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Oxford Law Citator

11 Contracts of Carriage

From: The Rome I Regulation on the Law Applicable to Contractual Obligations

Michael McParland

Content type:: Book content

Product:: Private International Law [PRIL] — International Commercial Law [ICML]

Published in print:: 19 March 2015

ISBN:: 9780199654635

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Subject(s):: Choice of law clauses — Rome Convention — Rome I Regulation and choice of law

(p. 445) 11 Contracts of Carriage

1. 11. Contracts of Carriage: Article 5 11.01
  1. A. Carriage of Goods and Passengers 11.01
  2. B. International Transport Conventions 11.02
  3. C. Contracts of Carriage under the Rome Convention 11.03
  4. D. Calls for Change? 11.18
  5. E. The Rome I Proposal: Draft Article 4(1)(c) 11.23
  6. F. ‘Carriage of Goods’ 11.31
  7. G. The Parties to a Contract of Carriage of Goods 11.63
  8. H. The Applicable Law under Article 5(1) for Contracts for the Carriage of Goods 11.77
  9. I. Contracts for the Carriage of Passengers: Article 5(2) 11.114
  10. J. Mixed Contracts of Carriage of Goods and Passengers 11.154
  11. K. The ‘Escape Clause’ under Article 5(3) 11.155
  12. L. Relationship between Rome I and International Conventions and other EU Instruments 11.160

Article 5

Contracts of carriage

1. To the extent that the law applicable to a contract for the carriage of goods has not been chosen in accordance with Article 3, the law applicable shall be the law of the country of habitual residence of the carrier, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country. If those requirements are not met, the law of the country where the place of delivery as agreed by the parties is situated shall apply.
2. To the extent that the law applicable to a contract for the carriage of passengers has not been chosen by the parties in accordance with the second subparagraph, the law applicable shall be the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence shall apply.

The parties may choose as the law applicable to a contract for the carriage of passengers in accordance with Article 3 only the law of the country where:
1. (a) the passenger has his habitual residence; or
2. (b) the carrier has his habitual residence; or
3. (c) the carrier has his place of central administration;
4. (d) the place of departure is situated; or
5. (e) the place of destination is situated.
3. Where it is clear from all the circumstances of the case that the contract, in the absence of a choice of law, is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply.

(p. 446) A. Carriage of Goods and Passengers

11.01 Article 5 of the Rome I Regulation provides special rules for determining the applicable law for contracts for the carriage of goods and passengers. The provisions of Article 5 apply to all modes of transport, and are a mixture of revised rules in relation to contracts for the carriage of goods previously found in Article 4(4) of the Rome Convention, and new rules relating to the carriage of passengers which had no predecessor in the Convention. The latter rules, in particular, were the subject of lengthy negotiations within the Rome I Committee. The nature of these rules needs to be understood against the background of widespread international provision for carriage contracts.

B. International Transport Conventions

11.02 The legal landscape of the international carriage by air,¹ road,² rail,³ inland waterways,⁴ and sea (both for the carriage of goods⁵ and for the carriage of passengers⁶) is dominated by (p. 447) international conventions.⁷ In general terms, these conventions seek to balance the competing interests of carriers on the one hand, and the differing interests of cargo owners and passengers on the other. As a consequence they include provisions detailing the scope of the carrier’s liabilities, establishing financial limits on claims, providing time limits for bringing actions, and making specific jurisdictional provisions. The application of these conventions is mandatory for contracting States.⁸ These conventions contain provisions prohibiting attempts to contract out to avoid the effect of such provisions.⁹ Provisions like Article X of the Hague–Visby Rules, create a ‘unilateral conflict rule’ in the lex fori of a contracting State.¹⁰ Even when the conventions are not mandatory, the widespread adoption of a ‘general paramount clause’¹¹ (or ‘clause paramount’)¹² in contractual terms, seeks to achieve the same result for non-contracting States by adopting the rules contained within such conventions (or respective laws enacting them) into the terms of the contract of carriage.¹³

C. Contracts of Carriage under the Rome Convention

11.03 Because of the widespread existence of these international transport conventions, the decision to include transport contracts within the Rome Convention was only made ‘after a long and animated discussion’ within the Working Group.¹⁴ In reaching their decision, ‘the Group repeatedly stressed in the course of the discussions on transport problems that the international conventions took precedence in this matter’.¹⁵ The Rome Convention distinguished between contracts for the carriage of goods and contracts for the carriage of passengers.

The carriage of goods under the Rome Convention

11.04 Under the Rome Convention, parties to contracts for the carriage of goods were entitled to select the applicable law, whether in whole or in part, without any restriction as to the law of a country that could be chosen.¹⁶ That choice had to be expressed or demonstrated with reasonable certainty, and was subject to the ordinary limitations imposed by Article 3 (p. 448) (and elsewhere) in the Convention.¹⁷ But in default of a party choice of law, the Working Group ‘deemed it inappropriate to submit contracts for the carriage of goods’ to the general presumption in Article 4(2), ‘having regard to the peculiarities of this type of contract’.¹⁸ The principal reason was because, in contracts for the carriage of goods, the concept of characteristic performance adopted in the Article 4(2) presumption would almost inevitably lead to the application of the law of the carrier’s principal place of business. This could result in the selection of an applicable law from a country which had little connection with the circumstances of the underlying contract, especially in relation to maritime carriers operating under a ‘flag of convenience’.

11.05 Under the 1972 Draft Convention, there had been no special rule for contracts for carriage of goods and the general presumption in draft article 4 in favour of the country of the characteristic performer was to apply. The 1972 Expert Group Report had anticipated that an escape clause in their draft article 4 could be used in appropriate circumstances to select the country with which the contract was most closely connected. They thought this might be appropriate in maritime transport contracts for both goods and persons, especially in a situation where the place of the conclusion of the contract and the loading of the goods coincided.¹⁹ But, as Professor Erling Selvig argued at the 1974 Copenhagen Colloquium, draft article 4 was not well suited to deal with choice-of-law problems relating to carriage of goods under bills of lading. If the general characteristic performance presumption in draft article 4 was adopted for carriage of goods by sea then this would lead in most cases to the application of the law of the carrier which in many cases would be the law of the ship’s flag. This would frequently be the law of a distant country not linked in any way with the particular transport. Professor Selvig suggested that:

[i]n order to meet the need for such a link one has in maritime transportation as well as other transportation relied, generally speaking, on factors for the applicable law, such as the place of departure and/or place of destination.²⁰

11.06 Professor Selvig became one of the two specialist advisors to the Rome Convention Working Group on transport matters, and his influence is apparent in the changes made in the Convention text. It has been argued that Professor Selvig’s concerns over the role of the role of flags of convenience were misplaced, and based on a misunderstanding of the true contractual position in maritime trade and the likely operation of the general presumption.²¹ But it must be recognized that, by the time of the Rome Convention negotiations, concerns over the use of flags of convenience were longstanding among the international community.²² In any event, it would have been apparent to the Working Group that the usual operation of Article 4(2) could produce objectively unjustifiable results in carriage (p. 449) of goods cases. As Advocate-General Bot would subsequently observe in Intercontainer Interfrigo SC (ICF):

very often, in international relations, the habitual place of residence of the supplier of the characteristic performance, that is to say, the carrier, since the main object of such a contract is the movement of goods, does not have any objective connection with the contract. Such is the case, for example, of a carrier established in Germany contracted to transport the goods of a French consignor from France to Italy.²³

The special presumption: Article 4(4) of the Rome Convention

11.07 The Working Group decided to create a special presumption in Article 4(4) of the Rome Convention for contracts for the carriage of goods that would replace the general presumption of characteristic performance found in Article 4(2). Article 4(4) said:

A contract for the carriage of goods shall not be subject to the presumption in paragraph 2. In such a contract if the country in which, at the time the contract is concluded, the carrier has his principal place of business is also the country in which the place of loading or the place of discharge or the principal place of business of the consignor is situated, it shall be presumed that the contract is most closely connected with that country. In applying this paragraph single voyage charter-parties and other contracts the main purpose of which is the carriage of goods shall be treated as contracts for the carriage of goods.

11.08 As the Court of Justice would subsequently hold in Haeger & Schmidt GmbH:

the first two sentences, Article 4(4) of the Rome Convention reflects the specific nature of the contract for the carriage of goods which, at least in a cross-border context, does not lend itself easily to being connected with the country of residence of the contractual party who effects the characteristic performance since, given that the principal purpose of such a contract is the transport of goods and the carrier's habitual residence has no objective connection with that contract. Thus, the second sentence of Article 4(4) of the Convention sets out an exhaustive enumeration of the connecting criteria concerning the law applicable to contracts for the carriage of goods.²⁴

11.09 Article 4(4) of the Convention applied to a contract between ‘the carrier’ and ‘the consignor’, the ‘main purpose’ of which was the ‘carriage of goods’. Such contracts would include ‘single voyage charterparties and other contracts the main purpose of which is the carriage of goods’. But Article 4(4) was not intended to apply to all contracts that met this ‘main purpose’ requirement. Article 4(4) was limited to those contracts involving a certain conjunction of connecting factors. In order for the presumption in Article 4(4) to apply, the carrier’s ‘principal place of business’ had to be in the same country as either (i) the ‘place of loading’, and/or (ii) ‘discharge’ of the goods and/or (iii) ‘the principal place of business of the consignor’. If so, then Article 4(4) declared that it was to be presumed that the contract was most closely connected with that country, and therefore the law of the country of the carrier’s principal place of business would apply. But in any contract by which goods where (p. 450) being carried the location of the carrier’s principal place of business did not coincide with one of those three special connecting factors, then Article 4(4) could not apply.²⁵

11.10 The concept of the carrier’s ‘principal place of business’ was not defined in the text of the Rome Convention. A majority of the Working Party appear to have assumed that the contract terms themselves might indicate where this was, as ‘contracts of carriage normally contain a clause conferring jurisdiction on the court of the carrier’s principal place of business’.²⁶ That place was not necessarily to be equated with the place of incorporation (the ‘seat’) of the carrier, particularly if that was only remotely connected with the carrier’s business. To counter any possibility that subsequent changes in the location of carrier’s principal place of business might give rise to difficulties in determining whether the other special connecting factors under Article 4(4) of the Convention were satisfied, the Giuliano–Lagarde Report noted that ‘it has been made clear…that the reference to the country in which the carrier has his principal place of business must be taken to refer to the carrier’s place of business “at the time the contract is concluded”’.²⁷

11.11 Even so, an example of the difficulties that might readily arise in determining a carrier’s principal place of business can be seen from a consideration of the facts in the English jurisdiction case of The Rewia, an action that arose out of the loss of a cargo of nutmegs and mace being carried from Grenada to Rotterdam.²⁸ The alleged carrier was a ‘one-ship’ Liberian corporation, whose directors and shareholders were based in Hamburg.²⁹ The company’s sole business was the ownership, operation and employment of The Rewia. But the actual operation and management of the ship was delegated entirely to another company in Hong Kong. Sheen J held that the Liberian corporation did not have their principal place of business in Hamburg, but in Hong Kong. Although the company’s central management and control was in Hamburg, Hong Kong was where instructions were given and the place from which control was exercised on behalf of the company over the employees and business of the company, which was namely the operation of The Rewia, and therefore where it had its principal place of business.

