what decisions of foreign
courts are to be given legal effect.24 The Japanese invalidating decree seems
unlikely to be given legal effect in other countries. It is firstly because thepublic notice may strike the foreign recognising courts as an insufficientmeasure to safeguard the interests of the lawful holders since it does notoften come to the notice of them, all the more so if they are foreigners as thenotice is written in Japanese only. It is also because some countries may

22
The minimum two-month period for public notice (Article 145 of the Non-Contentious ProcedureAct) plus the time actually needed for administration.
23
e.g. Article 305 of the Norwegian Maritime Code provides:
A request to have a lost bill of lading declared null and void shall be made to a County or Town
Court at the place where the goods are to be delivered. In other respects the provisions of Act of
18 December, 1959, No. 1 Relating to the Declaration of Nullification of Debt Instruments shallapply. When the Court has decided to proceed with such a case, delivery of the goods can be
demanded against security for claims which the holder of the lost bill of lading may bring against
the carrier. (The English translation by Peter Bilton, Trond Solvang, and Erik Røsæg at
http://folk.uio.no/erikro/WWW/NMC.pdf).
A similar provision is to be found in Swedish law: See Hugo Tiberg “Legal Qualities of TransportDocuments” (1998) 23 Tul. Mar. L.J. 1, 18.
24e.g. Chapter III of the Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction
and the recognition and enforcement of judgments in civil and commercial matters.

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refuse to recognise foreign decisions arising out of ex parte proceedings,25
though they may make an exception for decisions arising out of non-contentious procedures26 since the defendant’s interests are generally not atstake in such procedures.
It should be noted that even if the invalidating decree is given no legal
effect in the relevant foreign countries, it may nevertheless have practicalusefulness, as will be explained in a chapter below.
IV
PURPOSES FOR WHICH THE INVALIDATING DECREE IS
SOUGHT IN PRACTICE

Where a carrier has lost a set of bills of lading which it had issued before
surrendering them to the consignor, it may, while re-issuing another set ofbills, petition for the invalidating decree in order to prevent two sets of valid
bills from circulating. But bills of lading are more often lost while in thehands of persons other than the carrier. In those cases, two purposes are conceivable for which the invalidating decree is sought. Those purposes will be
examined in turn below.
A. To Demand the Carrier to Deliver the Goods without the Production of
the Bill of Lading

Where the delivery of goods is requested without the production of thebill of lading, the carrier may accede to the request if sufficient security istendered in the form of letters of indemnity. Among the factors taken into
account by the carrier when deciding whether to accede to the request are27
whether its P&I club will indemnify it for its potential liability for misdelivery,28 the consignee’s financial standing to honour its letter of indemnity,
whether the consignor or a reputable bank are also willing to provide letters

25
Thus, for example, judicial decisions authorizing provisional or protective measures which are
made ex parte and which are intended to be enforced without prior service are not to be recognized orenforced under the EU Council Regulation No. 44/2001. (See Denilauler v. Couchet Case 125/79 [1980]
E.C.R. 1553). The invalidating decree arises from ex parte proceedings as outlined in the chapter“Procedure for obtaining the invalidating decree” above.
26
As outlined in the chapter “Procedure for obtaining the invalidating decree” above, the invalidating
decree arises out of non-contentious procedure unless a holder of the lost instrument, noticing the public
notice, comes forward and disputes the right of the petitioner.
27
See “London Club warns on dangers of misdelivery” Lloyd’s List June 2, 1999.
28
The rules of most P & I Clubs expressly provide that liabilities and costs arising out of delivery of
goods without the production of bills of lading are not covered unless otherwise decided by discretion of
the Club. See e.g. section 17(c)(ii) of the 2008 Rules of the UK P&I Club.

