As is known, at the end of August, Hanjin Shipping filed for bankruptcy at the same time in South Korea and in the U.S.. As a result, around 70% of the container vessels of its fleet, loaded with cargo, were literally forced to proceed, without however being allowed to dock at the original ports of destination.

Considering that the South-Korean company has for some years been in worrying financial waters, several customers – who were prevented from having their cargo returned – wondered why freight forwarders might have continued to enter into contracts of carriage with Hanjin, with a risk of exposing their principals to serious problems in case of the company’s collapse (as later occurred).

This case gives us the occasion to address the issue of liability of freight forwarders to third parties for their choice of the carrier with whom to enter a contract of carriage.

The freight forwarder contract is treated by the Italian Civil Code as an (undisclosed) agency agreement whereby the freight forwarder undertakes to enter into a contract of carriage, in its own name and on behalf of the principal, and to perform any acts ancillary thereto.

Therefore, a freight forwarder – other than a freight forwarder-carrier within the meaning of Article 1741 Italian Civil Code[1] –  shall be liable in respect of the entrusted tasks (according to the terms below) essentially in two cases: (i) if it fails to enter into a contract of carriage and (ii) if it fails to act with due professional care, by entering into contract of carriage with an “unreliable» carrier.

The second scenario involves liability on the part of the freight forwarder due to «culpa in eligendo», i.e. «negligence in selecting» the carrier with whom to enter into the contract of carriage.

A typical example of culpa in eligendo is when carriage is entrusted to a carrier who has no adequate insurance cover in place. Another example could be when carriage is entrusted to a carrier in an apparently precarious financial situation. This latter scenario could fit the Hanjin case.

In such cases, the principal must prove, in addition to, of course, the damage suffered, also negligence or imprudence in the conduct of the freight forwarder. In other words, one must prove that the choice of loading the cargo onto the ships of a financially troubled carrier was reckless and thus in breach of Article 2043 of the Italian Civil Code.

Therefore, from a compensation prospective, in a case of carrier’s negligence, under Italian law the burden of proof lies with the customer. It is indeed the customer who must prove that the freight forwarder entered into contract with an «unreliable» carrier.

This is, in fact, the main professional responsibility of a freight forwarder. According to a well-established line of precedents of Italian courts, the freight forwarder (other than a freight forwarder-carrier) cannot indeed be held liable for «culpa in vigilando» (i.e. negligence in supervising the acts of the entrusted carrier), precisely because its responsibility is strictly limited to entering into a contract of carriage that is as functional as possible to the principal’s needs (in addition to performing ancillary operations).

At this stage, once the scope of the freight forwarder’s liability and the room for legal action by customers has been understood, as concerns the Hanjin case, customers will have to prove that the freight forwarder was, or could have been, aware of the precarious financial situation that eventually led to the company’s collapse.

This can only be assessed on a case-by-case basis and any assessment of the freight forwarder’s conduct –  concerning a profession marked by a high level of specialisation – must be carried out according to equally high parameters of diligence.

If, on the contrary, the freight forwarder had proposed particularly attractive freight rates compared to the market to the customer, the customer might be deemed to have accepted the relevant risk, precisely as occurs in the market of financial products, where an investor who buys a high-risk (and high-return) product is – as a rule – prevented from bringing a liability action against the bank concerned.