Sören Thorlin November 30 2011 Nordic freight forwarding conditions to be modernised Skarp Stockholm Advokatbyrå | Shipping & Transport - Sweden Sören Thorlin Shipping & Transport BackgroundNew provisions CommentBackgroundIn Sweden, freight forwarders are subject to no special mandatory regulations. In principle, the parties involved are free to agree whatever terms they wish, provided that these do not contravene the law. Despite this, few freight forwarding agreements are made between parties. Rather, the General Conditions of the Nordic Association of Freight Forwarders are widely used within the Nordic countries (ie, Sweden, Norway, Denmark and Finland). The effective edition of this standard agreement took effect on June 1 1998. The general conditions contain provisions relating to: the forwarder's assignment; the performance of assignment; the liability of the forwarder as a carrier, as a provider of services and in connection with storage; the liability of the principal; and complaints and the procedure in the event of disputes. One of the most important clauses in the general conditions establishes the so-called 'network principle', according to which liability as carrier is governed by a special set of rules which apply depending on the means of carriage (see below). The general conditions were developed through negotiations between organisations representing both forwarders and freight shippers in all the Nordic countries. The conditions are considered to be well balanced; thus, the general conditions are considered to be a so-called 'agreed document'. The general conditions hold a unique position in the Nordic countries and are widely used throughout the shipping industry. Normally, the general conditions are applicable to a freight forwarding operation by referring to the conditions when entering into the agreement. During recent years it has been an open secret that the general conditions are undergoing revision. The initiative was taken by the Nordic Association of Freight Forwarders, and the work is being carried out by a group of lawyers representing the professional industrial organisations for carriers in their respective countries. In Sweden, that work is being overseen by the Swedish International Freight Association. However, even before this revision work began, the question as to whether a new Nordic-wide document on freight forwarding should be drawn up was open to debate. The background to the revision is that in 2006 the Norwegian organisation wanted certain environmental regulations to be included in the general conditions. Hence, Norway sent out invitations to its Nordic colleagues. Soon the representatives met in Copenhagen to discuss not only the proposed new environmental rules, but also other proposals for change.By this time, however, the Swedish International Freight Association had started to think about a future beyond Nordic-wide general conditions. One thought was to take a closer look at the International Federation of Freight Forwarders Association rules, and the German Freight Forwarders' Standard Terms and Conditions were also on the table. Eventually, the association decided to continue its Nordic cooperation, in line with the long tradition of common legislation among the Nordic countries (eg, the Nordic Maritime Code). During the preparation work, lawyers representing the respective organisations in the four countries met regularly to discuss those provisions that they considered necessary to change. During these meetings the new document gradually took shape, and in late September 2011 a draft document was agreed upon by the parties. At the beginning of October 2011, the draft document was sent to the respective freight shipping organisations in each of the four countries (in Sweden, the Shippers' Council). These organisations will now consider the content of the draft together with their members. However, there is much work to be done before the existing general conditions can be replaced. After considering the draft, the Shippers' Council will negotiate the draft document with its sister organisations in the Scandinavian countries. The Swedish International Freight Association hopes to initiate negotiations with the Shippers' Council in early 2012. The goal is then to have a revised version of the conditions at hand by Summer 2012. New provisions The draft is still a secret document and subject to discussion and negotiation. Thus, at this stage no specific details on the new draft document are known. However, some of the proposed changes have become public knowledge. The network principle, as set out in Article 23 of the existing document, will remain untouched. The principle has long been understood by lawyers but is almost unknown among hauliers, shippers and consignees. Therefore, this fundamental principle will be moved to Article 1 of the new document, where it is less likely to be overlooked. Otherwise, the network principle will remain untouched, although its applicability will be extended. At present, the principle applies only to Sections 5 and 15 to 25; in the revised version, the principle will apply to the whole document. One problem to arise from the existing general conditions is the question of whether a freight forwarder acts as a forwarder only or as a carrier. When drafting the new document, the authors put a lot of effort into defining the role of a forwarder in order to avoid any uncertainties with regard to what services can be provided by a modern-day freight forwarder. Many advances have been made since 1998 – for example, with regard to third-party and fourth-party logistics. Today, some freight forwarders even run their own small factories, assembling products, storing them and delivering them to the final customer. With regard to the forwarder's liability as carrier, the important 'own price' criteria will remain untouched in the draft document – that is, where a forwarder offers a carriage and freight in its own name, it will always have carrier liability. The draft document proposes no changes in relation to storage. However, a separate discussion will be initiated with insurance companies concerning the liability insurance of freight forwarders (see Section 29(c)). A number of articles in the existing general conditions are widely regarded as being overly complicated. For example, Sections 9 to 13 appear to deal with almost the same issues. In order to simplify the text, these five sections have been cut down to three. However, even though one of the reasons for the revision was to simplify the document, the new edition has more pages than its predecessor. The group discussed whether it would be feasible to issue a shortened main document with several annexes to be referred to depending on the type of services provided by the freight forwarder, but this plan was ultimately rejected. The revised document introduces a non-liability rule in favour of the freight forwarder in relation to goods delivered to the freight forwarder outside the agreed time of delivery. Should a shipper deliver goods to the forwarder earlier than agreed, the forwarder has no liability until the agreed time is reached. Under the existing conditions, disputes may be dealt with in different ways in the different countries. In Sweden, disputes in which the claimed amount is above €30,000 must be referred to the Arbitration Institute of the Stockholm Chamber of Commerce, in accordance with the rules for expedited arbitration; disputes in which the claimed amount is below that amount must be actioned in court. Under the new conditions, court proceedings are the starting point, regardless of the amount in dispute. Should the parties wish to avail of arbitration, they must draw up a separate arbitration agreement. The authors leaned towards the courts in the new draft because arbitration awards are rarely made public. This also means that the rules of successive carriage in the Convention on the Contract for the International Carriage of Goods by Road will be fully available. CommentThe draft of the new general conditions remains a secret. Negotiations will start soon, but there is still a long road to walk before a new version of the general conditions will be ready to use. It seems likely that it will be 2013 before the parties agree on a final version of the text.For further information on this topic please contact Sören Thorlin at JCA Skarp by telephone (+46 8 676 9780), fax (+46 2 118 0699) or email ([email protected]).