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Invalidating Lost Bills of Lading557

of indemnity, the enforceability of the letters of indemnity particularly in the
country where the port of discharge is situated and whether there is the alternative of warehousing the cargo and recovering the expenses from the consignee. Even if the carrier is unwilling to deliver without the production of
the bill of lading, the consignee is entitled to receive delivery by obtaining
the invalidating decree or, as explained in a preceding chapter, simply by
petitioning for the invalidating decree and furnishing security under Article
518 of the Commercial Code.
It seems, however, rarely for this purpose is the invalidating decree soughtin practice. One possible reason is that while the person who has lost a billof lading is entitled under Article 518 of the Commercial Code to demanddelivery, only the consignee would have interest in making such a demand.
Where a bill of lading has been lost whilst in the custody of other persons,they may have little incentive to invoke Article 518. There is indeed noreported case on that provision with respect to bills of lading while there aresome cases with respect to other negotiable instruments. In fact, the awareness of the entitlement under Article 518 among the Japanese maritime practitioners does not seem high. Another more significant reason would be thatcarriers normally agree to deliver the goods without the production of billsof lading if sufficient security in the form of letters of indemnity is provided.29 This is the case not only where there is a delay in the arrival of the bills
but also where the bills have been lost. It would therefore be unnecessary inmost cases to seek the decree for the purpose of demanding the delivery of
goods. In fact, in most of the total of some 440 cases in which the invalidating decree was issued in respect of bills of lading, the decree was petitioned for considerably later than the time at which the goods would havearrived at the port of discharge assuming that the ship had not spent too
much time at ports along the way. In those cases, demanding the delivery of
goods would not have been the purpose for which the decree was sought.
B. To Request the Return of the Banker’s Letter of Indemnity from the Carrier

In practice, it is mainly for the purpose of seeking the return of banker’s
letters of indemnity from the carrier that the invalidating decree is sought inrespect of bills of lading.

For an English decision mentioning this practice, see The Houda [1994] 2 Lloyd’s Rep. 541, 553(C.A.). For the Chinese practice, see Yingying Zou “Delivery of Goods by the Carrier under the Contractof Carriage by Sea; a focus on China” (http://hdl.handle.net/1765/6943), which at p. 241 says that in
China, as well as delivering goods against a letter of indemnity, the carriers sometimes take the risk ofmaking delivery on the consignee’s announcement of the loss of bills in newspapers. See also, Lixin Han,
“A Study on the Liability of the Carrier and the Actual Carrier for Delivery of Goods without a B/L in
China”, 39 J. Mar. Law & Com. 275 (2008).
29

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As mentioned above, where a bill of lading has been lost, the prevailingpractice is for the carrier to deliver the goods to the consignee in exchange
for letters of indemnity.30 If the carrier does not find the consignee’s letter ofindemnity sufficient as security, it may also require the consignee to procure
a letter of indemnity from a reputable bank.
The bank will charge the consignee for its letter of indemnity. The charges
may keep accruing while the letter remains in the hands of the carrier.31
Some letters of indemnity provide that they are valid for a fixed period oftime,32 in which case the charges will stop mounting when that period has
expired. The charges will also stop mounting when the potential liability of
the carrier for misdelivery of the goods ceases to exist by virtue of the time
bar33 since the banker’s liability for indemnity will then also be extinguished.
The consignee may demand the return of the letters of indemnity from thecarrier on the basis that the liability on them has ceased to exist.34 But thecarrier may resist, arguing that it remains at risk of its liability for misdelivery being pursued in countries where the applicable time bars35 are longer or

30
Where a bill of lading has been lost whilst in the hands of the consignor, the latter may request thecarrier to issue a new bill of lading by furnishing a letter of indemnity. See e.g.
http://www.kline.com/KAMFAQs/K-Line_FAQs_Bill_of_Ladings.asp/. In such cases, the text above
should be read by replacing the word “consignee” with the word “consignor.”
31
In respect of bills of exchange and promissory notes, D.E. Murray, “The U.N. Convention on
International Bills of Exchange and International Promissory Notes with Some Comparisons with theFormer and Revised Article Three of the UCC” ([1993/1994] 25 U. Miami Inter-Am. L. Rev. 189, 223)
says that premiums on a surety bond surrendered for a lost instrument could become enormous over theyears. On the other hand, some letters of indemnity may be subject to a one-time charge.
32
For example, the standard form letter of indemnity recommended by the International Group of P&I
Clubs (“Standard Form Letter of Indemnity to be Given in Return for Delivering Cargo Without
Production of the Original Bill of Lading Incorporating a Bank’s Agreement to Join in the Letter ofIndemnity”) provides in clauses 4 and 5 that the bank’s liability is to last six years but may be extended
from time to time at the request of the shipowner for a period of two years at a time.
33
One year under Article 3(6) of the Hague Visby Rules and two years under Article 20 of the
Hamburg Rules after the goods were delivered or should have been delivered.
34
With respect to bills of exchange and promissory notes, Article 80(2) of the 1988 United Nations
Convention on International Bills of Exchange and International Promissory Notes provides that the person who has received payment by furnishing security is entitled to obtain release of the security when
the party who paid and received the security is no longer at risk to be obliged to pay a second time.
According to the Report of the Secretary-General, this is the case, for example, where the time bar has
expired or where proof is brought that the lost instrument was in fact destroyed: Commentary on Draft
Convention on International Bills of Exchange and International Promissory Notes (A/CN.9/213) p. 122,
184.
35
The law applicable to the time bar would be the governing law of the claim for the delivery of goods
if the issue is characterized as substantive while it would be the lex fori if characterized as procedural.

