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Logistics Bulletin Logistics July 2013 LOGISTICS BULLETIN Welcome to the July edition of our Logistics Bulletin. We begin this edition by reviewing two recent logistics cases. The US District Court recently confirmed that the US Carriage of Goods by Sea Act 1936 clearly applied to limit the sub-contracting domestic carrier’s liability and we look at how Himalaya Clauses in multimodal bills of lading protect subcontractors for the land leg of the transport. We then turn to a recent decision of the Federal Supreme Court of Germany, which confirmed the view taken by the English Court that, for the purpose of Article 2 CMR, the Hague Rules apply to the sea leg of a multimodal transport, limiting the road haulier’s liability for that leg. The carriage of dangerous goods by air gives rise to both potential civil and criminal exposure for all parties involved in the cargo chain, including shippers, freight forwarders and air carriers. We analyse the types of liability which might arise from carriage of dangerous goods by air and how cargo interests may seek to mitigate against such risks. Liquidated damages clauses can be commercially useful, but must be carefully drafted in order to avoid falling foul of the English law rule against penalties. In a recent decision, the English High Court applied a more modern approach to analysing contractual wording and we examine the potential impact on liquidated damages clauses in logistics contracts. Finally, we put the spotlight on competition and look at the latest competition issues in the logistics sector, including mergers, acquisitions and antitrust investigations. Justin Reynolds, Partner, [email protected] Craig Neame, Partner, [email protected] Himalaya Clauses in motor carrier, Service Transfer Inc The Court held strongly that Carmack multimodal transport: (STI), for the carriage of goods by road did not apply in this case, for two implications of a US District from Erlanger to the port of Norfolk, reasons: Court’s decision in Royal & Virginia. There was an accident during this stage of the journey, which First, Carmack does not apply to Sun Alliance Insurance plc v non-receiving carriers transporting Service Transfer Inc resulted in a total loss of the goods. Baxter’s subrogated insurer, Royal goods as part of transhipment A recent decision granting partial & Sun Alliance Insurance (RSA), between the US and non-adjacent summary judgment in the US District claimed against STI for the loss, who foreign countries. This is because 2 Court (Southern District of New York) in turn, applied for partial summary STI did not fulfil the two-part test for has confirmed that the US Carriage judgment that it was entitled to rely liability under Carmack, that: of Goods by Sea Act 1936 (COGSA) on the limitations in liability conferred (a) The carrier must provide can be contractually extended to limit by COGSA, and, in particular, on the transportation or service subject to a sub-contracting domestic carrier’s Himalaya Clause present in the bill of the jurisdiction of the US Surface liability. The decision provides a useful lading, and the Clause Paramount, Transportation Board (STB); and, illustration of the US courts’ current which expressly extended COGSA’s approach to interpreting contracts for application to the inland proportion of (b) The carrier must “receive” the the multimodal international carriage the shipment. goods for transportation under the of goods. STB’s jurisdiction over domestic STI argued that, in claiming directly motor transport. against it, RSA were disregarding Himalaya Clauses the bill of lading and umbrella service Second, RSA’s further argument, that Because sub-contracting is central contract by pursuing a direct, there was a de facto domestic bill of to multimodal transport, multimodal unlimited liability action against them lading between STI and Baxter under transport operators (MTOs) typically as subcontractor, which was not which STI were liable under Carmack, contract to protect their subcontractors permitted under COGSA. RSA argued against claims in tort from shippers. instead that the Carmack Amendment1 One of the most common ways of – and not COGSA – applied in this doing this is by including in bills of instance. Carmack imposes liability lading a “Himalaya Clause”, which against certain carriers for damage permits the subcontractor to rely caused during the carriage of goods on the exclusions, limitations and by road. RSA argued that Carmack defences in the MTO’s bill of lading applied to the relationship between STI despite the subcontractor not being a and Baxter and thus they were liable party to the bill. for the loss. Royal & Sun Alliance Insurance plc v Service Transfer Inc (4 Dec 2012, US District Court, Southern District of New York) Here, the shipper, Baxter Healthcare The case illustrates