Chapter 13

International Multimodal Transport

Chapter Contents

Introduction

Use of containers for consolidation of cargo was one of the most important developments in the transport industry in the latter part of the last century.1 They reduced losses caused by congestion, delay and pilferage at ports. Improvements in transport management through information technology, innovative ship and other vehicle building methods (e.g., cellular ships, articulated lorries) also contributed to the emergence of multimodal2 (also called combined or intermodal) transport3 – door-to-door carriage using two or more modes of transport, such as road/sea/road and road/rail/sea/road.4 The growth of multimodal transport brought with it the evolution of single transport documents, such as through bill of lading and multimodal (combined) transport document, to cover the entire carriage of cargo from door-to-door. It also fuelled an expansion of freight forwarders who not only provided packing services, warehousing, customs clearance, and so on, but also undertook transport arrangements across international frontiers involving several carriers. Not all freight forwarders, however, operated vessels;5 some acted as either principal or agent of the consignor in arranging carriage, whereas others also carried goods part of the way on their vessels.

Unlike other forms of unimodal transport,6 multimodal transport unregulated by an international convention brought with it legal chaos. Questions, such as who to sue (i.e., freight forwarder, contracting carrier, actual carrier) in the event of delay in delivery, loss or damage to goods, where to sue, time limits for initiating action, or the basis and extent of the forwarder’s or carrier’s liability take on a new urgency.

International attempts to bring order have received a mixed response. The United Nations Convention on International Multimodal Transport of Goods (hereinafter ‘MT Convention’), signed at Geneva on 24 May 1980,7 has not attracted the 30 signatures/accessions to come into force, because it is seen as overly consignor-friendly by the transport industry. Also, its association with the Hamburg Rules8 may have been a major contributory factor for its unpopularity. According to a recent report based on the responses to questionnaires9 from

1For an interesting review of the growth of containerisation, see Graham and Hughes Containerisation in the Eighties, 1985, LLP. Note, however, that the concept of transportation of goods using containers was known as far back as 1801. See Section II (‘The evolution of multimodal transportation’) in Palmer and DeGiulio, ‘Terminal operations and multimodal carriage: history and prognosis’ (1989) 64 Tulane LR 281.

2The concept of multimodal transport is perceived by the United Nations Conference on Trade and Development (UNCTAD) as door-to-door transport under the responsibility of a single transport operator. See Item 3, Fostering competitive multimodal transport services, 3rd session, 6–12 June 1995 (available at www.unctad.org) and seen by many as offering a safe and efficient means of transporting goods.

3The United Nations Economic and Social Council (UNECE) defines multimodal transport as ‘carriage of goods by two or more modes of transport’; intermodal transport as ‘movement of goods in one and the same loading unit or road vehicle, which uses successively two or more modes of transport without handling the goods themselves in changing modes’ and combined transport as ‘intermodal transport where the major part of the European journey is by rail, inland waterways or sea and initial or final legs carried out by road are as short as possible’

(TRANS/WP.24/2000/1 available at www.unece.org). However, UNCTAD seems to use these terms interchangeably in their documents.

4See Palmer and DeGiulio, ‘Terminal operations and multimodalism carriage: history and prognosis’ (1989) 64 Tulane LR 281, for an interesting account of the evolution of multimodal transport.

9The questionnaires were sent to all governments and industry, as well as interested intergovernmental and non-governmental organisations and a number of experts on the subject. The report says that they received 109 replies but does not indicate how many questionnaires were sent out in total.

the UNCTAD Secretariat,10 lack of sufficient ratifications to enable the MT Convention to come into force is attributable to a number of factors. Among them, lack of interest in the MT Convention from leading maritime countries, the large number of ratifications required for the MT Convention to enter into force, dissatisfaction with the liability scheme (namely, basis of liability, monetary limitation of liability and the principle of uniform liability) adopted by the MT Convention, lack of commitment by governments, and adoption of network system with regard to limitation of liability.11

The International Chamber of Commerce (ICC)’s Uniform Rules for a Combined Transport Document 1973 as amended in 197512 and the UNCTAD13/ICC Rules for Multimodal Transport Documents 199214 (hereinafter ‘UNCTAD/ICC Rules’) have had more success through their acceptance by transport operators. Transport documentation, such as the International Federation of Freight Forwarders Associations (FIATA)15 Negotiable Multimodal Transport Bill of Lading (hereinafter ‘FIATA Bill’), is modelled on the latter. Of course, like other rules drafted by the ICC (e.g., the International Rules for the Interpretation of Trade Terms (INCOTERMS)),16 the UNCTAD/ICC Rules have to be incorporated into a contract by the parties.