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Invalidating Lost Bills of Lading559

uncertain.36 Therefore, in an effort to cut down on the charges, the consignee
may request the return of the letters of indemnity regardless of whether theliability for indemnity has been extinguished. In an attempt to persuade thecarrier, the consignee may attach to his request a copy of the decree invalidating the lost bill of lading. How useful the decree is to achieve that purpose will be examined in the following chapter.
V
USEFULNESS OF THE INVALIDATING DECREE TO ACHIEVE
THE INTENDED PURPOSES

How useful the invalidating decree is to achieve the two purposes mentioned above will be considered below.

A. To Demand the Carrier to Deliver the Goods without the Production of
the Bill of Lading

It has been seen above that it would not be often that a petition for theinvalidating decree is made for the purpose of demanding the delivery of
goods without the production of bills of lading. But in the cases where apetition is made for that purpose, the usefulness of the decree depends primarily on the viewpoint taken by the country in which the port of discharge
is situated. That is because it is in that country where the consignee intended to receive delivery when it entered into the transaction in the first placeand because it is also in that country where the consignee would like its rightto demand delivery to be enforced without delay. Even if its right to demanddelivery is upheld by a judgment in another country and that judgment isenforceable in the country where the port of discharge is situated, the result
may not be satisfactory for the consignee as it may take time for the foreign
judgment to be enforced.
For the invalidating decree in Japan to be effective, it would therefore benecessary that (1) the law, including choice-of-law rules, of the country
Thus, in The Captain Gregos ([1990] 1 Lloyd’s Rep. 310, 316 (CA)), Bingham L.J. held in obiterthat the one-year time bar of the Hague Visby Rules was intended to apply to a claim for misdelivery
resulting from the delivery of goods without the production of bills of lading. But the correctness of thatview is doubted by Boyd, Burrows and Foxton, Scrutton On Charterparties And Bills Of Lading (1996,
20th ed) at p. 435, note 43, presumably on the basis that the Rules are applicable only until the dischargeof the goods (See Articles 1(e) and 2). For a detailed survey of contradicting authorities of various
jurisdictions, see William Leung “Misdelivery of Cargo without Production of Original Bill of Lading:Applicability of the Mandatory Legal Regime of Hague-Visby and the One Year Time Bar” 39 J. Mar.
Law & Com. 205 (2008) in particular pp. 212 et seq.
36

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where the port of discharge is situated provides that the delivery of goods
may be demanded in the absence of bills of lading by obtaining a decree terminating the validity of the bills or by petitioning for such a decree, (2) theinvalidating decree or a petition for it under that law can be substituted forby the equivalent in Japan, and (3) the invalidating decree in Japan is entitled to recognition in that country. The requisite (1) will be satisfied if theapplicable law provides for a decree terminating the validity of negotiable
instruments. Article 305 of the Norwegian Maritime Code, for example, provides that the delivery of goods may be demanded against security if a petition is made to the court to have a lost bill of lading declared null and voidand the court has decided to proceed with the case. But the requisite (2) is
not likely to be satisfied since the procedure to follow before obtaining aninvalidating decree may be different from the Japanese equivalent in important respects such as the method and duration of the public notice. The requisite (3), too, will be unlikely to be satisfied, as examined above.37
It may therefore be concluded that the invalidating decree or a petition for
it in Japan is unlikely to be useful to achieve the purpose of demanding thedelivery of goods without the production of bills of lading unless the port ofdischarge is situated in Japan and Japanese law is the applicable law. As forthe applicable law, Japan has no express choice-of-law rule in the statutes orthe case law for determining the law applicable to the question what steps
must be taken to demand delivery in the absence of bills of lading. But theview that it is the law of the country in which the port of discharge is situated is widely supported among commentators. It would follow that in thecases where the port of discharge is not situated in Japan, the consignee
would have to seek, in the country in which it is situated, a decree equivalent
to the Japanese invalidating decree as may be available in some other civil
law countries38 or an order compelling the carrier to deliver without the
production of bills of lading as may be available in some common law
countries.39

