Fear of Damage and the CMR

 

A recent decision from the court in Amsterdam, ECLI:NL:RBAMS:2019:10104, published 21 February 2020, is a reminder of two salient differences between the liability structure of the international road carriage convention, the CMR, and that under the sea carriage conventions: as regards what constitutes ‘damage’; as regards express contractual provisions varying the scheme of the convention.

Danone, were the shipper of dairy products from Germany to France. When the goods arrived in France it was found that the seal on the container had been broken and Danone destroyed the goods and claimed their full value and the cost of their destruction. The framework contract stipulated that Danone was entitled to destroy all goods in the case that the presence of persons in the trailer was suspected, and could invoice the full value of the goods plus destruction costs. The court decided that ‘damage’ in the CMR meant a substantial physical change in the state of the goods. The fact that the seal had been broken, which allegedly caused a decrease in the market value and marketability of the goods, was not characterised as ‘damage’ within the meaning of the CMR. Recovery of economic loss under CMR is restricted to the items referred to in art.23(4) “the carriage charges, Customs duties and other charges incurred in respect of the carriage of the goods”. By contrast, with carriage of goods by sea under the Hague Rules, a claim can subsist in relation to pure economic loss, such as the value of sound cargo destroyed due to fear of contamination by proximity to damaged cargo (The Ocean Victory Ltd. [1982] 2 Lloyd’s Rep. 88.).

Danone were also unsuccessful in referring to the specific provisions in their framework contract, due to art.41 of the CMR, because because they increased the mandatory liability of the carrier under the CMR.  Article 41 renders null and void derogations of CMR, whether for the benefit of the carrier or the sender. By contrast, art III(8) of the Hague Rules has only a one way effect in rendering null and void provisions which are for the benefit of the carrier, with art V preserving the effect of contractual provisions that benefit the shipper.

 

 

 

Are CMR consignment notes electric?

 

They will be soon. The UK has indicated its intention to accede to the e-CMR protocol allowing an electronic consignment note as an alternative to a paper consignment note. In 2008 the CMR protocol became part of the Convention and came into force in 2011 for accepting countries, of which there have been few to date. The UK intends to deposit its instrument of accession to the UN in September 2019, after which it will take 90 days for the Protocol to come into force in the UK. Next stop, extending COGSA 1992 to electronic bills of lading?

UK Referendum Result. Implications for shipping law?

As a result of the vote to leave the EU,  the UK will cease to be a member of the EU probably around November 2018 after the new prime minister has invoked article 50 and Parliament has repealed the European Communities Act 1972. How will this affect shipping law?

Substantively, not a great deal. English dry shipping is based on common law, and a few key statutes, such as COGSA 1992, and the implementation of international carriage conventions through domestic legislation – such as COGSA 1971 with the Hague-Visby Rules. Nothing European here, so no change.

With  wet shipping, the CLC and the Fund are part of our national law through domestic law implementing international conventions. Similarly,  the Wreck Removal Convention, the Salvage Convention, and the 1976 Limitation Convention. Again, nothing European here, so plus ca change.

However, procedurally,  we are very much affected by European legislation – and this is something we shall return to in a later post. As a starting point, bear in mind the two sources of EU legislation.

  • Directives which are implemented by and Act of Parliament. On our leaving the EU it will be up to Parliament to decide whether to repeal or amend the implementing legislation.
  • Directives which are implemented as statutory instruments pursuant to s.2 of the European Communities Act 1972. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep them we need to enact them as part of our domestic law.
  • Regulations which have direct effect. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep Regulations we need to enact them as part of our domestic law.

Piggy back jurisdiction under CMR? The Supreme Court answers ‘No’

Where jurisdiction is established over the first road carrier under the CMR, can proceedings against successive carriers be brought in that forum? In British American Tobacco Switzerland S.A. and Others v Exel Europe Ltd [2013] EWCA Civ 1319, [2014] 1 Lloyd’s Rep. 503, the Court of Appeal said ‘yes’. The Supreme Court has now reversed the decision, [2015] UKSC 65.

The cargo owner entered into a CMR contract of carriage with a carrier, based in England, and agreed exclusive English jurisdiction for disputes arising out of the contract of carriage. The claims arose out of thefts of cigarettes from two cargo containers while in the custody of Dutch sub-contractors, the first in Belgium, the second near Copenhagen. The cargo sued the first carrier and the two Dutch sub-carriers. An advantage of suing in England would be that recovery of customs duty is allowed in full under art. 23(4) CMR by the English courts.

Although it was entitled to bring proceedings in England against the first carrier, this was not the case as regards the successive carriers who did not fall within any of the grounds of jurisdiction in art. 31 of CMR. What about art. 34 which has the effect of joining a successive carrier to the contract of carriage on the terms of the consignment note? The jurisdiction clause did not appear in the consignment note and it would be contrary to principle to hold a party to a choice of court clause of which he had no express notice. Then there is art. 36, under which joint and several liability is imposed on the first, the last, and the guilty carrier. However, this was not to be interpreted to include an additional head of jurisdiction allowing for a defendant domiciled in one member state to be sued in the courts of the place where a co-defendant was domiciled. The 2001 Brussels Judgments Regulation did not provide any other basis for jurisdiction over the two sub-contractors or otherwise act as an aid to the interpretation of the CMR.

Lord Clarke and Lord Sumption both considered that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings. However, they agreed with Lord Mance that the language of the CMR clearly provides otherwise. The only way for a cargo owner to ensure that its claims against all the carriers that are potentially liable under art. 34 is to ensure that the jurisdiction clause in the head contract is expressly referred to in the consignment note.