11.12 The consignor’s ‘principal place of business’ was also left undefined in the text of the Convention. Again, as with the carrier’s principal place of business, this could only be determined as a question of fact applying the same methods. Although no express indication was given it seems clear that, as with carrier’s principal place of business, this question was be determined at the time of the conclusion of the contract.³⁰

11.13 There was also no express provision made (or guidance given in the Giuliano–Lagarde Report) for what rule in Article 4 should apply in cases where the necessary conjunction of connecting factors in Article 4(4) did not align.³¹

The carriage of passengers under the Rome Convention

11.14 Contracts for the carriage of passengers that formed a component of a ‘package tour’, ‘ie an ordinary tourist arrangement consisting of a combination of travel and accommodation (p. 451) for an inclusive price’,³² were subsumed within the protections offered to consumers under Article 5 of the Rome Convention.³³

11.15 By contrast, no special provision was made for standalone contracts for the carriage of passengers. Parties were free to choose the applicable law under Article 3 without any restrictions. In the absence of party choice, then contracts for the carriage of passengers were subject to the general presumption in Article 4(2).³⁴ This solution was only adopted by after a majority vote within the Working Group.³⁵ It was made in the knowledge that the application of the general presumption under Article 4(2) would almost inevitably lead to a choice of the law of the country of the central administration or the principal place of business of the carrier, as the performance which was characteristic of the contract was ‘to transport in a contract of carriage’,³⁶ subject only to the escape clause in Article 4(5).

11.16 Some delegations to the Rome Convention Working Group had favoured the inclusion of passenger contracts within the scope of the special presumption applied to contracts for the carriage of goods contained in Article 4(4). They argued that, as with all transport contracts, there was a need for a combination of connecting factors. Referring solely to the place where the carrier, who provides the characteristic performance, has his principal place of business may not be a significant connecting factor on the facts of a particular contract. Those delegations cited by way of example ‘the case of transportation of French or English passengers between London and Paris by an American airline’.³⁷ The adoption of the law of a US State to govern such an arrangement would seem less closely connected than either English or French law. Those delegations who were in favour of combining all transport contracts in the special presumption rule of Article 4(4) of the Convention also emphasized that in a mixed contract that involved both the carriage of passengers and goods there could be difficulties in applying two different laws.³⁸

11.17 The majority of delegations, however, were against the inclusion of passenger contracts within the special presumption in Article 4(4). Their principal arguments were (1) that the application of several laws to passengers on the same journey would involve ‘serious difficulties’; (2) that the ‘formulation’ of Article 4(4) was such that ‘it would hardly ever apply to carriage of passengers’, so recourse would usually be had to Article 4(1), which did not give the judge ‘sufficiently precise criteria for decision’; (3) that as contracts of carriage normally contained a clause conferring jurisdiction on the court of the carrier’s principal place of business, Article 4(2) ‘would operate so that the law of the court of competent jurisdiction would coincide with the applicable law’.³⁹ Indeed, the Giuliano–Lagarde Report went on to emphasize that, ‘in any event’, a judge ‘will not be able to exclude consideration of the country in which the carrier has his principal place of business in seeking the places with which the contract is most closely connected’.⁴⁰ In practical terms, in the unlikely event that (p. 452) the carrier’s standard terms and conditions did not contain a choice of law, then contracts for the carriage of passengers would invariably be subject to a ‘carrier’s law’.

D. Calls for Change?

11.18 A number of responses to the Rome I Green Paper favoured removing the special presumption in Article 4(4) of the Convention. The European Economic and Social Committee (‘EESC’) noted it had been questioned if contracts for the carriage of goods really needed a special provision, and expressed the view that it would ‘not be inappropriate’ to remove Article 4(4) and make contracts of carriage subject to the general rule.⁴¹ The EESC thought that:

the aim of protecting carriers, which is implicit in several uniform substantive arrangements for various type of carriage of goods, does not require the present wording of the provisions, since if the accumulation of connections cannot be materialised, recourse will have to be had to either paragraph (1) or paragraph (2).⁴²

11.19 There was support for this suggestion especially among German scholars. Professors Magnus and Mankowski thought it wise to strike out Article 4(4) because it bore ‘no proper justification’.⁴³ Flags of convenience were a specific phenomenon of maritime carriage contract, and did not have counterparts in other areas of transportation, and concluded that transport contracts are no different from others from a private international law perspective:

If there are peculiarities, those peculiarities stem from special Conventions—and these special Conventions will prevail by virtue of Art. 21 [Article 25]. However, the transformation into the future Rome I Regulation offers the opportunity to strike out and drop Art. 4(4) [of the] Rome Convention, a rule not serving a real or discernible purpose and complicating matters unnecessarily.

11.20 The Max Planck Institute also recommended the deletion of Article 4(4) of the Convention.⁴⁴ The Institute found it hard to see why the place of performance in the case of transportation of goods merited a different treatment from all other contracts, including the contract for the carriage of passengers. The existing rule was seen as peculiar: a fact they sought to demonstrate by reference to Swiss and Russian law.⁴⁵ It was recognized that a general presumption as found in Article 4(2) of the Convention would in some cases be inappropriate, ‘especially if it points exceptionally to the law of a country of a flag of convenience wholly unconnected with the operation of the ship and the execution of the contract’. However, the solution proposed to deal with such problems was not to have a special presumption but instead have an ‘exception clause’ that ‘leaves sufficient flexibility for the adaptation of the general presumption to the particular instances of the case’.⁴⁶

(p. 453) 11.21 By contrast, the Nordic Group recommended retaining a special provision for contracts for the carriage of goods derived from Article 4(4) of the Rome Convention, and advocated a solution that is an early precursor to the first part of Article 5(1) of the Regulation.⁴⁷

11.22 There was also a debate over the question of contracts for the carriage of passengers, and the balance to be achieved between the interests of carriers and consumers. Some scholars questioned the exclusion of ordinary contracts of carriage from the consumer contract protections of Article 5 of the Convention. As Professor Morse observed ‘[i]s it really so obvious that the rights of a passenger on a cross-channel ferry against his or her carrier are inappropriate for the regulation of Article 5?’⁴⁸ While Professor Basedow’s report as part of the Commission’s funded Antwerp Study concluded that the explanation given in the Giuliano–Lagarde Report for excluding standalone passenger contracts ‘is still valid’:

A German tourist taking a train ride from Madrid to Sevilla [Seville] should be subject to the same national provisions, regardless of whether he bought the ticket in Madrid or at the office of the Spanish railway company in Germany.⁴⁹

E. The Rome I Proposal: Draft Article 4(1)(c)

11.23 As part of its radical re-structuring of Article 4,⁵⁰ the Commission proposed replacing Article 4(4) of the Rome Convention with a new fixed rule rather than a presumption. This rule would apply to law of the carrier’s habitual residence to all contracts of carriage including those for the carriage of passengers. The need to establish additional connecting factors based on place of loading, discharge or the principal place of business of the consignor was to be abolished, along with the escape clause formerly found in Article 4(5) of the Convention.

11.24 Draft article 4(1)(c) of Rome I Proposal, provided that:

1. To the extent that the law applicable to the contract had not been chosen in accordance with Article 3, the contract shall be governed by the law as determined as follows:…

(c) a contract of carriage should be governed by the law of the country in which the carrier had his habitual residence.

11.25 Although this new rule would select the law of the country of the carrier’s ‘habitual residence’ rather than their ‘principal place of business’ as under the Convention, this aspect (p. 454) was no doubt seen at that stage as more a matter of form rather than substance, as draft article 18(1) of the Proposal then indicated that for a legal person, their ‘principal establishment’ was to be considered their ‘habitual residence’ for the purposes of the Regulation.

11.26 Other than the general statement that the proposed changes to Article 4 were designed ‘to enhance certainty as to the law by converting mere presumptions into fixed rules and abolishing the exception clause’,⁵¹ the Commission gave no specific explanation for the proposals contained in draft article 4(c) in either their Explanatory Memorandum or in the draft recitals to the proposed Regulation.⁵²

Reactions to the Rome I Proposal

11.27 Draft article 4(1)(c) of the Rome I Proposal found favour with the European shipping industry,⁵³ who also welcomed the Commission’s proposal not to create separate rules for the carriage of goods and the carriage of passengers.

11.28 The initial reaction elsewhere within Brussels to draft article 4(1)(c) of the Proposal was more mixed.⁵⁴ The European Parliament favoured a return to a presumption rather than a rule, and was unhappy about the removal of the escape clause.⁵⁵ When the Proposal was first discussed at the meeting of the Committee of Civil Law Matters (Rome I) of 3 and 4 July 2006, several delegations expressed ‘strong reservations’ about draft article 4(1)(c).⁵⁶

11.29 Thereafter, the legislative development of Article 5 involved:

(i) Abandoning the Commission’s idea of one rule to deal with both contracts of carriage and of passengers within the scope of Article 4 and the creation of a new, separate rule in Article 5;
(ii) Restoring and revising (via Recital (22)) various aspects of the guidance given in both the Rome Convention and the Giuliano–Lagarde Report on the meaning of the concept of carriage of goods and the identities of the parties involved in such contracts;
(iii) Restoring for contracts of the carriage of goods, revised versions of the necessary connecting factors that were required to be aligned with the country of the habitual residence of the carrier before that country’s law would be selected as the applicable law in default of party choice (Article 5(1) first sentence);(p. 455)
(iv) The addition of a new, fall-back rule of the country where the agreed place of delivery of goods is situated in the second sentence of Article 5(1);
(v) The crafting of an entirely new rule for the carriage of passengers which is now found in Article 5(2); and
(vi) The restoration of a new escape clause in Article 5(3).