B. To Request the Return of the Banker’s Letter of Indemnity from theCarrierThen, how useful is the invalidating decree for the purpose of supporting
the request for the return of the banker’s letter of indemnity from the carrier?
See the chapter “Effectiveness of the invalidating decree outside Japan.”See fn 8 above.
39
See fn 7 above.
37
38

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561

Where the letter of indemnity provides that the liability on it will cease
upon the delivery of the bill of lading,40 presenting a copy of the invalidating
decree would provide a sufficient legal ground for demanding the return of
the letter of indemnity. This is because, as explained above,41 the invalidating
decree has the effect of restoring to the petitioner the status of the holder ofthe lost instrument.42 But letters of indemnity with such a clause would not beappropriate to be used in the cases where the bill of lading has been lostthough they may be suitable for the cases where it is late in arriving.
Where the letter of indemnity does not contain such a clause, it would
seem that the invalidating decree would not provide a sufficient legal groundfor obtaining the return of the letter. Two reasons present themselves.
Firstly, the liability for misdelivery for which the carrier is to be indemnified under the letter of indemnity is not extinguished by virtue of theissuance of the invalidating decree, since the decree only has the effect ofdepriving the lawful holder of the bill of lading of his status as the holder
and does not have the effect of depriving him of his substantive right against
the carrier to demand delivery or pursue liability for misdelivery.43 If he successfully adduces other evidence than the invalidated bill of lading to prove
his substantive right, the carrier will seek its liability to be indemnified
under the letter of indemnity.
Secondly, the carrier will not be exonerated from its liability towards thelawful holder merely by returning the letter of indemnity against a copy of
the invalidating decree. Although the carrier would be exonerated from its
liability if it delivers the goods to the holder of bills of lading without grossnegligence,44 in the situation with which our present discussion is concerned,
the carrier has delivered the goods without the production of bills of lading
and therefore could not claim to have been without gross negligence even if
it did so sincerely believing the words of the consignee that the bills havebeen lost.45

40
e.g. Article 5 of “Standard Form Letter of Indemnity to be Given in Return for Delivering Cargo
Without Production of the Original Bill of Lading Incorporating a Bank’s Agreement to Join in the Letterof Indemnity” (recommended by the International Group of P&I Clubs).
41
See the chapter “Effects of the invalidating decree” above.
42
Article 160(2) of the Non-Contentious Procedure Act.
43
As explained in the chapter “Effects of the invalidating decree” above, with a reference to theSupreme Court decision on 25 January 2001.
44
Article 20(1) of the Carriage of Goods by Sea Act incorporating by reference Article 519 of theCommercial Code which in turn incorporates by reference Article 19 of the Act on Checks.
45
A carrier takes a major risk under virtually all legal systems if it delivers goods without requiring
the production of bills of lading. A classic Japanese authority is the decision of the Grand Court of
Judicature (the highest court in the pre-WWII period) on 16 September 1926 (reported in 5 Daishinin
Minshu 688 in Japanese). For other legal systems, see William Tetley, “Letters of Indemnity at Shipment
and Letters of Guarantee at Discharge” [2004] ETL 287 esp. text accompanying fn 107-118.

