Multimodal Transport Contracts: A Critique

Soumik Chakraborty

Editor’s Note: Today’s commercial actors use sophisticated systems weighing relevant factors such as storage costs, placement of production facilities and transportation expenses against each other in order to generate highest possible profit. This also necessitates the putting in place of legal framework capable of addressing the various issues.

Introduction

We only have to look around us on the road as we travel to work or home, or to use eyes at a railway station to know that transport of goods takes up a lot of room our modern  day infrastructures provide. There has been an explosive growth of freight transport in the last few decades. A lot of goods we use in our homes or lives originate from a different place that may be quite far away such as fruits in Supermarket or electric appliances at home that makes life easier.

Before the Industrial Revolution, it was hardly cost effective or even feasible to carry goods halfway across the world if they were not valuable or extra-ordinary[i]. Limitations on trade by transport structures available did more however than simply curtail the range of affordable products on offer for the public. They also had a negative effect on the location of industry, limited transport possibilities, and forced production to take place near or in heavily populated areas to secure necessary workforce and market possibilities. There was need of cost effective movement of goods.

Bill of Lading

The Bill of Lading is a document of title of goods, transferable by endorsement and is a receipt from shipping company regarding the number of packages with a particular weight and markings and a contract for the transportation of same to a port of destination mentioned therein.[ii] A Bill of Lading is a document generated by a shipping line or its agent, giving details of a shipment of merchandise. Alongside this principal purpose, the bill of lading also certifies that the goods have been shipped aboard a vessel, assigns title to the goods, and requires the carrier to release the merchandise to the holder of the title or a named party at the destination port. In the case of Coventry v Gladstone,[iii] Lord Justice Blackburn defined a Bill of Lading as “A writing signed on behalf of the owner of ship in which goods are embarked, acknowledging the receipt of the Goods, and undertaking to deliver them at the end of the voyage, subject to such conditions as may be mentioned in the bill of lading.” A bill of lading is a key document used in the transport of goods. As a document of title, it is also an important financial instrument.

Inland, ocean, through and air waybill are the names given to bills of lading. An inland bill of lading is a document that establishes an agreement between a shipper and a transportation company for the transportation of goods over land. Ocean bills of lading specify the terms between exporters and international carriers for the shipment of goods to overseas locations. An air waybill is a bill of lading that establishes the terms of flights for the transportation of goods. The goods could be transported either domestically or internationally. This document also serves as a receipt for the shipper, proving the carrier’s acceptance of the shipper’s goods and the agreement to carry those goods to a specific airport.

Inland and ocean bills of lading might be negotiable or non-negotiable. If the bill of lading is non-negotiable, the transportation carrier is required to provide delivery only to the consigneenamed in the document. If the bill of lading is negotiable, the person who has ownership of the bill of lading has the right of ownership of the goods and the right to re-route the shipment. This is sometimes called a bearer bill of lading.

Purposes of a bill of lading are:

  • It is evidence of a valid contract of carriage, and may incorporate the complete terms of the contract between the shipper and the carrier which may include payment terms, rates, description of product classification, as well as other duties and obligations.
  • It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (see SLC below). The information could include pallet and/ or piece count, weight, product description and classification.
  • Once signed by the consignee, it is a receipt of goods received providing final confirmation of the quantity and condition of the product received. A signature by the consignee is acknowledgement the goods are received as described on the BOL unless discrepancies are otherwise noted at the time the BOL is signed.

A through bill of lading is a contract that covers the specific terms agreed to by a shipper and carrier when more than one type of transportation is being used. This document can cover the domestic and international transportation of export merchandise. It provides the details of the agreed-upon modes of transportation between specific locations for a set monetary amount. Similar to this is the Combined bill of lading. When a combined bill of lading is issued as a Combined Transport Bill of Lading, it involves multiple modes of transport from the Place of Receipt to Place of Delivery and all these movements are carried out as a single contract by multiple service providers under the employ of the carrier. Carrier takes responsibility for any loss or damage for the entire transport including the sea and other mode of transport. This is the same as Multimodal Bill of Lading.In India laws and rules related to bills of lading are governed by the Indian Bills of Lading Act, 1856.