11.30 Each of these matters are dealt with in detail below.

F. ‘Carriage of Goods’

11.31 Article 5(1) of the Regulation applies to ‘contracts for the carriage of goods’ which are concluded between a ‘carrier’ and a ‘consignor’. The interpretation of all three of these concepts Article 5(1) is assisted by the guidance given in Recital (22):

As regards the interpretation of contracts for the carriage of goods, no change in substance is intended with respect to Article 4(4), third sentence, of the Rome Convention. Consequently, single-voyage charter parties and other contracts the main purpose of which is the carriage of goods should be treated as contracts for the carriage of goods. For the purposes of this Regulation, the term ‘consignor’ should refer to any person who enters into a contract of carriage with the carrier and the term ‘the carrier’ should refer to the party to the contract who undertakes to carry the goods, whether or not he performs the carriage himself’.

‘Goods’

11.32 The term ‘goods’ is not defined under the Rome I Regulation, in contrast to a number of international carriage conventions.⁵⁷ It should be interpreted in the same way as under Article 4(1)(a) of the Regulation. By leaving the term undefined, the Rome I Regulation does exclude or limit the scope of contracts for the carriage of goods to certain categories of goods. It will include both commercial and household goods. It is analogous to the similarly undefined term ‘cargo’ in the air carriage Conventions.⁵⁸

A ‘contract for the carriage of goods’

11.33 The concept of a ‘contract for the carriage of goods’ is not defined in the body of the Rome I Regulation, and will be given an autonomous interpretation, independent of classifications given in the national laws of Member States. That interpretation is aided by Recital (22) which says that no change in substance is intended from Article 4(4), third sentence, of the Rome Convention, and then repeats the earlier Convention text that:

single-voyage charter parties and other contracts the main purpose of which is the carriage of goods should be treated as contracts for the carriage of goods.⁵⁹

(p. 456) 11.34 The restoration of the text from Article 4(4) of the Convention was first advocated by the Austrian delegation, who queried its absence from the original Rome I Proposal.⁶⁰ Austria suggested restoring the missing sentence to the text of the Regulation as ‘[t]his addition could avoid discussions on the reason for the omission of this sentence. It would enhance clarity’.⁶¹ At the Rome I Committee meeting of 25 April 2007, ‘some delegations’ returned to the point and suggested referring to it in a recital to the new Regulation.⁶² This is now Recital (22).

Charterparties

11.35 The reference in Recital (22) to ‘single-voyage charter parties’ (les contrats d’affrètement pour un seul voyage / Charterverträge für eine einzige Reise) in the context of contracts for the carriage of goods requires some explanation. Charterparties,⁶³ often simply referred to as ‘a charter’, are contracts for the use or hire of a vessel.⁶⁴ The charter is the document containing all the terms and conditions of the contract between a shipowner and the person entitled to use the ship, ‘the charterer’. They are invariably made in writing and usually on standard forms.⁶⁵ They fall into three main categories:

(1) A demise charterparty, or bareboat charter or charter by demise. This involves the hiring or leasing of a ship for a period of time, during which the shipowner provides only the ship, and the charterer provides the crew together with all stores and bunkers and pays all its operating costs.⁶⁶ Although the demise charterer may themselves subsequently enter into contracts for the carriage of goods on the ship they have leased, the contract between themselves and the ship’s owners is not a contract for the carriage of goods and is thus outside the scope of Article 5(1) of the Rome I Regulation.
(2) A time charter. This is a contract for services to be rendered to the charterer by a shipowner through the use of the vessel by the shipowner’s own servants (the master and crew) acting in accordance with such directions as to the cargoes to be loaded and the voyages to be undertaken as by the terms of the charterparty the charterer is entitled to give them.⁶⁷ Under a time charter, the shipowner places the ship, its crew and equipment at the disposal of the charterer for a specified period,⁶⁸ in return for which the charterer pays what is generally known as ‘hire’; even though a time charter is not a lease (p. 457) or contract for the hire of the ship as the time charter gives the charterer no possessory interest in the ship.⁶⁹ Although, no doubt, the underlying objective of the charterer is that goods will be carried on the chartered vessel, a time charter between the owner and the charterer is not, in the normal sense, a contract for the carriage of goods within the meaning of what is now Article 5 of Rome I.⁷⁰
(3) A voyage charter. This is a contract of carriage of goods under which the charterer pays for the use of a ship’s cargo space for one, or sometimes more than one voyage. Under a voyage charter, the charterer pays ‘freight’ as the price for the carriage, which is generally paid per unit of cargo.⁷¹ Under a voyage charterparty, key elements of the contract to be identified include the freight and the loading and discharging ports.

11.36 A ‘single-voyage charter’⁷² is one where the owner of the vessel agrees to perform one designated voyage carrying a cargo in return for the payment of freight⁷³ and, when appropriate, demurrage.⁷⁴ But voyage charterparties may include more than a single voyage. A charter may be categorized as a ‘consecutive voyage charter’ when it involves a series of designated voyages, where each voyage follows on directly from the previous one.⁷⁵ Alternatively, the charter may be an ‘intermittent voyage charter’ where the sequence of voyages contracted for do not follow on consecutively, or involve repositioning voyages in which the owners may carry cargoes for persons other than the charterer.⁷⁶ In cases where there are a series of periodic voyages in a specific vessel, or a number of vessels that might be nominated to fulfil the contract, these charters may be categorized as ‘tonnage contracts’ or more generally as ‘contracts of affreightment’ (‘COAs’).⁷⁷

11.37 There are also various hybrid forms of charterparties such as a ‘slot charter’ (or ‘space charter agreement’), where the owner lets, and the charterer hires, a number of ‘slots’ on board a ship to accommodate containers of goods;⁷⁸ (or a ‘trip time charter’, which often involves a single trip being made during the currency of a time charter),⁷⁹ and amounts in many cases to the charter of the vessel for a specific voyage on time charter terms.⁸⁰

(p. 458) 11.38 The terminology used in Article 4(4) of the Convention and now transposed into Recital (22) of Rome I was selected against a background whereby it was increasingly recognized that traditional distinctions between charterparties was becoming less clear. During the negotiations for the Rome Convention in the 1970s, it was recognized by leading maritime commentators that:

recent developments in chartering practice have, however, tended to obscure the distinction between time and voyage charters. For example, provision is sometimes made for a specific number of consecutive voyages or for as many voyages as the vessel can perform within a certain period. Such charters present their own problems, although they constitute a sub-category of voyage charters by reason of the method by which the shipowner’s remuneration is calculated.⁸¹

11.39 This was reflected by the UNCTAD report in 1974⁸² on charterparties, which also highlighted the various complex forms of ‘sub-letting’ that occurred, involving complex, long-term, interlocking bulk cargo sale and freight arrangements, with a result that there is ‘overlapping of time and voyage charters’.⁸³

11.40 The form of words used in Article 4(4) of the Rome Convention, with its emphasis on the ‘main purpose’ of the contract being the carriage of goods, allowed other contracts to be equated with contracts for the carriage of goods; as one of the main purposes of that provision was to extend the application of the second sentence of Article 4(4) to contracts which, despite being categorized as charterparties under national law, have as their principal purpose the carriage of goods.⁸⁴ Contracts of carriage of goods under bills of lading, plainly fell within Article 4(4), and in relation to single-voyage charterparties, this ‘main purpose’ requirement is a ‘qualification which will rarely if ever be unfilled’.⁸⁵ A typical example of such a charter is one which involves a seller of goods under a cost, insurance and freight (‘CIF’) contract chartering a vessel to carry the goods to their destination. The reference to single-voyage charters could be seen as a deliberate attempt to anchor the concept by reference to a contract that would be expected to fulfil the necessary ‘main purpose’ criterion. At the other end of the charterparty spectrum, it is obvious that a demise charter did not fall within the scope of Article 4(4) of the Rome Convention, as these charters are essentially leases of vessel and could not satisfy the ‘main purpose’ criterion. But for others contracts would have to depend on the facts. However, because of the fact that only single-voyage charters were identified in the text some commentators expressed doubts over whether consecutive voyage charters or other similar contractual arrangements involving the carriage of goods fell within the scope of Article 4(4).⁸⁶ If that interpretation had been correct, then both Article 4(4) of the Convention and now Article 5(1) of the Regulation would be (p. 459) incapable of reflecting developments in chartering practice, ‘and thus will be diminished in practical utility by an excessively technical and unrealistic interpretation of its scope’.⁸⁷

11.41 The Giuliano–Lagarde Report had said the wording in Article 4(4) of the Convention now found in Recital (22) was ‘intended to make it clear that charterparties may be considered to be contracts for the carriage of goods in so far as that is their substance’.⁸⁸ This reference to charterparties in the plural, especially when read in conjunction with the text of Article 4(4) which referred to both ‘single voyage charterparties and other contracts the main purpose of which is the carriage of goods’ would indicate that other forms of charter could also fall within the special presumption in Article 4(4), but only as long as their main purpose was not the hire of the vessel but was the actual carriage of goods.⁸⁹

Intercontainer Interfrigo SC (ICF)

11.42 This broader interpretation of Article 4(4) would subsequently be supported by the Court’s decision in ICF.⁹⁰ The facts of ICF, concerned a projected rail link for the transport of goods between Amsterdam and Frankfurt. The claimant, Intercontainer Interfrigo SC (ICF), a Belgian company, agreed to make railway wagons available to the defendants, Balkenende Oosthuizen BV (Balkenende), who were acting on behalf of MIC Operations BV (MIC). Both defendants were companies established in the Netherlands. ICF was to carry out the rail transport of the goods, and bought locomotives and services for that purpose. MIC leased the loading capacity which was available to third parties and was to oversee the operational phase of the transport. Although a draft agreement, entitled ‘Draft Contract concerning the operation of shuttle train services Amsterdam Westpont Terminal-Frankfurt Hoechst Terminal’⁹¹ was sent which incorporated a Belgian choice of law clause, it was never signed. In a subsequent action brought in the Netherlands on an unpaid invoice for work done on the project, the Dutch defendants claimed the action was time-barred under Netherlands law. In response, the Belgian claimants contended that the applicable law was Belgian where the action had been brought in time. The Hoge Raad referred a series of questions to the Court.⁹²