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In practice, though, the banker’s letters of indemnity may be returned on
the initiative of the carriers in the exercise of their business judgment. In
legal terms, it would constitute a waiver of their right to claim indemnity. A
major factor which the carrier will take into account would be the need tokeep cordial relationships with the cargo interests.46 Another material factor
would be the chances of facing a claim for damages for misdelivery, which
may not be high since lost bills of lading are not as likely to be acquired
bona fide and for value as lost promissory notes or bills of exchange.47 Timebar, too, can be an inconclusive factor to be taken into account where thecarrier is susceptible to be sued in a number of countries where time bars ofdifferent lengths are applicable. In addition to those factors, if a copy of theinvalidating decree is presented, the carrier will take it into account in its
business judgment. The carrier will be assured by the invalidating decree tothe extent in which the bill of lading, having been rendered null and void,
will no longer be acquired bona fide and for value. The invalidating decree
also means nobody has come forward as the lawful holder during the periodof public notice and therefore implies that the chances of the bill having
been acquired bona fide and for value before the issuance of the decree areso much smaller. It also implies that the consignee’s failure to produce thebill of lading was not due to the fact that it had failed to pay the price of thegoods to the consignor. The invalidating decree is useful, in as much as itprovides the carrier with assurance in those ways, to support the request for
the return of the banker’s letter of indemnity from the carrier.
It must be noted, though, that the usefulness of the invalidating decree
when used in persuading the carrier to return the letter of indemnity is limited. Its usefulness is especially limited where it is certain that a short time
bar is applicable to the claim of misdelivery since the consignee would thenbe entitled to obtain the return of the letter of indemnity upon the expiry of
the time bar, which will be due not long after the end of the period of public notice for obtaining the decree. The limited usefulness of the invalidat-

In fact, carriers sometimes take the legally dangerous step of delivering goods in the absence of billsof lading without requiring letters of indemnity in order to maintain cordial relationships with the cargointerests.
47
It is firstly because, unlike the instruments which embody obligations to pay money, bills of lading
could be exchanged for money under a letter of credit only by tendering other shipping documents called
for by the letter and therefore the person acquiring a bill of lading intending to convert it into a sum ofmoney would also have to obtain a letter of credit and the shipping documents called for under it.
Secondly, a person about to acquire a bill of lading may find out that it has previously been lost if he contacts the notify party mentioned on it. He may do so especially where some time has elapsed since theissuance of the bill because the notify party, being the person to whom an arrival notice is to be given, is
usually the intended consignee.
46

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Invalidating Lost Bills of Lading563

ing decree may explain why no serious inconvenience is known to exist48
notwithstanding that no similar decrees are available in many countries
including those with the common law tradition. It may also explain why
similar decrees in some civil law countries such as Norway and Sweden
seem to be hardly used for bills of lading.
On the other hand, it should also be noted that the cases in which theinvalidating decree can be of some use are wide ranging. This is because its
usefulness depends on the business judgment of the carrier and therefore
whether it has legal effect in the relevant countries is not a decisive factor.
In fact, among the total of some 440 cases in which the decree wasannounced in respect of bills of lading in the official gazette, some 130 cases
appear to have involved foreign carriers.49
VI
JURISDICTION OF THE JAPANESE COURTS TO ISSUE THE
INVALIDATING DECREE

Since the usefulness of the invalidating decree is not confined within theboundary of Japan, it may be of interest in what circumstances the invalidating decree may be obtained from the Japanese courts. Japan has no statutory provision determining the international jurisdiction of its courts to issue
the invalidating decree.50 So the case law will be examined below.
A. Case Law

The Tokyo Summary Court decision on 20 October 200551 is a recent casein point. In that case, the invalidating decree was sought in respect of bills

48
To guard against the possible loss of a bill of lading, sometimes a set of multiple bills of lading aresent separately to the consignee, so that if one in the set is lost, the others may be used to claim delivery.
But this preventative measure will not be available where payment is made under a letter of credit since
Article 20(a)(iv) of the UCP 600 calls for the tender of a full set of bills.
49
With the help of his student assistant, Ms Asuka Noda, the present author has counted the numberof the cases in which the carriers (shipowners and charterers) or the issuers of the bills are incorporated
outside Japan and, by the sound of their names, are apparently not the subsidiaries of Japanese companies.
50
There is, however, a provision for determining the internal jurisdiction, which is applicable when
the Japanese courts have international jurisdiction. Thus, Article 157(1) of the Non-Contentious
Procedure Act confers jurisdiction on the court for the place of performance specified in the instrument
and, in the absence of such designation, on the court for the place of domicile of the obligor on the instrument (such as the debtor on a promissory note).
51
Reported in 196 (2007) Kaiji-ho Kenkyu-kai Shi 60 (Japan Shipping Exchange) in Japanese.