Rise of Containers

Without intricate contemporary infrastructure and transport systems, the worldwide trade which caters to our needs would be quite impossible. In the last few decades sophistication and efficiency of international carriage of goods has increased. Introduction of cargo enabled handling processes to gain a high level of standardization and helped overcome many of the technical difficulties concerning the transhipment of goods. Use of containers lessened the occurrence of pilferage during cargo transferral and reduced loading and discharging time.

Containerization

Containerization is a system of intermodal freight transport using intermodal containers  made of weathering steel. The containers have standardized dimensions. They can be loaded and unloaded, stacked, transported efficiently over long distances, and transferred from one mode of transport to another—container ships, rail transport flatcars, and semi-trailer trucks—without being opened. The handling system is completely mechanized so that all handling is done with cranes and special forklift trucks. All containers are numbered and tracked using computerized systems.

The system, developed after World War II, dramatically reduced transport costs, supported the post-war boom in international trade, and was a major element in globalization. Containerization did away with the sorting of most shipments and the need for warehousing. It displaced many thousands of dock workers who formerly handled break bulk cargo. Containerization also reduced congestion in ports, significantly shortened shipping time and reduced losses from damage and theft.[iv]

The idea of using some type of shipping container was not completely novel. Boxes similar to modern containers had been used for combined rail- and horse-drawn transport in England as early as 1792. The US government used small standard-sized containers during the Second World War, which proved a means of quickly and efficiently unloading and distributing supplies. However, in 1955, Malcom P. McLean, a trucking entrepreneur from North Carolina, USA, bought a steamship company with the idea of transporting entire truck trailers with their cargo still inside. He realized it would be much simpler and quicker to have one container that could be lifted from a vehicle directly on to a ship without first having to unload its contents.

His ideas were based on the theory that efficiency could be vastly improved through a system of “intermodalism”, in which the same container, with the same cargo, can be transported with minimum interruption via different transport modes during its journey. Containers could be moved seamlessly between ships, trucks and trains. This would simplify the whole logistical process and, eventually, implementing this idea led to a revolution in cargo transportation and international trade over the next 50 years.

The usage of containers shows the complementarity between freight transportation modes by offering a higher fluidity to movements and a standardization of loads. The container has substantially contributed to the adoption and diffusion of intermodal transportation which has led to profound mutations in the transport sector. Through reduction of handling time, labor costs, and packing costs, container transportation allows considerable improvement in the efficiency of transportation. Thus, the relevance of containers is not what they are – simple boxes – but what they enables; intermodalism. Globalization could not have taken its current form without containerization. Intermodalism originated in maritime transportation, with the development of the container in the late 1960’s and has since spread to integrate other modes.  It was the mode most constrained by the time taken to load and unload the vessels. A conventional breakbulk cargo ship could spend as much time in a port as it did at sea. Containerization permits the mechanized handling of cargoes of diverse types and dimensions that are placed into boxes of standard sizes. In this way goods that might have taken days to be loaded or unloaded from a ship can now be handled in a matter of minutes.

Advantages of Containerization are:

  • Standard transport product. A container can be manipulated anywhere in the world as its dimensions are an ISO standard. Indeed, transfer infrastructures allow all elements (vehicles) of a transport chain to handle it with relative ease.
  • Flexibility of usage. It can transport a wide variety of goods ranging from raw materials (coal, wheat), manufactured goods, and cars to frozen products. There are specialized containers for transporting liquids (oil and chemical products) and perishable food items in refrigerated containers.
  • Management. The container, as an indivisible unit, carries a unique identification number and a size type code enabling transport management not in terms of loads, but in terms of unit. This identification number is also used to insure that it is carried by an authorized agent of the cargo owner and is verified at terminal gates. Computerized management enables to reduce waiting times considerably and to know the location of containers
  • Economies of scale. Relatively to bulk, container transportation reduces transport costs considerably, about 20 times less.
  • Speed. Transhipment operations are minimal and rapid, which increase the utilization level of the modal assets and port productivity.
  • Warehousing. The container limits damage risks for the goods it carries because it is resistant to shocks and weather conditions. The packaging of goods it contains is therefore simpler, less expensive and can occupy less volume. This reduces insurance costs since cargo is less prone to be damaged during transport. Besides, containers fit together permitting stacking on ships, trains and on the ground. It is possible to superimpose three loaded and six empty containers on the ground. The container is its own warehouse.
  • Security. The contents of the container are anonymous to outsiders as it can only be opened at the origin, at customs and at the destination. Thefts, especially those of valuable commodities, are therefore considerably reduced, which results in lower insurance premiums.

