Multimodal Cargo Transportation – One Carrier, Different Liabilities

The transport sector of Lithuania is a stable and continuously developed economic section that generates nearly 13 percent of all of the value of the total gross domestic product (GDP) of Lithuania. From this year the intermodal terminals officially launched in May – June in Vilnius and Kaunas and the container distribution centre (the HUB) launched in Klaipėda should add up by gradually speeding up the pace to the contribution of the growing transport sector into the gross domestic product created by Lithuania and the general competitiveness of the sector in the international logistics system. It is to be hoped that the most northern Baltic Sea ice-free port, a well-developed infrastructure of the container cargo handling and railway of the Klaipėda port, as well as the gauge “Rail Baltica” built up to Kaunas, we could say, so far still pilot but full of potential routes of the container trains Viking, Šeštokai Express, The Sun and The Mercury, which should give a new impetus to the development of multi-modal cargo transportation in Lithuania.

One of the main factors affecting the development of the business is clarity and stability of the processes (including that of legal regulation). When we consider the universally known truth that the law usually follows public relations, the Ruling of the Court of Appeal of Lithuania adopted in 2014 in a case, where sufficiently detailed arguments were presented as to the issues of multimodal cargo transportation, is no coincidence in this respect.

The Concept of Multimodal Transportation

For the sake of clarity, it should be noted that in the global practice of cargo shipment, when several modes of transport are used for cargo transportation, different terminology is used to describe such a process: “multimodal transportation”, “intermodal transportation” or “combined transportation”. In principle, all these concepts define the process of transportation when a cargo is shipped from point A to point B by more than one mode of transport, but each of these concepts has its own peculiarities. For example, both the concepts of inter-modal and combined transportation generally define a process of transportation by more than one mode of transport, whereby a cargo is transported from one mode of transport to another without changing the intermodal transfer loading unit (e.g., a container, a removable displacement or semi-trailer). Meanwhile, the multi-modal transit transport business definition is often used to describe the process when changing the mode of transport the cargo itself is reloaded and not the unit of intermodal loading (in which the cargo is placed). However, sometimes the concept of multimodal transport is used to define the process of transportation in the most general sense, when a cargo in the course of transportation from point A to point B is shipped using more than one mode of transport (i.e., the concept of multimodal transportation thus includes the definitions of the processes of intermodal and combined transport). It should be noted that in the Lithuanian case law the concept of multimodal transportation is used in a broad sense until now (for example, both the cases, when a cargo was transported via maritime ferry in semi-trailer and later, without reloading it off the semi-trailer it was transported on road in a trailer, as well as the cases where a cargo was transported having reloaded it from a railroad wagon to a semi-trailer of a truck).

The Court of Appeal of Lithuania has also remained to the latter concept of “multimodal transportation” and in 2014 it handled the dispute concerning the liability of the carrier who lost part of its cargo transported via international route using several modes of transport. The panel of judges has noted that although the definition of “multimodal transport” is not provided under the national legislation of Lithuania, according to international sources of law the transportation of a cargo is considered to be multimodal when the cargo is transported using two or more modes of transport. The Court has also highlighted that the contract of multimodal transportation of cargoes is classified as a contract on cargo carriage. The person who has undertaken the duty under the contract to transport the cargo provided by the consignor to the destination is usually called an operator of multimodal transportation – they take the liability for the entire shipment, and among other things, for the proper delivery of the cargo to its destination.

Multimodal Transportation or Freight Forwarding?

In dealing with the dispute between the multimodal carrier and the consignor of the cargo, the Court has noted that as in the case of the contract on forwarding, the operator of multimodal transportation can carry the cargo both personally and take care of the organisation of cargo transportation, by using third parties for the actual cargo transportation. The Court has made it clear that the scope of liability of the operator to the consignor of the cargo does not depend on the role of the operator in the process of transportation, i.e. whether they acted solely as a freight operator in the performance of the obligations assumed to the consignor: did not actually transport the cargo by themselves, but coordinated its transportation or actually transported the cargo by themselves. It is important that the multimodal carrier undertakes to the consignor to act on their behalf and risk, thus, they assume full liability in respect of the consignor. The only difference is that the operator of multimodal transportation by using other actual carriers in the process of transportation, later could be able to demand that they compensate the damages it had remunerated to the consignor at its own account.

By classifying the established legal relations between the parties of the dispute, the Court of Appeal of Lithuania has pointed out that, according to the contract on cargo transportation via international routes the parties have agreed on transportation of cargoes by several modes of transport, rather than on the organisation of transportation. In addition, the Court decided from the provisions of the contract that its matter of subject was not simply the legal representation of the customer, but the entire organisation of the process of cargo transportation, by carrying out all the steps necessary for the transportation of the cargo in its own name and liability. Thus, the legal relationship of the multimodal cargo transportation was restricted by the Court from forwarding in the strict sense of the relationship, where the freight forwarder could nominally act only as the agent of the customer that assumes liability in the process of organisation of cargo transportation only for the proper selection of actual carriers (which, in turn, for the stage of the transportation carried out would legally commit to be directly liable to the consignor).