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Journal of Maritime Law & CommerceVol. 39, No. 4of lading issued in Tokyo on which Yokohama (Japan) was named as theport of loading and Keelung (Taiwan) as the port of discharge.52 The court
denied jurisdiction, holding that the Japanese courts had jurisdiction only
where the port of discharge was situated in Japan. The court reasoned that,in view of the interests and convenience of those concerned, the decreeshould be sought in the country where the port of discharge was situated inorder to ensure the effectiveness of the decree. The court acknowledged thata similar decree might not be available in that country but showed no concern, holding that there should be alternative rules in that country to deal
with the same issue, i.e. how goods should be delivered where the bills of
lading have been lost. The court disregarded the choice-of-court clause in
the bills of lading on the ground that it was only concerned with adversarial actions to determine the rights and obligations of the carrier and as suchdid not extend to cover the non-contentious procedure for terminating thevalidity of bills of lading. Since this is a decision of a lower court, it is notbinding on the courts in the future cases.
This is the only case on the jurisdiction of the Japanese courts to issue theinvalidating decree in respect of bills of lading in which a reasoned decision
was given.53 Though the Japanese courts are supposed to ascertain their jurisdiction ex officio, they do not have to expressly state the jurisdictional bases,
especially in the ex parte proceedings, such as those for obtaining the invalidating decree, in which no party disputes the jurisdiction. The other cases inwhich the invalidating decree was issued are announced in the official gazettewhich only mentions some particulars of the facts and does not set out the
court reasoning. It is, therefore, unclear what jurisdictional bases were relied
upon in those cases. In most of the total of some 440 cases announced in theofficial gazette in the past 60 years, the port of discharge was situated inJapan. But in nearly forty cases, the port of discharge was not situated inJapan. Among them, in almost all cases, the place of issuance of the bills of
lading was situated in Japan. There is however a recent case in which clear-

The facts in details were as follows. The bills of lading were issued on 26 April 2005 by a Japanesecompany with its principal place of business in Tokyo. They named a manufacturer of electrical appliances as the consignor and were made out to the order of a bank. There was a choice-of-law clause infavor of Japanese law with respect to the issues of contract evidenced by the bills and a choice-of-court
clause giving the Tokyo District Court exclusive jurisdiction over actions against the carrier. Those billsof lading were lost sometime between 29 April and 6 May of the same year while they were stored in abuilding in Tokyo. The bills were apparently in the custody of the cargo division of an airline company,
which presumably acted as the carrier of the bills between the consignor and the consignee. They madea petition to the Tokyo Summary Court for the invalidating decree.
53
In respect of bonds, there is a decision on 25 July 1931 (reported in 10 Daisihin Minshu 603 in
Japanese). In this case, the Grand Court of Judicature (the highest court in the pre-WWII period) declined
jurisdiction to issue the invalidating decree in respect of lost bonds which had been issued by a Japanesecompany and were to be reimbursed in London and New York.
52

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Invalidating Lost Bills of Lading565

ly neither the port of discharge nor the place of issuance was situated inJapan.54 In that case, a set of three bills of lading on which International
Fisheries (a company incorporated in Myanmar) were named as the consignor were issued by Pacific International Lines (presumably a Singaporean
company) in Yangon (Myanmar) on 25 September 2002 and were made out
to the order of Sumitomo Corporation (a Japanese company). Yangon(Myanmar) was named as the port of loading and Singapore as the port ofdischarge. The bills of lading were lost while in the custody of Myanmar
Investment and Commercial Bank. Presumably because they were to betransmitted via Hachinohe (Japan), a petition was made there for the invalidating decree by Sumitomo Corporation (which was presumably the lastendorsee of the bills) and it was granted by the Hachinohe Summary Court.
The law in this area, therefore, remains to be settled. But it would be safe
to assume that the Japanese courts will exercise jurisdiction to issue theinvalidating decree in the cases where the port of discharge is situated inJapan since no contrary decisions have been found in the case law. What isless clear is whether they will do so in other cases. It was answered in thenegative by the Tokyo Summary Court in its decision on 20 October 2005,
but there are a number of cases in which jurisdiction was exercised notwithstanding that the port of discharge was situated outside Japan in the circumstances where the place of issuance of the bills of lading was situated inJapan. Though there is a case in which the court exercised jurisdiction
notwithstanding that clearly neither the port of discharge nor the place of
issuance was situated in Japan, it will be wrong to assume that jurisdiction
is regularly exercised in such cases.
B. Comment