Challenges faced by Containerization are:

  • Site constraints. Containerization implies a large consumption of terminal space. Conventional port areas are often not adequate for the location of container transhipment infrastructures, particularly because of draft issues as well as required space for terminal operations.
  • Infrastructure costs. Container handling infrastructures, such as gantry cranes, yard equipment, road and rail access, represent important investments for port authorities and load centres.
  • Stacking. The arrangement of containers, both at terminals and on modes  is a complex problem. At the time of loading, it becomes imperative to make sure that containers that must be taken out first are not below the pile.
  • Empty travel. Maritime shippers need containers to maintain their operations along the port networks they service. The same number of containers brought into a market must thus eventually be relocated, regardless if they are full or empty.
  • Illicit trade. By its confidential character, the container is a common instrument used in the illicit trade of drug and weapons, as well as for illegal immigrants. Concerns have also been raised about containers being used for terrorism. These fears have given rise to an increasing number of regulations aimed at counteracting illegal use of containers.

Multi-Modal Transportation of Goods

A contract involving carriage by more than one mode of transport is called multi-modal transport. Containerization facilitated the growth of multi-modal transport contracts but is not a necessity. Since the container revolution in the 1950s, multimodal carriage has increased dramatically. Evidence of the popularity of multimodal transport is the emergence and increase of multimodal terminals everywhere. Article 1.1 of the United Nations Multimodal Convention defines multimodal transport as follows: “‘International multimodal transport’ means the carriage of goods by at least two different modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country”.[v]

In a Multi-Modal transport the carrier does not have to possess all the means of transport, and in practice usually does not; the carriage is often performed by sub-carriers. The carrier responsible for the entire carriage is referred to as a multimodal transport operator, or MTO. In practice, freight forwarders have become important MTOs; they have moved away from their traditional role as agents for the sender, accepting a greater liability as carriers. Large sea carriers have also evolved into MTOs; they provide customers with so-called door-to-door service. The sea carrier offers transport from the sender’s premises to the receiver’s premises, rather than offering traditional tackle-to-tackle or pier-to-pier service. MTOs not in the possession of a sea vessel are referred to as Non-Vessel Operating Carriers (NVOC) in common law countries

United Nations Convention on Contracts for the International Sale of Goods, Vienna, 1980 (CISG)

The contract of sale is the backbone of international trade in all countries, irrespective of their legal tradition or level of economic development. The CISG was therefore considered one of the core international trade law conventions whose universal adoption is desirable.

The CISG was the result of a legislative effort that started at the beginning of the twentieth century. The resulting text provides a careful balance between the interests of the buyer and of the seller. It also inspired contract law reform at the national level.

The adoption of the CISG provides modern, uniform legislation for the international sale of goods that would apply whenever contracts for the sale of goods are concluded between parties with a place of business in Contracting States. In these cases, the CISG would apply directly, avoiding recourse to rules of private international law to determine the law applicable to the contract, adding significantly to the certainty and predictability of international sales contracts.

Moreover, the CISG may apply to a contract for international sale of goods when the rules of private international law point at the law of a Contracting State as the applicable one, or by virtue of the choice of the contractual parties, regardless of whether their places of business are located in a Contracting State. In this latter case, the CISG provides a neutral body of rules that can be easily accepted in light of its transnational nature and of the wide availability of interpretative materials.

Finally, small and medium-sized enterprises as well as traders located in developing countries typically have reduced access to legal advice when negotiating a contract. Thus, they are more vulnerable to problems caused by inadequate treatment in the contract of issues relating to applicable law. The same enterprises and traders may also be the weaker contractual parties and could have difficulties in ensuring that the contractual balance is kept. Those merchants would therefore derive particular benefit from the default application of the fair and uniform regime of the CISG to contracts falling under its scope.

