British American Tobacco Denmark A/S and others v. Kazemier Transport BV

British American Tobacco Switzerland SA v. H Essers Security Logistics BV and another

[2015] UKSC 65

The UK Supreme Court recently held that the English courts had no jurisdiction over successive carriers in a dispute arising out of the international carriage of containers that was subject to the Convention on the Contract for the International Carriage of Goods by Road 1956 (“CMR”). The CMR is given the force of law in the UK by the Carriage of Goods by Road Act 1965. In construing the relevant jurisdictional provisions of the CMR, the Supreme Court came to a different conclusion from the Court of Appeal and held that, while they had jurisdiction over the first carrier, the English courts did not have jurisdiction over the successive carriers. The Court acknowledged that commercial logic pointed towards the related claims against all three carriers being dealt with in one set of proceedings and heard in the same jurisdiction. Nonetheless, in the Court’s view, the language of the CMR led to a different conclusion.

The stolen goods in this case were cigarettes. They had a high value and attracted significant duty/taxes. The advantage of establishing English law and jurisdiction would have meant that the duty/taxes would be potentially recoverable in the CMR claim against all three carriers, which may not be the case in some other jurisdictions that interpret the CMR differently.

The background facts

These were two related appeals that were heard together, the Claimants in both appeals being companies in the British American Tobacco Group (“BAT”). BAT had a framework agreement with an English company, Exel Europe Ltd (“Exel”), for the international transport of containers containing cartons of cigarettes. The framework agreement provided for English law and the exclusive jurisdiction of the English courts and it was common ground that the CMR applied to this agreement.

Exel sub-contracted the carriage of two containers of BAT cigarettes to two Dutch companies, Essers Security and Kazemier Transport, respectively on identical provisions regarding choice of law and court. Exel was the first carrier pursuant to the CMR, while Essers and Kazemier were the last/performing carriers.

Two CMR notes were issued, one in Switzerland and one in Hungary and both were signed by or on behalf of Essers and Kazemier respectively as carriers. The cigarettes were destined for Denmark but were subsequently stolen from both cargo containers. The first container was allegedly hijacked in Belgium, whilst most of the cigarette cartons in the second container disappeared while it was parked overnight near Copenhagen.

BAT commenced English court proceedings against all three carriers. There was no dispute that the Court had jurisdiction over the proceedings against Exel. As against the successive carriers, BAT relied on the English jurisdiction clause in the framework agreement and/or on the English proceedings against Exel. Essers and Kazemier challenged the English Court’s jurisdiction over them on the basis of the CMR jurisdiction provisions.

The Commercial Court held that it had no jurisdiction over Essers and Kazemier. On appeal, the Court of Appeal came to the opposite conclusion and held that Essers and Kazemier could be sued in English proceedings. The Supreme Court has now reversed that decision and restored the Commercial Court’s order to set aside the claim forms against the successive carriers.

The relevant provisions of the CMR

Article 31.1 of the CMR provides as follows:

“In legal proceedings arising out of carriage under this Convention, the plaintiff may bring an action in any court or tribunal of a contracting country designated by agreement between the parties and in addition, in the courts or tribunals of a country within whose territory (a) the defendant is ordinarily resident, or has his principal place of business, or the branch or agency through which the contract of carriage was made, or (b) the place where the goods were taken over by the carrier or the place designated for delivery is situated, and in no other courts or tribunals.”

Article 34 provides that a second carrier only becomes a successive carrier by becoming a party to the contract of carriage under the terms of the consignment note by reason of his acceptance of the goods and the consignment note.

Article 36 provides for legal proceedings for loss, damage or delay to be brought against the first carrier, the last carrier or the performing carrier and that an action can be brought against several carriers at the same time.

The Supreme Court decision

BAT’s main argument was that, once the English Court had established jurisdiction over Exel under Article 31.1, Article 36 allowed it to establish jurisdiction under the successive carriers that may be potentially liable for the loss even though proceedings against them could not of themselves be brought within Article 31.

The Supreme Court disagreed. Article 31 is a complete jurisdictional code that confers jurisdiction only if the criteria specified in Article 31.1 are satisfied. If the English Court does not have jurisdiction over the successive carriers pursuant to Article 31, then there is no scope for joining them into the English proceedings against Exel as necessary and proper parties. The Court clarified that Article 36 is not a jurisdictional provision and does not confer jurisdiction where it does not otherwise exist. In this case, neither of criteria (a) or (b) in Article 31.1 applied. England was not the place where the goods were taken over nor the place designated for delivery, nor were the successive carriers present in the jurisdiction. The Court dismissed the argument that the successive carriers had contracted with BAT through Exel as their agents or that Exel was a “branch” of either Essers or Kazemier.

BAT also sought to argue that the successive carriers were party to the exclusive English jurisdiction clause in the framework agreement because Article 34 provides that the successive carriers become a party to the contract of carriage under the terms of the consignment note by accepting the goods and the consignment note. Again, the Court disagreed. The consignment notes signed and accepted by the successive carriers did not contain the exclusive English jurisdiction clause. The successive carriers had no express notice of the clause and should not therefore be bound by it because it would be unjust to hold a successive carrier liable on the basis of terms and conditions to which it had not agreed.

Finally, the Court considered the desirability of all the related claims against all the carriers being resolved in one place and one set of proceedings. BAT sought to rely on the provisions in the Brussels Regulation that provide for claims that are closely connected to be heard together to avoid the risk of irreconcilable judgments. The Court pointed out, however, that the CMR contains no such provision and that it provides a  regime that applies to numerous non-EU states. There is, therefore, no conflict with EU law.

Comment

The joinder of all carriers in English proceedings would arguably have had the advantage of ensuring that all parties concerned and their witnesses would be involved in the same proceedings in which BAT sought to establish wilful misconduct against the carriers and prevent them from relying on the limit of liability provided for in the CMR. On the other hand, it appears unjust to compel a party to litigate in a jurisdiction to which it has not agreed and with which it has no connection.

Where the original parties to a freight forwarding agreement wish for all proceedings down the contractual chain to be heard in the same forum, their contract should provide that any consignment notes issued to sub-contractors expressly incorporate an appropriate jurisdiction clause.