CLAIMS RECOVERIES IN EUROPE:

Unlimited liability in cases of damages dur-

ing the transport to / from Europe / Ger-
many
 RELEVANT SITUATIONS

Most international transportation regulations provide the injured party

or it´s insurer two possible jurisdictions, usually at the place where
the carrier takes over the goods and the place of delivery. Although
the same international conventions apply to both jurisdictions, most
likely each jurisdiction interprets them differently. If a German carrier
is involved in many cases a claim in Germany will be possible.

American Order Chicago - Stuttgart

Freight
Forwarder

Lufthansa Chicago - Frankfurt

American trucking Frankfurt -

Trucking German trucking
company company Stuttgart

Buyer D
Seller Chicago
Stuttgart
pharmaceuticals
EXW

In most jurisdictions a contract for the carriage of goods is classified

as contract between consignor and carrier for the benefit of the con-
signee. The Bundesgerichtshof (German supreme court) therefore de-
cided that the consignee as the beneficiary of this contract is entitled
to claim a damage from any carrier who has undertaken the delivery
to him and was responsible for the damage. This could be especially
of interest for cargo insurers if the goods were insured by the sender
on behalf of the consignee for example if the parties of the sales-
contract agreed on the CIF- or CIP Incoterms.

In the slide above the consignor in Stuttgart is able to claim the dam-
age which occurred on the way from Frankfurt to Stuttgart against
the carrier who transported it to Stuttgart because the contract be-
tween the American main carrier and his German subcontractor is a
contract for the benefit of the consignee.

Frankfurt

ANTWERPEN

Passing of risk
according to
CISG

PHOENIX
NEW YORK

A more common example is a sales contract between an American

buyer and a German seller which is ruled by CISG or the Incoterms
EXW combined with the obligation of the seller to organize the trans-
port to the purchaser. In many cases the seller will hire a German
Carrier. In this case the buyer often will insure the goods in the USA.
The American insurance company will have the choice to claim any
transportation damage against the carrier in Germany.
 LEGAL SITUTATION

The most important rules and regulations on transportation law that

apply in Germany are the German code of commerce (HGB) which
includes German transportation and maritime law, the CMR, the Mon-
treal convention, the CMNI (Budapest Convention on the Contract for
the Carriage of Goods by Inland Waterway) and the CIM (Contract for
the International Carriage of Goods by Rail). The German code of
commerce is modeled after the CMR, therefore many parts corres-
pond.

damage occurring between taking over goods and

delivery
§ 425 HGB, Art. 17 CMR, § 606 S. 2 HGB = ,
Art. 18 MC

§§ 426, 427 HGB, Art. 17 CMR, etc.

Defective condition of packing,
unavoidable damages, etc.

Qualifiziertes Verschulden

not liable
As with the CMR and the most other regulations, the carrier is liable
for damage from the time he takes over the goods until the time of
delivery. The carrier on the other hand could defend himself with the
objection of a defective condition of packing or the unavoidability of
the damage. These objections exclude any liability of the carrier.

damage occurring between taking over goods and

delivery
§ 425 HGB, Art. 17 CMR, § 606 S. 2 HGB = ,
Art. 18 MC

§§ 426, 427 HGB, Art. 17 CMR, etc.

Defective condition of packing,
unavoidable damages, etc.

Limitation of liability 2 SDR, 8.33

SDR, 19 SDR, up to 40 SDR

Qualifiziertes Verschulden

liable not liable

If none of the objections is justified and the carrier is liable, his liabili-
ty is limited. According to the German code of commerce and the
CMR the liability is limited to the amount of 8.33 special drawing
rights (SDR) per kilogram of the damaged or lost consignment. The
German maritime law, modeled in part after the Hague-Visby Rules,
provides for a limitation of liability at 2 SDR per kilogram (kg) or
666,67 SDR per package or unit depending on which amount is high-
er. The liability in the international inland waterway transport has
these same limitations. For the Montreal convention the liability is
now limited to 19 SDR per kg. For the carriage of goods by rail the
limitation of liability is at 17 SDR per kg.

According to § 435 HGB and Art. 29 CMR these before mentioned li-
mitations do not apply in case the damage was caused recklessly and
with the knowledge that damage would probably result or in case of
willful misconduct. Contrary to other countries, the German courts
have assumed the existence of these requirements so often that an
unlimited liability has practically become the rule. For domestic and
international road transport, the German Supreme Court has now li-
mited this unlimited jurisdiction a little bit. In return, the Supreme
Court opened a door to an unlimited liability for transports under the
Montreal convention. In maritime law the Supreme Court made the
assumption of an unlimited liability easier.
The most important definitions in connection with this “qualified de-
fault” are given in the next slides.

damage occurring between taking over goods and

delivery
§ 425 HGB, Art. 17 CMR, § 606 S. 2 HGB = ,
Art. 18 MC

§§ 426, 427 HGB, Art. 17 CMR, etc.

Defective condition of packing,
unavoidable damages, etc.

Limitation of liability 2 SDR, 8.33 qualified default

SDR, 19 SDR, up to 40 SDR

Qualifiziertes Verschulden

liable not liable

QUALIFIED DEFAULT ?

willful misconduct / intent to cause damage or a

damage caused recklessly and with knowledge that
it would probably result (same as Art. IV Hague-
Visby Rules)
 RECKLESSLY ?

A particularly grave breach of responsibility on the

part of the carrier in which the carrier starkly
disregards the interests of his partners.

