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Forwarder responsible for water damage. Network clause in NSAB 2000 could not be applied

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Legal news
calendar 25 September 2020
globus Denmark

The Maritime and Commercial High Court has in a newer case considered the network clause in NSAB 2000. In this case, a toy manufacturer wished to apply the network clause of the NSAB 2000 between the owner and the carrier. For this to be possible, the owner had to prove that the water damage that had occurred to the cargo, occurred during sea carriage. As the owner could not lift the burden of proof, the court found that the network clause and thus the The Danish Merchant Shipping Act could not be applied.

A toy manufacturer shipped cargo in a container from Hong Kong to the Czech Republic and therefore made a contract of carriage with their usual forwarder. The forwarder employed another carrier, who then employed a performing carrier. The cargo had to be carried by ship, train and truck, so it was a multimodal carriage with several performing carriers were involved.

When the cargo arrived at the destination water damage was discovered. The toy manufacturer received compensation from their insurer, who then claimed compensation from the forwarder. The cargo was in their contractual possession when the damage occurred. 

The toy manufacturer and the forwarder had entered into a framework agreement, where the forwarder was liable as carrier. The forwarder was liable for damage to the cargo, occurring after it was handed over to transport. The framework agreement referred to NSAB 2000. If the toy manufacturer could prove, that the damage had occurred during sea carriage, then the network clause in NSAB 2000 would be applicable. And if the network clause in NSAB 2000 was applicable, the Danish Merchant Shipping Act would be applicable. The limitation rule in The Merchant Shipping Act would make the forwarder liable for a higher amount than the network clause in NSAB 2000 limits of liability.

However, the forwarder alleged that the toy manufacturer could not prove when the damage occurred since the damage was not caused by sea water.

The Maritime and Commercial High Court: network clause in NSAB 2000 not applicable

The Court found that the insurer had been unable to prove that the damage had occurred during the sea carriage. Therefore, the network clause in NSAB 2000 and the Merchant Shipping Act was not applicable in this matter. The forwarder was only liable in accordance with the limits of NSAB 2000 and not the Danish Merchant Shipping Act.

The Court did not find that there was any basis for proving that the damage was caused by gross negligence, thus it was the forwarder's responsibility in accordance with the limitations in the framework agreements and thereby the NSAB 2000 as well.

IUNO’s opinion

The case shows that the network clause in NSAB 2000 and NSAB 2015 is rarely used by the courts. In this case it was the lack of knowledge on where the damage had occurred that led to the network clause in NSAB 2000 not being applicable.

The judgment is in accordance with common practice and must probably be read in such a way that if the damage had been caused by sea water, the network clause in NSAB 2000 would have been applied and the limitation rule of Merchant Shipping Act limit been used. IUNO recommends accordingly, that if it is possible to ascertain, for example through survey when the damage occurred, this should be done.

[The Maritime and Commercial High Court’s ruling in case BS-31174/2019-SHR]

A toy manufacturer shipped cargo in a container from Hong Kong to the Czech Republic and therefore made a contract of carriage with their usual forwarder. The forwarder employed another carrier, who then employed a performing carrier. The cargo had to be carried by ship, train and truck, so it was a multimodal carriage with several performing carriers were involved.

When the cargo arrived at the destination water damage was discovered. The toy manufacturer received compensation from their insurer, who then claimed compensation from the forwarder. The cargo was in their contractual possession when the damage occurred. 

The toy manufacturer and the forwarder had entered into a framework agreement, where the forwarder was liable as carrier. The forwarder was liable for damage to the cargo, occurring after it was handed over to transport. The framework agreement referred to NSAB 2000. If the toy manufacturer could prove, that the damage had occurred during sea carriage, then the network clause in NSAB 2000 would be applicable. And if the network clause in NSAB 2000 was applicable, the Danish Merchant Shipping Act would be applicable. The limitation rule in The Merchant Shipping Act would make the forwarder liable for a higher amount than the network clause in NSAB 2000 limits of liability.

However, the forwarder alleged that the toy manufacturer could not prove when the damage occurred since the damage was not caused by sea water.

The Maritime and Commercial High Court: network clause in NSAB 2000 not applicable

The Court found that the insurer had been unable to prove that the damage had occurred during the sea carriage. Therefore, the network clause in NSAB 2000 and the Merchant Shipping Act was not applicable in this matter. The forwarder was only liable in accordance with the limits of NSAB 2000 and not the Danish Merchant Shipping Act.

The Court did not find that there was any basis for proving that the damage was caused by gross negligence, thus it was the forwarder's responsibility in accordance with the limitations in the framework agreements and thereby the NSAB 2000 as well.

IUNO’s opinion

The case shows that the network clause in NSAB 2000 and NSAB 2015 is rarely used by the courts. In this case it was the lack of knowledge on where the damage had occurred that led to the network clause in NSAB 2000 not being applicable.

The judgment is in accordance with common practice and must probably be read in such a way that if the damage had been caused by sea water, the network clause in NSAB 2000 would have been applied and the limitation rule of Merchant Shipping Act limit been used. IUNO recommends accordingly, that if it is possible to ascertain, for example through survey when the damage occurred, this should be done.

[The Maritime and Commercial High Court’s ruling in case BS-31174/2019-SHR]

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Aage

Krogh

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Thune Ikkala

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Joachim

Sieverts Nielsen

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Lars

Rosenberg Overby

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Mads

Poulsen

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