11.43 The Hoge Raad’s first question was whether Article 4(4) of the Rome Convention should be construed as meaning ‘it relates only to voyage charterparties and that other forms of charterparty fall outside the scope of that provision?’⁹³ The facts of ICF made this an odd question. The nature of the contractual arrangements in ICF were such that it has been questioned whether it could be described as a charterparty at all.⁹⁴ But more significantly, (p. 460) whatever the contract in ICF could be categorized as, it would not be a ‘contract of carriage’ for the purposes of Article 4(4) of the Convention. This was because none of the required connecting factors with Belgium, the principal place of business of ICF, were met. Both the place of loading and the principal place of business of the consignor were in the Netherlands, and the place of discharge was in Germany. Because of this, the Dutch Advocate-General Bot dismissed the possible application of Article 4(4) out of hand without considering the wider implications the Hoge Raad’s question.⁹⁵ The CJEU took a different approach, and considered the arguments raised before it as to the scope of Article 4(4) and the meaning of its third sentence that ‘[i]n applying this paragraph single voyage charter-parties and other contract the main purpose of which is the carriage of goods shall be treated as contracts for the carriage of goods’.⁹⁶

11.44 Before the Court, the Netherlands argued that Article 4(4) was not limited to single voyage charterparties but also applied to all other contracts, the main purpose of which is the carriage of goods. The Netherlands submitted that it was apparent from the Giuliano–Lagarde Report⁹⁷ that the third sentence of Article 4(4) was intended to make it clear that charterparties may be considered to be contracts for the carriage of goods ‘in so far as that is their substance’. That category therefore covered ‘short-term charterparties, in which a means of transport along with its crew is made available to a charterer for a certain period of time for the purpose of carriage’.⁹⁸ The Netherlands argument appears intended to include within the scope of Article 4(4) time-charters and other hybrid charters as long as their ‘main purpose’ was the carriage of goods.

11.45 By contrast, the Czech Government argued that the last sentence of Article 4(4) was intended to extend the scope of that provision to ‘certain categories of contracts connected with the carriage of goods’ although these contracts cannot be categorized as contracts of carriage.⁹⁹ For a charterparty to be covered by the last sentence of Article 4(4), its ‘main purpose must be the carriage of goods’. It followed therefore, that the ‘main purpose’ requirement must be understood, not as relating to the direct purpose of the contractual relationship, ‘but as the purpose which, to be achieved, needs to be assisted by that relationship’.¹⁰⁰

11.46 In contrast to both the Netherlands and the Czech Republic, the European Commission argued for a restricted interpretation of the scope of Article 4(4). The Commission submitted that only certain categories of charterparties fell within the scope of the final sentence (p. 461) of Article 4(4). The necessary connecting criterion only applied to those charter-parties ‘by which a means of transport is made available by a carrier on a single occasion and those entered into by a carrier and a consignor which relate exclusively to the carriage of goods’ were covered.¹⁰¹ The Commission considered that, even though it was undeniable that the contract in ICF involved the carriage of goods, such factors were not sufficient to categorize it as a contract for the carriage of goods for the purposes of applying Article 4(4) of the Convention. They noted that contractual relationships with various consignors and obligations relating to the actual carriage of goods, including loading and unloading, appear to have been entered into between MIC and ‘third parties’ to which MIC had hired out the load capacity in the train wagons chartered.¹⁰²

11.47 The Court implicitly rejected the Commission’s restrictive interpretation. The Court concluded that, as was apparent from the wording of the third sentence in Article 4(4) the Rome Convention equated contracts of carriage, not only with single voyage charterparties, ‘but also other contracts, in so far as the main purpose of those contracts is the carriage of goods’.¹⁰³ But the Court went beyond merely restating the words of the third sentence of Article 4(4).¹⁰⁴ They instead emphasized that one of the aims of that provision was to extend the scope of the rule of private international law laid down in the second sentence of Article 4(4) to contracts ‘the main purpose of which is the carriage of goods, even if they are classified as charterparties under national law’.¹⁰⁵ The Court then declared that, in order to ascertain the main purpose of the contract, it was necessary to ‘take into consideration the objective of the contractual relationship, and consequently, all the obligations of the party who effects the performance which is characteristic of the contract’.¹⁰⁶

11.48 As for the obligations arising under ‘a charterparty’, the Court said:

In a charterparty, the owner,¹⁰⁷ who effects such a performance, undertakes as a matter of course to make a means of transport available to the charterer. However, it is conceivable that the owner’s obligations relate not merely to making available the means of transport but also to the carriage of goods proper. In such circumstances, the contract in question comes within the scope of article 4(4) where its main purpose is the carriage of goods.¹⁰⁸

11.49 Accordingly, the CJEU concluded that Article 4(4) of the Convention must be interpreted as meaning the connecting criterion provided for in the second sentence of Article 4(4) applies to a charterparty, other than a single voyage charterparty, ‘only when the main (p. 462) purpose of the contract is not merely to make available a means of transport, but the actual carriage of goods’.¹⁰⁹

11.50 The distinction that the Court in ICF was drawing was between contracts whose main purpose is ‘merely’ one of hire of the means of transport and those contracts where their main purpose is the ‘actual carriage of goods’. The latter falls within what is now Article 5 of Rome I, the former does not. This distinction is similar to that found in national case law on the Convention on the Contract for the International Carriage of Goods by Road (‘CMR Convention’), which seeks to draw a line between a contract for the carriage of goods by road (to which the CMR does apply) and a contract for the hire a vehicle and a driver (to which the CMR does not apply).¹¹⁰ That distinction in CMR cases is not always easy to make, and the experience of the national courts dealing with CMR Convention cases shows some divergence of approach.¹¹¹ Not dissimilar problems may arise in relation to Article 5 of the Regulation and the CJEU may be required to give further guidance.

Haeger & Schmidt GmbH

11.51 In Haeger & Schmidt GmbH, a French company (Va Tech) with its registered office in Lyon, France, engaged another French company (Safram) as the principal freight forwarding agent, to organize the carriage of a transformer originating from the United States from the port of Antwerp (Belgium) to Lyon.¹¹² Safram, acting in its own name but on behalf of Va Tech, concluded a second commission contract with a German company, Haeger & Schmidt, for the carriage of the transformer by inland waterway. Haeger & Schmidt then chose for that purpose a Mr Lorio, a carrier established in Douai (France), and owner of the barge El-Diablo, registered in Belgium, who was to perform the carriage.¹¹³ While the transformer was being loaded in Antwerp, it slid on the slipway, causing the barge El-Diablo to capsize and sink with its cargo.¹¹⁴ Va Tech sought compensation for its loss before the Tribunal de commerce de Douai (Commercial Court, Douai) from Safram and Haeger & Schmidt. Haeger & Schmidt, in turn, sought to join Mr Lorio and his insurer, Mutuelles du Mans assurances IARD (MMA IARD), which also had its registered office in France, as third parties.¹¹⁵ The Tribunal de commerce de Douai upheld Va Tech’s claim for damages, ruling that French law was the only law applicable to the contracts in question and declaring Safram and Haeger & Schmidt, in their capacity as forwarding agents, liable for the losses incurred on loading.¹¹⁶ Haeger & Schmidt lost on appeal, and brought a subsequent appeal before the Cour de Cassation, claiming that German law should have applied to the (p. 463) contract, as Haeger & Schmidt had effected the performance characteristic of the commission contract for the carriage of goods between the parties and that it was established in Germany. Accordingly, the French lower courts could only apply French law by the application of the exception clause in Article 4(5) of the Rome Convention, and only do so after comparing the connections that existed between the contract and (i) Germany, and (ii) France, in order to ascertain, in the light of all the circumstances of the case, the country with which the contract was most closely connected.¹¹⁷ On a reference from the Court de cassation, the Court of Justice considered¹¹⁸ whether Article 4(4) of the Rome Convention must be interpreted as applying to a commission contract for the carriage of goods and, if so, what are the requirements for a commission contract for the carriage of goods to be considered a contract for the carriage of goods.¹¹⁹

11.52 The Court emphasized that the expression ‘shall be treated as contracts for the carriage of goods’ and the conditions under which another contract may be considered a contract for the carriage of goods, necessitated ‘consistent and independent criteria…in order to guarantee the full effectiveness of the Rome Convention in view of the objectives which it pursues’.¹²⁰ Applying the interpretation in the ICF decision, the Court held that the last sentence of Article 4(4) allowed ‘other contracts to be equated with contracts for the carriage of goods’, since one of the purposes of that provision is to extend the application of the second sentence of Article 4(4) to contracts which, despite being categorized as charter-parties under national law, have as their principal purpose the carriage of goods. In order to ascertain whether that criteria as satisfied, ‘it is necessary to take into consideration the objective of the contractual relationship and, consequently, all the obligations of the party who effects the performance which is characteristic of the contract’.¹²¹

11.53 The Court held that the same holds true for a commission contract for the carriage of goods, which is a separate contract the characteristic performance of which consists in organizing the carriage of goods. As the carriage of goods per se is not its principal purpose, a commission contract for the carriage of goods cannot be considered to be a contract for the carriage of goods.¹²² However, taking account of the purpose of the contractual relationship, the actual performance effected and all of the obligations of the party who must effect the characteristic performance, and not the parties’ categorization of the contract, a commission contract for the carriage of goods may turn out to actually be a contract for the carriage of goods, if its principal purpose is the transport as such of the goods.¹²³ The Court then noted that it was apparent from the order for reference that the first two contracts concluded, on the one hand, by Va Tech and Safram and, on the other, by Safram and Haeger & Schmidt, were categorized by the Cour de Casssation as commission contracts for the carriage of goods. In order to have effected carriage of the transformer by inland waterway, Haeger & Schmidt had concluded a contract for the carriage of goods with Mr Lorio, the owner of the barge El-Diablo.¹²⁴ It was also apparent that the principal purpose of the contract (p. 464) concluded by Safram and Haeger & Schmidt was ‘the overall organization of carriage and not simply legal representation of the contractor’, with Haeger & Schmidt acting as intermediary under its own responsibility and in its own name, but on behalf of the contractor, in order to complete the tasks necessary for the carriage of the transformer in question.¹²⁵ The Court of Justice therefore directed it was for the French court, in examining the overall circumstances of the dispute, including the contractual stipulations reflecting the economic and commercial reality of the relations existing between the parties, and the purpose of Article 4(4) of the Rome Convention, to ascertain whether and to what extent the commission contract for the carriage of goods in question has as its principal purpose the actual carriage of the goods concerned.¹²⁶ The Court concluded by holding that the last sentence of Article 4(4) of the Rome Convention must be interpreted as applying to a commission contract for the carriage of goods ‘solely when the main purpose of the contract consists in the actual transport of the goods concerned’, which it was for the referring court to verify.¹²⁷

