In road transport, the applicable liability regime depends on whether the transport in question is a “domestic” or “international” one. While for international transportation within Europe the general liability principles are harmonised by the Convention on the Contract for the International Carriage of Goods by Road (CMR), domestic transportation is governed by the relevant national laws which may vary considerably in terms of scope of liability, liability caps, reservations, and periods for the limitation of actions.

A transport is considered domestic if the place of taking over the goods and the place designated for delivery are situated in the same country, even if part of the transport occurs through the territory of another country.

If the place of taking over the goods and the place designated for delivery are situated in different countries, the transport is considered international.

If such transport is carried by out by several carriers under the same consignment note, it remains international even if each carrier conducts its part of the carriage only within one country.

In cross-border transports, particularly to and from Finland, part of the carriage is often conducted by ship or rail. In this case, the provisions of the CMR remain applicable if the goods are not unloaded but the vehicle transporting them is itself carried by another means of transport. In this context, “vehicle” also includes trailers and semi-trailers.

Only if the damage or loss was clearly not caused by the carrier but by some event that could only occur in the course and by reason of the carriage by ferry, does the liability regime applicable to carriage by sea apply.

If, in the course of the carriage, the goods are reloaded on different means of transport (for example, from truck to ship), the transport in question is a so-called multi-modal transport. So far, despite numerous international efforts, no uniform rules covering multi-modal transports “door-to-door” have been put in place. As a rule, the carrier’s liability is determined in accordance with the liability regime applicable for the particular transport mode during which the damage or loss occurred. In practice, difficulties often arise when trying to determine at which stage of the transport the goods were damaged.

The goods are considered to be reloaded also if the whole container is loaded onto a ship and later onto another truck. In this case, the transport consists of two road transports and one sea transport. If the transport as a whole is carried out under the same consignment note, according to which the place for picking up the goods and the delivery address are in different countries, both road transports are governed by the CMR even if each of them is conducted within only one country. Thus, reloading the goods does not divide an otherwise international carriage into several national carriages.

Road transports in an international context are thus predominantly governed by the CMR, which is why this article focuses on the principles of that convention.

The relevant national law, on the other hand, must always be taken into consideration when engaging in cabotage transports, i.e. domestic transports carried out by foreign carriers. (For details on cabotage transports please also refer to our article “Road Cabotage in the Freight Transport Market: Opportunities and Obligations”.) The same applies when founding a permanent establishment in another country. (See also our article “Taxation of Foreign Transport and Logistics Services“.)

In Finland, the relevant national provisions are primarily contained in the Act on the Contract for the Carriage of Goods by Road (tiekuljetussopimuslaki), which is based on the CMR. Other than the CMR, the provisions of the Act are also applicable to furniture removal. The particularities of Finnish Law in comparison with the CMR will be outlined briefly in this article.

One distinctive feature of transport law is the strict liability of the road carrier. While normally under contract law, the contractor is not liable if there was no fault on his or her part, this is not always true with respect to the road carrier. The road carrier is generally liable for any loss or damage that occurs between the time at which the goods are picked up and the time of delivery.

The carrier is relieved from liability only in exceptional cases; namely by being able to prove that the damage or loss was caused by an inherent defect in the goods, by the claimant’s wrongful act or omission, or as a result of circumstances in which the claimant’s instructions were not given as a result of a wrongful act or omission by the carrier. The same applies if the damage or loss was due to circumstances that the carrier could not avoid and the consequences of which he or she was unable to prevent. The carrier cannot rely on the defective condition of the vehicle used for the transport in seeking to exclude liability.

The burden of proof to which the above-mentioned limitations apply lies with the carrier. However, if the carrier can establish that the damage or loss is attributable to certain special risks – for example, defective packaging or the special nature of the goods – the carrier is not liable unless the claimant proves that these risks have, in fact, not caused the damage or loss.

It is therefore important that the carrier carefully examine the goods before taking them over and notes possible flaws or deficiencies in the consignment note. Otherwise, it will be presumed that damage or loss have occurred in the course of the transport. In this context, the carrier must check that the number of packages and their marks and numbers correspond with the consignment note and that the goods and their packaging appear to be in good condition. Accordingly, where the carrier is unable to examine the goods because they were loaded by the sender, a note to this effect should be made in the consignment note.

The fact that there are usually three parties – the sender, the freight carrier and the consignee – is another distinctive feature of a contract for the carriage of goods. Although the contract is usually concluded with the sender, the freight carrier is as a rule liable for damages and loss also towards the consignee.

In general, the liability of the freight forwarder is restricted to the amount by which the value of the goods has diminished and, as far as applicable, the refund of carriage charges, customs duties and other charges incurred in respect of the carriage. Lost profits and other indirect damages are usually not covered.

