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Freight Forwarders as Agents

Discuss About The Maritime Law Freighters Forwarders Fluctuate.

The services rendered by a freight forwarder may fluctuate depending on the company or the transaction but the primary responsibility of a freight forwarder is to make arrangements for transiting the commodities from one place to another either by road, sea or air. The freight forwarder or a forwarding agent is considered as a fundamental member of the international transport and trade community. The freight forwarder arranges transportation for the commodities of other people in exchange for a fee. Freight forwarders may perform the legal roles of a principal contractors or agents (Cain 2014). The accountability of a freight forwarder shall depend on the role played by the freight forwarder while they make shipping arrangements.

Freight forwarder may act as an agent for a shipper or owner of goods. While the freight forwarder acts as an agent, the freight forwarder shall not provide any assurance whether such goods will reach its destination rather the freight forwarder shall only perform the responsibility for the logistics of the delivery procedure of the goods (Hill and Kulkarni 2017). A freight forwarder will perform one of the following roles as an agent if:

  • he receives commissions on bookings made with the actual carriers, which are calculated upon the transportation services, which must be carried out;
  • he charges the owner or shipper with a payment that is calculated on the total shipping expenditure (Hill and Kulkarni 2017);
  • the shipper/owner forms a transportation contracts with the carriers instead of the freight forwarder;

Moreover, the freight forwarding agent must reveal the expenses of the carrier to its client as the decision of the client regarding the selection of contracts with various carriers shall be considered as final. Further, the freight forwarder shall be liable for failing to perform his responsibilities, which is to exercise reasonable care while selecting carriers for transportation of the commodities (Maraist et al. 2016). If the freight forwarder acts as an agent, he shall be held liable for:

  • failing to exercise due skill and care while deciding on sub-carriers and non-compliance with the instructions of the shipper;
  • failing to communicate the instructions of the shipper to the subcarrier, and
  • failing to act in the best interest of the shipper;

The freight forwarder may act as a forwarding agent who is primarily responsible for exercising rational care while deciding on carriers to transfer the commodities. The freight forwarder shall be held accountable for committing a infringement of contract or tort if it fails to perform this obligation (Maraist et al. 2016).

As a principal, a freight forwarder is accountable for the carriage irrespective of the fact whether it carries possession of goods. As a principal, the freight forwarder shall enter into a contract as the actual carrier of goods instead of entering into the contract on behalf of the shipper. Under such circumstances, the shipper shall have a direct contractual relationship with the freight forwarder regarding the carriage of goods (Schoenbaum 2016).

Freight Forwarder as a principal

Additionally, apart from the particular contractual obligations that the freight forwarder may have in relation to the shipper, while acting as the principal, the law shall impose other relevant obligations. The additional obligations were upheld in the case of Nabob Food Ltd v Harry W. Hamacher Spediteur GmbH & Co [2013] where the court ruled that a freight forwarder performing as principal shall be accountable for the goods he transports. The freight forwarder shall also be considered as an insurer of the goods that is different from the negligence on part of the freight forwarder (Katzmann 2016).

 In order to determine whether a freight forwarder is acting as an agent or a principal, there are no clear rules for such determination (Cain 2014). However, the court may consider certain factors while determining the same.

  • whether the freight forwarder performed responsibilities of an agent or a principal;
  • whether the freight forwarder provided any documentation that mentions his obligations regarding transfer of commodities to the consumer;
  • whether the consumer received bill of lading from the freight forwarder;
  • whether the freight forwarder charge any fee calculated upon the freight and charged any amount as is fee;

Thus, it can be inferred from the above discussion that the significance of characterizing a freight forwarder acting as a principal or an agent is often subjected to determination where the cargo is damaged during transition or where payment for the carrier cargo is not made. The significance has been explained in the case of Bertex fashions Inc v Cargonaut Canada [1995]. This case stated that during transport, if a property is damaged, the freight forwarder who arranged for the movement of the freight of the client might be held accountable for such damage, even if the freight forwarder does not deal with the commodities himself (Hanna 2017). While the freight forwarders act as agents, they are expected to exercise reasonable care while selecting the carriers to convey the freight and while acting as chief, the freight forwarder may be held legally responsible as the carriers who conveyed the goods.

In regards to the concept of the admiralty law, a claim can be initiated on two different grounds either by acting in personam or through action in rem. The legal claims initiated on the grounds of action in personam, it is issued or served on the company or person who are liable for the damage suffered. The legal claims issued initiated on grounds of action in rem, action can be taken under the Admiralty jurisdiction of the High Court and usually is in opposition to the ship/ships of unnamed or named defendants (Greenbaum et al. 2017).

One of the characteristics of admiralty law is that it commences from litigation where a legal claim can be made on two grounds. Firstly, a claim can be brought against any person or company in personam, where the person or company shall be personally liable for the damages sustained. Secondly, a legal claim can be brought in rem, which can be obtained under the Admiralty jurisdiction of High Court and is a legal claim brought against ship or ships of known or unknown defendants (Greenbaum et al. 2017).

Significance of identification of a freight forwarder as an agent or principal

Republic of India and The Government of the Republic of India (Ministry of Defence) v India Steamship Co. Ltd (The “Indian Grace”) (No.2) [1998] 1 Lloyd’s Rep. 1, at 10. 

Before the decision in the Republic of India and The Government of the Republic of India (Ministry of Defence) v India Steamship Co. Ltd (The “Indian Grace”) [1998], the action brought in rem was distinct from action brought in personam. However, in regards to the decision of the case, Lord Steyn stated that action in rem and action in persona are identical since the commencement of the litigation. Such controversial statement gave rise to numerous debates that it has fundamentally reformulated the character of the action in rem without even considering the maritime lien relevant to the matter, which did not justify the reformation.