The lack of a uniform liability regime for multimodal transportation inevitably affects commerce because of uncertainty in respect of its legal infrastructure. As observed by the WTO:17

The consequence of current arrangements is therefore a patchwork of regimes which fails to capitalize on modern IT-based communications systems and practices, which impedes the introduction of a single multimodal waybill/transport document, and which does not reflect fully the increased use of containerised transportation operating across different modes, making mode-specifi c liability arrangements inappropriate. In cases of loss or damage to goods, this creates uncertainty as to the time of loss. Damage, uncertainty as to mode and identity of the carrier; and uncertainty as to the applicable legal regime for liability and its effects.18

The United Kingdom (UK) does not have specific legislation regulating multimodal transport.19 To the extent it is regulated, it is based on general contract law, law of bailment, the law of tort and the voluntary incorporation of UNCTAD/ICC Rules or Standard Trading Conditions by members of the British International Freight Association20 (BIFA) in their contracts.

10‘Multimodal transport: the feasibility of an international legal instrument’, UNCTAD/SDTE/TLB 2003/1 (13 January 2003).

11UNCTAD/SDTE/TLB 2003/1 (13 January 2003), paras 22–6.

12ICC Publication No 298. BIMCO (Baltic and International Maritime Council) produced a document called COMBICON which conformed with the 1975 ICC Rules.

13United Nations Commission on Trade and Development.

14ICC Publication No 481. The Rules, adopted by the ICC Executive Board on 11 June 1991, came into effect on 1 January 1992. Text available at www.unctad.org.

15International Federation of Freight Forwarders Association. Further details about the organisation are available at website www

.fiata.com.

16See Chapter 1, INCOTERMS – a breif overview.

17World Trading Organization.

18G/C/W 133, 2 December 1998, ‘Issues relating to the physical movement of consignments (transport and transit) and payment, insurance and other financial questions affecting cross-border trade in goods’.

19A number of countries world wide have enacted legislation to address multimodal transport – for example, India. See Carr, ‘International multimodal transportation of goods: the Indian response’ (2000) 3(1) International Trade Law Quarterly 1. See also UNCTAD/SDTE/TLB/2, 25 June 2001, ‘Implementation of multimodal transport rules’, for illustrations of multimodal legislation in various parts of the world. The Asean (Association of Southeast Asian Nations) recently adopted in 2005 the Asean Framework Agreement on Multimodal Transport. Text available at www.asean.org.

20BIFA is the UK body representing international freight services and the only source for obtaining FIATA bills in the UK. It also provides expert determination service as an alternative form of dispute resolution. Further information is available at www.bifa.org.

This chapter concentrates on legal problems encountered by the cargo interest (consignor/ consignee)21 using a freight forwarder and available solutions in English law,22 unification through use of BIFA’s Standard Trading Conditions,23 existing provisions for combined transport in the international unimodal transport conventions implemented by the UK and the future of the United Nations Convention on International Multimodal Transport of Goods. Relevant problems faced by freight forwarders vis à vis carriers and sub-carriers will also be highlighted.

Freight forwarder – agent or principal?

The freight forwarder,24 as stated earlier, assumes a number of different roles. Where he takes on the role of arranging transport, his capacity is important in sorting out the liability of the various parties involved in multimodal transport. Ideally, the transport document issued by the forwarder should expressly indicate capacity – that is, whether he is acting as agent25 for the consignor or as principal. In practice, this is rarely the case.26 The question is resolved by looking to other factors, such as:

•The type of transport document. For instance, a forwarder’s house bill of lading27 referring to the groupage bill of lading issued by the carrier may indicate the forwarder’s intention to act as principal.

