A member of the Lloyd’s Agency network has called on cargo underwriters to forge international ties if they wish to “break the unbreakable”.
Speaking at a Cargo Forum at Lloyd’s, Harald von Seydlitz-Kurzbach, Managing Director of Reck & Co, Lloyd’s Agent in Bremen, talked about the Montreal Convention (MC) – which sets out airlines’ liabilities for passengers and their baggage – and its impact on the cargo insurance market.
Article 22 of the MC says that the liability for damaged or lost cargo shall be limited at 17 Special Drawing Rights (SDR) per kg (valued at €18 per kg, as at December 2007) However, von Seydlitz argues this is not enough.
He said: “If we consider that air carriage is primarily used for high value goods like electronics, pharmaceuticals or similar, you will appreciate that an unbreakable limitation of 17 SDR per kg appears to be unacceptable for many people shipping goods and their cargo underwriters.”
A survey undertaken by the European Commission in 2000 uncovered that the average value of goods transported by air was in the region of €45 per kg. “Seven years have passed since then and commercial prices may have increased. I must say that today not even an amount of €80 per kg appears sufficient to cover a reasonable share of the cargoes shipped by air,” he continued.
“It disadvantages the insured because they will not receive the best possible result [if claims are limited to 17 SDR per kg]. They close files with less money than there was available.”
However, a recent judgment in Hamburg has held that the unbreakable can indeed be broken, so long as the case has a link into Germany. One particular loophole was found in the terms and conditions of the freight forwarder, in particular if the freight forwarder is a German one that acts strictly under the German Forwarders Standard Terms (ADSp).
The County Court of Hamburg had to decide over a case on which a cargo insurer filed suit against a German Freight Forwarder after two converters on their way back to Germany from the US were lost on-route.
Part 27 of the German freight forwarders conditions stipulate that the forwarders liability shall be unlimited in cases of gross negligence or wilful misconduct. When the Hamburg court ruled that the Freight Forwarders had waived its rights to invoke the strict liability under MC and instead complied with ADSp when signing the contract of carriage with the shipper, the court found in favour of the cargo insurer.
von Seydlitz said the ruling highlighted the importance of obtaining on-ground information. “We can provide local knowledge which, if it comes to a decision between simple and gross negligence, could lead to unlimited liabilities,” explained von Seydlitz, who is also a member of the German Maritime Arbitration Association and a lecturer of Maritime Commercial Law in the Bremen University of applied Science.
Ideally you need to live in the country and understand the jurisdiction. The Montreal Convention provides for strict liability, but this judgment has opened the door to increased liabilities. The new decision offers better protection to clients.”
Franz Kasten, Head of Reck & Co’s Survey offices in Germany, France and Belgium, said: “From my perspective it is important to collect complete information on a loss occurrence at an early time in order to establish all facts properly. This could result in unlimited liability at a later time.”
Marc Friedrich, Head of the recoveries department in Reck & Co, also championed the cause of local knowledge. He said: “Everybody has their strengths – Germany is a favourable jurisdiction if it comes to challenging carriers or freight forwarders liability restrictions. But if I had a case against a US or Canadian company, I would contact my people over there in order to achieve best possible results for clients.
“We need to make use of the knowledge and information which is available, wherever it may be. The only thing that matters in the end is the result.”
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