Merchant Shipping Act
Choice of Law and Paramount Clauses
When cargo is damaged during carriage by Danish vessels, the claimant may directly raise a claim for damages against the Danish ship-owners before the Danish courts. This may be appropriate in cases where the transport document has been issued by an independent contractor or agent of the contracting carrier whose identity is unknown and (i) the contracting carrier cannot meet the claim for damages or (ii) the contracting carrier has his principal place of business in a remote and unknown jurisdiction.
Pursuant to the Danish Merchant Shipping Act implementing the Hague-Visby Rules, the contracting carrier and the performing carrier are jointly and severally liable for payment of damages to the claimant. However, their liability is limited to SDR2 (Special Drawing Rights) per kilogramme of damaged cargo or SDR667 per lot of damaged cargo assessed at the discretion of the claimant.
The Merchant Shipping Act is internationally mandatory in cases where the cargo is loaded or unloaded in a Scandinavian country (ie, Denmark, Norway, Finland or Sweden). Under the transport documents for shipments to or from Scandinavia, the contracting and performing carriers are always jointly and severally liable to pay damages to the claimant irrespective of any other agreement to the contrary. The liability may not be limited to an amount below that prescribed by the Hague-Visby Rules.
In addition, the act is mandatory in cases where the cargo is loaded in a Hague-Visby member state, or where the transport document is issued in a Hague-Visby state.
For example, the Danish act implementing the Hague-Visby Rules applies to a carriage from South Africa to Europe or to a carriage from Russia to Asia if the transport document is issued in a Hague-Visby state. In these cases the performing carrier will be jointly liable with the contracting carrier for damages payable to the claimant.
In such cases, however, carriers are permitted to agree that carriage is not subject to the Danish Hague-Visby Rules, but to the Hague-Visby Rules of another state. But no other agreement may be made. For instance, the parties may not agree on the application of the Hague Rules or the COGSA to the carriage.
In all other cases the Merchant Shipping Act is not applicable. Therefore contracting parties are free to agree on other rules, including the Hague Rules or the COGSA or any other provisions. Again the interpretation under Danish law of the choice of law clause is important in this respect.
Choice of Law and Paramount Clauses
If legal action is brought against the performing carrier before the Danish courts, there is often a dispute as to whether the transport document contains a valid agreement that the Hague-Visby Rules or whether the Hague Rules of another country apply instead of the Danish Merchant Shipping Act.
Ship-owners try to escape joint and several liability as prescribed by Danish law. According to the Hague Rules and the Hague-Visby Rules, there is generally only one liable carrier pursuant to the transport document, as neither the Hague Rules nor the Hague-Visby Rules entitle the claimant to hold the contracting and performing party jointly and severally liable.
In certain cases the Danish courts may exclusively apply the provisions of the Merchant Shipping Act if it appears from the jurisdiction clause in the bill of lading that Danish law should apply. In the Anthony Rainbow Case the Danish Maritime and Commercial Court held that only the provisions of the Merchant Shipping Act were applicable to a bill of lading containing conflicting paramount and jurisdiction clauses.
The case concerned a shipment of timber from Canada to Great Britain, forwarded to Brest in the north of France. Part of the cargo fell overboard in rough weather. Eight bills of lading had been issued for the shipment in Vancouver Canada.
The Danish Merchant Shipping Act did not apply to the carriage and the carriers were therefore free to agree on the rules governing the legal relationship between them. The bills of lading contained a general paramount clause: "The Hague Rules as enacted in the country of shipment shall apply to this contract."
In addition the bill of lading contained the following jurisdiction clause:
" Any dispute arising under this bill of lading shall be decided in Copenhagen Denmark, where the carrier has his principal place of business and the laws of Denmark shall apply except as provided elsewhere herein."
The Maritime and Commercial Court held that only the Danish Merchant Shipping Act was applicable to the carriage as the court found that there were no grounds for applying a restrictive interpretation of the jurisdiction clause. It was ordered that: "Pursuant to Clause 3, the contract of carriage is subject to Danish law, and as no other agreement has been made [the Merchant Shipping Act] shall apply."
Consequently, the ship-owner was held liable.
There are no specific statutory rules in Danish law governing the liability of the inland road carrier similar to those contained in the CMR Convention. The CMR Convention as implemented in Danish law only applies to international carriages.
The inland road carrier's liability is, however, subject to the more general rules of the Danish Road Traffic Act. These statutory rules, which are generally applied to all traffic accidents, are not suitable for the liability of inland road carriers in relation to the damage or loss of the goods carried.
In respect of damage or loss of goods during national transport by road carried by an inland road carrier, the liability for damage is most likely to be judged by the NSAB 2000.
The NSAB 2000 states the general terms and conditions for Nordic freight forwarders. The use of the NSAB 2000 requires that the rules are agreed between parties. The majority of Danish freight forwarders have undertaken the NSAB 2000 simply by referring to the rules in their offer to the client. The NSAB 2000 is based on the CMR Convention and the CMR Convention is therefore often used as a guideline whenever interpretation of certain details of an agreement is needed.
According to Article 16 of the NSAB 2000, the carrier is generally fully liable for the acts of his agents or other persons of whose services he makes use. As long as the claimant has established that the damage or loss of the goods occurred while the goods were in the possession of the carrier, the carrier is liable unless he can establish that the damage or loss was not caused by his own, or his assistant's, wrongful act or neglect. For example, if the damage or loss of goods is caused by the shipper or if the damage is beyond the control of the freight forwarder (force majeure). However, the general rule relating to circumstances beyond one's control is very limited under Danish law. Strikes, lock outs and bad weather conditions are not regarded as force majeure under Danish law. In other words, the liability of the freight forwarder is very strict. The burden of proof lies with him and it is very hard for the freight forwarder to establish force majeure.
According to Article 17.1 of the NSAB 2000 the owner of lost goods can claim damages corresponding to the invoice value. In addition, the owner can claim damages for freight and customs expenses. If the goods are only partly damaged, the owner can claim damages corresponding to the decrease in value, as stated in Article 18.
In the case of delay, the freight forwarder must pay damages according to a specific estimate, as stated in Article 20.1. If the delay is severe as laid out in Article 20.2, the owner of the goods is entitled to damages corresponding to the rules on total loss.
However, in all these cases the freight forwarder is entitled to limit his losses in line with Article 21. For expenses due to total loss or partial damage, the limitation is Dkr8,33 per kilogramme. For expenses due to delay, the freight forwarder is entitled to limit his loss to an amount equivalent to the freight payment.
Road Traffic Act
The NSAB 2000 complements the Danish Road Traffic Act. According to Section 101 of the Danish Road Traffic Act, the inland road carrier is responsible for any damage caused by the vehicle in connection with a traffic accident, an explosion or by fire arising from the vehicle. Section 101, however, only applies when the vehicle is in use and not, for instance, if it is parked. Consequently, the Road Traffic Act does not apply to the carrier's liability in the case of theft of the goods or damage in connection with loading or unloading.
Denmark has ratified the following transport conventions:
- The CMR Convention came into force in Denmark on September 26 1965;
- The Warsaw Convention came into force in Denmark on October 1 1937;
- The Hague Rules came into force in Denmark on May 7 1937, but Denmark withdrew on March 1 1985;
- The Hague-Visby Rules came into force in Denmark on June 23 1977; and
- The COTIF Convention, which replaced the CIM Convention, came into force in Denmark on May 1 1985.
For further information on this topic please contact David Rubin or Jesper Windahl at Bech-Bruun Dragsted by telephone (+45 77 33 77 33) or by fax (+45 77 33 77 44) or by e-mail ([email protected] or [email protected]).
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