The CISG governs contracts for the international sales of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. It applies to contracts for sale of goods between parties whose places of business are in different Contracting States, or when the rules of private international law lead to the application of the law of a Contracting State. It may also apply by virtue of the parties’ choice. Certain matters relating to the international sales of goods, for instance the validity of the contract and the effect of the contract on the property in the goods sold, fall outside the Convention’s scope. The second part of the CISG deals with the formation of the contract, which is concluded by the exchange of offer and acceptance. The third part of the CISG deals with the obligations of the parties to the contract. Obligations of the sellers include delivering goods in conformity with the quantity and quality stipulated in the contract, as well as related documents, and transferring the property in the goods. Obligations of the buyer include payment of the price and taking delivery of the goods. In addition, this part provides common rules regarding remedies for breach of the contract. The aggrieved party may require performance, claim damages or avoid the contract in case of fundamental breach. Additional rules regulate passing of risk, anticipatory breach of contract, damages, and exemption from performance of the contract. Finally, while the CISG allows for freedom of form of the contract, States may lodge a declaration requiring the written form.

The CISG applies only to international transactions and avoids the recourse to rules of private international law for those contracts falling under its scope of application. International contracts falling outside the scope of application of the CISG, as well as contracts subject to a valid choice of other law, would not be affected by the CISG. Purely domestic sale contracts are not affected by the CISG and remain regulated by domestic law.

 

 

Rotterdam Rules

The most recent addition to the list of uniform multimodal carriage regimes is the UNCITRAL Convention on Contracts for the International Carriage of Goods Wholly or Partly by  Sea, also known as the Rotterdam Rules (RR), which was signed in Rotterdam on 2rd September, 2009. This Convention started out as a draft meant to bring uniformity to the legal aspects of sea transport. It currently encompasses contracts for multimodal carriage as well, provided one of the stages of transport concerns is carriage by sea. This concept is a new one. Sea carriage is generally not suited to transport goods from door-to-door. Most destinations cannot simply be reached by sea, so the goods are often transferred to another means of transport when they reach the port to complete the carriage. As a result a significant part of the contemporary sea carriage is performed under multimodal transport contracts.[vi]

The Convention’s carrier liability is in principle a uniform one; all carriage is to be governed by the maritime regime of the Convention, unless the carriage stage in question falls within one of the exceptions. This system of exceptions is qualified as the ‘limited network’ approach. The result is that non-sea carriage stages may partly be governed by the rules of Conventions that provide mandatory rules on carrier liability specifically tailored to the type of non-sea carriage of the transport stage in question.

Main provisions of the Rules are:

  • It extends the period of time that carriers are responsible for goods to cover the time between the point where the goods are received to the point where the goods are delivered.[vii]
  • It allows for more e-commerce and approves more forms of electronic documentation.
  • It obligates carriers to have ships that are seaworthy and properly crewed throughout the voyage. The level of care is set to due diligence, which is the same as in the Hague Rules.
  • It increases the limit liability of carriers to 875 units of account per shipping unit or three units of account per kilogram of gross weight.
  • It eliminates the “nautical fault defence” which had prevented carriers and crewmen from being held liable for negligent ship management and navigation.
  • It extends the time that legal claims can be filed to two years following the day the goods were delivered or should have been delivered.
  • It allows parties to certain “volume” contracts to opt-out of some liability rules set in the convention.

Due to its ‘maritime plus’ nature the new regime is likely to offer some difficulties fitting in with the existing uniform carriage law. Because the scopes of the existingunimodal carriage conventions cause them to apply-certain parts of-multimodal carriage contracts as well conflicts may ensue if the Rotterdam Rules enter into force. The rules contain a number of Articles intended to prevent such conflicts, one of which is the article embodying the limited network approach. Within its mandatory character, sufficient flexibility is introduced in the Rotterdam Rules to provide a leeway for the carrier and create commercial convenience for both parties. The travauxpreparatoires of the Rotterdam Rules is well documented and thus should serve as ready reference in the interpretation, adjudication and application of the Rules to commercial disputes that arise in the international carriage of goods wholly or partly by sea.