•The charges. An inclusive price,28 as opposed to freight charges plus commission, may indicate that the forwarder is acting as principal.This presumption may be displaced by contract terms.29

•The language used by the consignor and forwarder. For instance, did the consignor request the forwarder to carry or to make transport arrangements?

•The extent and frequency of communication between the consignor and the forwarder. Regular updates on developments in transport arrangements to the consignor may suggest that the forwarder is acting in the capacity of agent. Under BIFA Standard Trading Conditions, a forwarder’s failure to produce evidence of any contract entered into as agent on demand by the consignor changes his capacity to that of principal (cl 6(B)).

21In English law, the person who has property in the goods is prima facie the party with whom the contract is made (see Mullinson v Carver (1843) LT (OS) 59). In a sale contract, this would normally be the buyer, although complications may arise as where seller retains property in the goods, and so on. See Chapter 1, Passing of property.

22Applies also to Wales.

23All references to the BIFA Standard Trading Conditions are to 2005 version, unless otherwise indicated.

24Freight forwarders sometimes call themselves also by other names – for example, road transport operator, air cargo agent and multimodal transport operator.

25 See Victoria Fur Traders v Rodline [1981] 1 Lloyd’s Rep 570. In this case, cl 6 of the waybill was held to be incorporated as a result of past course of dealings and British Airways were acting as agents for the plaintiffs.

26See cl 4(A) of the BIFA Standard Trading Conditions, which in itself is insufficient to establish whether the forwarder acted as an agent or as principal.

27House bills of lading are normally issued where there is groupage of cargo – that is, where cargo of a compatible nature is consolidated into a container load and the carrier issues a groupage bill of lading to the forwarder. Groupage is popular since it helps reduce transportation costs, insurance costs and theft. It must be noted that house bills of lading are merely regarded as a receipt

of cargo. They are not negotiable like shipped bills of lading. See also Hetherington, ‘Freight forwarders and house bills of lading: The Cape Comorin’ (1992) 1 LMCLQ 32.

28See Colley v Brewer’s Wharf and Transport (1921) 9 Lloyd’s Law Rep 5. See also Aqualon (UK) Ltd v Vallana Shipping Corp [1994] 1 Lloyd’s Rep 669, where the stamping of consignment note by the second defendant Nilsson International BV with the words ‘as agents only’ was held to be insufficient to treat them as an agent. There was nothing in the relationship or dealings between Aqualon

and Nilsson that prevented Aqualon from treating Nilsson as a CMR (Convention on the International Carriage of Goods by Road 1956) carrier (at p 677). For more on the CMR, see Chapter 12.

29For instance, cl 5(B) of the BIFA Standard Trading Conditions 1989 stated: ‘The offer and acceptance of an inclusive price for the accomplishment of any service or services shall not itself determine whether any such service is or services are to be arranged by the company acting as agent or to be provided by company acting as a contracting principal.’

•Past course of dealings between forwarder and consignor.

•The usual capacity of the forwarder. Does the forwarder normally provide the services as agent or principal?30

In the event of the forwarder acting as agent, the consignor is in a direct contractual relationship with the carrier(s) performing the different segment(s) of the multimodal transport operation.The issue of whom to sue in the event of loss or damage is dependent on the kind of transport document issued by the contracting carrier:

•The contracting carrier may issue a FIATA Bill or a multimodal transport document that incorporates the UNCTAD/ICC Rules 1992. In this event, the claimant (cargo owner) will be able to sue the contracting carrier (multimodal transport operator) for loss of, or damage to, goods while they are in his charge – that is, from the moment of collection to delivery.

