Recent Changes in  the Italian Civil Code  on  contract of freight forwarding and multimodal carriage

Claudio Perrella LS Lex, Italy

A few recent and relevant changes have been introduced in  the Italian Civil Code  impacting on the contract of freight forwarding and multimodal carriage.

Article 1737 of the code has been modified providing that the freight forwarder can conclude contracts of carriage not only in his own name  and on behalf of his principal, but also in the name and on behalf of the principal.

The original scheme contained in the Civil Code provided that the freight forwarder could act just in his name and on behalf of the principal, and a number of decisions had dealt with the issue whether the indication of the identity of the principal at some stage of the stipulation or the arrangement of the contract of carriage was consistent with the law, and which were the consequences arising from  such disclosure.

Such an indication is in fact pretty common, for instance by indicating the principal as shipper in the bill of lading.

This has take place increasingly  over the last years, since litigation for container demurrage/detention has soared, and freight forwarders appearing as shipper on the bill of lading have been summoned for the payment   of demurrage accrued at unloading ports.

The new provisions make clear now that the freight forwarder can indicate the identity of the principal, provided that he  has the authority to do so, so the likely issue in the future will be whether such authority exists, and  the evidence proving it.

Article 1739 has been amended confirming again that the freight forwarder has no obligation or duty to procure insurance for risks of transit, unless there is a specific request in that regard by the principal.

The specification was considered needed in light of a few cases where the existence of a duty to insure – despite the absence of specific instructions  in that regard – had been debated.

The principal is now requested to instruct the freight forwarded to stipulate the insurance coverage.

One may reasonably assume however that the freight forwarder will have the duty to assess the suitability of the insurance coverage,  in consideration  of the kind of carriage to be performed and the risks related.

Article 1741 now provides that when the freight forwarder does not act merely as an agent for his principal, but undertakes instead to perform the carriage, his liability is governed by article 1696 civil code, which sets out the limitation of liability for carriage of goods by road.

The freight forwarder acting as contracting carrier will be now entitled to invoke a limitation of liability of  1 euro or 8.33 SDR per kg of goods damaged or lost, respectively for national or international carriage of goods, unless he is found having acted with gross negligence.

Whether the freight forwarder is contracting as an agent for the stipulation of a contract of carriage, or is a contracting carrier, will depend on the facts: this may happen, pursuant to Italian case-law, where he has explicitly acted as carrier (for instance issuing transport documents indicating the forwarder as carrier), or has acted in a manner inconsistent with a role of pure forwarder.

A clue often considered by local Courts in assessing whether a freight forwarder has in fact undertaken the liability of the carrier is where the remuneration is lump-sum and does not contain an indication of the freight paid to the carrier (although a few recent decisions have considered the lumpsum element less significant than in the past); another element is a very wide discretionary liberty in instructing the actual carrier coupled with a conduct which induces the principal to  assume that the carriage is in fact performed by the freight forwarder.

Limitation of liability arising from carriage by road requires in principle that the carrier is recorded in the “Albo degli autotrasportatori”, the Italian Register of Road Hauliers, and freight forwarders which do not own trucks and vehicles are not recorded in such Register.

This caused some debate on whether forwarders acting as contracting carriers could be allowed to invoke a limitation of liability.

The amended article 1741 of the Civil Code makes clear that this is the case.

Finally, article 2761 now gives the freight forwarder a  right of lien which can be enforced on all goods forwarded or carried (even in different stages) under the same contract.

The change is pretty relevant, affording the freight forwarder a lien considerably wider than the one previously granted, and putting freight forwarder and carrier in the same position.

Under Italian law  (Article 2761 civil code)   the carrier has a lien over the goods carried,  securing the freight charges accrued against those particular goods; the lien may procure a Court-ordered sale of the cargo,  so that the sale proceeds can satisfy the claim.

It was settled case law (until around 15 years ago) that there can be no valid and enforceable lien for a claim arising from a previous carriage.

However, the Supreme Court in 2005 mitigated the approach traditionally taken by the Italian Courts, admitting that:

  1. the lien can be enforced also on goods “indirectly” held by the carrier, for instance in case the carrier instruct subcontractors for the execution of the transport,  provided that the goods have not reached destination and are not in receiver’s availability.
  2. the lien set out by Articles 2761 and 2756 c.c. can be enforced also on goods other than those which originated the claim,  provided that all the transports have been performed in execution of the same contract (hence the principle should apply to framework agreements, while the traditional limitation would persist in respect of spot transports).

Further decisions of the Court of Milan and of the Court of Genoa confirmed such approach, clarifying when a contract of carriage could be considered as a framework contract.

The addition of the freight forwarder among the parties entitled to exercise the lien provides a significant additional protection.

It is likely though that some issues of coordination will arise in the future, namely the regulation of competing liens belonging of carrier and freight forwarder for the same claims.

Finally, article 1696 has been amended in relation to multimodal transport, stating that when it is not possible to establish during which stage of the carriage the loss or damage has taken place, the limitation liability for the carrier is  1 € per kilo of gross weight in case of national transport and 3 € per kilo of gross weight in case of international transport.

The amendment is again rather significant, although a few practical issues are likely to arise in the future.

Article 1696 of the Civil Code was amended in 2005 providing for a limitation of  liability based on the CMR  and introducing a limit of 8,33 SDR per kilo of goods damaged or lost in international transports.

The provisions has been construed as applying to multimodal transport; Italian Courts have in fact traditionally held the applicability of the Civil Code to multimodal carriage,  regardless of whether one of the various  kind of transport is predominant, or whether the damage takes place during a specific stage.

The amendment may have now the rather peculiar consequence that CMR limitation will apply for multimodal transports when it is possible to establish when the damage has taken place, but the lower limit of 3 euro per kilo may apply instead when such identification is not possible.