In April 2009 Green Group (Hong Kong) Ltd entrusted Pantai Co Ltd to ship a batch of goods to Monza, Italy. Pantai accepted the commission and, acting as the contractual carrier, entrusted Panalpina World Transport (China) Ltd Xiamen Branch to transport this batch of goods. During this period, Green Group insured against cargo damage with Ping An Insurance (Group) Company of China Ltd Fujian Branch.
When the said goods arrived in Genoa, Italy, the land transportation began. At this point the goods were in the charge of Panalpina Xiamen Branch. During the transportation, a container was stolen and was never recovered. In accordance with the insurance contract, the consignee sought compensation from Ping An Insurance on the grounds of damage incurred to the cargo. Ping An Insurance obtained a right of subrogation after providing compensation and took legal action against Pantai and Panalpina Xiamen Branch for subrogation before Xiamen Maritime Court.
It was clear that the goods in question were missing, and the procedure of providing compensation under the insurance agreement - as well as the sum itself - appeared to be in order. However, under Italian law a carrier's compensation liability in respect of land transportation is limited to €1 a kilogram.
During the trial, the opposing parties disagreed on the question of whether the liability limitation applied in this case.
Ultimately, the limitation for land carriers under Italian law was applied to the plaintiff's substantial compensation claim. The application by a Chinese court of overseas law, albeit in a case involving foreign interests, represents a break from conventional practice.
Although a carrier is not entitled to rely on the limitation on actual damage during land transportation under Chinese law, the goods were transported by land in Italy, which was also where the damage took place. Moreover, the Italian rule has a well-founded rationale: to encourage international trade and protect carriers from overwhelming risk. Therefore, the court held that the Italian rule applied. The defendants paid compensation according to this liability limitation, which greatly reduced the final sum.
The facts of the case were simple and clear, and nearly all the evidence was unfavourable to the defendants in terms of their exemption from liability. Chinese law does not entitle a carrier to limit liability for compensation where cargo damage occurs during land transportation. Unless the parties have contracted to limit such damages in advance, the carrier is usually required to pay compensation in the amount of the actual loss. However, in this case the consignee was a foreign company, the transport was multi-modal (ie, by sea and land), and the place of tort was Italy, not China. Therefore, under private international law, the law of the place of tort applied.
Chinese civil procedure provides that in respect of foreign-related cases, the interested parties bear the burden of ascertaining any potentially relevant foreign laws. Moreover, in order to ensure their authenticity and validity, only foreign laws that are notarised or acknowledged by Chinese embassies and consulates can be taken as a basis for trial.
Therefore, it is advisable to entrust a qualified foreign attorney to research the law and provide an opinion on it. In order to ensure the authenticity of foreign laws, parties should consider submitting the attorney's statutory declarations.
As Chinese courts remain cautious in applying foreign law, it is vital to ensure the legality and legitimacy of the investigation procedure. For example, in addition to offering a statutory declaration by a foreign attorney, it may be advisable to obtain a statement from the embassy of the foreign country in question, thereby guaranteeing the authenticity and validity of such legal provisions.
For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065), fax (+86 21 5396 1204) or email ([email protected]).