•The contracting carrier may issue a through bill of lading.31 The situation here is complex. The issue of whether the contracting carrier assumes responsibility for the entire voyage or only for the portion he has performed is determined by looking to the terms of the through bill of lading. Normally, the contracting carrier will assume responsibility only for his part of the carriage and acts as an agent either for the sender or for the on-carriers.32 In the event of damage to, or loss of, goods, the claimant needs to sue the carrier responsible for the loss or damage.This may prove difficult, especially where a container is used. The document given by the carrier would only show the condition of the container when received, not the condition of the goods in the container. If expert opinion shows that the damage was caused by incursion of sea water, for instance, this would show that damage occurred during the sea leg. In most cases, however, it may not be possible to localise the cause of the damage. The problems

are compounded where the damage is gradual – for example, from slow leaks. The terms and conditions of each carrier will be relevant to establish the extent of carrier liability. There is the problem of deciding the venue for judicial proceedings. The claimant may have to sue the carrier in a foreign jurisdiction. He will also have to ensure that he sues the carriers within the time limits set by the liability regime applicable to the particular transport segment.33

It must be noted that the consignor cannot sue the freight forwarder acting as agent for loss or damage to goods, although he can be sued for not exercising due care and skill in carrying out his duties as agent.34,35

30See Marston Excelsior Ltd v Arbuckle, Smith and Co [1971] 1 Lloyd’s Rep 70; [1971] 2 Lloyd’s Rep 306 (CA); Jones v European and General Express Co (1920) 25 Com Cas 296 and Troy v Eastern Co of Warehouses (1921) 37 TLR 428. The phrase forwarding agent is normally not understood as a carrier as established in Jones v European and General Express Co. Correspondence may indicate otherwise, even the addition of an extra percentage to a quotation. It is a matter to be established taking into account all the circumstances.

31A through bill of lading was initially invented to cover sea voyage involving transhipment. However, it was modified to include goods by two or more different modes of transport. A distinction is also drawn in the context of sea carriage between a ‘pure ocean through bill of lading’ and an ‘ocean through bill of lading’ (see Tetley, Marine Cargo Claims). In a pure ocean through bill of lading, the sea carrier issuing the through bill takes responsibility for the entire carriage. In the case of the ocean bill of lading, the first carrier acts as an agent of the shipper vis à vis successive carriers. Hence, each carrier is responsible for that segment when he is in possession of the goods.

32 This view is also put forward in Faber et al, Multimodal Transport Avoiding Legal Problems, Practical Guides Series, 1997, LLP, at p 1.

33See Table 13.3.

34See ‘Responsibilities and liabilities of an agent’, below.

35Clause 5(C) of the BIFA Standard Trading Conditions 1989 provided that a company acting as agent secures services for carriage, handling, packing and so on ‘by establishing contracts with third parties so that direct contractual relationships are established between customer and such third parties’.

principal.60 Unclear instructions can be interpreted reasonably by the agent.61 The agent, as forwarder, will be expected to appoint persons who are capable and competent to perform the tasks.62 In English law, an agent also has fiduciary duties toward his principal since the relationship is seen as one of trust. In other words, there must be no conflict between the agent’s personal interests

and his obligations to the principal.63

Where the forwarder has acted negligently, the principal will be able to sue him for damages. In the event of fraud, the principal can sue him for fraud and conspiracy or sue to recover the profit made by him.64

Agent’s rights

As an agent, the forwarder is not liable (personally) to the carrier for freight charges, customs duties and so on, unless there is an established custom.65 The agent has the right to be indemnified for the expenses he incurs in carrying out his principal’s instructions.66 The agreed remuneration must be paid by the principal to the agent. Where he is not paid, the agent can sue the principal for the sum due. He also has a lien over the goods – he can retain possession of goods in respect of which outstanding debts due to him arise.67

Unification efforts by the industry

BIFA has made a major contribution to standardising the terms of multimodal carriage by drafting the Standard Trading Conditions for use by its members.68 These set out the responsibilities and liabilities of the company (defined in cl 1 as ‘the BIFA member trading under these Conditions’) and the customer (defined in cl 1 as ‘any person at whose request or on whose behalf the company undertakes any business or provides advice, information or services’) who warrants that he is either the ‘owner or the authorised agent of the owner’ (cl 3). Owner is defined by cl 1 as ‘owner of the goods transport unit and any other person who is or may become interested in them’.The definitions are sufficiently wide to bring freight forwarders and consignors/consignees within their ambit. BIFA has also endorsed the FIATA Bill, which incorporates the UNCTAD/ICC Rules. The terms of this transport document where issued upon agreement will substitute for the Conditions.