The UNCTAD/ICC Rules for Multimodal Transport Documents (URM)

Since no Uniform law regime has been able to make it to operant status, contractual standard rules such as the International Council for Commerce (ICC) Uniform Rules for a combined transport document (URC), have flourished, based on the Tokyo Rules and the TCM Convention. In 1992 they were replaced by the UNCTAD/ICC Rules, based on the Hague Rules and the Hague-Visby Rules as well as the FBL and ICC Uniform Rules. The UNCTAD/ICC Rules are a merger between the URC and the MT Convention. This standard set of contract rules attempts to fill the gap in the field of international multimodal transport liability legislation.

These rules however lack the stature of mandatory international legislation, they cannot set aside the rules of international conventions. The result is remaining uncertainty in terms of liability and legal position.[viii] These rules apply when they are incorporated into a contract of carriage, in whatever form this is made, writing, orally or otherwise. Whether this is a unimodal or multimodal transport contract or whether a document has been issued or not is of no consequence. A Multimodal carrier wishing to use the Rules as a basis for his multimodal transport contract would have to add other clauses dealing with matters such as Jurisdiction, arbitration and applicable law to satisfy his particular needs. Rule 1.2 read:

“Whenever such a reference is made, the parties agree that these Rules shall supersede any additional terms of the multimodal transport contract which are in conflict with these Rules, except insofar as they increase the responsibility or obligations of the multimodal transport operator”

Similar to the MT Convention, specific provisions on limitation of the liability of the multimodal carrier are included for cases of localized loss as dealt with in Rule 6.4.

As long as there is no International regime regulating multimodal transport the transport sector will make use of these kinds of contracts to negate as much of the uncertainty concerning the applicability of legal regime as possible. Experts have suggested that the existing private law arrangements are satisfactory.[ix]However logically a new system would be more effective since contractual rules such as the UNCTAD/ICC Rules do not set aside any mandatory arrangements and thus the uncertainty regarding the legal regime that applies is not lifted entirely.

The Multimodal Transportation of Goods Act, 1993

Introduction

The Multimodal Transportation of Goods Act, 1993 was introduced to facilitate the exporters and give them a sense of security in transporting their goods. The Government of India thought it necessary to codify the rules and regulations governing Multimodal Transportation and enacted the Multimodal Transportation of Goods Act, 1993 based on the UNCTAD/ICC (United Nations Council for Trade and Development/ International Council for Commerce) rules which have gained widespread acceptance.

The Multimodal Transportation Act lays down the standard terms and conditions governing this activity. Under the provision of the Act only those companies who are registered by the competent authority which has been notified to be the Director General of Shipping, can carry out Multimodal Transportation. This requirement of registration has been imposed by the government to ensure that only such companies which have the necessary expertise infrastructure and financial capability are allowed to undertake Multimodal Transportation so that the interests of shippers are fully protected.

Registration

Under the Act, a transport to be a multimodal transport, 3 conditions has to be satisfied:

  • The goods are to be carried by two or more modes of transport
  • The place of acceptance of the goods should be in India.
  • The place of delivery of the goods should be outside India.

As per the MMTG Act three categories of companies are eligible to be registered as Multimodal transport operators (MTO). They are:

  • Shipping Companies
  • Freight Forwarding Companies
  • Companies which do not fall in either of the above two categories.

Section-3, 4, 5&6 of Multi-Modal transportation of goods act deal with the law regulating various aspects such as registration, cancellation and appeal against such registration or cancellation of registration of multi-modal transport operator.