The main purpose test in practice

11.54 It had been suggested prior to the Court’s decision in Haeger & Schmidt GmbH that ultimately what is required in determining the scope of Article 5(1) of the Regulation is the identification of the principal obligation of the characteristic performer, and if (and only if) that is that obligation is to carry goods then Article 5(1) will be engaged. If not, then the contract should be classified as a contract for hire and would then fall, most probably, within Article 4(1)(b).¹²⁸ That interpretation is consistent with a literal interpretation of the ‘main purpose’ requirements contained in Recital (22) of the Regulation. This approach appears to be consistent with the ruling in Haeger & Schmidt GmbH, which referred to whether contract in question has ‘as its principal purpose the actual carriage of goods’.¹²⁹

11.55 This text is likely to be satisfied by not only traditional single-voyage charterparties, but other arrangements which are contained in or evidenced by a wide variety of contractual documentation, such as bills of lading, mate’s receipts, sea waybills, through transport documents, non-negotiable receipts, and ship’s delivery orders.¹³⁰

11.56 But other than Haeger & Schmidt GmbH, there is little guidance from the Courts as to how the ‘main purpose’/‘principal purpose’ test should be determined, especially in circumstances where the party’s obligations may depend upon the applicable law of the contract, which (by definition at this stage of the classification process) is yet to be determined.¹³¹

11.57 In the Brussels Regime, the Court has a preference for jurisdiction matters to be determined, where possible from the provisions of a contract without reference to the substantive law. In Car Trim,¹³² in relation to determining the place of delivery for the jurisdictional purposes of Article 5(1)(b) of the Brussels I Regulation, the Court advised that a national court was to determine first whether the place of delivery was apparent ‘from the provisions of the (p. 465) contract’. Where it was possible to identify the place of delivery in that way, ‘without reference to the substantive law applicable to the contract’, then that was the place of delivery for the purposes of that Regulation. But, on the other hand, the Court acknowledged that there could be circumstances in which the contract would not contain any provisions indicating, without reference to the applicable substantive law, the parties’ intentions concerning the place of delivery of the goods. In such circumstances, since the jurisdictional rule was autonomous, it was necessary to determine that place in accordance with another criterion which was consistent with the origins, objectives and scheme of the Brussels I Regulation. That could be either (1) the place of the physical transfer of the goods to the purchaser, or (2) the place at which the goods were handed over to the first carrier for transmission to the purchaser. The first of these two options was selected as the appropriate criterion. It was highly predictable, it met the objective of proximity and it ensured the existence of a close link between the contract and the court called on to hear and determine the case.¹³³

11.58 It seems likely in the light of Haeger & Schmidt GmbH that the Court will expect national courts to adopt the same initial approach to determining whether the main purpose of the contract is for the carriage of goods under Article 5(1) of the Rome I Regulation. Where possible, a court will be expected to decide the issue from the provisions of the contract without reference to the substantive applicable law. The Court in Haeger & Schmidt GmbH directed the question to be answered by reference to ‘the contractual stipulations reflecting the economic and commercial reality of the relations existing between the parties’.¹³⁴ At the stage of the analysis where the applicable law has not yet been selected, this is the only realistic starting point. Where that is not possible, the Court will be faced with either (i) devising some alternative rule; or (ii) directing that such contracts should not fall within Article 5(1) where the position is not clear; or (iii) sanctioning an analysis based on the putative applicable law. The latter seems an unattractive solution.

11.59 It is clear however, that the ‘main purpose’/‘principal purpose test’ involves looking behind any label the parties might have applied to their roles under the contract in question, and seeks to determine whether, on the facts, a party to that contract had assumed a (lawful) obligation to act as a carrier of goods. This requires ‘taking account of the purpose of the contractual relationship, the actual performance effected and all of the obligations of the party who must effect the characteristic performance, and not the parties’ categorization of the contract’.¹³⁵

Bailment

11.60 A mere bailee of goods will obviously not fulfil the ‘main purpose’/‘principal purpose’ test. There must be an element of carriage, of transportation of the goods in question. In English law, bailment is a separate cause of action that is distinct from both conversion and negligence. A bailment for reward arises when a carrier voluntarily assumes responsibility for goods shipped on a vessel.¹³⁶ It is yet to be determined whether a bailment should be classified as a contractual obligation for the purposes of the Rome I Regulation, but, as discussed (p. 466) in Chapter 6 of this volume, if the carriage of goods was ‘a legal obligation freely consented to by one person towards another’,¹³⁷ was ‘freely assumed’, and the obligation in question is not one that derives from ‘general rules of law’ applicable absent a contractual relationship between the parties,¹³⁸ it may well be. That seems to be the better view.¹³⁹

Freight forwarding

11.61 But not all contracts that form part of the chain of commerce involved in arranging for goods to be carried are necessarily contracts where the main purpose of the performing party’s obligations is ‘actually’ the carriage of goods. There may well be issues as to whether a freight forwarder has assumed that obligation. A ‘traditional’ contract between a freight-forwarder and a consignor, where the freight forwarder acts as agent for the consignor in making arrangements with the carrier, would not normally constitute a contract of carriage within the meaning of Article 5(1) of the Regulation. The main purpose of the obligation assumed by the freight-forwarder towards the consignor is not the actual carriage of goods but arranging for others to do so.¹⁴⁰ The position would be different if the freight-forwarder actually assumed an obligation to the shipper to carry the goods themselves.¹⁴¹ This is something that it is suggested might be more common in carriage of goods by road, when more complex movements of goods are required.¹⁴²

11.62 In France, a ‘commission de transport’ contract was held not to constitute a contract of carriage within the meaning of Article 4(4) of the Rome Convention.¹⁴³ The decision in Haeger & Schmidt (discussed at paragraph 11.52) confirms that normally such a commission contract does not qualify, but it is a question of fact in each case whether the principal purpose of particular contractual arrangements were the actual carriage of goods.¹⁴⁴

G. The Parties to a Contract of Carriage of Goods

11.63 Article 5(1) is concerned with identifying only two parties to the contract of carriage of goods; ‘the carrier’ and ‘the consignor’. Both must be identified and their habitual residence located in order for the proper functioning of Article 5(1).

(p. 467) ‘The carrier’

11.64 ‘The carrier’ is not defined in the text of the Regulation itself. But Recital (22) makes it clear that ‘the term “the carrier” should refer to the party to the contract who undertakes to carry the goods, whether or not he performs the carriage himself’. This repeats the guidance given by the Giuliano–Lagarde Report as to the proper interpretation of the same concept in Article 4(4) of the Convention.¹⁴⁵ It reflects an autonomous definition that should be interpreted independently of national traditions.

11.65 The Rome I Regulation, like the Convention before it, is concerned with identifying the ‘contracting’ carrier, the party who undertakes the contractual obligation to carry the goods in question, even though the carriage might be performed by another (the performing or actual carrier).

11.66 This is a distinction which is formally recognized in a number of civil codes. The Nordic Maritime Codes,¹⁴⁶ for example, define a ‘carrier’ as any person who concludes a contract with a shipper for the carriage of goods by sea, while an ‘actual carrier’ means any person who has been entrusted by the carrier to perform the carriage of part of it. The principal place of business of the contracting carrier has to be identified on the bill of lading.¹⁴⁷

11.67 In practice, especially in carriage of goods by sea, who actually undertakes the contractual obligation to perform the carriage is not always clear. The issue of the ‘identity of the carrier’ is often a very live one in any subsequent dispute as cargo interests try to work out who they can sue.¹⁴⁸ A bill of lading containing or evidencing a contract of carriage by sea may be issued on behalf of the owner or the charterer of a vessel, and there are often disputes as to who is contractually bound by it.¹⁴⁹ German maritime law, found in the Commercial Code (Handelsgestzbuch (HGB)) requires, (or rather hopes)¹⁵⁰ that a bill of lading should specify ‘the name of the carrier’.¹⁵¹ If a bill of lading which is signed by the master or shipowner’s agent does not contain the carrier’s name, it shall be presumed that the carrier is the shipowner.¹⁵²

11.68 The identity of carrier question may be further complicated if the bill of lading contains a ‘demise’¹⁵³ and/or an ‘identity of carrier’ clause. A demise clause is a clause in a bill of lading (p. 468) presented by a charterer to the Master for signing that specifies that the bill of lading is intended to be a shipowner’s bill.¹⁵⁴ Such clauses are intended to secure the protection of international limitation of liability conventions, but may not reflect actually who is undertaking the carriage.¹⁵⁵ In some systems of law, such as in the United States, demise clauses in bills of lading are not conclusive against the shipper and are invalid as a matter of public policy if they attempt to shift the potential liability of the charterer for cargo loss to the shipowner.¹⁵⁶ In contrast, in English law, such clauses are not traditionally regarded as invalid, but indeed have in the past been described as commonplace.¹⁵⁷

11.69 The potential difficulties caused by such demise and identify of carrier clauses can be demonstrated by the facts of the House of Lords case of The Starsin.¹⁵⁸ That vessel was demise chartered by her registered owners to Agrosin (‘A’), who then chartered her to Continental Pacific Shipping Ltd (‘CPS’) on a New York Produce Exchange (‘NYPE’) time charter. Various cargoes of timber and timber products were loaded at Malaysian ports and liner bills of lading issued. The bills were clearly marked with a CPS logo and the signature box on the face of the bills contained the words ‘As Agent for Continental Pacific Shipping (The Carrier)’. Beneath this box was a rubber stamp of CPR’s port agents. Apart from an express choice of English law and jurisdiction, and the express incorporation of the Hague Rules, standard printed clauses on the reverse of the bills of lading¹⁵⁹ included (a) an express definition of ‘carrier’ as meaning the party on whose behalf the bill of lading had been signed; (b) an ‘identity of carrier’ clause which said that the contract evidenced by the bill was with the ‘owner of the vessel’, (c) a ‘demise clause’ providing that the bill of lading would only take effect as a contract of carriage ‘with the owner or demise charterer’, and (d) a multipart Himalaya clause modelled on the Conline form, that sought to exclude liabilities of the servants or agents ‘of the carrier’.

