TT Talk - Deliberate for law and jurisdiction
Those involved in international carriage should be well aware that the law applicable to a contract and the jurisdiction in which disputes are to be decided often have a significant bearing on the outcome of a case. This is so for both the substantive determination of liability or remedy, as well as procedural matters, such as commencement of proceedings, disclosure, timelines and costs. A recent UK Supreme Court is exemplary.
It is extremely important for parties in international trade to agree the applicable law and the jurisdiction in which disputes are to be heard. This can either be by way of actual agreement in a specifically negotiated and signed contract, for example, in a terminal handling agreement. It may also be by actual, or – more often – presumed agreement, when the law and jurisdiction is referred to in a party’s Standard Trading Conditions (STCs), such as on the reverse side of a multimodal bill of lading.
Where the relevant contract relates to international transport, the contractual law and jurisdiction clause may be set aside in favour of the mandatory regime set out in the applicable international convention. In a recent landmark ruling, the Supreme Court, considered certain issues arising out of two international road transport contracts and the jurisdiction scheme set out in the Convention on the Contract for the International Carriage of Goods by Road 1956 (CMR).
This case (for detailed analysis follow link) involved two separate container loads of cigarettes, both hijacked during transits wholly within mainland Europe. The cargo interests had contracted the carriage to an English domiciled company, who sub-contracted to two different Dutch domiciled carriers.
Whilst CMR is an international convention, the courts of the various countries interpret its provisions differently, leading to forum shopping. England was a favourable jurisdiction to the cargo interests because the English law interpretation of CMR would permit recovery of significant duties/taxes demanded on the cigarettes, in contrast to other jurisdictions.
Pleadings & decisions
Cargo interests raised four key arguments in favour of English jurisdiction:
1.Jurisdiction secured against one carrier permits joining other carriers, even though they are not ordinarily resident etc, by virtue of the provision in Article 36 that "an action may be brought at the same time against several of these carriers"
The judgement stated that CMR requires each defendant to be sued in the place where it is domiciled or has its principal place of business. Article 36 is not concerned with jurisdiction and "certainly does not confer jurisdiction if it does not otherwise exist".
2. The overarching contract contained an English jurisdiction clause, which it was claimed "designated [the English courts] by agreement", although the successive carriers were unaware of the clause.
The Supreme Court found that the successive carriers were party to contracts of carriage only "under the terms of the consignment note, by reason of [their] acceptance of the goods and the consignment note", which did not include the jurisdiction clause. In other words, express notice is required.
3. On the basis that the instructions given, the Dutch successive carriers could be pursued on the basis that "the branch or agency through which the contract was made" was the English domiciled carrier.
It was found that the relevant “branch or agency” had to relate to the particular defendant. Thus, it would have been necessary for the successive carriers to maintain branch offices in England, through which the contracts of carriage were made.
4. The provisions of the Brussels Regulation enable jurisdiction to be established where CMR is inconsistent with the intent of the Brussels Regulation or where there are gaps in CMR.
The court determined that the CMR scheme is "deliberate and comprehensive", reflecting a balance between the interests of all parties concerned. As such, the Brussels Regulation was of limited relevance, there being no principles of EU law of concern or gap needing to be filled.
Thus cargo interests were unsuccessful, albeit that the Supreme Court accepted the commercial logic of seeking a single jurisdiction in which to pursue the case. While CMR did not, even on a purposive construction, permit this result in the given circumstances, it should be noted that it would have been possible to have named all the relevant carriers in one set of proceedings in the place where the goods were taken over or the place designated for delivery.
The case demonstrates the importance of the CMR consignment note, which all parties to a contract of international road transport should ensure are prepared and reviewed carefully. When preparing the consignment note, cargo interests and first CMR carriers, will want to ensure that all relevant terms, including a jurisdiction clause, where appropriate, are included. It can clearly be extremely important for the parties to designate the jurisdiction on the consignment note. Equally, successive carriers, when taking over a consignment note, must carefully review the terms which are recorded on the note.
“It can clearly be extremely important for the parties to designate the jurisdiction on the consignment note”
It is important, therefore, that companies providing carriage of goods services should ensure safeguards and checks are in place to oversee this process and that, if necessary, adequate training is provided to staff in the drawing up and reviewing of consignment notes, which are, of course, contractual documents that bind those companies.
The CMR provides a complete code on jurisdiction, which must be considered carefully to ensure that proceedings are commenced in the appropriate and correct jurisdiction. In view of varying interpretations of this convention, it is vital that you involve your insurer immediately in the event of a dispute so that lawyers can be instructed quickly to review and commence legal proceedings in the most favourable jurisdiction.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club