Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. London The St Botolph Building 138 Houndsditch London EC3A 7AR Guildford 1 Stoke Road Guildford GU1 4HW Manchester Chancery Place 50 Brown Street Manchester M2 2JT Oxford Rowan Place 3140 John Smith Drive Oxford Business Park Oxford OX4 2JZ T: +44 (0)20 7876 5000 F: +44 (0)20 7876 5111 Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2014Introduction In this, our second Transport and Logistics Newsletter we discuss a number of issues relevant to the international logistics industry. With more and more logistics providers expanding operations outside of Europe, unfamiliar processes, local rules and regulations, bureaucracy and security risks can have a significant impact on operations and can increase the risk of goods being lost, damaged or delayed during transport. It is for this reason that logistics providers, their customers and insurers should have a clear understanding to enable effective planning and minimise potential liabilities. Logistics solutions often give rise to complex legal issues between a range of different parties. Alongside the firm’s leading commodities, shipping and aviation practices, at Clyde & Co we have built a team of lawyers dedicated to dealing with any issue arising across the logistics industry, whether it be handling litigation in relation to damaged or stolen goods, drafting bespoke commercial agreements, advising on insurance, regulatory, health and safety, employment or trade union issues or assisting with a company sale or purchase, fundraising or listing. Our clients include global logistics providers, their customers, in-house logistics departments and insurers and they rely on us to manage all of their legal issues concerning the supply chain. Clyde & Co – A leading international law firm with over 1,500 lawyers operating over 6 continents. Newsletter Summer 2014 Transport and Logistics Contents Introduction Page 1 European Courts confirm that forum shopping is permitted under the CMR Page 2 UK import taxes – The importance of getting it right Page 3 Carrier and forwarder liability in Russia Page 4 Multimodal transportation in India Page 5 Overseas investment sparks West African infrastructure upheaval Page 6 Click and collect Page 7 Can your global workforce enforce UK employment rights? Page 8 New UK competition rules Page 9 Meet the team Page 10 Transport and Logistics Newsletter Summer 2014 2 Transport and Logistics Newsletter Summer 2014 European Courts confirm that forum shopping is permitted under the CMR John Flaherty, Partner, and Tom Gorrard-Smith, Associate For hauliers, cargo interests and their insurers, the court that hears disputes in respect of damage, loss or delay to cargo carried by road can be of critical importance. Whilst the preamble to The Convention on the Contract for the International Carriage of Goods by Road (the “CMR”) states that its objective is to provide a uniform liability regime, in practice, national courts interpret and apply the CMR slightly differently, leading to certain jurisdictions developing “shipper friendly” reputations including Germany, Italy and France, or “carrier friendly” reputations such as The Netherlands and the UK. Article 31(1) of the CMR provides that proceedings may be commenced in any jurisdiction where the defendant is resident or has its ordinary place of business, where the goods were taken over or the designated place of delivery. Accordingly, hauliers and cargo interests often have a number of options when it comes to deciding in which country to start legal proceedings. With Article 31(2) providing that where “an action is pending before a court or tribunal… no new action shall be started between the same parties on the same grounds”, the party that initiates proceedings first can obtain an enormous procedural and tactical advantage over their opponents. Significantly, as certain jurisdictions, such as The Netherlands, do not allow cargo interests to recover customs and excise duties under Article 23(4) of the CMR, the race to make a “pre-emptive strike” by commencing declaratory proceedings in a favourable jurisdiction can also impact on the quantum of a claim. Declaratory judgments – can they be relied upon? In an attempt to thwart forum shopping and to prevent hauliers from relying on a declaratory ruling obtained in another CMR state, in 2003 the German Federal Supreme Court ruled that a declaratory action by a haulier did not constitute a “pending” action for the purposes of Article 31(2) of the CMR. However, the issue as to whether declaratory proceedings made by courts in other EU Member States could be ignored was recently brought to the German court’s attention again in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV. Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV In August 2007, Canon contracted with Nippon Express (“Nippon”) to carry a consignment of cameras from The Netherlands to Germany. Nippon then subcontracted the carriage to Inter-Zuid Transport who, in turn, subcontracted to Kingma. As Kingma’s driver arrived late at the designated place of delivery, the lorry containing the cargo was left unattended at the recipient’s unguarded premises overnight, during which time the cargo was stolen. In September 2007 the carriers down the contractual chain commenced proceedings in The Netherlands and obtained a declaratory judgment in January 2009 which provided they were liable only up to the CMR limit of EUR 50,000. In September 2010, following a payment of EUR 500,000 to Canon in settlement of their claim, Nippon’s insurers, Nipponika Insurance, commenced recovery proceedings in Germany against Inter-Zuid. Inter-Zuid challenged the German court’s jurisdiction, referring the court to the declaratory relief issued by the Dutch court 18 months previously and arguing that the German court were, in accordance with Council Regulation (EC) No 44/2001 (“Regulation 44/2001), bound to give effect to the Dutch judgment. The German courts referred the matter for a preliminary ruling to the European Court of Justice (“ECJ”) requesting clarification from the ECJ as to whether Regulation 44/2001 applied to the CMR and other similar international conventions. Significantly, the ECJ ruled in December 2013 that it did apply and ruled that Article 71 of Regulation 44/2001 precluded the German’s courts previous interpretation of Article 31(2) of the CMR. The ECJ’s decision now means that the courts in European member states cannot ignore declaratory proceedings made by the courts in other member states and, significantly, emphasises the importance of moving swiftly to initiate legal proceedings after loss or damage under the CMR. Back to page 1 3 Transport and Logistics Newsletter Summer 2014 UK import taxes – the importance of getting it right Ray Smith, Partner, and Chris Waddington, Associate For many UK businesses bringing goods into the UK, import taxes (such as customs duty, excise duty and import VAT) can often be overlooked. However, these can be significant, so it is worth being aware of how goods are classified, the available reliefs or exemptions, and being ready to challenge any assessment issued by HMRC. Customs duty paid at importation, cannot be deducted or off-set against onward tax liabilities, unlike VAT. The liability to pay customs duty at importation depends on factors such as which goods are being imported, their country of origin, their value and the duty rate applicable. In addition, where the imported goods are subject to VAT, reducing the customs duty liability will reduce the value of the imported goods for VAT purposes. It is therefore critical for businesses involved in international trade to or via the UK to: –– Establish the correct classification and commodity code to determine the correct duty rate applicable. If in doubt you should obtain professional advice and/or apply to HMRC for a ‘binding tariff information’ (BTI) ruling to have certainty of treatment going forward –– Check whether: –– Any import or export licences are required or any special regulations apply to the goods (‘measures’) –– VAT is payable and the applicable rate of VAT –– Any reliefs or exemptions are available such as preferential duty rates for goods imported from certain countries (this usually requires a valid ‘certificate of origin’) or relief where imported goods are held or processed in the UK to be subsequently re-exported –– Any other customs procedures apply to your goods –– If you use a third party to handle delivery and customs clearance on your behalf, you should: ––Obtain copies of all customs declarations submitted to HMRC and check they are accurate –– Check that the contract clearly states which party is responsible for determining the classification of the goods and payment of any duty (usually the importer) –– Check whether they act as your ‘direct’ or ‘indirect’ representative as this determines, from HMRC’s perspective, whether the third party is also jointly liable for any customs duty There are also procedures which allow customs duty and import VAT to be suspended or deferred until the goods are re-exported or released into free circulation in the UK (e.g. customs warehousing), resulting in significant savings and/ or cash-flow benefits. What to do when HMRC raise an assessment If HMRC determine that an error on a declaration has been made, an assessment for the under-declared duty and import VAT (if applicable) will be issued (the time limit is three years from the date of import entry). This will usually include an assessment for interest and penalties. It is essential that errors and assessments are dealt with fully and promptly to avoid further penalties and/or interest charges. However, it is also critical not to accept HMRC’s decision and assessment without first verifying that they are actually correct in respect of both the applicable classification and the quantum of customs debt and any import VAT. Few businesses challenge HMRC’s classification and potentially lose the opportunity to avoid significant additional costs. You always have the right for a re-consideration and a right of appeal so it is prudent to check: –– The basis of HMRC’s classification – have HMRC fully the understood the product, its characteristics and function or have certain factors been ignored? ––Do you have the benefit of a valid BTI? ––Have you classified your product to the commodity code on the import declaration in reliance on advice obtained from HMRC? If so, EU regulations governing customs duty specifically include protections