Any person may apply for registration in the prescribed form accompanied by a fee of ten thousand rupees to the competent authority to carry on or commence the business of multimodal transportation. On receipt of the application, the competent authority shall satisfy that the applicant fulfils the following conditions, namely and on being so satisfied, register the applicant as a multimodal transport operator and grant a certificate to it to carry on or commence the business of multimodal transportation:-

  1. (i) That the applicant is a company, firm or proprietary concern, engaged in the business of Shipping, or freight forwarding in India or abroad with a minimum annual turnover of Rs.50Lkhs rupees during the immediately preceding financial year or an average annual turnover of Rs. 50Lkhs rupees during the preceding three financial years as certified by a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949;

(ii) That if the applicant is a company, firm or proprietary concern other than a company, firm or proprietary concern specified in sub-clause (i), the subscribed share capital of such company or the aggregate balance in the capital account of the partners of the firm, or the capital of the proprietor is not less than fifty lakh rupees;

  1. That the applicant has offices or agents or representatives in not less than two other countries,

Any applicant who is not a resident of India and who is not engaged in the business of shipping shall not be granted registration unless he has established a place of business in India. In respect of any applicant who is not a resident of India, the turnover may be certified by any authority competent to certify the accounts of a company in that country.  A Registration certificate granted shall be valid for a period of three years and may be renewed from time to time for a further period of three years at a time.

Appeal

Section-6, of Multi-modal transportation of goods act, 1993 provides for provision of appeal against a refusal by the competent authority to

(a) Grant or renew registration, or

(b) On cancellation of registration

An appeal against refusal by the competent authority to grant, renew or cancel registration lies with the Central Government. Generally an appeal preferred after the expiry of the prescribed period shall not be admitted, but where the appellant satisfies the central government that he has sufficient cause, for not preferring the appeal within the prescribed period, his appeal may be preferred even after the expiry of such prescribed period. All Appeals should be made in the prescribed form and on the payment of the prescribed fee. All Appeals shall be accompanied by a copy of order, against which such an appeal has been preferred.

Where the central government receives an application for appeal, it shall after giving parties a reasonable opportunity of being heard, & after making such inquiry as the central government deems proper, make such order as it deems fit.

Basis of Liability of Multimodal Transport Operator

The multimodal transport operator shall be liable for loss resulting from-

  • any loss of, or damage to the consignment;
  • delay in delivery of the consignment and
  • any consequential loss or damage arising from such delay,

However a multi-modal transporter shall be liable only in instances where such loss, damage or delay in delivery of consignment took place at a time when the consignment was in the charge of such multi-modal transport operator.

The multimodal transport operator shall not be liable if he proves that no fault or neglect on his part or that of his servants or agents had caused or contributed to such loss, damage or delay in delivery:

Moreover, the multimodal transport operator shall not be liable for loss or damage arising out of delay in delivery including any consequential loss or damage arising from such delay unless the consignor had made a declaration of interest in timely delivery which has been accepted by themultimodal transport operator.

Multimodal transport Document

“Multimodal transport document” means a negotiable or non-negotiable document evidencing a multimodal transport contract and which can be replaced by electronic data interchange messages permitted by applicable law. Section -7 of the Multi Modal Transportation of Goods Act deals with the issuance of a Multi-Modal Transport Document.

Where the consignor and the multimodal transport operator have entered into a contract for the multimodal transportation and the multimodal transport operator has taken charge of the goods, he shall, at the option of the consignor, issue a negotiable or non-negotiable multimodal transport document.

However, the multimodal transport operator shall issue the multimodal transport document only after obtaining, and during the subsistence of a valid insurance cover.

The multimodal transport document shall be signed by the multimodal transport operator or by a person duly authorised by him. The Multimodal transport document is treated as a document of title for transport purposes.

The multimodal transport document shall contain the following particulars, namely:-

(a) General information

  • the general nature of the goods,
  • the leading marks necessary for identification of the goods,
  • the character of the goods (including dangerous goods),
  • number of packages or units and
  • the gross weight and quantity of the goods as declared by the consignor;

(b) Apparent condition of the goods;

(c) The name and principal place of business of the multimodal transport operator;

(d) The name of the consignor;

(e) The name of the consignee, if specified by the consignor;

(f)  The place and date of taking charge of the goods by the multimodal transport operator;

(g)  The place of delivery of the goods;

(h) The date or the period of delivery of the goods by the multimodal transport operator as expressly agreed upon between the consignor and the multimodal transport operator;

(i) Whether it is negotiable or non-negotiable;

(j) The place and date of its issue;

(k) Freight payable by the consignor or the consignee, as the case may be, to be mentioned only if expressly agreed by both the consignor and the consignee;

(l) The signature of the multimodal transport operator or of a person duly authorised by him;

(m) The intended journey route, modes of transport and places of transhipment, if known at the time of its issue;

(n) Terms of shipment and a statement that the document has been issued subject to and in accordance with this Act; and

(o) Any other particular which the parties may agree to insert in the document, if any such particular is not inconsistent with any law for the time being in force.