In addition, the amount of damages is limited to certain maximum amounts assessed by reference to the weight of the goods, unless the carrier has caused the damage or loss by wilful misconduct or by default considered equivalent under the applicable national law. In cases involving partial damage or loss, the maximum liability is established based on the weight of the amount of goods concerned.

Under the CMR, the maximum amount of compensation to be paid for loss and damage is 8.33 SDR per kilogram (“Special Drawing Rights”) which is currently 9.37 euros (30.8.2007).

For domestic shipments, there are often different limitation levels. In Finland, for example, the maximum amount is 20 euros per kilogram, which is more than twice the amount to be compensated under the CMR. The standard terms frequently used by freight forwarders in the Nordic countries, PSYM 2000, provide for a maximum liability of 8.33 SDR per kilogram. However, this does not apply if carriage by road has been agreed upon or the damage/loss has clearly occurred during road carriage. In the latter case, the legal limit of 20.00 euros applies.

The limitation levels in other countries vary considerably. In some countries, they follow those set out in the CMR, but in others they are considerably higher or lower. The applicable limitation levels may also vary according to the kind of goods involved. When engaging in cabotage transports in other countries, it is therefore advisable to check the relevant national rules and to ensure that adequate insurance cover is obtained. It should be pointed out that so-called CMR insurance policies usually do not cover liability in relation to transportation which is purely domestic in scope.

It should also be noted that the maximum amounts for compensation are not tied to the currency SDR in all CMR contracting states. Some countries, including Russia and Poland, have not ratified the relevant protocol, with the result that the maximum amounts are linked to the price of gold, and the liability of the carrier is several times higher than it usually is under the CMR. When conducting transportation in such countries, this liability risk should be addressed by sensible choice of forum clauses.

Against surcharge, the parties may diverge from the limitations in favour of the sender or consignee. In the consignment, the sender can either declare a certain value for the goods which replaces the usual maximum amounts, or note that the goods are of special importance and fix the amount up to which compensation also for damage other than the loss of value (for example, lost profit) may be claimed.

In case of apparent loss or damage, the consignee must send a reservation in respect of it to the carrier immediately upon delivery. In case of loss or damage that is not apparent, a written reservation must be made within seven days, Sundays and public holidays excluded. These time limits are applicable under the CMR as well as under Finnish national law.

While under Finnish law the consignee loses the right to claim in respect of damage if a reservation is not sent as legally stipulated, under the CMR such failure usually only results in a shift of the burden of proof. The consignee may still pursue a claim if it can be proved that the damage or loss in question occurred before the goods were delivered. However, if the consignee and carrier have checked the goods together, evidence that contradicts the result of such checking is only admissible in case of loss or damage that was not apparent, and then only if the consignee makes a reservation within seven days of the day on which the check took place, Sundays and public holidays not included.

Actions for compensation of damage must be brought within one year. In case of wilful misconduct or default considered equivalent to wilful misconduct, the limitation period is three years. These limitation periods are applicable under the CMR as well as under Finnish national law. In case of damage or partial loss, the limitation period begins to run from the date of delivery. In case of total loss, it begins to run 30 days after the agreed delivery date or, if this date has not been agreed upon, 60 days after the goods have been taken over by the carrier.

In international transportation, a written claim made to the carrier suspends the period of limitation until the carrier rejects the claim by written notification and returns the documents attached to the claim.

Under the standard terms frequently used by freight forwarders in the Nordic countries, PSYM 2000, an action for compensation for loss or damage against the freight forwarder must be made within one year of delivery or the date on which the loss could be established. However, if a particular means of transportation was agreed, the mandatory rules applicable for that mode of transport take precedence over the PSYM 2000.

Punctual delivery of the goods is often of great importance for the customer. Delays may cause the consignee considerable damage in terms of loss of profit, disruptions in production and so on. The carrier has to compensate damage caused by the fact that the goods were not delivered within an agreed or within a reasonable time-limit. As a rule, however, compensation for delay does not exceed the carriage charges.

If the delay exceeds 30 days in international transports or 14 days in domestic Finnish transports, the consignee may, instead of claiming compensation for delay, claim for total loss of the goods. If no time-limit for delivery has been agreed, such claim may be made if the goods have not been delivered within 60 days in international transport or 28 days in domestic Finnish transports.

The rules regarding exemption of liability are the same as for damage or loss of goods. In cases of delay, the carrier is also obliged to prove that the preconditions of one of the exemptions have been met.

As a rule, the consignee loses the right to claim compensation for delay if he or she fails to send a reservation within 21 days. The limitation periods for such actions are the same as for cases of damage or loss and begin to run from the date of delivery.