in certain circumstances where this occurs We would therefore strongly recommend that professional advice is sought if your company receives notice that they are being investigated by HMRC and if there is any doubt whatsoever as to whether you or your agent have declared goods correctly. Back to page 1 4 Transport and Logistics Newsletter Summer 2014 Carrier and forwarder liability in Russia Maire Ni Aodha, Partner In relation to international carriage, Russia is a party to various international transport conventions (Hague Visby/Warsaw/CMR) and where any of those conventions apply, the Russian courts will permit the defences available and apply the limitation provisions under those conventions. As for domestic carriage, whether it be by air, inland waterways, rail or road, in general the carrier’s/forwarder’s defence under the applicable legislation (i.e. Aviation Code, Rail Charter, Civil Code, Transport Charter and Law on Forwarding Activities, respectively), is similar to that in Article 17 of the CMR Convention, which provides, inter-alia that: Article 17 of CMR The carrier shall, however, be relieved of liability if the loss, damage or delay was caused … through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent. Thus, for example, Article 34.5 of Law on Transport Charter: The Carrier shall be liable … unless the carrier proves that loss, short delivery or spoilage of cargo were caused by circumstances which the carrier could not avoid or the consequences of which he was unable to prevent; And Article 7.1 of Law on Forwarding Activities: The forwarding agent is liable … unless the forwarding agent proves that loss, short delivery or spoilage of cargo were caused by circumstances which the forwarding agent could not avoid and the consequences of which he was unable to prevent. Similar provisions can be found in the Aviation Code and Rail Charter. In determining a carrier’s/forwarder’s liability under the various transport legislation, the Russian courts have applied the provisions of Article 401.3 of the Civil Code, which provides inter-alia that: Unless otherwise stipulated by law or by contract, a person, who has failed to discharge, or has discharged in an improper way, an obligation in the conduct of entrepreneurial activity shall be liable, unless he proves that proper performance is impossible as the result of force-majeure, i.e., extraordinary circumstances unavoidable in the given situation. As a result Russian courts have ruled that carriers and forwarders can only avoid liability for loss or damage if they can prove that the loss/damage and the consequences of the loss/damage occurred/could not be avoided, was as a result of circumstances of force-majeure. This application of the law has been upheld by the Russian Higher Arbitrazh Court. Thus, even in cases where the carrier’s driver is not at fault for a road accident (for example where a third party vehicle has crossed the centre line into oncoming traffic and the carrying vehicle could not avoid a collision), the Russian courts have ruled that road traffic accidents are a usual incident of the “entrepreneurial activity” of a professional carrier, and therefore cannot be considered a force-majeure event. As to excluding or limiting liability, the applicable legislation invariably provides that any agreement to exclude or reduce liability below that specified by law is null and void. In general the applicable legislation provides that the compensation payable by a carrier/forwarder for loss or damage is, for cargo loss, the actual cost, and for damaged cargo, the depreciation in the actual cost. The Russian courts invariably accept the commercial invoice value as the actual cost of the cargo. A consequence of the liability of carriers/forwarders under the law is that liability insurance is prohibitively expensive with the result that quite a lot of carriers/forwarders do not have cargo insurance and claimants have been left holding a court ruling for the full value of their claim but little prospect of actually recovering their losses. Back to page 1 5 Transport and Logistics Newsletter Summer 2014 Multimodal transportation in India Harsh Pratap, Advocate, Clasis Law Being well-connected by road and by sea, India has seen a tremendous growth in multimodal transportation. It is important that parties are aware of the relevant provisions governing multimodal transport to ensure their interests are adequately safeguarded and necessary precautions can be taken. The Multimodal Transportation of Goods Act 1993 (“MTG Act 1993”) was enacted with the purpose of developing the multimodal transportation sector in India and to implement a uniform set of rules and regulations. Under the MTG Act 1993, a Multimodal Transport Operator (“MTO”) is the company who is registered as an MTO and concludes a multimodal transport contract either on his own behalf or through a person acting on his behalf as a principal. It does not include a company that acts as an agent either of the consignor or the consignee or the carrier participating in the multimodal transportation who assumes responsibility for the performance of the multimodal contract. Not only is the registration process both cumbersome and time consuming, this definition has led to significant issues