It is submitted that in the cases where the invalidating decree is useful,jurisdiction to issue the decree should be exercised to the extent in which it
would not unduly impair the interests of the parties concerned such as thecarrier and the lawful holder of the bill of lading. We will examine those factors in turn below.
1. The cases where the invalidating decree is useful

In order to grant the invalidating decree in the cases where it is useful toachieve the purpose for which it is usually sought in practice, it would seem
too narrow to restrict the jurisdiction of the Japanese courts to the cases

54
Hachinohe Summary Court 4 November 2003, announced in the official gazette on 2 December
2003.

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Journal of Maritime Law & CommerceVol. 39, No. 4

where the port of discharge is situated in Japan. This restrictive view, adopted by decision of the Tokyo Summary Court on 20 October 2005 and supported by some commentators, is based on the premise that the invalidating
decree is sought for the purpose of exercising the right embodied in the lost
negotiable instrument without the possession of it. Thus, the Tokyo
Summary Court in that decision held that the issue of jurisdiction would
arise where the right embodied in the lost negotiable instrument was exercisable in the absence of the instrument by obtaining the invalidating decree
under the applicable law. That premise is, however, erroneous in respect ofbills of lading as explained above,55 even if it may be correct with othernegotiable instruments. The usual purpose for which the invalidating decree
is sought in respect of bills of lading is, as seen above,56 not to demand thedelivery of goods without the production of bills of lading but to support therequest for the return of the banker’s letter of indemnity from the carrier.
That would have been the purpose also in the case of the Tokyo Summary
Court, though the courts and commentators have shown little awareness of
it. It can be inferred from the fact that the bills of lading were issued on 26
April 2005 and the carriage was from Yokohama to Keelung but the decree
was not sought until 27 July 2005. Since the bills were lost while they werein the custody in Tokyo of an airline company which presumably acted as
the carrier of the bills between the consignor and the consignee, the carrier
may have re-issued bills to the consignor at its request in Tokyo in exchange
for letters of indemnity. So the decree may well have been sought to support
the request for the return of the letters of indemnity in Tokyo from the carrier, which was a Japanese company with the principal place of business inTokyo. Also, in the case of the Hachinohe Summary Court, the invalidating
decree was sought by Sumitomo presumably to support their request to
Pacific International Lines (the carrier) to return the banker’s letter ofindemnity which they would have submitted in receiving the delivery of
goods in Singapore without the production of bills of lading. Even if theinvalidating decree did not have legal effect in Singapore, the carrier may
have taken it into account in their business judgment in deciding whether toreturn the letter of indemnity.
In those and other cases where the port of discharge is not situated inJapan, the invalidating decree obtained in Japan can be useful to support therequest for the return of letters of indemnity from the carrier. The decree isa factor to be taken into account by the carrier in its business judgment andtherefore whether it is given legal effect in other relevant countries is not
See the chapter “Purposes for which the invalidating decree is sought in practice” above.
Ibid.

55
56

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Invalidating Lost Bills of Lading

567

decisive. It follows that jurisdiction to issue the decree should be exercised
except to the extent it is necessary to restrict it to protect the interests of thecarrier and the lawful holder of the bill of lading, if there is any.
2. Protecting the carrier from the risk of being subjected to multiple claims

If the carrier has delivered goods after the invalidating decree was issued,
it may be held liable for misdelivery towards the holder of the bill of lading
in a country where the decree is not recognised. The risk of being subjected
to multiple claims for a single liability is in fact not unique to this area oflaw but generally exists because the recognition of foreign judgments is notguaranteed and because different legal systems are applicable to the same
issue in different countries due to the differences in their choice-of-law
rules. But the risk is greater to the extent that the invalidating decree, incomparison with other types of court decisions, is unlikely to be recognisedin other countries. On the basis that the invalidating decree may not haveeffect in countries other than the country of issuance, the proponents of theview that jurisdiction to issue the decree should be given only to the courts
for the place of performance of the obligation on the instrument points out
the risk of the obligee facing multiple claims in respect of a single obligation at the place of performance. But this would not be a sufficient reason to
support their view, at least where the instrument is a bill of lading, since thecarrier could not avoid the risk of facing multiple claims even if their view
were adopted. The reason is that the carrier’s liability for misdelivery might
be pursued in other countries than the country where the port of discharge issituated, such as the country chosen by a jurisdiction agreement in the billof lading and the country where the carrier’s principal place of business issituated, because the invalidating decree issued in the country where the portof discharge is situated may not be recognised in those countries.
As explained in an earlier chapter,57 the main purpose for which the invalidating decree is sought in respect of bills of lading is to request the returnof the banker’s letters of indemnity from the carrier. But the decree does notprovide a sufficient legal ground for demanding the return and the letters ofindemnity are in practice returned on the carrier’s own volition based on its
business judgment.58 The risk of facing multiple claims is a factor to be taken
into account by the carrier. It is true that it would be more assuring for the
carrier if the invalidating decree has legal effect in all the countries where it
may face a claim for damages for misdelivery from the lawful holder of thebill of lading. But even if not, the risk of facing multiple claims may not be
Ibid.
See the chapter “Usefulness of the invalidating decree to achieve the intended purposes” above.

