CMR Forum Shopping

Article 31 of the Convention on the Contract for the International Carriage of Goods by Road (CMR) provides a wide choice of jurisdictions in which legal proceedings might be commenced. This includes the courts of a country within whose territory the defendant is ordinarily resident or has his principal place of business, or the place where the goods were taken over by the carrier or the place designated for delivery.

In the pursuit of legal certainty, the CMR is to be applied autonomously, so that the parties to the contract know what to expect, regardless in which country their case is tried. But this is only theory. The choice of forum should be exercised carefully. The courts of different countries often reach widely differing conclusions in their interpretation of the CMR.

Negative declaration proceedings

It has become evident that certain countries are more friendly towards carriers, and other countries more friendly towards cargo interests. The Netherlands traditionally has a name to uphold as a carrier friendly jurisdiction, where more “continental” countries such as Germany and France, are more “shipper-friendly”. The choice of forum is not restricted to those parties who are claiming compensation under the Convention. By seeking a so called negative declaration, a declaration that the carrier has no (or only limited) liability in any given case, a carrier can actively seek to determine in which jurisdiction any dispute is to be resolved. Article 31 Section 2 of the CMR provides that where an action arising out of carriage under the Convention is “pending” before a competent court, “no new action shall be started between the same parties on the same grounds unless the judgment of the court or tribunal before which the first action was brought is not enforceable in the country in which the fresh proceedings are brought”.

Time may be of the essence

So if damage occurs, time may be of the essence. The party that initiates proceedings first can benefit enormously from the mere initiation of proceedings, whether or not the case will be actually tried or settled shortly thereafter.

For instance, upon delivery of goods carried from The Netherlands to France, damage occurs and parties face the question where to bring suit. The carrier that is on the defence will probably be called before the French court by cargo interests. It is therefore advisable for the carrier to strike first and bring the case before a Dutch court, in order to make a Dutch court formally declare that the carrier is not liable. The carrier has thus ensured that his case will be tried in a carrier-friendly jurisdiction. This legal version of the “pre-emptive strike” is wide spread.

The German courts have not sat still and they have interpreted Article 31 Section 2 CMR in such a way that the pre-emptive strike seems to have lost a lot of its worth for carriers. In a decision of 20 November 2003 the Bundesgerichtshof (BGH) decided that a declaratory action did not constitute a pending action and did not prevent the plaintiff from initiating further proceedings in Germany.

Position on limitation and damages in the Netherlands

Under Article 29 CMR the carrier is not entitled to avail himself of the provisions of this chapter which exclude or limit his liability or which shift the burden of proof if the damage was caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court or tribunal seised of the case, is considered as equivalent to wilful misconduct.

So what is the Dutch equivalent of wilful misconduct? The Supreme Court of The Netherlands has ruled that under Dutch law, the equivalent of wilful misconduct is acting “recklessly with knowledge that damage would probably result”. This is the same term as used in the Warsaw Convention and has given raise to similar debate, focusing on whether a subjective or objective test should be applied in determining whether the reckless actor had knowledge that damage would probably result.

In The Netherlands the Supreme Court has held that in accordance with the laws of The Netherlands the equivalent of wilful misconduct under Dutch law comes down to subjective conscious recklessness, which is nearly equivalent to intent. As a result, if proceedings are brought in The Netherlands, the carrier nearly always benefits from the Conventions rules regarding the limitation of damages, unless where there is sufficient proof of intent, like for example theft by the driver (Overbeek v. Cigna & Philip Morris v. Van der Graaf, HR 5 January 2001, NJ 2001/391 and 392).

Custom duties and other charges

There are also other grounds for carriers to initiate negative declaration proceedings in the Netherlands, such as the Dutch interpretation of Article 23 Section 4 of the CMR:

“In addition, the carriage charges, Customs, Duties and other charges incurred in respect of the carriage of the goods shall be refunded in full in case of total loss and the in proportion to the loss sustained in case of partial loss, but no further damage shall be payable.”

In a case where the consignment has been stolen during carriage, the cargo interests may be facing additional charges, taxes and levies, such as excise duties, penalties and VAT payable. Authorities may decide that the stolen goods are deemed to be imported in the country where they have been stolen. As a consequence cargo interests may be confronted with liabilities, that exceed the limitation considerably and in some cases – liquor, cigarettes – even exceed the value of the goods. The question is whether the cargo interests can reclaim these levies based on Article 23 Section 4 CMR (so on top of the limited liability).

Here again the answer to this question depends on the court where the case is tried. National courts disagree on the scope of costs mentioned in paragraph 23 section 4 CMR: what are “other charges incurred in respect of the carriage of the goods”?

The broad interpretation of the English Courts

Two doctrines have evolved. In London, the House of Lords has ruled in Buchanan & Co. v. Babco Forwarding & Shipping (UK) [1978] A.C. 141, “other charges” include expenses consequential on the way in which the carriage was actually carried out; and hence that they include the expenses consequential on breach of the contract of carriage, such as the cost of surveying damaged goods, the amount of extra duty or VAT payable because the goods did not reach their designated destination, and return carriage charges. English courts have therefore taken a broad interpretation of “other charges”. Other countries that favour a broad interpretation are Belgium and France.

The narrow interpretation of the Dutch Courts

The Dutch Supreme Court has chosen a more narrow interpretation. In a 2006-ruling Phillip Morris v. Van der Graaf (HR 14 July 2006, NJ 2006/599) the Supreme Court held that paragraph 23 section 4 of the CMR-treaty is to be explained in a narrow sense. The Supreme Court held that no other costs will be refunded, with the exception of those pertaining to a normal execution of the carriage as such. So costs pertaining to a certain customs regime will not be refunded. Also, duties and other charges that came to life due to the theft, need not be refunded.

Initiation of proceedings in The Netherlands

Under Dutch law, a Dutch court case is pending as soon as a writ of summons has been served. In cases where time is of the essence, it is possible to draft the writ within hours or days, all depending on the availability of the necessary information and the complexity of the case. So the time between the decision to initiate proceedings in The Netherlands and the time at which proceedings are actually pending can be short and will avoid unpleasant surprises, such as the other party initiating proceedings in a less carrier friendly jurisdiction.

Forum shopping should always be considered for claims falling under the scope of the CMR regime. Staying one step ahead can make all the difference.

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