Managing the risk of supply chain disruption in the Middle East
Trade & Commodities
A recent UAE Court of Cassation judgment highlights the (potentially expensive) problems facing road hauliers and their liability insurers when limitation of liability provisions are not properly incorporated in contracts of carriage. In this article, we examine the implications of this judgment and highlight the key issues for road hauliers to consider in their contracts of carriage.
While rights of limitation are available to road hauliers and their liability insurers, these must be expressly included in binding contracts of carriage failing which such rights might not be enforceable notwithstanding general reference to industry terms and/or the UAE being a signatory to the UN Convention for the International Carriage of Goods by Road 1956 (the CMR Convention).
Cargo interests engaged the Defendant to transport a large consignment of goods comprising assorted digital cameras, printers and other accessories (the Goods) from Dubai, UAE to a purchaser in Jeddah, KSA.
The Defendant agreed to transport the Goods via road, and a third party (the Transporter) was engaged to transport the Goods by use of two of the Transporter’s trucks. In May 2019, one of the Transport’s trucks suffered a road traffic incident (the Incident) causing damage to the Goods in the amount of approx. USD 920,000.
The Defendant sought, among other things, to limit its liability for damages claimed in relation to the Incident by relying on contractual reference to The National Association of Freight and Logistics (NAFL) terms and conditions and the UAE being a signatory to CMR Convention.
The contract of carriage’s terms and conditions made loose reference to the NAFL’s terms and conditions, specifically ‘Hauler Insurance Liability Coverage is as per NAFL terms and conditions.’ This was, insufficient to incorporate all of the NAFL’s terms and conditions, including rights of limitation. Express reference to the NAFL’s limitation provisions needed to be included in order for them to be binding on the contracting parties.
On 25 April 2018, the UAE issued Federal Decree No. 98/2018 on the Accession of the State to the CMR Convention.
The CMR Convention applies to contracts for the international carriage of goods by road, when the place in which the carrier takes over the goods and the place designated for delivery are situated in two different countries, of which at least one is a contracting country.
From the time they take over the goods to the time of delivery, carriers are liable for:
The CMR limits the liability of the carrier for loss and damage to 8.33 Special Drawing Rights (SDR) per kg of gross weight, unless the damage was caused by his wilful misconduct.
The Defendant argued that the haulier had the right to limit its liability on the basis that the UAE was a signatory to the CMR Convention and as such the haulier’s liability should be limited to approx. USD 70,000. Conversely, cargo interests argued that for the CMR Convention to apply it needed to be expressly incorporated in the contract of carriage and accepted by both parties, failing which the Courts were not at liberty to apply the CMR Convention terms.
At first instance, the Court rejected the arguments raised as to limitations of liability and ordered the Defendant to pay the claim in full. The Defendant unsuccessfully appealed this decision, and the Court of Appeal rejected the appeal in both form and substance confirming the judgment of the Court of First Instance.
On appeal to the Court of Cassation (Dubai’s final court of appeal), the first instance judgment was upheld, and the Defendant was ordered to pay the full claim (plus legal costs).
The Court of Cassation judgment is significant in that it is another example of the cautious approach adopted by the UAE courts when it comes to the application of limitation of liability. The CMR Convention provisions relating to financial limits on liability do not have automatic application, notwithstanding the UAE’s recent accession to the CMR Convention by Federal Decree No.98/2018.
As such, any carrier seeking to rely on these provisions, or any other similar limitation provisions like those found in the NAFL’s terms and conditions, should ensure that such terms are expressly incorporated into the contract of carriage and are clearly noted and accepted by all contracting parties.