Of the freight forwarders operating in the UK, members of BIFA are responsible for handling 80% of the overall business.69 This suggests that a large proportion of goods that are transported are governed by the Conditions. Forwarders who are not members of BIFA use their own terms, which, by and large, are not as favourable as the Conditions. The transport document may stipulate that only the carrier with custody of the goods at the time of loss or damage is responsible for the loss

60Harrods Ltd v Lemon [1931] KB 157.

61Ireland v Livingston (1872) LR 5 HL 395.

62Gillete Industries v Martin [1966] 1 Lloyd’s Rep 554.

63McPherson v Watt (1877) 3 App Cas 254; De Bussche v Alt (1878) 8 Ch D 286; Boardman v Phipps [1967] 2 AC 461.

64T Mahesan v Malaysia Government Officers’ Co-operative Housing Society Ltd [1979] AC 374.

65In Anglo Overseas Transport Ltd v Titan Industrial Corp Ltd [1959] 2 Lloyd’s Rep 152, custom in the London freight market was relevant to make the forwarding agents personally liable to the ship’s agents.

66See PSA Transport Ltd v Newton Landsdowne and Co Ltd [1956] 1 Lloyd’s Rep 121.

67See Fraser v Equitorial Shipping Co Ltd and Equitorial Lines Ltd [1979] 1 Lloyd’s Rep 103.

68BIFA requires that organisations meet certain requirements before they are considered for membership. These include adequate liability insurance and adoption of Standard Trading Conditions.

69BIFA, The International Freight Guide, 1997, LLP, at p 2.

or damage.The difficulties in establishing when or where the loss or damage occurred or whom or where to sue may leave the claimant shouldering the losses.

BIFA standard trading conditions

Historical background

The current Standard Trading Conditions 2005(a)70 (hereinafter ‘Conditions’) replaces the 2005 version. The Standard Trading Conditions 2005 version replaced the Standard Trading Conditions 1989 and 2000a71 and 2000b, which replaced Institute of Freight Forwarders Conditions 1984 (hereinafter ‘IFF 1984’). The Conditions are largely derived from IFF 1984, although there are some differences by way of arrangement and expression of terms and number of clauses.72

Applicability of the conditions

The Conditions, for use by members, need to be incorporated into the contract. Express incorporation is the ideal method. However, they may be incorporated impliedly or otherwise. Reference to the Conditions during the course of negotiations and past course of dealings between the company and the customer will be relevant. On incorporation, the terms determine the rights, responsibilities and liabilities of the various parties, unless the contract attracts the application of mandatory provisions. In this event, the Conditions’ contradictory provisions will be replaced by the provisions of the mandatory law to the extent of the derogation (cl 2(B)). To illustrate, where the road part of a multimodal transport operation attracts the application of the CMR, and it is established that damage to the goods occurred on the road segment, the forwarder will be liable to the maximum of 8.33 Special Drawing Rights (SDRs) per kg instead of the 2 SDRs per kg set by the Conditions.73

The Conditions will also be superseded where a FIATA Bill is issued. The terms of the FIATA Bill are considered in the latter part of this chapter (see pp 384–6).

Responsibility and liability of the forwarder

The forwarder in his capacity of principal is responsible for the goods from the time of taking charge of them to the time of delivery.74 In other words, he remains responsible for the goods while they are in his control. Delivery is not defined in the Conditions.75 A reading of cl 10(A) indicates that delivery will be deemed to have taken place as and when they are placed at the disposal of the customer.

The forwarder is required to perform his duties with a reasonable degree of care, diligence, skill and judgment (cl 23). In other words, he should not be negligent in performing his duties in relation to the goods from the point of receipt to the point of delivery. He is responsible for loss of

70Available at www.bifa.org.

71Clause 21(c) of the 2000a version had to be amended; reference to the Late Payments Act in the clause had to be dropped as a result of a court decision. See BIFA Link Issue 148, January 2003, p 6.

