John Habergham, Myton Law, Hull U.K.
Fellow members may well have an experience of clients who have become embroiled in disputes involving significant sums for container detention and demurrage and which has arisen out of the change in attitudes, globally, to traffic in recyclable materials – plastics is the most topical.
Previously, the Western world was content to export its recyclable plastic waste to distant states – and those states were, previously, content to take it.
However, with a change in global attitudes to environmental issues, these countries, led by, for example, by PRC, have decided that they don’t want this commodity any longer.
Local legislation deems the commodity illegal, refuses permission to import and the goods remain idle at various ports. Significant container and demurrage charges have built up.
Who bears the cost of these? And, then, who bears the responsibility for removal of the commodities from the countries which have placed an embargo on them?
With regard to removal it is fair to say that the ocean carriers are first in line, but they are the ones who have a published tariff for free time on quay and, thereafter, charges and so are casting around for a remedy. It is their money and they want it.
The margins in these, are usually pretty tight and there has been a degree of attrition – shippers are steadily going into liquidation (worst case) or are simply too small and without resources to pay.
Invariably, the carriers fall back on the terms of their bill of lading and/or waybill and which has a scheme of liability which, broadly speaking, goes like this – there is a wide definition of a “merchant” which extends to shipper or consignee or anybody with an interest in the goods and agents of such parties.
The liability of the “merchant” for “freight” is said to be joint and several.
“Freight” extends to detention and demurrage and quay rental.
Where the parties to the underlying sales/purchase contract were “men of straw” or something approaching it, the carriers, not unnaturally, turned to the forwarders who might have deeper pockets. This, on the grounds, that they were an “agent” to the shipper.
In my experience, the forwarder never appears as a party on the bill of lading or waybill.
Looking at it, in the round, by reference to English law, they would most probably be found to be an agent in the true sense of the word – procuring the contract for and on behalf of their principal with a third party, bringing those parties into privity of contract and thereafter dropping out of the picture, and incurring no liability themselves.
In many instances, they contracted on British International Freight Association Standard Conditions which a) bolsters, at the forwarder option, the agency status and b) contains an English law and jurisdiction clause.
They felt relatively secure.
Should they be?
The answer, at any rate, by reference to English law, is maybe not.
This is because English law takes the approach that the applicable law to apply is that of the putative contract which it has procured on behalf of its principal. So, if the waybill or bill of lading has a French law and jurisdiction or a German law and jurisdiction clause then the forwarder may find that its liability is governed by those systems of law.
It may be that, by reference to those systems of law, they would still be found to be an agent with no liability but it has taken a number of forwarders by surprise to find that, where they have been diligent in ensuring that they incorporate their own terms and conditions with their client, they find that that may not be the regime which governs their liability.
This issue is still playing out round the world so it will be interesting to see if ever this particular issue comes before a court in a relevant state.