Dr. Marco Remiorz, Dabelstein & Passehl, Germany

When a sea carrier files for insolvency in the course of the sea carriage, considerable additional costs and expenses occur in the efforts to deliver the cargo to the consignee.

If a German freight forwarder is instructed with the multimodal carriage including the sea leg, German Law can apply resulting in a general legal obligation of the forwarder having agreed on a fixed freight to perform the transport himself or with subcontractors in order to fulfil his obligation to deliver the cargo to the place of destination.

If a sea carrier instructed by the forwarder fails to perform his obligation due to financial problems, the forwarder is generally liable for the non-performance of the sea carrier as his vicarious agent. Additional costs e.g. by transhipping the cargo on to another vessel, extra storage, terminal, freight charges etc. are part of the economic risk of the forwarder whether the amount of the freight agreed with the sender covers the costs. The forwarder has agreed on a fixed freight to perform the transport, preferably the internal cost calculation of the forwarder results in a profit, however, in some cases the forwarder has to face not expected costs resulting in a financial loss for this particular assignment. This is the sole economic risk of the forwarder and he has no legal means in German Law to assign the risk to the shipper unless both have agreed on specific arrangements for that.

In cases where the shipper paid the extra costs and expenses, there are good chances to seek for compensation of those costs from the forwarder under the rules of German Law on agency of necessity.

If the non-performance of the sea carrier results in a loss of the cargo, the forwarder is liable for the loss due to German Law. It can be well discussed whether German general Transportation Law is applicable on such multimodal carriages or whether German Shipping Law applies to the specific leg of sea carriage, however, there are good reasons to apply Shipping Law when the actual sea carrier has not accomplished the sea carriage.

In cases of delay, German Shipping Law does not provide for specific rules, the general German Civil Law (BGB) is applicable. According to section 286 of the German Civil Code, the obligor is in default when he fails to perform following a warning notice from the obligee after performance is due. However, there is no need for a warning notice when the obligor seriously and definitely refuses performance or when a warning notice is superfluous for special reasons of the case. It can be well discussed whether a warning notice is necessary. However, as general rule based on a judgement of the Higher Regional Court of Hamburg dated 13 January 2016 it can be stated that the obligation to deliver the cargo is due after a time period of half of the designated time for the sea carriage elapsed from the date of the estimated time of arrival on. With other words if the sea carriage should last 20 days, the obligation to deliver the cargo gets due 10 days after the estimated time of arrival. If the shipper then sends a warning notice to the forwarder setting a time limit of e.g. one week to deliver the cargo, the prerequisites for delay are fulfilled because the forwarder has no possibility to exempt from liability being liable for the non-performance of his vicarious agent. But even if no proper warning notice was send, there are good arguments that the warning notice is legally superfluous when the obligee has actually no capability to fulfil the duty to deliver within the time limit adequately set.

When a liability for delay is established due to the general German Civil Law, there are not limitations of liability and the claim comprises also pecuniary damages. However, liability might be limited according due to the German Freight Forwarders’ Standard Terms and Conditions (ADSp).

As a result it can be stated that, according to German Law, a forwarder is generally liable for loss or damage and for delay caused by non or bad performance of subcontractors due to financial problems. The forwarder bears the risk for additional costs and expenses himself. Only under the strict requirements of section 313 of the German Civil Code an increase of the fixed freight might be demanded in addition to the agreement concluded, but only if circumstances which became the basis of the contract have significantly changed since the contract was entered into and if the parties would not have entered into the contract or would have entered into it with different contents if they had foreseen this change. Further, sections 313 demands that the forwarder cannot reasonably be expected to uphold the contract without alteration taking into account all the circumstances of the specific case, in particular the contractual or statutory distribution of risk. The prerequisites for an adjustment of the agreement are strict strengthening the general principle of sanctity of contracts. The forwarder is generally bound to his agreement with the shipper and not entitled to get a higher payment than the agreed freight when more costs and expenses than expected occur because of a bad or non-performance of one of the forwarder’s subcontractors.

For further information on this topic please contact Steffen Maelicke or Marco Remiorz at Dabelstein & Passehl by telephone (+49 40 31 77 97 0) or by fax (+49 40 31 77 97 77) or by e-mail (s.maelicke@da-pa.com, m.remiorz@da-pa.com).