When Does the Court Exempt the Marine Carrier and Freight Forwarder From Liability For Late Arriving

During the transportation of cargo, whether it is for import of for export, importers/exporters are assisted by many logistics entities in order to execute the actions involved in these processes, such as marine/air carriers, freight forwarders, customs brokers, warehouses, and more.

Naturally, with regard to transporting cargo around the world, it is impossible to guarantee 100% the dates of departure and arrival, as these matters depend not only on the logistics entities mentioned above, but also on other circumstances such as weather, congestion at the port of origin / destination, various battle situations, and so on.

In general, we can say that when physical damage is caused to the cargo during transport, the cargo owner has the option of finding the entity that is responsible for that physical damage and suing it in court.

But what happens when the damage is not physical damage to the cargo but rather damage caused to the consignor / consignee by the late departure or late arrival of the cargo?

Many times, based on the estimated time of arrival of the cargo, the client undertakes additional transactions with the goods, and due to the delay he suffers damage.  If such damage is compensable, then who must compensate the client for the damage caused by late arriving cargo?

This subject has been discussed in court more than once, and we will present an overview of the main points.

*The Agriver Case - Late Export of Agricultural Goods to Russia - The Freight Forwarder and the Marine Carrier are Exempt from Liability

In the year 2011, the exporter exported two shipments of peppers and tomatoes to Russia. For the purpose of the shipment the exporter hired an international freight forwarder and a marine carrier.

As a result of a delay that occurred in the departure of the shipments, the two shipments arrived a few days later than the planned time of arrival, one shipment having left Israel a few days late while the second shipment left on time but still was late to the port of destination.

According to the exporter's claim, when the shipments arrived in Russia it was discovered that significant decay had damaged the peppers and tomatoes, as a result of which the exporter received partial payment for one shipment and no payment at all for the other shipment. The exporter claimed NIS 200,000 in damage.

The exporter claimed that the freight forwarder and the carrier violated their commitments in relation to the date of delivery of the shipments and their arrival in Russia as well as in relation to the obligation to notify regarding changes in the dates of departure and arrival of shipments.

On the opposing side, the freight forwarder claimed no responsibility for the alleged damage, as he does not make commitments regarding the time of arrival of the shipments and so he is not responsible for damage caused to the shipments by delays or late arrivals at the destination port.

Moreover, the freight forwarder claimed that the exporter was notified regarding expected changes in the scheduled times.

The marine carrier claimed that he is not able to commit regarding the time of arrival of the shipments and in any case he notified the exporter regarding the schedule changes. As to the case in question, the marine carrier claimed that the cargo's leaving Israel was delayed due to congestion at the Port of Ashdod and the late arrival in Russia was caused in part by stormy weather at the port of destination.

The court ruled, with regard to the obligation to notify - that it had been proven that the marine carrier had notified the freight forwarder and the exporter in real time regarding the changes in the dates of departure from Israel, and so the obligation to notify was not violated.

With regard to the delay in the arrival of the shipments at the port of destination, the court ruled that while the two shipments did arrive later than the scheduled date, it was however a reasonable delay of a few days, and the delays at the port of destination were unforeseeable, especially since the delay was caused by difficult weather conditions.

In terms of contract, the court ruled that from the moment a certain shipment departs, the marine carrier is not liable for delays that depend on weather conditions, and this is according to the provisions of the contract of carriage that is in the bill of lading. In doing so, the exporter's claim that he hadn't read the stipulations of the bill of lading was rejected.

With regard to the obligation to notify regarding the delays in arriving at the port of destination, the court ruled that from the moment the shipments were already loaded on the ships and waiting at the entrance to the port of destination for their entry to be approved, the exporter could do nothing to prevent or decrease the damage, since it was not shown that he was able to speak with the clients and reach some kind of arrangement.

The exporter was required to pay court costs and attorney fees totaling NIS 25,000.

 [Civil Suit (Tel Aviv Magistrates Court)44442-02-12 Agriver Agriculture Ltd. vs. Mentfield (1983) Ltd. et al, Justice Tamar Naot-Perry, given on 21.07.2014]

*The Top Eden Fruits Case - Late Export of Agricultural Goods to Russia - The Marine Carrier is Liable

In a case that came before the Haifa Magistrates Court regarding cargo that was sent to Russia late, the court rejected the claims of the marine carrier and ruled that it is responsible for the delay in the cargo's arrival at the destination, but there the circumstances were entirely different.

In this case, the marine carrier (as well as additional entities, such as the Port of Ashdod) was found negligent because they did not load certain shipping containers on to the ship on which they were supposed to be sent overseas. The cargo, which was supposed to depart from the Port of Haifa, was transported from the Port of Haifa to the Port of Ashdod due to the Second Lebanon War, but wasn't loaded on time on the ship in the Port of Ashdod either, and therefore arrived in Russia late.

In these circumstances, the court ruled that the carrier be held negligent due to the loading failure. It also ruled that the carrier's protections under the contract of carriage apply only after the transporting begins, but when the containers were not loaded on the original ship that was supposed to transport them - the transportation did not begin, and the protections are irrelevant.

[Civil Suit (Haifa Magistrates Court)10580/07 Top Eden Fruits Ltd. vs. M. Dizengoff & Co. Ltd. et al - in this case the exporter was represented by our firm].

Conclusions:

The laws governing the liability of a vessel owner for damages to freight carried by the vessel are set out in the Hague–Visby Rules that were adopted in Israel pursuant to the Carriage of Goods by Sea Ordinance. These laws are adopted, inter alia, in the bills of lading that accompany the cargo on its way in the world.

The laws provide immunity for the carrier from liability for damages caused to the goods if the damages were caused by a fire (unless the fire was caused by the fault of the carrier), acts of God, war or maritime disasters.

Additionally, the laws state that in order to make a marine carrier liable for damage caused by delay, it must be proven that the delay caused the value of the goods to decline on the actual time of arrival versus the estimated time of arrival. Proving something of this sort is not at all simple.

Therefore, it is clear that maritime carriers use limitation of liability clauses on a regular basis and in this situation it is not at all easy to require them to pay compensation.

As to the entities handling the freight forwarding, the freight forwarders often try to argue that the protections given to the maritime carriers under the Carriage of Goods by Sea Ordinance and the international treaties, should apply to them as well. As far as is known to us, regarding marine transportation and differing from air transportation, the district court ruled that freight forwarders shall not be considered maritime carriers because they are not the owners of the vessels and they shall not enjoy the protections given to maritime carriers. [Civil Appeal (Jerusalem)2239/08 Israel Phoenix Assurance Company Ltd. vs. Helen Katz et al].

Another possible argument in defense of the maritime carriers is that they were hired in order to coordinate transportation, and since the cargos were loaded onto the vessels, they fulfilled their duty and should not be made liable for damages that were caused beyond their control and that they could not foresee.