57
58

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Journal of Maritime Law & CommerceVol. 39, No. 4

a conclusive factor in determining whether to return the letters of indemnity.
For those reasons, it is submitted that the risk of the carrier facing multiple claims should not be treated as a significant consideration in shaping therules for jurisdiction to issue the invalidating decree.
3. Protecting the interests of the lawful holder of the bill of lading

The invalidating decree has the effect of depriving the lawful holder of thebills of lading of his status as the holder. He will, thereafter, have to take thetrouble of adducing other evidence to prove his entitlement to demand thedelivery of goods. The invalidating decree should therefore be issued only
where the lawful holder would not be unfairly taken by surprise when he isdeprived of his status as the holder by the decree and would acquiesce to it
by virtue of the public notice posted.
It is therefore submitted that the Japanese courts should exercise jurisdiction only where the place of issuance of the bill of lading, the port of loading, or the port of discharge mentioned in the lost bill of lading is situated inJapan. Those places are usually mentioned on the face of bills of lading59 andare situated along the supposed course of circulation of the lost bill. The
place of the issuance of the bill and the port of loading, if not the same, areusually situated in the same country.
If the lost bill of lading contains a jurisdiction clause choosing theJapanese courts, it should not be read as pertaining to the jurisdiction toissue the invalidating decree. It is because a jurisdiction clause in a bill of
lading is usually concerned with a suit by or against the carrier and as suchis not concerned with the non-contentious procedure for terminating thevalidity of bills of lading. It is also because bills of lading containing a
Japanese jurisdiction clause are not necessarily supposed to make their way
through Japan in the course of their circulation. Neither does the carrier’s
principal place of business, even if mentioned on the face of the lost bill,
constitute a good jurisdictional base since bills of lading are not necessarily
issued at, or otherwise connected with, the carrier’s principal place of business. The lawful holder would, therefore, not acquiesce to being deprived ofhis status as the holder by the invalidating decree if it is issued in the country where the carrier’s principal place of business is situated or the country
chosen by a jurisdiction agreement in the bill of lading.

59
Article 15(1)(f)(g)(i) of the Hamburg Rules and Article 7(8)(9)(12) of the Japanese Carriage ofGoods by Sea Act require bills of lading to mention those places.

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VII
FINAL REMARK

569

Where bills of lading have been lost, those who have submitted letters ofindemnity to the carrier may wish to request the carrier to return of thebanker’s letter of indemnity in order to avoid the banker’s charges mounting
on it. They may then wish to consider petitioning for the invalidating decree
in order to support the request. If the port of loading, the place of issuanceof the bill, or the port of discharge is situated in Japan, it may be worth considering petitioning before a Japanese court. A Japanese court will exercise
jurisdiction to grant the decree if the port of discharge is situated in Japan.
Otherwise, if the court seeks to be persuaded that it should exercise jurisdiction, the petitioner would be advised to stress the practical usefulness,rather than the legal effectiveness, of the invalidating decree for their intended purpose of requesting the return of the banker’s letters of indemnity andto argue that other interested parties, such as the lawful holder of the bill (ifthere is any), will not be unfairly taken by surprise.
Similar decrees are available in some other civil law countries. Though
they do not seem to be invoked as often as the Japanese counterpart, it ishoped that this article will rekindle interests in their usefulness and raiseawareness of the jurisdictional question.