11.70 Due to negligent stowage, part of the cargo was damaged by water. The claimants were cargo owners, the ‘notify parties’ to whom the bills of lading had been endorsed. As such they had rights of suit under English law under the Carriage of Goods by Sea Act 1992. By the time of the action, the charterer CPS, who had issued the bills of lading, was insolvent. The clams were therefore brought against both the registered shipowner and the demise charterers A (hereinafter collectively referred to as the ‘shipowners’). At first instance, the judge held that the bills of lading were charterer’s bills and that (the insolvent) CPS had been the contractual carrier. The Court of Appeal, by a majority, held the bills were shipowner’s bills and that the (solvent) shipowners were the contractual carriers, a decision (p. 469) which entitled the cargo owners to sue them in contract in respect of any recoverable loss. On appeal by the shipowners, and cross-appeal by the cargo owners, the House of Lords allowed the shipowner’s appeal (save in the case of one cargo owner) and dismissed the cargo-owners’ cross-appeal. The House of Lords held that greater weight should attach to the terms of a contract specifically chosen by the parties than to standard printed conditions. Since the bills of lading contained a clear and unambiguous statement on their face that the cargo owner’s contracts were made with CPS as sole carrier, they were charterer’s bills; notwithstanding the contrary indications in the ‘identity of carrier’ clause (33) and the demise clause (35).¹⁶⁰

11.71 The Starsin was decided under the expressly chosen English law by English courts who are not traditionally hostile to demise and/or identity of carrier clauses. How such clauses might be treated by a court when conflict-of-laws issues are engaged in the absence of party choice of law, especially where the legal validity of such clauses might be in issue, has been the subject of unresolved debate.¹⁶¹ The problem could arise if there was a difference of approach between the applicable law of the contract and/or the lex fori as to whether such clauses were valid or not. A hostile forum might overrule them on public policy grounds. An otherwise favourable forum might be faced, thanks to a choice of law clause, with a foreign law that regarded them as invalid. How such a question would be resolved is a matter of some interest. In such circumstances, a court is likely to adopt a practical approach. Such clauses can either be treated conclusive as against the shipper in identifying the carrier or they are not conclusive. Even in countries like England which were traditionally sympathetic to such clauses, they can be overridden on the particular facts of the case as The Starsin, shows.

11.72 Although modern communications have lessened the role of a master, there may be cases where the existence of a contract of carriage of goods may depend on the authority of a ship’s master to bind the owner. If that does arise, then the question of whether the Master, as an agent for the owner, is able to bind his principal is excluded from the scope of the Regulation under Article 1(2)(g), and will be decided under the conflict rules of the forum.

‘The consignor’

11.73 The carrier’s contractual counterparty is identified in Article 5(1) as ‘the consignor’. Recital (22) provides an autonomous interpretation of that concept, saying that for the purposes of the Rome I Regulation, the term ‘consignor’ ‘should refer to any person who enters into a contract of carriage with the carrier’.

11.74 This definition is in stronger terms than the guidance previously given in the Giuliano– Lagarde Report on the meaning of the same concept in Article 4(4) of the Convention. Then it was said that the concept of the consignor referred ‘in general to any person who consigns goods to the carrier (Afzender, Aflader, Verzender, Mittente, Caricatore, etc).¹⁶² All of these various language versions reflect the idea being a ‘sender’ or ‘shipper’ of goods. Shipper (p. 470) is often interchangeable in carriage of goods by sea terminology with the concept a consignor.¹⁶³ The use of the term ‘consignor’ without further definition was also consistent with the terminology used in international transport conventions.¹⁶⁴

11.75 It was pointed out that the use of the term ‘the consignor’ was not free from potential confusion within the Rome Convention: it could mean both the person who entered into the contract of carriage with the carrier and the person who actually delivered the goods to the carrier.¹⁶⁵ Questions could arise to who was ‘the consignor’ when a freight forwarder, acting in his own name (but as agent for another), entered into a contact of carriage.¹⁶⁶ If the freight forwarder had contracted with the carrier in their own name, but was in fact acting as an agent for an undisclosed principal, ‘the position is more complicated’.¹⁶⁷ In practice, the consignor might be the person who was identified in and received the contractual documentation (consignment notes, etc).

11.76 Recital (22) to the Regulation now makes it clear that the concept of consignor refers to (i) ‘any person’ who (ii) ‘enters into a contract of carriage with the carrier’. This was introduced after one unnamed delegation to the Rome I Committee meeting on 25 April 2007 pointed to the difference between the concepts of ‘shipper’ and ‘consignor’ and ‘presumed that the use of the word “consignor” was intended to mean the person who had concluded the contract on carriage’. That presumption was accepted by the European legislator and is reflected in the terms of Recital (22). The effect of this guidance is that the focus is on the person who enters into the contract of carriage, and the identity and status of who actually (p. 471) delivers the goods to the carrier is irrelevant.¹⁶⁸ A forwarding agent who contracts in their own name on behalf of an undisclosed principal may well be regarded as the consignor for the purposes of Article 5(1).¹⁶⁹

H. The Applicable Law under Article 5(1) for Contracts for the Carriage of Goods

11.77 The two sentences of Article 5(1) contain three rules for determining the applicable law that govern contracts for the carriage of goods.

Party autonomy preserved

11.78 The first rule is that of party autonomy. Article 5(1) of the Regulation begins by emphasizing that it only applies ‘to the extent that the law applicable to a contract for the carriage of goods has not been chosen in accordance with Article 3’. Party autonomy, within the general limits imposed by the Regulation, is therefore preserved for contracts for the carriage of goods. Parties are free to choice the applicable law that governs their contract of carriage, and this choice is ‘routinely exercised in relation to contracts for the international carriage of goods’.¹⁷⁰ No special rules are imposed. Most carriers, certainly in the carriage of goods by sea, use standard form contracts that include or incorporate a specific choice of law provision; though it has been suggested this practice is less widespread in other forms of international carriage of goods.¹⁷¹ When an express choice of law has been omitted, an implied choice can be clearly demonstrated with by the terms of the contract or the circumstances of the case, such as by an exclusive choice of court agreement in favour of a court or tribunal in a Member State,¹⁷² or by the use of a standard form of charterparty with an English arbitration clause.¹⁷³

11.79 But sometimes things go wrong. In the common law case of Compagnie D’Armament Maritime SA v Compagnie Tunisienne de Navigation SA,¹⁷⁴ a Tunisian company contracted with French shipowners¹⁷⁵ to ship oil from one port to another in Tunisia with freight (p. 472) payable in French francs. The contract was negotiated by the parties in Paris, but the brokers prepared the written contract using a standard English printed tanker voyage charter form that provided for London arbitration. Printed clause 13 provided the contract should be governed by the laws of the flag of the vessel carrying the goods. But no vessel or flag was ever specified. It had been contemplated that ships owned by the French shipowners would be primarily used to perform the contract, but the ships chartered to perform the carriage were Norwegian, Swedish, Liberian, French, and Bulgarian. In London arbitration, the tribunal held that French law was the proper law of the contract, an award that was upheld by Megaw J. The Tunisians’ appeal against that finding to the Court of Appeal was allowed,¹⁷⁶ with the Court concluding that, in the circumstances clause 13 was meaningless and should be ignored, and that the express provision for arbitration in London carried with it the implied choice of English law. The French shipowner’s appeal to the House of Lords was allowed. A majority of the House of Lords held that clause 13 sufficiently indicated a choice of French law as the proper law of the contract,¹⁷⁷ but unanimously agreed that, if it did not, French law should still be the proper law of the contract, as it was the system of law with which the contract had its closest connection. A clause in a contract providing for London arbitration did not necessarily carry the inference that the proper law should be English law.¹⁷⁸ It is that kind of case, where the printed form paperwork may not match up with the actual circumstances of the transaction, that the other two rules in Article 5(1) of the Regulation may be engaged in disputes before national courts.

The first default rule: the carrier’s law

11.80 The second rule in the first sentence of Article 5(1) is that if the parties have not made a choice of applicable law in accordance with Article 3, then the applicable law of a contract for the carriage of goods shall be the law of the country of habitual residence of ‘the carrier’; provided that (i) ‘the place of receipt’, and/or (ii) ‘the place of delivery’, and/or (iii) the habitual residence of ‘the consignor’ is (or are) also situated in that same country. This ‘first default rule’ represents a clarifying revision to the presumption found in Article 4(4) of the Rome Convention, and as before, this rule ‘rests upon a combination of connecting factors’,¹⁷⁹ and requires ‘a convergence of a number of locational factors in a single place’.¹⁸⁰

The habitual residence of the carrier and consignor

11.81 Under Article 5(1) of the Regulation, one possible conjunction of locational factors is that both the carrier and the consignor’s habitual residence are situated in the same country. The habitual residence of both will primarily be determined by the provisions of Article 19.¹⁸¹ For a company, or other body, corporate or unincorporated, it ‘shall be the place of central administration’.¹⁸² Where the contract was concluded in the course of the operations of a branch, agency or any other establishment, or if under the contract, performance is the responsibility of such a branch, agency or establishment, it is the place where the branch, (p. 473) agency or any other establishment is located that shall be treated as the place of habitual residence.¹⁸³ The habitual residence of both will be determined at the date of the conclusion of the contract.¹⁸⁴ Any subsequent change in that location is likely to be irrelevant to the operation of Article 5(1), but may be considered as a factor under the escape clause in Article 5(3).

The place of receipt/place of delivery

11.82 The second and third possible conjunctions of connecting factors under Article 5(1) arises when either (a) the ‘place of receipt’ and/or (b) the ‘place of delivery’ of the goods that are to be carried are also situated in the country of the carrier’s habitual residence.

