U.S.: Through Transit Carrier's Right to C.M.R. Limitation in Europe is Recognised

December 2001

A container of Trek bicycles was received for shipment at Oconomowoc (USA) and carried overland for loading on board the owner’s vessel at Montreal. The cargo was shipped to Antwerp without incident. The owner issued a through transit bill of lading requiring delivery of the cargo to Spijkenisse in Holland. The owner sub-contracted a haulier to undertake the land transit leg of the contract voyage and during this period the container was stolen while in transit through Belgium.

A small proportion of the cargo was recovered, although a claim for the remaining stolen cargo was submitted to the owner in the sum of US$ 123,275. Attempts were made to conclude the claim in accordance with the limitation available under the International Convention for the Carriage of Goods by Road 1956 (the C.M.R. Convention). In this case, the C.M.R. limitation for the cargo (8.33 SDR per kilo) was equivalent to US$ 52,419 and was considered applicable as the cargo was stolen in a country that has ratified the C.M.R. Convention. The claimants refused to accept settlement at this level and since the cargo originated in the U.S.A, they commenced proceedings in New York.

Whilst it had been anticipated that the first instance Court would hold the owner responsible for the loss of the cargo while in the custody of its servant (the haulier), it had not been anticipated that the Court would overlook the carrier’s right to limitation under the C.M.R. Convention. A judgement for the full claim amount, plus interest, in the total sum of US$ 157,237 was issued. An Appeal was submitted on the owner’s behalf.

It was argued that the first instance Court had incorrectly applied the provisions of US COGSA (under which limitation is not available for this shipment) on the basis that US COGSA does not apply to the in-land leg of a through transit shipment in a foreign jurisdiction. The owner contended that as the C.M.R. Convention was ratified in the country where the loss occurred (Belgium), the C.M.R. limitation should apply to this claim.

Further information relating to the C.M.R. Convention was requested by the Appeal Judges to support the owner’s argument and advice from Belgian Counsel was obtained to describe how the Belgian Courts would apply the C.M.R. Convention in these circumstances.

The United States Court of Appeals for the Second Circuit accepted the owner’s argument and reversed the decision of the lower court. This enabled the owner to limit liability to US$ 52,419 under the C.M.R. Convention.

This decision indicates that the US Courts are willing to recognise limitation regimes that apply to shipments in foreign countries albeit that such regimes have not been ratified by the United States.