as often it is the freight forwarders who conclude the contract with the actual shipper and who makes arrangements for the transportation and assumes responsibility for transporting the goods. As the shipper often does not have any direct contract with the actual MTO it makes it difficult for the shipper to sue under the multimodal transport document (“MTD”) for any loss or damage to the cargo whilst in the custody of the MTO. The shipper can, however, avoid such a situation by insisting that it is named as the shipper in the MTD issued by the MTO. Under the MTG Act 1993, a multimodal movement requires the export of goods from India using at least two different modes of transport. It is, however, extremely common for registered MTOs to issue MTDs for uni-modal transport, resulting in a number of claims being filed under the MTG Act 1993. Furthermore, as the MTG Act does not apply to imported goods, it means that different rules and regulations apply to such movements. In respect of liability for loss or damage, the Act provides that the MTO must show that the loss or damage did not occur due to any fault or neglect of the MTO or his agents. If the nature and value of the consignment have not been declared by the consignor and the stage of transport where the loss or damage occurred is not known, the Act gives a right to the MTO to limit its liability to two SDRs per kilogram of the gross weight of the cargo affected or 666.67 SDRs per package or unit, whichever is higher. If, however, no carriage by sea or by inland waterways is involved, the limit incurred is 8.33 SDRs per kg. Where the mode of transport is known, the MTO is liable according to the provisions of the applicable law governing that type of movement. The Act provides that delivery of the consignment to the consignee is prima facie evidence of proper delivery in accordance with the MTD, unless notice of the loss or damage is given by the consignee to the MTO at the time the goods were handed over. Where loss and damage is not apparent, the notice should be given within six days. Problems arise, however, where defects are identified after six days or when consignees fail to notify the carrier, in which case the burden to prove the goods were handed over in a damaged condition falls on the consignee. The Act gives the MTO a statutory lien over the goods and the documents for MTOs consideration under the MTD. The Act also puts the onus on the shipper to inform the MTO of the nature of any dangerous goods and what precautions should be taken to transport such goods. Failure to do so will render the shipper liable for all loss unless the MTO has knowledge of the goods. The Act provides for a limitation period of nine months to bring an action against the MTO from the date of delivery or the date on which the goods should have been delivered. The Act also allows the MTD to provide for any dispute to be referred to arbitration. The parties should be aware of the intricacies of the MTG Act 1993 when transporting goods in India and also any specific terms and conditions agreed, so that they are aware of their rights and obligations and are able to take necessary precautions. Back to page 1 6 Transport and Logistics Newsletter Summer 2014 Overseas investment sparks West African infrastructure upheaval John Flaherty, Partner, and Tom Gorrard-Smith, Associate The escalating international demand for energy has sparked a scramble by foreign energy companies to tap West Africa’s vast off-shore resources. Governments along Africa’s Atlantic Ocean seaboard have now sat up and taken note of this opportunity to utilise the influx of foreign direct investment (“FDI”) to be able to overhaul their crumbling road and rail networks which have, for decades, been a source of persistent exasperation for logistics providers and cargo underwriters alike. Although Nigeria’s oil industry has been the main destination for FDI, the last five years has seen a dramatic increase in overseas investment across various economic sub-sectors. This has resulted in a marked increase in imports and exports, with China’s need for resources and commodities in particular driving trade flows between West Africa and East Asia. However, the region’s outdated infrastructure has been unable to keep pace with the economic growth, hampering local, regional and international trading efforts. 2013 saw an estimated USD 31 billion in FDI flow into Africa, with a significant portion aimed at investing in ports, roads and rail networks across West Africa, attempting to remove infrastructural bottlenecks and smooth trade flows. Dwell times, the period from when a container is discharged from a vessel until it exits a terminal, are on average four times longer in West African ports than in Asia, leading to significant congestion and delays, increasing transportation costs and impacting upon trade within the region. There is now heightened impetus to develop a multi-use multi-purpose infrastructure in West Africa to speed up the transportation of goods, and FDI, particularly from China, is crucial to achieving this goal. Infrastructural developments Overseas investment in the region is not simply limited to private Chinese companies attempting to diversify their markets abroad and export their expertise. In