11.83 Both concepts are changes to the equivalent provisions in Article 4(4) of the Convention, which referred to (i) ‘the place of loading’ and (ii) ‘the place of discharge’. The choice of those terms reflected the Hague/Hague–Visby Rules that defined a ‘contract of carriage’ as covering ‘the period from the time when the goods are loaded on to the time when they are discharged from the ship’.¹⁸⁵ Under the Hague–Visby Rules, that period ran from ‘tackle to tackle’; from when a vessel’s loading tackle is hooked onto the cargo at the port of loading till it is released at the port of discharge.¹⁸⁶ Article 4(4) of the Convention sought to identify the physical location of the ‘places’ where loading or discharge operations took place. Wherever the goods were loaded upon the ship, plane, train or vehicle being used to transport them, and subsequently discharged, is what counted, rather than any technical issues arising out of the mode of loading or discharge. According to the Giuliano–Lagarde Report, ‘the places of loading and unloading which enter into consideration are those agreed at the time when the contract is concluded’.¹⁸⁷

11.84 The ‘place of delivery’ was first introduced as a replacement for ‘place of discharge’ in the 2 March 2007 revised Proposal from the German Presidency.¹⁸⁸ The decision to adopt the ‘place of delivery’ may well reflect¹⁸⁹ a desire to align the terminology of Article 5 with that of the special jurisdiction rules of what was then Article 5(1)(b) of the Brussels I Regulation, that, unless other agreed, the place of performance of the obligation in question shall be, in the case of the sale of goods, the place in a Member State ‘where, under the contract, the goods were delivered or should have been delivered’.¹⁹⁰ Or the change might reflect the then continuing debate within the Rome I Committee over the use of the agreed place of delivery as a better connecting factor than the carrier’s law. It seems likely that the concept of ‘place of delivery’ and that of the ‘agreed place of delivery’ in the second sentence of Article 5(1) will be interpreted in the same way.¹⁹¹

(p. 474) 11.85 The Convention’s ‘place of loading’ was originally used in the text of the new draft article 4(a)(1) in the German Presidency’s 2 March 2007 revisions to the Proposal.¹⁹² During the 25 April 2007 Rome I Committee Meeting, ‘several delegations’ suggested replacing ‘place of loading’ with the term ‘place of receipt’.¹⁹³ One delegation dissented, and ‘would have preferred to base the rule on the place of loading instead of the place of delivery in order to ensure coherence with the Hague–Visby Rules’.¹⁹⁴ The change to ‘place of receipt’ was made in the German Presidency and incoming Portuguese Presidency’s 25 June 2007 amendments.¹⁹⁵

11.86 No definition of the ‘place of receipt’ is contained in the Rome I Regulation. It is submitted that, by analogy, with the Brussels Regime jurisdiction case law,¹⁹⁶ this will be determined by identifying where, by under the provisions of the contract, rather than the substantive law, the physical transfer of the goods into the possession, custody or control of the carrier took place.

11.87 One consequence of those changes was a break with any subliminal linguistic links with earlier maritime conventions. They appear to represent a general legislative intention to adopt broader, more neutral concepts, free from the echo of technicalities concerning precisely when a carrier’s liabilities started or finished that are associated with the maritime conventions.

The fall-back rule: the agreed place of delivery

11.88 The second sentence of Article 5(1) contains a ‘fall-back’ rule. In the event that the conjunction of connecting factors required to apply the law of the carrier’s habitual residence in the first default rule are not met, then the ‘law of the country where the place of delivery as agreed by the parties is situated shall apply’.

11.89 In practice, this fall-back rule may be the one that is used most under Article 5 in the absence of party choice of law. This is because, in ‘most international carriage of goods by sea cases’, the three connecting factors with the habitual residence of the carrier are unlikely to be met.¹⁹⁷ In such cases, the fall-back rule of the law of the place of delivery will be applied, subject only to the possible operation of the escape clause in Article 5(3).

11.90 The fact that goods are delivered somewhere does not mean that that country’s law is to apply. It has to be the place of delivery ‘as agreed by the parties’. The requirement that it should be ‘agreed’ was originally suggested by the Swedish delegation to deal with the possibility that the goods might actually have been delivered somewhere other than the country originally planned, or might have been lost during transport.¹⁹⁸ A member of the Danish delegation to the Rome I Committee has also suggested this requirement ‘was justified by (p. 475) the need for predictability and the fact that proceedings concerning damaged goods would often be instituted in the country where the goods were delivered to’.¹⁹⁹

11.91 But the place of delivery does not have to be agreed at the time of conclusion of the contract. The German Presidency had suggested in their 2 March 2007 proposals that it should be the place of delivery ‘as agreed by the parties at the time of the conclusion of the contract’.²⁰⁰ But that proposal was rejected by the Rome Committee at their meeting of 25 April 2007, and was subsequently deleted from the Presidencies’ 25 June 2007 text, which then had reached the form subsequently enacted as Article 5(1) of the Regulation.

11.92 The Regulation provides no guidance on the concept of ‘place of delivery’, but, consistent with the terms of the jurisdictional provisions of the Brussels Regime and the Court’s case law, the starting point will be based on purely factual criteria, with the place of delivery being identified by the provisions of the contract without reference to the substantive law applicable. Where it is impossible to determine the place of delivery on that basis, without reference to the substantive law applicable to the contract, that place is the place where the physical transfer of the goods took place, as a result of which the purchaser obtained, or should have obtained, actual power of disposal over those goods at the final destination of the sales transaction.²⁰¹

11.93 In Electrosteel,²⁰² the Court applied their earlier ruling in Car Trim, and held that in interpreting the words ‘under the contract’ in Article 5(1) of the Brussels Regulation, a national court must take into account all the relevant terms and clauses in that contract, including, as the case may be, the terms and clauses generally recognized and applied in international commercial usage, such as the International Commercial Terms (‘Incoterms’), in so far as they enable that place of delivery to be clearly identified. Where the contract concerned contains such terms or clauses, it may be necessary to examine whether they are stipulations which merely lay down the conditions relating to the allocation of the risks connected to the carriage of the goods or the division of costs between the contracting parties, or whether they also identify the place of delivery of the goods. As regards the Incoterm, ‘Ex Works’, which is relied on in the dispute in Electrosteel, the Court observed that the clause entitled not only the application of rules entitled ‘transfer of risks’ but also those entitled ‘division of costs’ and separately ‘delivery’ and ‘taking delivery’. By contrast where the goods covered by the contract are merely in transit, passing through the territory of a Member State which is a third party in terms both of the domicile of the parties and of the place of departure or destination of the goods, it must be ascertained in particular, whether the place mentioned in the contract situated in such a Member State, is used only to spread the costs and risks relating to the carriage of the goods or whether it is also the place of delivery of the goods.

(p. 476) 11.94 It has thus been suggested that where there has been no specific agreement on the place of delivery then this rule in Article 5(1) of the Rome I Regulation cannot apply.²⁰³ In such circumstances, it is argued that the contract should then be governed by the provisions of Article 4(2) of the Regulation, which would direct that the contract should be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. This would lead to the application of the carrier’s law, subject to the rule of displacement in Article 4(3) of the Rome I Regulation.²⁰⁴

11.95 It has been argued by Professor Nielsen, a member of the Danish delegation to the Rome I Committee, that in some cases the use of the place of delivery as the connecting factor is ‘likely to be unjust and cost-demanding’:²⁰⁵

For example, if a Swedish customer contracts with a Danish carrier that he deliver by ship 300 containers. Out of the 300 containers, 100 containers shall be delivered from China to Singapore, 100 containers from China to Johannesburg, and 100 containers from China to New York. Under this provision, the various deliveries will be subject to Singaporean, South African and New York law respectively, considering that the deliveries are subject to the same contract of carriage. In such cases, parties are advised to agree on the law applicable.²⁰⁶

11.96 In jurisdiction cases, the CJEU has indicated in the Color Drack case that for the purposes of applying the Article 5(1)(b) of the Brussels I Regulation that where there were several places of delivery of the goods within one Member State, the ‘place of performance’ must be understood as the place with the closest linking factor between the contract and the court having jurisdiction, and as a general rule, it will be at the place of the principal delivery, which must be determined on the basis of economic criteria.²⁰⁷ This principal has been extended in Wood Floor Solutions²⁰⁸ to the provision of services in more than one Member State, where the starting place for determining jurisdiction was the court within whose jurisdiction the main provision of services was situated.²⁰⁹ Whether this approach will be followed in relation to determining the applicable law remains to be seen. The Court may decide to effectively allow a ‘mosaic’ effect to occur, as under the Rome II Regulation. Or there may be grounds for seeking one law by the judicious use of the escape clause in Article 5(3).

The legislative development of the Article 5(1)

11.97 Both Germany and Sweden were particularly concerned over the implications of the proposed default rule in draft article 4(1)(c) in the Rome I Proposal. Germany considered that if it was rigidly applied it would lead to the country of the seat of the principal establishment of the carrier being used as the carrier’s ‘habitual residence’.²¹⁰ This would often be at a great (p. 477) distance from the place of loading or destination itself. The Germans therefore suggested that, in cases where the carrier’s principal establishment was not in either the country of loading or the place of destination, then the place of destination might be a more relevant connecting factor. Sweden²¹¹ proposed replacing draft article 4(1)(c) with a return to a presumption rather than a rule, but with contracts for the carriage of goods being presumed to be most closely connected ‘with the country in which the goods shall be delivered’ rather than with the country of the carrier’s habitual residence.²¹²

11.98 The Finnish Presidency’s 12 October 2006 revisions saw amendments to the text of draft 4(1)(c).²¹³ While still trying to maintain the ‘one-rule fits all’ of the Proposal, The Presidency tentatively suggested the restoration from the Rome Convention of the need to require additional connecting factors with the law of the country of the carrier’s habitual residence in order to justify that law being selected as the default rule in the absence of party choice. Three connecting factors were suggested: (i) the place of departure, (ii) or the place of destination of the carriage, or (iii) the habitual residence of the consignor or passenger, if they also situated in the country of the carrier’s habitual residence. The revised draft article 4(1)(c)²¹⁴ now read:

1. To the extent that the law applicable to the contract had not been chosen in accordance with Article 3 [and without prejudice to Articles 5–7], the law governing the contract shall be ~~governed by the law as~~ determined as follows:

…

(c) A contract of carriage should be governed by the law of the country ~~in which~~ where the carrier had his habitual residence’ [provided that the place of departure or the place of destination of the carriage or the habitual residence of the consignor or the passenger is also situated in that country].

