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Editorial

Freight Forwarder’s Liability for Cargo Lost by Carrier

December 2013 - Transport. Legal Developments by Penkov, Markov & Partners.

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Although the forwarder is by no means a new concept under Bulgarian law and although public relationships in the context of freight forwarding services are largely settled, some regulatory gaps that need filling still exist. These are largely due to ever increasing expectations and requirements on the part of consignors, as well as increasingly fierce market competition - factors that force forwarders to undertake certain commitments at the pre-contractual phase that they are not prepared to fulfil when providing the actual service.

 

Of special importance in this context is the issue of the forwarder's liability in cases where the cargo either arrives damaged at its destination or not at all.

 

Clearly, in such cases it is the carrier that must be held liable in the first place, but when the carrier cannot be identified or is unable to mend the damages caused, then the consignor will need to seek compensation from the forwarder.

 

Moreover, in some cases there is not even a written contract between the consignor and the carrier save for the bill of lading, which, however, is increasingly seen in legal practice as a mere pro forma paper to which the parties do not necessarily intend to attribute any contractual significance.

 

To ensure the seamless exercise of the forwarder's liability, the contract between forwarder and consignor must provide in no uncertain terms for such liability, while explicitly setting the conditions under which such liability is to be invoked. Should the forwarder, however, not be held liable for loss or damage even without such conditions being met? Should it not follow from there, as it does in some more sophisticated legal systems, that by signing a forwarding contract (as opposed to a mere brokerage agreement for procuring a carrier), the forwarder must be regarded as the actual carrier in terms of the liability assumed?

 

In our view, by undertaking the all-round organization of shipment, whereby the consignor plays no part in the selection of a carrier, and by receiving a fee which subsumes within itself any and all costs, including those for the de facto conveyance of the cargo, the forwarder should be regarded as the carrier in terms of his rights and obligations and, especially, in terms of his liability for damages to, or loss of, cargo.

 

The above should apply to both domestic and international transport services and could be based both on the existing practices of foreign courts, which undoubtedly have wider historical experience in trying cases related to forwarding, and on the relevant provisions of Bulgarian law.

 

Thus, for example, under Art. 9 and Art. 53 of the General Shipping Provisions of the Bulgarian National Association of Forwarders, which apply with respect to contracts entered into by any and all of its members, in cases where the forwarder is a principal-operator (i.e. they have undertaken the all-round organization and performance of the shipping operation), they assume full liability for any damage or loss, including total loss of cargo at its final destination.

 

Similar regulation is also provided in legislation concerning shipment of goods by water, air and land, e.g. the Road Transport Act of Bulgaria, respectively the Convention on the Contract for the International Carriage of Goods by Road (CMR), which has been duly ratified and promulgated and now constitutes part of Bulgaria 's domestic law.

 

Under all of the above legislation, the liability of a forwarder, whether as an operator or as the entity responsible for organizing shipment in its entirety, who has explicitly undertaken this commitment (naturally, within the bounds of the universally applicable limitations of liability to the extent provided under international acts) is undoubted.

 

Last, but not least in importance, our own perception of the extent of development of contractual relations is substantiated by insurance coverage of forwarder's liability, including to its full extent, being offered by insurers operating on the Bulgarian market.

 

All of the above prompts the reasoned conclusion, in the spirit of the supreme principle of civil law: pacta sunt servanda (agreements are meant to be kept), that it is unacceptable for a party to undertake a commitment for comprehensive care prior to being assigned a service and then renege on its commitment if such care requires compensation for damages. This rule must be strictly adhered to in all public (civil as well as commercial) relationships and specifically in the context of a forwarder's liability, and is quite normal for a civilized law-governed country with a developed market economy.

 

The above should therefore be endorsed by the legislator through the introduction of explicit provisions to that effect in the relevant laws and bylaws, and supported by judicial practice when dealing with legal disputes of that nature.

 

 

 

Alexander Stefanov

 

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