In all cases except those in which a reservation has been made in multi-modal transport document

(a) The multimodal transport document shall be prima facie evidence of the fact that the multimodal transport operator has taken charge of the goods as described in the document; and

(b) No proof to the contrary by the multimodal transport operator shall be admissible if the multimodal transport document is issued in negotiable form and has been transmitted to the consignee or transferred by the consignee to a third party, if the consignee or the third party has acted in good faith relying on the description of the goods in the document.

The Quantum Case

A noteworthy example of the existing confusion surrounding multimodal contracts and the manner in which courts handle this legal jungle is the English case known as Quantum[x].

In September 1998 Air France issued to the claimants, Quantum Corporation, an air waybill in Singapore, providing for the carriage of hard disk drives – to the claimed value of US$1.5 million – from Singapore to Dublin. The intended routeing was by air from Singapore to Paris and then from Paris to Dublin by road and sea over the Irish Sea. This was recorded in the master air waybill. A large number of similar consignments involving the same parties had been carried in this way previously.

For the trucking leg, the carriage was performed by regular contractors of Air France, Plane Trucking. Whilst the cargo was in the UK, in the custody of Plane Trucking, it was stolen by their employees. Plane Trucking admitted liability for the theft but was in liquidation at the time of the proceedings. Plane Trucking’s liability insurers had purported to avoid the policy. Air France also accepted liability.

Air France maintained that its General Conditions were incorporated into the contract of carriage by means of terms in the air waybill. Under Article 11.7 of the Air France conditions, its liability was limited to the amount of SDRs 17 per kilo. Unlike the Warsaw Convention, the conditions did not disentitle Air France from relying on the per kilo limitation in the event that the loss ‘resulted from an act or omission of the carrier, his servants or agents, done with intent to cause damage, or recklessly and with knowledge that damage would probably result.[xi]

Claimants maintained that Air France’s liability, in relation to the Paris-Dublin leg, was subject to the Convention on the Contract for the International Carriage of Goods by Road (‘CMR’). Article 1 of that Convention provided that the Convention applied to

“Every contract for the carriage of goods by road in vehicles for reward, when the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a Contracting country.”

France is a contracting country to the CMR Convention

For the purposes of Article 6(1)(d)) of the Convention, “The consignment note shall contain the following particulars… the place and date of taking over delivery….”, the claimants submitted that the goods were taken over in Paris. Under Article 23 of the Convention, the carrier may limit its liability to SDRs 8.33 per kilo of the goods lost or damaged. Under Article 29 of the Convention, however, the carrier is not entitled to take advantage of the limit set out in Article 23, where the loss or damage was caused by its wilful misconduct or that of ‘the agents or servants of the carrier, or [of] any other persons of whose services [the carrier] makes use for the performance of the carriage’.

Mance LJ delivered the judgment of the court. He defined the issue to be addressed as “What constitutes a ‘contract for the carriage of goods by road’ within the meaning of Art.1 of CMR.” He accepted that the issue could be approached on the assumption that although carriage by road from Paris to Dublin was Air France’s intended mode of performance, Air France was not contractually obliged to carry the goods in that manner and, might, if they had so wished, have carried the goods on that leg by air. The contract recorded in the air waybill was clearly for two legs, the first to be performed by air, the second a trucking leg, unless Air France elected to substitute some other means of transport, as their Conditions permitted.

Differences in opinion between the German, Dutch and English courts of law, and even between the courts of these countries among themselves, underline that the law which is applied to a multimodal contract is uncertain at the outset; it depends on which court is addressed and how the scope of application rules of the potentially applicable regimes are interpreted by said court.