The standard terms frequently used by freight forwarders in the Nordic countries, PSYM 2000, provide for a shorter reservation period of 14 days from the date the delay could be established. However, if a particular means of transport was agreed upon, the mandatory rules applicable for that mode of transport take precedence over PSYM 2000.

For cross-border transports, the provisions of the CMR are mandatory. Unlike other international conventions, such as the UN Convention on Contracts for the International Sale of Goods (CISG), the CMR cannot be excluded by the parties, not even by choosing the law of a country that is not party to the convention.

As a result, the freight carrier has no possibility to exclude or limit liability under the CMR, nor is it possible to offer customers better terms than those stipulated in the convention. Contractual provisions that derogate directly or indirectly from the convention are void. This is also true for clauses that shift the burden of proof for certain circumstances.

However, national law is applicable with respect to those matters that are not regulated in the CMR; for example, the division of responsibilities for loading and unloading the goods. In this context, choice of law also becomes a relevant consideration. Where no specific choice is made, the applicable law is usually the law of the country in which the carrier’s head office is situated if the place for picking up or delivering the goods or the head office of the sender is also situated in that country. Otherwise, the law of the country to which the contract has the closest connections is applicable.

For domestic transports, the parties may derogate from the statutory provisions of national law to a certain extent. However, the possibilities to do so vary considerably from country to country. In Finland, for example, the statutory provisions regarding scope of liability, maximum amounts for compensation, reservations, and limitation periods for actions are as a rule mandatory. The parties may derogate from these provisions only if appropriate with respect to the exceptional nature of the goods, the exceptional manner of transport, or other exceptional circumstances.

In some other countries, on the other hand, the parties may agree on liability questions to a much larger extent, often also depending on whether derogations from the statutory law are made by means of an individual agreement or in standard terms used by one party.

Accordingly, the possibilities to derogate from statutory national law by choosing the law of another country vary considerably, depending on how essential the application of unified liability rules is regarded as being in the country in question. In any case, choice of law always becomes relevant with respect to matters not regulated by the national liability rules.

In this context, a choice of forum made by the parties may be of significant importance since the question whether a particular contractual provision or the parties’ choice of law is deemed admissible will often depend on which national court decides the matter.

As a rule, the carrier is also liable for any subcontractors carrying out the transport, or part of the transport, on the carrier’s instructions. In case of loss or damage, the carrier is usually entitled to indemnity from the subcontractor if liability to compensate customers arises. The extent of such indemnity depends on the specific provisions of the sub-contract, and it may prove ineffective if the liability of the subcontractor is not arranged back-to-back with the liability of the main carrier; for example, if the limitation period under the sub-contract is shorter than under the main contract. The potential direct liability of the subcontractor towards the customer is another issue that should be considered in this situation. This matter is argued and handled differently in different countries.

One interesting feature of transport law is the provisions pertaining to successive transports performed by several independent carriers on the basis of the same consignment note. Here, each carrier may become liable not only for his or her own part of the transport but for the transport as a whole. The second and every following carrier becomes party to the contract, under the terms of the consignment note, by accepting the note and the goods. Claims for compensation may be raised against the first or last carrier, or against the carrier who was performing the part of the transport during which the damage, loss, or delay was caused.

Thus, by accepting the consignment note from a previous carrier, the carrier always assumes the risk of being held liable for the entire transport even if another carrier is responsible for the damage which occurred. As a rule, even reservations entered by the carrier when taking over the goods do not protect the carrier from such liability. These reservations become relevant only for indemnity claims against other carriers.

The scope of liability depends on the degree of fault of the carrier responsible and on the terms of the consignment note. If the damage was caused as a result of a qualified fault (e.g. gross negligence) of one of the carriers, also the first and the last carrier in the chain cannot avail themselves of the maximum amounts when held liable by the customer. The same applies if, according to the consignment note, the stated value of the goods or a special interest is applicable instead of the normal maximum amounts. For the single carrier, whose own insurance policy will usually only cover the normal maximum amounts, this gives rise to a considerable risk, unless a specific agreement is reached in order to deal with this issue.

A carrier who becomes liable to pay compensation under the rules discussed above, despite not being responsible for the damage caused, may seek partial indemnity from the other carriers involved. As a rule, the carrier responsible for the damage is solely liable to pay compensation. If several carriers are responsible for the damage, each of them has to pay an amount proportionate to their share of the liability. If it cannot be ascertained who was responsible for the damage, all carriers are liable in proportion to their share of the freight charges. Should one of the carriers be insolvent, the share of the compensation due from that carrier will be distributed between all carriers involved. However, the carriers are free to agree on different rules for distributing the liability among themselves.