Applicability of the CMR convention to road legs in multimodal transports open to question

Under the Convention on the Contract for the International Carriage of Goods by Road ("CMR convention") and the Finnish Road Transport Act, a carrier is, as a general rule, liable for loss of and damage to the goods occurring during the transport as well as for any delay in delivery. It is, however, subject to interpretation whether the CMR convention and the Finnish Road Transport Act are applicable to road legs of international multimodal transports (in other words, transports that are carried out by using more than one means of transportation).

According to a recent ruling by the Vaasa Court of Appeal (VaaHO 2015:5), the CMR convention and the Finnish Road Transport Act do not apply to road legs of international multimodal transports. The claimant has been granted leave to appeal the decision to the Supreme Court. The ruling by the Supreme Court is expected within one year.

The Vaasa Court of Appeal only had to decide on the forum question. What cannot be read from the ruling is that, as the CMR convention and the Finnish Road Transport Act do not apply to road legs of multimodal transports according to the judgement, it follows that the mandatory rules of the CMR convention and the Finnish Road Transport Act protecting the carrier (statute of limitations, limitation of liability etc.) cannot be relied upon in international multimodal transports. The Supreme Court's ruling on the subject will therefore have a significant impact on most transports to and from Finland.

Relevant provisions of the CMR convention

The CMR convention is aimed to standardise the conditions governing contracts for the international carriage of goods by road. The CMR convention is implemented in Finland through the Finnish Road Transport Act. According to Article 1 of the convention, the convention applies to contracts for the carriage of goods by road when the place of taking over of the goods and the place designated for delivery are situated in two different countries, of which at least one is a contracting country.

According to Article 2 of the convention, if the vehicle containing the goods is carried over part of the journey by other means of transportation, and the goods are not unloaded from the vehicle, the CMR convention will nevertheless apply to the whole of the carriage. If the goods are, however, unloaded from the vehicle for part of the journey and transported by sea, for example, it is subject to interpretation whether the convention becomes applicable on the road legs. Case law in the contracting states is inconsistent, which has led to lengthy disputes about among others forum questions.

Forum questions are dealt with in Article 31 of the CMR convention. If the CMR convention becomes applicable, the plaintiff may bring an action in several alternative forums, for example, in any court or tribunal of a contracting country designated by agreement between the parties or at the place where the goods were taken over by the carrier or the place designated for delivery is situated. If the CMR convention is not applicable, the competent court(s) may differ as other rules are applied (in this case the Brussels I regulation).

Reasoning of the Vaasa Court of Appeal

In the recent case from the Vaasa Court of Appeal, A Ltd had undertaken to transport a mobile crushing plant owned by M Oy from Pori in Finland to Sheffield in the United Kingdom. The crushing plant was transported by road from Pori to Rauma in Finland, where it was unloaded from the vehicle and loaded onto a vessel. The journey continued by sea to Hull in the United Kingdom, where the machine was unloaded from the vessel and loaded onto another vehicle for the remaining road transport. After the machine left Hull by road on its way to Sheffield, it disappeared.

M Oy and its insurer sued the carrier A Ltd in Pori, i.e. the place where the goods were taken over by the carrier. The carrier A Ltd disputed the local district court's jurisdiction. The district court found that it had competence to try the matter based on Article 31 of the CMR convention and the corresponding provision of the Finnish Road Transport Act. The carrier A Ltd appealed the district court's decision.

The Vaasa Court of Appeal came to the conclusion that international case law does not appear to support the view that the CMR convention would become applicable if the goods are unloaded from the vehicle for the sea leg.

The court reasoned further that the character of a road transport remains unchanged only if the goods remain unloaded. If the goods are unloaded from the vehicle, the risk for the goods disappearing or being damaged increases. Consequently, the appellate court came to the conclusion that the CMR convention does not apply to the road legs and the district court should not have based its competence on Article 31 of the CMR convention.

Contradiction to previous Helsinki Court of Appeal judgment

The outcome in the judgment by Vaasa Court of Appeal is contradictory to a judgment by the Helsinki Court of Appeal from 6 November 2009 (judgement no. 2900/2009). In that case, cargo on its way from Finland to the United States was damaged during the road transport leg in the United States. The freight had been unloaded from the vehicle in Finland before loading it onto a vessel towards the United States. The Helsinki Court of Appeal stated that the Finnish Road Transport Act, the provisions of which correspond to the CMR convention, was applicable on the road transport legs.

In the case before the Vaasa Court of Appeal, after concluding that the CMR convention was not applicable, the court considered whether the jurisdiction of the Finnish district court could be based on the Brussels I regulation. The court stated that the main rule in the Brussels I regulation is that the courts where the defendant is domiciled have jurisdiction. The court stated that even in the case of transport agreements, the general rule is that the claimant is not free to choose between the courts where the goods were handed over to the carrier and the courts where the goods where supposed to be delivered, although the claimant may under certain exceptional circumstances have such an option.

The Vaasa Court of Appeal concluded that the case had a closer connection to the United Kingdom and that the place of performance under the transport agreement was thus in the United Kingdom. Finnish courts did not have jurisdiction to hear the case and the case was therefore dismissed.

So what now?

The Supreme Court has granted leave to appeal and we find it likely that the ruling by the Vaasa Court of Appeal will be overruled by the Supreme Court. This is mainly because Vaasa Court of Appeal has, in our view, applied the Brussels I regulation wrongly. In accordance with case law from the CJEU (Peter Rehder v Air Baltic Corporation, C-204/08, para 40-44), the claimant should have been able to choose between Finnish and English courts, as both qualify as the place of performance under the transport contract.

Consequently, we believe that the Supreme Court will come to the conclusion that Finnish courts have jurisdiction regardless of whether the CMR convention becomes applicable.

No easy predictions due to inconsistent case law

What the Supreme Court's ruling on the applicability of the CMR convention and the Finnish Road Transport Act will be is not easy to predict. As mentioned, case law from the contracting states is inconsistent. According to case law from some contracting states, such as the United Kingdom, the CMR convention is applicable whereas in others, such as Germany, it is not. In Denmark, the position appears to have changed by a ruling from the Danish Supreme Court in 2008 and case law now indicates that the CMR convention would be applicable in Denmark on road legs of multimodal transports. It would appear that the Danish Supreme Court ruling from 2008 has not influenced the Vaasa Court of Appeal ruling in any way, as it only makes reference to an older Danish ruling.

In the interest of predictability, it would be preferable that the Finnish Supreme Court would find the CMR convention applicable. Otherwise, no mandatory law will apply on road legs of multimodal transports, which is hardly in the interest of any of the contracting parties. Such transports would only be governed by the transport agreements, often entered into based on the assumption that the CMR convention is applicable.

Until the ruling from the Supreme Court, the situation will remain unclear. Unfortunately, the uncertainty as to the applicability of the CMR convention will remain on the international level also thereafter.

Therefore, the risk of the CMR convention not being applicable should be addressed carefully when drafting and negotiating transport agreements and especially when planning strategy in disputes.