Benefits of Multimodal Transport

Despite certain pitfalls, there are numerous benefits of Containerization and Multimodal transportation of Goods:

  • Saves time in Cargo Shipment
  • Saves money and the Environment
  • Increases productivity and competitiveness of the freight transport industry as a whole.
  • Multimodal carrier provides for storage between stages reducing headache
  • Multimodal carrier has more pull in these circles, he is able to influence the transport itinerary making it cheaper and efficient
  • Every carrier issues his own type of transport document
  • Damage to Goods is a lesser likelihood in case of cargo shipment and due to single carrier party placing liability becomes easier
  • One qualified operator organizes and is responsible and accountable for entire transport chain, so no problems arise in miscommunication.

Challenges to Multimodal Transport

The challenges faced by this system of Transportation are:

  • With the globalization of production and the liberalization of services, developing countries and countries in transition, more than ever, need more than ever to increase their capabilities in offering reliable and cost-effective transport and logistics services, taking advantage of technological development through appropriate “leap-froging” into modern technologies and commercial practices;
  • There is a world-wide need for harmonization of the legal environment for multimodal transport, in particular considering the development of new forms of international transport such as combined road/rail transport and short-sea shipping in Europe.
  • Measuring, understanding, and responding to the role of intermodalism in the changing customer requirements and hyper competition of supply chains in a global marketplace;
  • The need to reliably and flexibly respond to changing customer requirements with seamless and integrated coordination of freight and equipment flows through various modes;
  • Knowledge of current and future intermodal operational options and alternatives, as well as the potential for improved information and communications technology and the challenges associated with their application;
  • Constraints on and coordination of infrastructure capacity, including policy and regulatory issues, as well as better management of existing infrastructure and broader considerations on future investment in new infrastructure.

Conclusion

The rise of containership and Containerization has improved business and transportation by reducing Travel costs, saving time and reducing damage to goods. In a coastal place like Cochin with the huge Vallarpadam Shipping Terminal, often huge containers labelled NYK, Maersk, Hapag-Lloyd and COSCO can be seen. However there are some major pitfalls and shortcomings as well that has been highlighted in the Quantum case. The main difficulty is determining the legal regime applicable to international multimodal carriage contracts. The multihued tapestry of the current international legislation presents this problem.

This prelude reveals that in order to improve matters in this area the major issue to be decided concerns the exact nature of the contract. Before the law applicable to a contract can be found the contract itself needs to be defined and demarcated. Questions raised in this context are for instance how such a contract is different from other contracts such as freight forwarding contracts or even unimodal carriage contracts, whether the modes of transport to be used may be left open by the contract and what it is exactly that makes a contract international.  Once this issue is determined and a concrete set of laws governing multimodal transport contracts is established, there will be a lucid system of governing multimodal transports and help improve the world economy.

Edited by Saksham Dwivedi

[i]Spice Trade

[ii]  Bohra, Harsh. International Trade and Finance.Wide Vision.

[iii] 1866 C48

[iv] Levinson, Marc. “Sample Chapter for Levinson, M.: The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.”. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton University Press.Retrieved 17 February 2013.

[v]  United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980)

[vi]As per the UNCTAD Review of Maritime Transport, 2008, he world containership fleet had reached 13.3 million twenty-foot equivalent units by May 2008.

[vii] Adeline Teoh (16 November 2009). “UN shipping convention ready for Australia”. Dynamic Export.

[viii]UNECE, Inland Transport Committee, Working Aprty on Combined Transport, “Possibilities for reconciliation and harmonization of civil liability regimes governing combined transport”

[ix]Ibid.

[x]Quantum Corporation Inc. and Others v. Plane Trucking Ltd and Another, [2002] 2 Lloyd’s Rep. 25, ETL 2004, p. 535-560, with a remark by P. Laurijssen, p. 561-570. For another remark see Koller 2003, p. 45-50. For the initial judgement see Quantum Corporation Inc. and others v Plane Trucking Ltd. and Another, [2001] 2 Lloyd’s Rep. 133.

[xi] Warsaw Convention, Art.25

One Reply to “Multimodal Transport Contracts: A Critique”

  1. Thanx for uploading this document , which helped me working out with my project and clearly understand the concept of multimodal transportation.
    Thanx a lot…. and keep posting this type of documents………..

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