The Supreme Court treats cases of loss and damage in a different

way, therefore we will present the current German jurisdiction also
divided into cases of loss and damage.

Liability on the merits,

§ 425 HGB

Limitation of liability,
§§ 429, 431 HGB

Unlimited liability,
§ 435 HGB

damaged lost

In the past, the Supreme Court in cases of unexplained loss always

assumed an unlimited liability. A qualified default was hereby pre-
sumed and the claimant received compensation in full. The reason
was that the onus of proof in reality has been reversed. The carrier
had to exonerate himself. If he was not able to do this, he was liable
in full.
According to all the regulations on transport valid in Germany the
claimant has to fully demonstrate and to prove that the carrier acted
recklessly and with the knowledge that a damage would probably re-
sult or in ways of willful misconduct. It is sufficient though that the
pleading would suggest a default with some probability and only the
carrier could reasonably describe the circumstances of the damage
that has occurred in his sphere. Then the carrier cannot only deny the
pleading of the claimant, bearing in mind that the action of the carrier
can seriously be supposed to have led to the damage.

If this is the case the carrier has to make further statements as to the
circumstances that belong to his perception, when the aggrieved par-
ty is outside these circumstances and does not have information on
the relevant facts, whereas the opponent would be able to retrieves
such information.

loss

Secondary burden of
demonstration of the carrier

No demonstration
= unlimited liability

The most common case of a qualified default is the organizational de-

fault of the carrier.

The carrier has to demonstrate the amount of care he spent in each

specific case. This obligation includes the carrier’s duty to lay out the
work flow in his company as well as his security and controlling
measures. The carrier is also under the obligation of a so called re-
search duty. Due to the circumstances it might even be necessary
that the carrier has to lay out which discovery action regarding the
relevant loss in detail he has taken and what the results of his re-
search were.
 MOST COMMON CASE - ORGANIZATIONAL
DEFAULT

Organization default is the accusation of a direct or

indirect reckless default which caused the damage
due to an insufficient organization of the company
or the transport itself.

If the carrier is unable or not sufficiently able to fulfill these require-

ments of the German Supreme Court, the jurisdiction assumes a
qualified default that leads to an unlimited liability. This is almost al-
ways the case.

Liability on the merits,

§ 425 HGB

Limitation of liability,
§§ 429, 431 HGB

Unlimited liability,
§ 435 HGB

damaged goods lost goods

Also in cases of damage usually the damage has occurred in the

sphere of the carrier. Usually the claimant has little possibility to
demonstrate and prove a qualified default.

Unlike with loss cases the carrier does not have to demonstrate his
organization in cases a qualified default is indicated. He only has to
research the causes for the damage und give the claimant a conclu-
sion of his findings. The claimant then has to demonstrate that the
damage was caused by qualified default. Practically this means that
the liability for damage is usually limited, because the carrier’s dam-
age findings rarely indicate a recklessly caused damage.

damaged
Obligation to
research

Practical consequence:
only limited liability

Exemption: lack of
securing the cargo

DAMAGE (LACK OF SECURING THE CARGO)

Usually the claimant has the onus of proof regarding the

circumstances for an unlimited liability. Due to the different levels of
information regarding the causes of damage, the responsible party
has to provide detailed information on his operating practices,
whenever the claimant demonstrates indication for a qualified default.
This standard applies in cases where the damage occurred due to the
lack of securing of the goods with the consequence of a unlimited
liability of the carrier if he cannot demonstrate his proper
organisation.
 CONTRIBUTORY DEFAULT

In the past years the German Supreme Court has restricted its regu-
lar jurisdiction of the unlimited liability of carriers and introduced the
concept of contributory default. A contributory default in German law
is assumed when the constituent of the carrier did not indicate the
risk of an especially high damage which is assumed when the value of
the goods is more than ten times the statutory or agreed limit of lia-
bility.

DEFINITION

The carrier seldom knows what specifically he is transporting. It

is assumed that knowing the high value of the consignment the
carrier might take more effort to avoid a damage.

If the claimant has not informed the carrier in very specific

terms of the particularly high value of the cargo, then, should
damage occur to that cargo, the claimant is guilty of
"contributory default." The information is supposed to give the
carrier the possibility to take measures to prevent the damage.
The carrier cannot do this when he is not informed about a
particular high risk.
 Risk of a particular high damage

The German supreme court assumes the risk of a particular high

damage when the value of the goods is more than ten times the
statutory or agreed limit of liability.

damage occurring between taking over goods and

delivery
§ 425 HGB, Art. 17 CMR, § 606 S. 2 HGB = ,
Art. 18 MC

§§ 426, 427 HGB, Art. 17 CMR, etc.

Defective condition of packing,
unavoidable damages, etc.

Limitation of liability 2 SDR, 8.33 qualified default

SDR, 19 SDR, up to 40 SDR

contributory
Qualifiziertes default
Verschulden

liable not liable

Depending on how high is the difference between the limited liability

and the actual value of the damaged or lost consignment the amount
of a contributory default could vary from a small percentage of the
damage up to an exclusion of liability.
 damage occurring between taking over goods and
delivery
§ 425 HGB, Art. 17 CMR, § 606 S. 2 HGB = ,
Art. 18 MC

§§ 426, 427 HGB, Art. 17 CMR, etc.

Defective condition of packing,
unavoidable damages, etc.

Limitation of liability 2 SDR, 8.33 qualified default

SDR, 19 SDR, up to 40 SDR

contributory
Qualifiziertes default
Verschulden

liable not liable

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