Nigeria, APM Terminal, AP Moller-Maersk’s port operator subsidiary, has recently concluded plans to increase its investment in the Apapa Container Terminal to USD 330 million to boost capacity to 1.2 million TEU per year. Similar infrastructure projects are now also underway in Ghana, Ivory Coast and Liberia. Alongside port developments, Maersk have also upgraded its services to West Africa by introducing a further twentytwo 4,500 TEU WAFAMAX (West African Max) vessels designed specifically with lower drafts in order to meet restrictions in many West African ports. Investment risks With the region enjoying a prolonged period of consistent economic growth, West Africa’s trade potential is ultimately reliant on the development of supporting infrastructure. Whilst foreign investors have been quick to identify the exponential opportunities available, considerable risks both for overseas investors and their government joint venture partners remain. As regulatory and policy frameworks are being hurriedly drawn up to manage these infrastructural developments, there is a risk that these projects may not be adequately governed. Such uncertainty makes it less attractive for international investors and will increase the operating costs in relation to, for example, security and insurance. Nonetheless, this is a challenge that many West African countries, together with overseas investors, are actively developing solutions for, in order to facilitate increased levels of international trade. Whilst the risk management required for any foreign investor looking to do business should not be under-estimated, the potential upsides that can be achieved means that we expect to see increasing levels of foreign investment into transport and infrastructure projects in West Africa. Back to page 1 7 Transport and Logistics Newsletter Summer 2014 Click and collect Nick Purnell, Partner, and Isabel Ost, Associate Ever-changing consumer demand has highlighted the significance of the logistics industry, in particular the importance that delivery companies move in parallel with retail partners. An increasing number of UK retailers such as Amazon, Asos and Waitrose are partnering with delivery companies, Transport for London and local stores to offer ‘Click + Collect’, where customers buy online and pick up the items from appointed locations. Its popularity is sky-rocketing, with 40% of UK consumers using Click + Collect over the Christmas shopping period last year. Correspondingly, consumers are notoriously unforgiving when it comes to service, and their experience when purchasing, receiving and returning goods can have a massive impact on both a brand’s reputation and the rate at which they will return to that retailer or service provider. Bad online reviews could mean the end of a partnership between retailers and delivery companies, as the reputation of one can drastically affect the other. So what do you need to consider before launching into the next big thing in retail? The contract matrix In a classic in-store purchase, a consumer creates a contract with the retailer at the point of sale. Any complaints regarding the item are dealt with between these two parties. A retailer may then have a claim against the manufacturer, but the consumer will only have to deal with the retailer in question. This system is mirrored for online purchases, but both the number of parties and the risk involved may increase when offering delivery or Click + Collect. It makes little difference for the consumer how their item is received – their contractual remedies remain with the retailer. However, that retailer will have an agreement with a logistics provider or contractors (unless the retailer has its own in-house delivery function) to transport the goods and either the retailer or the logistics provider will need a relationship with a storage facility and, for Click + Collect, a local storage location. The retailer, the party responsible for delivery and the party responsible for storage must agree who will maintain insurance over the products at every point in the process and must maintain effective communication system which ensures that the items are tracked and cared for throughout transit. Consumer law If a retailer uses a third party to deliver goods there will not be any direct contractual relationship between the carrier and the consumer. Consumers will almost certainly seek to enforce their contractual remedies against the retailer, who have to comply with myriad consumer laws and regulations, some of which apply equally to in-store sales and to distance sales. Such requirements will have a knock-on effect for agreements between retailers and their contracting partners. It is possible a consumer may also argue that a retailer is in breach of contract if goods are lost after being delivered to a neighbour rather than the specified address (if the consumer has not agreed to this as a delivery option). Retailers may be liable to the consumer in these circumstances, but may wish to recoup their losses against the delivery company if they are at fault. In addition to general consumer rights, retailers who provide online shopping must also comply with various legislative requirements which cater for the fact that consumers are unable to see and touch