Accordingly, with the Court having stated that the contractor had undertaken the duty of the carrier by the contract (the operator of multimodal transportation) to transport the cargo to the destination agreed, the arguments by the disputing party that had undertaken such obligations were dismissed that the actual carrier hired by the multimodal transportation operator should directly be liable to the consignor – contractor of the cargo for loss of part of the cargo. Thus, on the basis of the Ruling by the Court of Appeal of Lithuania, on the one hand, there was some clarity and certainty put that the multimodal carrier, by assuming the duty in the usual of transportation of the cargo to the destination agreed, regardless of its actual role in the process of transportation is liable for the entire process of transportation; on the other hand, by hinting about other possible models of agreement on cargo transportation organisation, Parties of the contract at the same time were free to adjust the subject-matter of the contract, providing that the organiser of such a transportation by not actually carrying out the transportation may restrict its own functional purpose and liability at the same time in a narrower field, i.e. to provide that acting as a freight forwarder, the agent of the client will be solely liable for the selection of appropriate third parties, their coaching and supervision, but not for the shipment itself.

The Issues of Liability of the Operator of Multimodal Transportation

The second important issue that was discussed at Court of Appeal of Lithuania, that held the dispute between the parties, is the problem of the legal regime applicable to the liability of the operator of multimodal transportation. As known, the cargo transportation by different modes of transport is governed by different international conventions that differently regulate the problems of foundations of limitation and exemption from liability for the carrier. Therefore, when transporting a cargo in different modes of transport there will inevitably be questions raised related to the regulation of the liability of the operator carrying out the multimodal transportation. As noted by the Court of Appeal of Lithuania, the international and foreign case law is dominated by determination of the regime of civil liability of the operator of multimodal transportation under the criterion of “the network system”, i.e. the conditions and scope of the carrier’s liability for cargo loss and damage are determined by the law governing the stage of transportation of the cargo, in which damage was caused. However, in many cases due to objective reasons it becomes impossible or is complicated to determine the stage of cargo transportation where damage was caused. In this case, there is a problem of determination of the applicable law.

In the opinion of the panel of judges, wishing to rely on the provisions of the convention that regulates the specific type of transport and limits the liability of the carrier, the carrier bears the burden of proof to justify the circumstances of cargo loss or damage, i.e. that the damage was caused when transporting the cargo by a specific type of transport. But what happens when the operator of multimodal transportation does not have solid evidence that could justify that the damage arose in a particular stage of cargo transportation? In addition, not infrequently, there is damage caused when the cargo is at an intermediate station – the cargo terminal. The point is that the issue of the liability of the operator of multimodal transportation is regulated neither by international conventions, nor at the national level, by leaving the contractual parties of the multimodal transportation free to solve all of these issues by mutual agreement. If they do not do so, the parties of the dispute risk of falling into a “grey zone”, when, not knowing at which stage of transportation the damage could be caused, it will be first necessary to figure out which countries national law should be applied to the dispute. But this is only the beginning. It should be borne in mind that in the absence of the possibility of applying any of the international conventions that regulate the cargo transportation via a specific type of transport, the general norms of the Civil Code that regulate cargo transportation are scarce enough. In addition, the fun part is that they themselves typically provide that the issues of the carrier’s liability are regulated by codes of individual modes of transport, so the disputing parties, not knowing the stage of cargo transportation at which the damage was caused, could not rely on such special legislation. Finally, it should be noted that the general norms of the Civil Code that regulate cargo transportation do not actually provide for the provisions on limited liability of the carrier that are usual in the international conventions, as well as the grounds and conditions, which, if proved by the carrier, would generally relieve them from liability. Therefore, the operators of multimodal transportation should have in mind that, having entered the discussed “grey zone”, they could probably be held liable for cargo loss or damage at a total cargo value.

So, the question arises about how to avoid for the contract parties of multimodal transportation to enter into a vicious circle of non-localised damage? The answer is quite simple. In the world practice, this problem is successfully solved by including provisions into the multimodal transport contracts stating that transportation should be subject to a standardised Rules for Multimodal Transport Documents that are usual in commercial practice approved by the issues of the United Nations Conference on Trade and Development (UNCTAD) and the International Chamber of Commerce (ICC). In the aforementioned rules the issues of the liability of the multimodal transport operator are addressed not only using the previously discussed network system criterion (i.e. with regard to the stage of transport, where the damage was caused), but the cases of limitation of liability of the carrier are discussed sufficiently in detail, where it is impossible to localise the damage. However, it should be borne in mind that the rules indicated do not have a mandatory status (i.e. they are assigned to so-called soft law, and they can be applied to the relationship of the parties of multimodal transport contract only having incorporated them into the contract of transportation or having made a clear reference in the contract as to the application of the rules in question.

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