Italy - Change in Limitation Rules

August 2005

The Italian Constitutional Court recently ruled* that article 423 of Italian Navigation Code is contrary to the fundamental principles of the Italian Constitution to the extent that it allows the maritime carrier to limit his liability for loss or damage to  cargo even in cases of gross negligence or willful misconduct.

Article 423 (first paragraph) of Navigation Code provided that: 

"the indemnification due by the carrier cannot, for each unit of cargo, exceed Euro 103.29, or the major figure corresponding to the value declared by the shipper prior to loading".

The Constitutional Court focused its attention on the differences between the rules governing the liability of the maritime carrier and those governing the liability on carriage by air and by road where limitation is excluded in cases of willful misconduct or gross negligence. The Court held that this difference in approach was contrary to the principles set out by article 3 of the Constitution, namely that all citizens are equal before the law and that the law has to provide the same rules for similar cases.

The impact of the judgement could be fatal to a defence based on article 423 of the Code of Navigation. Judgements of the Constitutional Court effect both pending as well as future proceedings. From now on Italian Courts will apply art 423 "as amended" by the Constitutional Court. Therefore the carrier's right to limitation will be denied if willful misconduct or gross negligence of the carrier is established by the Courts.

According to Italian law and jurisprudence, the concept of "gross negligence" is slightly different from the "reckless and with knowledge that damage would probably result" test which is used, for instance, in the Hague-Visby Rules in order to exclude the right of limitation of the carrier. According to Italian law and practice "gross negligence" is the conscious behaviour of a person acting with exceptional and inexcusable imprudence and negligence, who not only omits to act with the due diligence required for the particular task undertaken but also without the basic diligence normally observed by others in similar circumstances, even if it is found that there is no intention to cause a damage. The burden of proof rests with the party alleging gross negligence of the carrier.  

Article 423 applies to contracts of carriage subject to Italian law which are not governed by the Hague-Visby Rules. The Hague-Visby Rules apply to 

"every Bill of Lading relating to the carriage of goods between ports in two different States if: 

• the bill of lading is issued in a Contracting State; or 
• the carriage is from a Port in a contracting State; or 
• the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State giving effect to them are to govern the contract; 

whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person" 

(article 10 of the Convention) 

Therefore, article 423 of the Navigation Code governs the liability of the carrier in the following cases:

 i) when the carriage is between ports of Italy, i.e. is a national transportation; 

ii) when the carriage is between ports of different States if: 

- Hague-Visby rules do not apply, and; 

- Italian law is applicable according to Rome Convention 1980, i.e. when Italian law has been chosen by the parties to the contract or when, pursuant to article 4.2 of the Convention, the carrier has its registered office in Italy and Italy is the place of loading or unloading of the cargo or is the place where the shipper has its domicile or registered office".

In the same decision the Constitutional Court has also decided that there was no conflict between the Constitution and article 423 of the Code of Navigation in relation to the absence of a system of automatic revaluation of the limitation sum (which has been fixed at Euro 103.29 since 1954). The Court had rejected this question in two previous cases. Notwithstanding that the limitation sum provided fro by the Code of Navigation is very low, there is no prejudice where the shipper can declare, before shipment, the value of the goods and therefore break the right of limitation of the carrier (even if, in this case, the shipper has to pay an increased rate of freight).

 

With thanks to Studio Legale Mordiglia, Genoa, for preparing this article.  

*Judgement n.199 of 26 May 2005