the goods before purchasing them. These requirements will affect a retailer’s online terms and conditions. When offering online sales retailers need to be wary that their website terms and conditions, advertising practices and privacy and cookie policies are compliant with UK law and any other jurisdiction in which they are trading, which will, inevitably, have a knock-on effect for their dealings with partners. Conclusion When offering delivery or Click + Collect services, retailers have an added imperative to have clear arrangements with contracting partners in place, not only in the interest of providing excellent service but also to ensure compliance with consumer laws. Therefore, before launching a new product or service, it is important to consider and set out not only the particular roles and duties of each party, but also how any issues will be dealt with quickly and quietly to avoid the bad press that can make or break a company’s reputation. Back to page 1 8 Transport and Logistics Newsletter Summer 2014 Can your global workforce enforce UK employment rights? Chris Holme, Partner Managers throughout the world need to be wary of UK1 employment rights. Employment tribunals and courts, including the UK Supreme Court, have been labouring over what, on the face of it, should be a simple question: Can an employee, whose job gives them connections in more than one country, make the most of the UK’s sophisticated employment rights? If you are asked to identify your UK workforce you can picture people based at a UK site, who may or may not travel around a bit, but always end up back home in the UK. However, global employment is not always that simple. The problem starts with the employment relationship itself. The contract of employment is likely to say what the governing law is. That is important when you are dealing with rights and liabilities that arise under the contract, such as notice, bonus and restrictive covenants. However, contract rights are supplemented by statutory rights, such as unfair dismissal and various forms of discrimination. It is made clear by legislation that the governing law of the contract does not decide whether the statutory rights apply. You do not avoid UK employment rights simply by careful drafting (although it may still help). In 2006, the House of Lords, in deciding the scope of UK unfair dismissal rights, identified three categories of employees who may be covered: • Employees working in the UK at the time of the dismissal: They will usually be covered (but not always, if the relationship with the UK was “casual”) • “Peripatetic” employees: For employees who travel extensively; to identify where their true “base” is, we need to look at what happens in practice rather than at their contract –– Expats: Being a UK citizen or having a UK employer is not enough. There needs to be something that makes the connection with the UK stronger than anywhere else. Examples given were: being posted abroad merely to be a representative of the UK employer, or working on what is seen as a UK “enclave” More recently, and usually in the context of expats, the Supreme Court has focussed on the strength of the connection between the employment relationship and the UK, looking not just at whether the connection is stronger than with any other jurisdiction, but also whether it is strong enough to mean that Parliament intended UK rights to apply. The UK Equality and Human Rights Commission have claimed similar principles apply in respect of discrimination cases. Tribunals and appeal courts have, in some cases, found the connection to be strong enough even if the employee has never worked in the UK. Factors taken into account have included whether the employer is a UK company, the domestic home of the employee, where tax is paid, whether the case concerns EU rights (rather than just UK rights) and even the employment status of spouses. But the cases and guidelines all make it clear that other factors may be relevant. It seems, therefore, that the question of whether someone based abroad is covered by UK employment rights is going to be answered by way of example, rather than by clear and reliable rules. This is bad news for international businesses, which may prefer certainty. To clarify any areas of doubt, it may be worth taking advice to establish if there is a UK connection in an overseas employment relationship. Back to page 1 9 Transport and Logistics Newsletter Summer 2014 New UK competition rules John Milligan, Partner From 1 April 2014 the reforms introduced by the Enterprise and Regulatory Reform Act 2013 have come into force. The recently established Competition and Markets Authority (“CMA”) has become operational and assumed the functions of the Competition Commission and the competition functions of the Office of Fair Trading (“OFT”) namely, competition investigations, merger control and market investigations. With the logistics sector, in particular, dominated by a relatively small number of multinational firms which in recent years have used vertical acquisitions to build market share along the supply chain, regulators have confirmed they will be taking steps to prevent competition from being threatened. In June 2014 the CMA confirmed its decision to bar Eurotunnel from operating its