Over the course of many centuries a very subtle system (from the legal point of view) of international trading has developed, particularly in relation to commodities. Under this system a person who buys goods becomes the owner of them when he pays for them. In practice, because the goods are generally on a ship at the time when payment is wanted by the seller, a document of title, which represents the goods, is handed over in exchange for payment. The bill of lading is the paradigm of such a document of title. When a trader “buys” a bill of lading he considers that he is the owner of the goods to which the bill relates and that when the ship arrives he will be entitled to take physical possession of the goods on surrender of the bill of lading. Alternatively, he can “sell” the bill of lading to another so that that other may himself take physical possession of the goods in due course.

There are, of course, many necessary refinements which make such a system work. There are frequently to be found additional optional extras, such as letters of credit. Not merely do the goods and the documents physically pass from one country to another, but different legal systems may apply to the various contracts which are made relating to the same goods and documents. Very large sums of money indeed may be involved in commodity transactions and, when markets become volatile, the profit or loss on a single transaction may be such as to be significant even to the largest houses.

Having regard to the vast number of transactions which are effected every day, what is surprising is not how many go wrong but how very few. One of those very few is illustrated by The Gosforth, decided by the District Court at Rotterdam on 20 February 1985.

On 14 June 1984 Commodity S.A., a Brazilian company, sold to Josco USA, a company established at Minneapolis, 50–60 thousand tons of citrus pulp pellets, f.o.b. Santos, payment to take place within 15 days of the issuance of any bill of lading. Pursuant to this contract 6,000 tons of the goods were loaded on 8 January 1985 at Santos by Commodity into the Gosforth for shipment to Rotterdam. Josco USA should have paid Commodity for those goods (U.S. $420,000) by 23 January 1985 at the latest but failed to do so. Commodity invoiced Josco USA for that sum on 8 January but indorsed the bill of lading in blank and handed it to Josco’s local agents who forwarded it to Josco N.L., the Dutch agent of Josco USA. The document of title to the goods had thus been surrendered by Commodity without their having received payment for it and it was from this, perhaps unusual, event that the litigation ultimately stemmed.

When Josco N.L. received the bill of lading they handed it to ICM, a Dutch company which is a member of the SGS group of international surveying, valuing, etc., companies. Josco had re-sold the goods in smaller parcels to 13 European buyers and ICM were requested, as seems to be usual in the trade, to issue delivery orders in respect of those parcels. ICM retained the bill of lading and gave 13 delivery orders to Josco N.L. The delivery orders were handed to Bank Mees and Hope N.V. at Rotterdam and on or about 17 January 1985 the European purchasers received their respective delivery orders by making the appropriate payment to the bank.