Law of the Flag. An expression applied to the municipal law of the country to which a ship belongs of which the flag is the symbol, when that law is resorted to in preference to the Zero loci contractus for the construction and effect of a contract or the determination of a liability affecting the ship or her cargo.
The law of the flag is "to 'regulate the liabilities and regulations which arise among the parties to the agreement, be it of af freightment or by hypothecation, upon this principle, that the ship-owner who sends his vessel into a foreign port gives a notice by his flag to all who enter into contracts with the shipmaster, that he intends the law of that flag to regulate those contracts, and that they must either submit to its operation or not contract with him or his agent at all ;" Foote, Priv. Int. L. 408; and in England this rule is usually followed, the tendency being that, in the absence of indication of the in tention of the parties, the presumption is in favor of the law of the ship's flag ; Scrut ton, Chart. Part. 11; but in 3 Moo. P. C. N. S. 272 ; Liverpool & G. W. S. Co. v. Ins. Co., 129 U. S. 397, 9 Sup. Ct. 469, 32 L. Ed. 788 ; 12 Q. B. D. 589; 10 id. 540, it was held that the lex loci contractus must prevail. In his treatise on merchant shipping (3d ed. 170) MacLachlin thus states the rule as to the effect of the law of the flag on the authority of the master. "The agency of the master is devolved upon him by the law of the flag. The same law that confers his authority, ascertains its limits, and the flag at the mast-head is notice to all the world of the extent of such power to bind the owners or freighters by his act. The foreigner who deals with this agent has notice of that law, and, if he be bound by it, there is no injustice. His notice is the national flag which is hoisted on every sea and under which the master sails into every port, and every circumstance that connects him with the vessel isolates that vessel in the eyes of the world, and demonstrates his relation to the owners and freighters as their agent for a specific purpose and with power well de fined under the national maritime law;" id.; this was suggested by the author quoted as a possible explanation of the apparently anom alous exception of bottomry bonds from the general rule that the lex loci contractus pre vails.
This rule was followed in Lloyd v. Guibert, where the question was as to the master's authority to bind the ship-owner; L. R. 1 Q. B. 115 ; s. c. 6 Pe. & S. 100, and 33 L. J. Q. B. 245 ; s. c. on appeal 35 id. 74; 6 B. & S. 120.
In this case, in the Queen's Bench, Black burn, J., in language almost exactly follow ing that above quoted, applied the law of the flag (French), which did not recognize a personal liability of the owner in a bot tomry bond, as against the lex loci con tractus (Danish), or the laws of the place of performance (English), or those of the place when the cargo was loaded (Haytien).
The court, after noting the "singular ab sence of authority," said two Ameri can cases had been cited; Arayo v. Cline], 1 La. 528, 20 Am. Dec. 286, and Pope v. Nick erson, 3 Sto. 465, Fed. Cas. No. 11,274, adding that "neither of these decisions is binding on us, but we have derived very great as sistance from them." As to the last of these cases there follows this comment: "The very learned judgment of Mr. Justice Story just referred to affords a complete answer to a plausible argument in which was suggested that the general maritime law clothed the master with power to bind his owners abso lutely, and that the municipal law of the owner's country was analogous to secret re strictions in the ostensible authority of a partner or other agent clothed with general power." In the Exchequer Chamber, where the judgment was affirmed, Willes, J., said : "The general rule, that where the contract of affreightment does not provide otherwise, there, as between the parties to such con tract, in respect of sea damage and its inci dents, the law of the ship should govern, seems to be not only in accordance with the probable intention of the parties, but also most consistent and intelligible, and there fore most convenient to those engaged in commerce." The same doctrine was applied by the English Court of Appeal to the mas ter's control over the cargo as well as the ship, by Brett, L. J., in L. R. 7 P. D. 137; by Dr. Lushington in Br. & L. 38, and in a later case by Sir J. Hannen, who sustained a sale of part 'of a damaged cargo, where it was shown by the remit to have been un necessary, such sale being authorized by the law of the flag ; [1891] Prob. 328. But see Malpica v. McKown, 1 La. 249, 20 Am. Dec. 279 ; Arayo v. Cline', 1 La. 528, 20 Am. Dec. 286, where the lex loci contractile was held to prevail.
In Pope v. Nickerson, 3 Sto. 465, Fed. Cas. No. 11,274, although the law of the flag was, in fact, enforced, the decision cannot be said to have followed the rule laid down by Mac Lachlin, as in that case the particular point decided was as to liability of the owner to the freighter, when the former was a citizen of a state the laws of which did not recog nize such liabilities, while by the law of the state in which the freighter resided and also of the foreign port where the cargo was shipped, such a liability existed, and the lex domicilii of the ship-owners was held to gov ern the contract. See also The Virgin v. Vyfhius, 8 Pet. (U. S.) 8 L. Ed. 1036; Bor