Shipping & Transport - Germany

In a recent case(1) before the Dusseldorf Court of Appeal, the insurer of C, a receiver of cargo, sought recourse against the freight forwarder for loss of goods.

Facts

German-based company C contracted to buy 128-megabyte secure digital memory cards from a Taiwan seller. The seller, which was to arrange for transportation of the goods, entered into a contract of carriage with a Taiwan forwarder, UT. Both the seller and UT had their principal place of business in Taiwan and UT's terms and conditions of service stipulated that Taiwan law was to apply to the contract. The Taiwan Civil Code allows the forwarder to deny liability for damage or loss of valuables the value and character of which they were not informed of prior to shipment (Article 639).

The last leg of the carriage was carried out by the defendant German freight forwarder, which agreed with the original carrier, UT, to transport the cards by lorry within Germany. One package of cards was lost. The claimant cargo insurer reimbursed the receiver for the cards and brought an action as successor in title against the defendant forwarder. It succeeded in the court of first instance.

In the court of appeal, the defendant argued that German law was applicable. Hence, it could exclude its liability because of Section 437(2) of the German Commercial Code, according to which the forwarder is allowed all defences, contractual and statutory, that the contractual carrier can bring forward against the shipper. Since in light of Article 639 of the Taiwan Civil Code the carrier could not be held liable, the same defence had to be valid for the defendant sub-forwarder. Consequently, it argued, the case had to be dismissed.

Decision

The Dusseldorf Court of Appeal held for the defendant and reversed the first instance judgment.

The court decided that German law applied since a subsequent choice of law is also valid in non-contractual relations (Article 42 of the Introductory Act to the Civil Code). By reference to German law in counsel's statements at first instance, the parties implicitly agreed on the application of German law. Once chosen, German law remained the governing regime even though the defendant referred to Taiwan law to support its defence.

On the other hand, according to the court, the preliminary question concerning the law governing the contractual relationship between UT and the shipper had to be verified independently of the contract. Since both UT and the shipper had their principal place of business in Taiwan and the only evident choice of law clause pointed to Taiwan law, the Taiwan Civil Code was the applicable statutory regime.

The court concluded that UT could deny liability on the basis of Article 639 of the Taiwan Civil Code because secure digital memory cards were to be regarded as valuables and UT had not been thus informed. Accordingly, the defendant could avail itself of an equivalent defence. The fact that reference to the Taiwanese Civil Code was made but did not stir the defendant's case before the court of appeal, the court held, since applicable foreign law was to be applied by the court ex officio and, hence, regardless of the parties' argument thereto.

Comment

The decision contains two aspects of interest in international carriage involving Germany and a non-EU state.

First, the court ruled that the law governing the contract between the parties was German law. The contract did not contain a choice of law clause. However, in the court of first instance the parties predominantly relied on German law provisions. The court ruled that this was sufficient to assume a tacit agreement between the parties on the application of German law.

The second aspect relates to Section 437(2) of the German Commercial Code, providing that the actual carrier is entitled to all exceptions and defences of its contract with the head carrier. That contract was subject to Taiwan law, which was decided on the basis of German international conflict of laws rules, since both the head carrier and the original shipper's main place of business was in Taiwan. Under Taiwan law the carrier is exempt from liability for the loss of valuable goods if the shipper failed to notify it of their true value.

The court pointed out that neither the forwarder's late reference to this defence nor the fact that the defence was provided by a contract subject to a foreign regime impeded the forwarder's reliance on this defence.

For further information on this topic please contact Esther Mallach at Dabelstein & Passehl by telephone (+49 40 31 77 970) or by fax (+49 40 31 77 97 77) or by email (e.mallach@da-pa.com).

Endnotes

(1) OLG Düsseldorf, Urt v January 17 2007, Az: I 18 U 98/05.