72The IFF 1984 had 44 clauses and was categorised in a more obvious fashion. For example, it had sections entitled ‘Company as

forwarding agent’, ‘Company contracting as principal’, making it user friendly. The Conditions bunch the different capacities of the company under the heading ‘The company’. There are also a number of clauses in the IFF 1984 that are not found in the Conditions – for example, cl 34, which states the company is not a common carrier and cl 36(a)–(d).

73See Table 13.1 for the maximum liability limits expressed in SDRs by the various unimodal international carriage of goods conventions and Table 13.2 for the various conditions and conventions relating to multimodal transport.

74This is no different from r 4 of the UNCTAD/ICC Rules.

75Compare with r 2.8 of the UNCTAD/ICC Rules. See also cl 12.1 of the FIATA Bill.

or damage to the goods, unless occasioned by an event that could not be avoided and the consequences of which could not be prevented by the exercise of reasonable diligence (cl 24(B)).76 The forwarder is not liable for loss or damage caused by specific events – for example, strikes, lock-outs, stoppage or restraint of labour – that he is unable to avoid by the exercise of reasonable diligence (cl 24(A)).77 The Conditions are no different from the UNCTAD/ICC Rules (r 5.1) in respect of the forwarder’s basis of liability. He is presumed to be at fault in the event of loss or damage and the burden is cast on him to show that it could not be avoided despite the exercise of reasonable diligence. The standard of care required by the forwarder is expressed as one of ‘reasonable diligence’. Lack of reasonable diligence is likely to be treated as negligence,78 and the standard for ascertaining the exercise of reasonable diligence will be determined by looking to the actions of skilled men in similar circumstances.

The forwarder’s maximum liability under the Conditions is 2 SDRs per kilogram.79 Where the claim involves errors or omissions, maximum liability is set at 75,000 SDRs. In the event of delay in delivery, the compensation payable is set at twice the charges for the relevant transaction. The Conditions allow the parties to agree to a higher limit, but this may require the payment of additional charges. The forwarder will be liable for the higher amount only if it has been agreed in writing (cl 26(D)).

Assessment of compensation is to be made by reference to the value of the goods when they were shipped or should have been shipped. The formula adopted by the Conditions is different from the formula adopted in the UNCTAD/ICC Rules (r 5.5.1) where assessment is made by reference to the value of the goods at the place and time where they are delivered or where they should have been delivered according to the transport document. Of course, the difference in approach to calculation of compensation can be seen as exhibiting bias one way or another. Compensation calculated in terms of value of goods from place of shipment favours the forwarder since he is likely to have a better idea of value of the goods at the place of shipment as opposed to the place of delivery,

It must be noted that, where the forwarder has acted in the capacity of agent, general principles of agency outlined earlier in this chapter are relevant. The consignor/consignee will have to claim for his losses or damage from the actual carrier or contracting carrier. The forwarder as agent, however, is liable for negligence on his part in carrying out the principal’s actions or for acting outside the scope of his authority. He will also be liable for breach of his fiduciary duties. The Conditions, however, do impart wide powers in respect of the choice of routes, and procedure to be followed in the performance of any service provided, to the forwarder (cl 4B).

Forwarder’s rights

The contract will normally specify the charges to be paid by the consignor to the forwarder. The Conditions require the customer to pay all sums as and when they are due in cash or as otherwise agreed (cl 21(A)). Where this is not paid, the Conditions create a general lien (cl 8(A)) on goods and documents in its possession. In other words, the forwarder can hold on to the goods and documents until the sums due are paid by the customer or owner.The forwarder has the right to sell the goods on 28 days’ notice in writing (cl 8(A)(ii)).

76This is similar to cl 36(f) of the IFF 1984.

77Compare with cl 36 (a)–(e) of the IFF 1984, which lists the circumstances where the forwarder is relieved of liability. They include insufficiency of packing, inherent vice, strikes, lock-out and omission of the customer.

78The Hague-Visby Rules use the phrase ‘due diligence’ in Art III(1). Lord Devlin in The Amsteslot [1963] 1 Lloyd’s Rep 223 treated the issue as one of ascertaining negligence on the part of the carrier.

79This corresponds with the liability set in the Hague-Visby Rules. See Table 13.1 for a comparison with other unimodal international carriage of goods conventions. See also Table 13.2.