All questions

Shipping contracts

i Shipbuilding

The French shipbuilding industry has proved increasingly promising in recent years. Shipbuilding contracts are governed by Articles L5113-1 to L5113-6 of the Transport Code, which provide for a holistic approach to contractual freedom. Pursuant to Article L5113-2, the main requirement is for the contract to be in writing. Moreover, the shipyard is required to make a declaration to the competent maritime administration, to enable the administration to determine whether the necessary safety conditions for the construction are met.

Two types of sales coexist: the parties must choose between a sale that will be completed on delivery, or a sale in which the ownership is transferred during construction. The aim of the latter type of sale is to protect the owner if the shipyard goes bankrupt.

Regarding the actions that can be engaged against a shipyard for defects, Article L5113-4 of the Transport Code provides that the builder 'guarantees any hidden defect of the vessel, even if the buyer has accepted the delivery without reservation'. This action is time-barred one year after the defect is discovered. This provision sets out a strict liability regime, reinforced by the applicability of Article 1643 of the Civil Code, which imposes on the seller an obligation to reimburse the purchase price, or to compensate for damage that may have occurred because of the defects. Clauses limiting or excluding the builder's liability in the event of the existence of hidden defects are only valid in certain circumstances under French law.

ii Contracts of carriage

The 1968 Protocol to amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (the Hague-Visby Rules) is enforceable in France. The UN Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules) is not applied by the French courts unless the parties have inserted a paramount clause in the contract of carriage.

The French Transport Code also contains provisions concerning contracts of carriage. Depending on the international nature of the contracts and other criteria, such as the port of departure or destination, an international convention or a French law will apply. When applicable under the conflict-of-law rules, French law also governs issues not addressed by the Hague-Visby Rules.

French legislation does not contain specific provisions in respect of multimodal transport. Freedom of contract prevails, except in two cases where provisions on multimodal transport are set by an international convention: a rail–sea carriage is governed by the mandatory provisions of the Uniform Rules Concerning the Contract for International Carriage of Goods by Rail; and in the case of a road–sea carriage, provisions of the Convention on the Contract for the International Carriage of Goods by Road 1956 (the CMR Convention) are applicable if the goods are not unloaded from the road vehicle. It must be highlighted that under French law, a party that organises a carriage (multimodal or otherwise), acting for the account of another party but in its own name, is considered to be a forwarding agent, governed by Article L132-3 et seq. of the French Commercial Code. A forwarding agent is liable for its own acts and omissions. Unlike a freight forwarder, it is also vicariously liable for the acts and omissions of its subcontractors, including the carrier. As such, it has a strict liability for loss or damage to the goods.

Cabotage in France is reserved for French and European nationals shipowners8 who operate vessels registered in, and fly the flag of, a Member State of the European Union or the European Economic Area (EEA) pursuant to Article 257 of the Customs Code.9 Maritime cabotage is also governed by the Maritime Cabotage Regulation.10 As a result of Brexit, vessels registered under the UK flag, owned or operated (or all three) by UK entities will no longer meet the conditions of access to French cabotage.

iii Cargo claims

As a contract of carriage will impose a strict liability on the carrier in most instances, cargo claimants will seek to file their claims on a contractual basis. Both the shipper and the consignee or endorsee will have a right of action against the carrier under the bill of lading, provided they have personally suffered losses. In addition, parties whose names are not mentioned on the bill can also sue the carrier on a contractual basis if they can establish that they are the actual shipper or consignee of a cargo (for example, because a freight forwarder or a non-vessel operating common carrier (NVOCC) is named in lieu of them). Cargo underwriters can act personally before the French courts on a contractual basis if they establish that they have been subrogated to the rights of the insured.

A frequent issue concerns the identity of the carrier. Contractual claims can be pursued against the carrier named on the bill, even if it is not the actual carrier (NVOCC bills). If the name of the carrier is not provided on the bill, a rule established in 198711 states that the registered owner of the vessel is deemed the carrier. Demise clauses cannot be invoked against shipowners in France.

Under French law, a party can claim full recovery of losses sustained – that is to say, not only resulting from the actual damage to the cargo but also as a consequence of, for example, the damage or loss and the extra costs incurred.

Both the Hague-Visby Rules and the French Transport Code provide that action against the carrier for loss or damage is time-barred after one year, unless the parties agree on a time extension12 after the event that has given rise to the claim.

Where an arbitration clause is mentioned on a bill of lading, the kompetenz-kompetenz principle prevents French courts from deciding by themselves whether this clause applies.13 The French Supreme Court has moderated its position regarding jurisdiction clauses and considered that where the consignee, on acquiring the bill of lading, succeeded to the shipper's rights and obligations by virtue of the relevant national law, then a jurisdiction clause can be invoked against the consignee with no need to establish the specific agreement.14 Nevertheless, the enforceability of jurisdiction clauses remains much disputed before the French courts.

iv Limitation of liability

France has ratified the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976) and the Protocol to amend the LLMC Convention 1996 (the 1996 LLMC Protocol, as amended15) has been in force in France since 2007. This applies to vessels flying foreign flags (regardless of whether they are a party to the LLMC Convention 1976). French domestic law, which applies to vessels flying the French flag and subject to proceedings before the French courts, contains similar provisions to those of the LLMC Convention 1976 under Article L5121-1 et seq. of the Transport Code.

Constituting a limitation fund in France is relatively quick and simple. An ex parte application requesting the court's permission to constitute a limitation fund can be presented to the president of a commercial court, who will appoint a liquidator and stipulate the way in which the fund can be constituted. Funds are usually made up by way of a P&I club guarantee. Once the letter of undertaking or the cheque has been handed to the liquidator, a second application must be presented for the court to acknowledge the constitution of the fund.

France is known for being strict with regard to shipowners seeking to limit their liability. The French courts have initially adopted an objective approach of the conduct-barring limitation, considering that an inexcusable fault has been committed when the shipowner 'should have known' that the loss 'may' result from the conditions in which the voyage was undertaken.16 Later decisions, however, suggest that the French courts are gradually overcoming their claimant-friendly approach and have adopted a subjective approach in line with a strict application of the terms of the LLMC Convention 1976.17