The arrest of a ship refers to a legal procedure, which prevents any person from touching the vessel so that it can be used as a claim security. The legal rules applicable to arrest of ships depends upon several jurisdictions, for instance, in nations with maritime common law; the arrest of ships under action in rem is crucial as maritime creditors depend on it as a security for their claim (Greenbaum et al. 2017). Again, in nations with civil law, the action in rem does not exist and every action related to civil law or maritime claims take place in personam. The arrest of the vessels is allowed with respect to non-maritime claims and the vessels are treated as any other belongings of the possessor. The mere existence of the vessel is adequate to make a proficient tribunal exercise control over the owner regarding any legal claim.

An action in rem is a claim against the property instead of against a person. In order to succeed in claims in personam, it is necessary to have direct participation during the case proceedings before the court. On the other hand, legal action in rem is brought against the cargo or ship, the proceeds of sale or the freight. Two theories dealt with the notion of action in rem, namely, the personification theory and the procedural theory. As per the personification theory, the ship is the defendant and a legal action in rem is brought against the ship regardless of her present ownership and regardless of any connection with owner’s liability in personam while the claim is brought against the ship (Schoenbaum 2016).

On the other hand, the procedural theory refers to action in rem as merely a procedural method that acts as an assurance that the ship owner will appear in court. However, Zhao and Lianjun (2017) argues stating that a deed that has been initiated as an action in rem shall remain as one until it is dismissed provided any amendment is made with respect to its character. It is frequently mistaken that an action changes its character and becomes an action in personam after the owner of the res (defendant or ship) makes appearance before the court and gives bail as was observed in The Broadmayne [1916].

Characteristics of admiralty Law

In regards to the opinion of Lord Steyn regarding the nature of the admiralty jurisdiction, the House of Lords defined action in rem as an action undertaken against the possessor and not against the ship, which takes place when the possessor appears in the court for safeguarding their benefit, which refers to procedural theory. The notion of action in rem had undergone changes when House of Lords declared that an admiralty action in rem implies actions against the ship holder. Another issue that arose in regards to the decision of the case regarding whether action in rem and action in personam are the same (Zhao and Lianjun 2017).

Prior to the decision in Indian Grace No.2, the House of Lords held that both were same and when a judgment against any action brought in personam is given in favor of a part, no further action in rem can be brought against the same matter (Schoenbaum 2016).  In Indian Grace No. 2 case, the House of Lord held that an action in rem could be brought against any person who is related to the ship against which the claim is brought. In reviewing the modified notion of action in rem, Lord Steyn referred to the concept of ‘personification’ of the ship by the Admiralty Court to preserve its authority and the prevalence of procedural theory after the enactment of Judicature Acts.

Conclusion

Therefore, it can be inferred from the evaluation for the two principles and the two theories along with the contentious judgment made by the House of Lords, that an action in rem is distinct from an action in personam. The Admiralty Court allowed  action against the vessel as if it were only reasonable in personam, then for the most part of the situations arising in maritime disputes would have been difficult to decide due to lack of correlation between parties from diverse jurisdiction (Gaskell 2017).

As was observed in the Indian Grace No.2 case, the nature of the admiralty jurisdiction applied procedural theory, which failed to explain the seizure of any ship owned by the person liable in personam and neither it included maritime lien (Hanna 2017). Besides, it did not explain what happens to people of companies or mortgagees who do not have express interests in ship. These issues would have been resolved if action in rem were decided to be an action against the ship and not the possessors.

References

Bertex fashions Inc v Cargonaut Canada [1995] F.C.J. No. 827 (F.C) at para 45

Cain, P., 2014. Complexity, Confusion and the Multifaced Legal Roles of the International Freight Forwarder. Macquarie LJ, 14, p.25.

Gaskell, N., 2017. Bills of Lading 2e: Law and Contracts. Routledge.

Greenbaum, A.B., Aarsheim, K., Chang, E., Felder, B.O., Mau, D.A., McCarthy, R.M., Moeller, M., O'Connor, R.E., Penninger, S.S., Schultz, P.L. and Stillman, D.T., 2017. RECENT DEVELOPMENTS IN ADMIRALTY AND MARITIME LAW. Tort Trial & Insurance Practice Law Journal, 52(2), p.175.

Hanna, C., 2017. Admiralty Law. World Encyclopedia of Law.

Hill, C. and Kulkarni, Y., 2017. Maritime law. Taylor & Francis.

Katzmann, R.A., 2016. MARITIME LAW AND COMMERCE. journal of Maritime Law & Commerce, 47(3).

Mandaraka-Sheppard, A., 2014. Modern maritime law and risk management. CRC Press.

Maraist, F.L., Galligan Jr, T.C., Maraist, C.M. and Sutherland, D.A., 2016. Cases and Materials on Maritime Law. West Academic.

Nabob Food Ltd v Harry W. Hamacher Spediteur GmbH & Co [2013]

Republic of India and The Government of the Republic of India (Ministry of Defence) v India Steamship Co. Ltd (The “Indian Grace”) [1998] 1 Lloyd’s Rep. 1, at 10

Schoenbaum, T., 2016. Admiralty and Maritime Law. West Academic.

The Broadmayne [1916] P.64 (CA).

Zhao, L. and Lianjun, L., 2017. Freight forwarding and multimodal transport. In Maritime Law and Practice in China(pp. 157-170). Informa Law from Routledge.

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