John Habergham, Myton Law, Hull U.K.
The Supreme Court has revisited the issue of recovery of excise duty in claims involving CMR It has maintained the existing position and slapped down an earlier Court of Appeal decision which seemed to form the basis of the appellant’s claim in this matter.
This other case involved the calling in of guarantees by the relevant tax authorities due to the loss of tax seals by the relevant carrier during transit– the appellants in this case invoked it by way of analogy, because the Cort of Appeal decided that they were too remote to count as “other charges”.
The consignment consisted of cigarettes. As is typical, in the carriage of products such as cigarettes and alcohol, the excise duty sum far outweighed the value of the goods.
During carriage, part of the consignment was stolen. Under English law, although stolen, they are deemed to enter free circulation and, therefore, the relevant party becomes obliged to pay the excise duty.
It is noteworthy that the purpose of excise duty is unrelated to the contract of carriage itself. The purpose is to affect consumer behaviour. It is done for public policy reasons – that tobacco and alcohol have a negative impact on health and should not be encouraged.
The core of the dispute involved article 23.4 of CMR the effect of which is that a cargo claimant, in addition to claiming the value of the goods, may recover:
“In addition, the carriage charges, customs duties and other charges incurred in respect of carriage of goods shall be refunded in full in the case of total loss and in proportion to the loss sustained in the case of partial loss, but not further damages shall be payable.”
English law had interpreted “other charges” in a broad manner and that it extended to excise duty. The reasoning was that the excise duty became chargeable because of the way the goods were carried. In other words, “in respect of” is wide enough to cover the way the goods were carried, miscarried or lost. The effect is that the limitation provisions in CMR may apply to the goods but such as excise duty is recoverable in full.
Material put before the Supreme Court showed that some jurisdictions adopted a similar broad approach eg Denmark and Italy. But that a narrow interpretation has been adopted in other jurisdictions eg Germany and the Netherlands. Therefore, although weight should be given to foreign court decisions when interpreting an international convention, where they conflict, there is no “universal wisdom” to draw upon. There was no consensus. In fact, the court thought that such consensus as existed was evaporating.
So, notwithstanding the academic criticism of the original decision imposing the broad interpretation, the Supreme Court saw no reason to change the law – it considered the criticisms to be “unjustified or overstated” and in restrained judicial speak, firmly reprimanded the Court of Appeal decision regarding the tax seals as wrongly decided and creating uncertainty where none existed.
I suppose an argument could be made that where excise duty is as a consequence of wider public policy and those public policy aims can be better achieved if the burden remains on cargo interests, rather than carriers; and where international carriage convention regimes deliberately limit monetary compensation, there is an attraction to the French approach which has adopted neither broad nor narrow interpretation but holds that excise duty is recoverable as part of the value of the goods themselves.
As a procedural aside, note that this issue was deemed to be of sufficient wider interest that the special leapfrog procedure from first instance court to Supreme Court was adopted.