MyFerryLink service from Dover on the basis the decision would enable freight operators to have three competing operators for crosschannel transportation. The redefined criminal cartel offence, now without any requirement for dishonesty, has also been introduced. After ten years with no successful prosecutions under the Enterprise Act 2002, this is intended to make it easier to bring criminal prosecutions against individuals involved in cartel activity. One may therefore expect more prosecutions in the future. According to guidelines there will be no cartel offence if arrangements have been made public. There are criminal proceedings underway in relation to alleged cartel offences in the UK market for galvanised steel tanks for water storage (announced late January 2014.) As regards competition investigations for cartels and other anticompetitive agreements and abuse of a dominant position, the CMA has powers to seek oral explanations from individuals on any matter relevant to the investigation, similar to criminal investigations. The Competition Appeal Tribunal, as well as the High Court and Magistrates Court also has power to issue warrants to search and seize documents, computers and other evidence, and use reasonable force in conducting investigations. Greater transparency, including earlier sight by companies of proposed fines, will seek to give parties a greater opportunity to know the status of investigations and make more informed representations. Fines remain subject to a maximum limit of 10% of parties’ group worldwide turnover. As regards merger control, the CMA will have a discretionary power to impose hold-separate undertakings – suspending and potentially reversing measures taken to integrate merging businesses prior to clearance – in relation to anticipated as well as completed mergers. Breach of such undertakings will be punishable by fines of up to 5% of worldwide turnover. Despite the UK system of merger filings being voluntary, this development may increase merging parties’ incentive to seek UK merger clearance prior to completion. For Phase 1 clearances, the 40 working day time limit for clearing mergers will now be a formal statutory as opposed to administrative timetable. Phase 2 clearances will remain subject to a time limit of 24 weeks. Extensions of course can and do occur for provision of information and discussion of commitments to allay competition concerns if required. The thresholds for a ‘relevant merger situation’ which the CMA has jurisdiction to investigate (GBP 70 million turnover of the target or increase or creation of ‘share of supply’ of 25% or more), and the voluntary nature of the UK merger notification regime remain. In relation to market investigations (examples include the BAA airports investigation, private healthcare and motor insurance) there will be new statutory time limits requiring the CMA to consult on making a market investigation reference within six months of launching a study, and to conclude all market studies within 12 months. The CMA will also have wider powers to gather information compliance with requests being mandatory. The time limit for Phase II market investigations will be reduced from 24 to 18 months and remedies must be implemented within a further six months. Back to page 1 10 Transport and Logistics Newsletter Summer 2014 Meet the team Nick Purnell Partner, Corporate & commercial T: +44 (0)20 7876 5347 E: nick.purnell@clydeco.com Isabel Ost Associate, Corporate & commercial T: +44 (0)20 7876 5313 E: isabel.ost@clydeco.com John Milligan Partner, Competition T: +44 (0)20 7876 5451 E: john.milligan@clydeco.com John Flaherty Partner, Disputes & logistics contracts T: +44 (0)20 7876 6346 E: john.flaherty@clydeco.com Chris Holme Partner, Employment T: +44 (0)20 7876 6216 E: chris.holme@clydeco.com Maire Ni Aodha Partner, Disputes T: +44 (0)20 7876 4782 E: maire.niaodha@clydeco.com Nigel Taylor Partner, Corporate T: +44 (0)20 7876 4214 E: nigel.taylor@clydeco.com Ray Smith Partner, Tax T: +44 (0)20 7876 6145 E: ray.smith@clydeco.com Harsh Pratap Partner, Shipping and international trade T: +91 22 4332 7536 E: harsh.pratap@clasislaw.com Chris Waddington Associate, Tax T: +44 (0)20 7876 4212 E: chris.waddington@clydeco.com Tom Gorrard-Smith Associate, Disputes & logistics contracts T: +44 (0)20 7876 6349 E: tom.gorrard-smith@clydeco.com Back to page 1 11 Clyde & Co offices Associated offices Offices opening in 2014 Our offices 37 Offices across 6 continents 300 Partners, over 1,500 fee earners and 2,500 staff For full office details please refer to the Clyde & Co website www.clydeco.com/offices/global Asia Pacific Beijing Chongqing* Hong Kong Jakarta* Melbourne Mumbai* New Delhi* Perth Shanghai Singapore Sydney Ulaanbaatar* Europe Guildford London Madrid Manchester Nantes Oxford Paris Piraeus St Petersburg* Americas Atlanta Caracas Montreal New Jersey Newport Beach New York Rio de Janeiro* São Paulo San Francisco Toronto Middle East/ Africa Abu Dhabi Cape Town** Dar es Salaam Doha Dubai Johannesburg** Riyadh* Tripoli *Associated offices **Offices opening in 2014 CC005114 - July 2014 Clyde & Co LLP www.clydeco.com Further advice should be taken before relying on the contents of this Newsletter. 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