how Himalaya Clauses as Corporation (Baxter), entered into a incorporated into multimodal bills of lading can help multimodal (land, sea, then land) bill of lading with the MTO, American to protect subcontractors for the land portion of the President Lines Ltd (APL), for the transport and the difficulties of holding subcontractors shipment of a cargo of human plasma by road and sea from Erlanger, liable under domestic regulations such as Carmack. Kentucky to Vienna, Austria. APL then CRAIG NEAME subcontracted with the defendant 1 46 U.S.C. §14706 2 From the US Supreme Court’s decision in Kawasaki Kisen Kaisha Ltd v Regal-Beloit Corporation 130 S Ct 2433, 2439 (2010) 02 Logistics Bulletin also failed. This was because the bill CMR v Hague Rules - which despite the damage and loss taking of lading itself was not domestic, and applies when and why? place during the sea leg of the expressly stated carriage of goods all transport. The road carrier sought to the way to Vienna. Even if there were rely on the exception found in Art. 2 of Summary of “UND ADRYATIK” to be a second domestic bill, this CMR, meaning that it was the Hague BGH, Judgment of 15 December would be invalid under US law unless Rules that applied. 2011 - I ZR 12/11 - OLG München additional consideration had been received for it in addition to that which In summary, Art 2 sets out the Introduction was paid under the main bill of lading. broad proposition that if the cargo remains on board the road vehicle Both parties acknowledged there had Difficulties can arise when trying to during carriage by some other mode, not been additional consideration. determine whether the Convention on e.g. during a Ro-Ro sea crossing, the Contract for International Carriage RSA’s defence therefore failed and STI then CMR will generally apply. The of Goods by Road (CMR) or the Hague/ were granted summary judgment for exception, also found in Art 2, states Hague Visby Rules determine the road non-liability. The case illustrates how that if it is established that the loss or carriers’ liability where goods are lost Himalaya Clauses as incorporated damage was not caused by the road or damaged during the sea leg of an into multimodal bills of lading can carrier and the loss or damage was international multimodal transport. help to protect subcontractors for the attributable to some event which could land portion of the transport and the The Federal Supreme Court of Germany only have occurred in the course of difficulties of holding subcontractors recently decided in the case of Und and by reason of carriage by the other liable under domestic regulations such Adriyatik that, when the requirements mode, then CMR is ousted in favour as Carmack. of Article 2 CMR are fulfilled, it is the of any other “conditions prescribed by Hague/Hague Visby Rules and not law.” It is important to note that CMR For further information, please contact CMR that governs the road carriers’ will still apply even if the exception is Craig Neame, Partner, on liability during the sea leg. The English met, if there are no other “conditions +44 (0)20 7264 8338 or Court reached a similar decison some prescribed by law.” [email protected], or time ago in Thermo Engineers Ltd and Matthew Wilmshurst, Associate, others v Ferrymaster Ltd3. Federal Supreme Court Judgment on +44 (0)20 7264 8115 or [email protected], The First Instance and the Appeal Facts of the Und Adryatik or your usual HFW contact. Court found in the Claimant’s favour, Research by Otto Rich, Trainee. The contract of carriage involved the stating that CMR also applied to the transportation of goods from Turkey to sea leg of the voyage and not the the UK and Spain. Hague Rules. The case was appealed once more, and it was left to the Initially, using two trucks, the goods Supreme Court to consider and were transported to the Turkish port interpret what amounted to “conditions Pendik, where the trucks carrying the prescribed by law” for the purposes of goods were stowed on board the “Und Art. 2 CMR. Adryatik”. A fire broke out on board during the sea passage from Trieste, This question posed numerous Italy, which destroyed the vessel and difficulties with no straightforward the cargo. The cause of the fire was answer. The Supreme Court never established, but serious doubts reviewed the history of Art. 2 CMR were raised at the time regarding the and considered how other Member effectiveness and operation of the fire States had tackled the question. It fighting system on board. considered the meaning of the French interpretation, the Dutch interpretation The Claimant alleged that the in Hoge Raad der Nederlande and the applicable liability regime was CMR, English approach in Thermo Engineers Ltd and others v Ferrymaster Ltd, in 3 Thermo Engineers Ltd and others v Ferrymaster trying to answer the question.
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