The Swedish proposal

11.99 On 15 November 2006, Sweden put forward further proposed amendments to the text of draft article 4(1)(c).²¹⁵ In line with their earlier comments, Sweden proposed a significant change for contracts for the carriage of goods. Absent party choice, such contracts would be governed by ‘the law of the country where the [agreed] place of delivery is’, rather than by the habitual residence of the carrier: (draft article 4(1)(c bis)²¹⁶ Sweden’s revised draft was in the following terms:

1. To the extent that the law applicable to the contract had not been chosen in accordance with Article 3 and without prejudice to Articles 5–7, the law governing the contract shall be determined as follows:…

(c) A contract of carriage of passengers shall be governed by the law of the country where the passenger has his or her habitual residence, provided that the place of departure or the place of destination is situated in that country;

(p. 478)

(c bis) a contract of carriage of goods shall be governed by the law of the country where the [agreed] place of delivery is [.]²¹⁷

11.100 Sweden argued that for contracts for the carriage of goods in international trade the place of delivery was more closely linked to the transport itself than the habitual residence of the carrier:

In practice, especially in the maritime transport sector, the carriage of the goods is often taken care of by carriers operating from third countries (cross traders). For example a Taiwanese carrier could operate a container line between the UK and Sweden. In certain cases it could also be difficult to find out who is actually the carrier. It is very common in the transport industry that the performance of the transport is out-sourced to other carriers. This is underlined by the fact that the bill of lading for example is normally signed by the master on behalf of the owner of the vessel and the owner could be a sub-carrier.²¹⁸

11.101 Sweden noted that their suggestion this place of delivery be ‘agreed’ was tentatively put in square brackets, because some delegations might feel a need to qualify:

What is the place of destination in a situation where the goods are actually delivered somewhere else than originally planned or where the goods are totally lost during the transport.²¹⁹

11.102 When the Swedish delegation presented their proposal to the Rome I Committee at their meeting on the 17 January 2007, the Committee was divided over the three proposals.²²⁰ There were concerns over the use of the carrier’s habitual residence as the appropriate connecting factor, given in the long-standing disquiet over the use of flags of convenience. As a consequence, it was noted that:

Some delegations supported the Commission proposal, others the Swedish proposal. Several delegations suggested distinguishing between transport or passengers and transport of goods, and among the passengers between consumers and other passengers. Some delegations asked what would be the consequences if, in the Presidencies’ text, the condition in square brackets was not fulfilled. Some expressed doubts as to whether the habitual residence of the carrier would be an appropriate connecting factor where the carrier was operating under a flag of convenience. However, one delegation referred to the definition in Article 18 and took the view that this provision could solve that problem. Several delegations pointed out that it would be inappropriate to apply the law of the habitual residence of the passenger because this would lead to multiple laws applicable at the same time and these laws would not be predictable for the carrier.

2 March 2007: a new draft article 4(a)

11.103 In the light of the divergence of opinion between the delegations, the German Presidency published a revised Proposal on 2nd March 2007.²²¹ This suggested replacing draft article 4(1)(c) with a new (and separate) provision for contracts of carriage, then to be (confusingly) numbered draft article 4(a). The Presidency followed the approach contained in the Swedish proposal and drew a distinction between contracts of carriage of goods and of passengers and include a proposed escape rule in draft article 4(a)(3).

(p. 479) 11.104 In draft article 4(a)(1) the Presidency suggested two specific rules for the carriage of goods. The first was based primarily on Article 4(4) of the Rome Convention, and the second was a possible fall-back rule based on the Swedish proposal regarding the use of the place of delivery as the appropriate connecting factor. The new proposed text read:

1. To the extent that the law applicable to the contract for the carriage of goods has not been chosen by the parties in accordance with Article 3, the law applicable shall be the law of the country of the habitual residence of the carrier, provided that the place of loading or the place of delivery or the habitual residence of the carrier is also situated in that country. [If those requirements are not met, the law of the country where the place of delivery (as agreed by the parties at the time of the conclusion of the contract) is situated shall apply.]

11.105 The Presidency noted²²² that if the second sentence in square brackets was maintained, then the words ‘or the place of delivery’ in the first sentence might perhaps not be necessary. If the sentence in square brackets was not maintained, a fall-back rule could be the closest connection, and the proposed escape clause in draft article 4(a)(3) might need to be reformulated.

The 25 April 2007 Rome I Committee meeting

11.106 The German Presidency’s proposed text was considered at the Rome I Committee meeting on 25 April 2007.²²³ Then there was general agreement among the delegations that choice of law agreements should be possible in the carriage of goods sector, and several delegations underlined that the default rule in the absence of party choice would therefore be of limited impact.

11.107 Two delegations expressed their preference for the Commission’s original draft article 4(1)(c) proposal; one of them was even open to excluding contracts of carriage. But the other delegations who took the floor agreed in principle to the German Presidency’s 2 March 2007 suggestion to create a special rule for contracts of carriage.

11.108 The first sentence of the German Presidency’s 2 March 2007 text (based on Article 4(4) of the Rome Convention) was accepted in principle by those delegations (subject to an improvement in the drafting). Concerning the drafting, several delegations suggested replacing ‘place of loading’ by ‘place of receipt’. One delegation would have preferred to base the rule on the place of loading instead of the place of delivery in order to ensure coherence with the Hague–Visby Rules, the other delegations agreed to the place of delivery as the subsidiary connecting factor.²²⁴ One delegation pointed to the difference between ‘shipper’ and ‘consignor’ and presumed that the use of the word ‘consignor’ was intended to mean the person who had concluded the contract of carriage. Several delegations underlined the need to ensure coherence with international conventions in the area of transport. Some delegations pointed to Article 4(4), third sentence, of the 1980 Rome Convention and suggested referring to that idea in a recital.²²⁵

11.109 As regards the fall-back rule in second sentence of paragraph 1 (based on the Swedish proposals), delegations were in favour of maintaining the text in square brackets. One delegation suggested deleting the words ‘at the time of the conclusion of the contract’ in the second sentence.²²⁶

(p. 480) 11.110 The Chair concluded that the Committee agreed in principle to the draft article 4(a)(1), first sentence, subject to a possible redrafting (replacement of ‘place of loading’ by ‘place of receipt’). In the second sentence, all brackets and the words ‘at the time of the conclusion of the contract’ should be deleted. Article 4(4), third sentence, of the Rome Convention could become a recital. The relation with international conventions in the area of transport should be addressed in (what is now) Article 25. However, the Chair underlined that, as far as he was aware, those conventions included rules of substantive law so that, normally, there should be no conflict with the rules on applicable law.²²⁷

The 25 June 2007 text

11.111 The consensus reached at the 25 April meeting relating to contracts for the carriage of goods was reflected in the new proposals put forward by the German Presidency and the incoming Portuguese Presidency on 25 June 2007.²²⁸ A revised draft article 4(a) (with amendments made to 2 March 2007 Proposal) now read:

Draft Article 4(a)

Contracts of Carriage

1. To the extent that the law applicable to the contract for the carriage of goods has not been chosen by the parties in accordance with Article 3, the law applicable shall be the law of the country of the habitual residence of the carrier, provided that the ~~place of loading~~ place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country. [ If these requirements are not met, the law of the country where the place of delivery [ as agreed by the parties ~~at the time of the conclusion of the contract]~~ is situated shall apply.

11.112 These changes to what would become Article 5(1) of the Rome I Regulation, were agreed by the Council without further comment at the Rome I Committee meeting of 3–4 July 2007:

The Committee agreed on paragraph 1 of that provision as set out in document 11150/07.²²⁹

11.113 This proposal remained unchanged through the subsequent legislative development of the Regulation. It was unchanged in the 28 August 2007 compromise amendment (number 23) put forward by the Rapporteur, M Cristian Dumitrescu,²³⁰ in the Presidency’s further revisions to draft article 4(a) of the 20 September 2007,²³¹ and in the 19 November final compromise package presented by the Presidency,²³² which was put before the European Parliament on 21 November 2007.²³³ In accordance with the understanding reached between the delegations at the Rome I Committee meeting on 25 April 2007, the proposal put to the European Parliament, also contained the new draft recital (8i) which restated the third sentence of Article 4(4) of the Rome Convention, in the terms that are now found in Recital (22). Both of those changes were contained in the Final Compromise Package which was put forward by the Presidency on the 26 November 2007.²³⁴ This included a new draft recital (8j) in the form proposed five days earlier as draft recital (8i).

(p. 481) I. Contracts for the Carriage of Passengers: Article 5(2)

11.114 Article 5(2) is entirely new and includes rules relating to standalone contracts for the carriage of passengers that were not found in the Rome Convention. Article 5(2) of the Regulation provides that:

(2) To the extent that the law applicable to a contract for the carriage of passengers has not been chosen by the parties in accordance with the second subparagraph, the law applicable shall be the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the law of the country where the carrier has his habitual residence shall apply.

The parties may choose as the law applicable to a contract for the carriage of passengers in accordance with Article 3 only the law of the country where:

(a) the passenger has his habitual residence; or

(b) the carrier has his habitual residence; or

(d) the place of departure is situated; or

(e) the place of destination is situated.

Recital 32

11.115 The interpretation of Article 5(2) is assisted by Recital 32 which provides:

(32) Owing to the particular nature of contracts of carriage and insurance contracts, specific provisions should ensure an adequate level of protection of passengers and policy holders. Therefore, Article 6 should not apply in the context of those particular contracts.

11.116 The ‘adequate level of protection’ provided to passengers in Article 5(2) is regarded as sufficient to justify their exclusion of such contracts from the consumer protections of Article 6. The scope of Article 5(2) is limited in part by the operation of Article 6. Those contracts of carriage that form part of package travel contracts as specified within Article 6(4)(b) of the Rome I Regulation²³⁵ may be entitled to consumer contract provisions.²³⁶ If so, Article 5(2) has no application to such a contract. However, it seems likely that a travel contract which includes a travel element that does not satisfy the package travel requirements of Article 6 may still fall within the scope of Article 5(2).²³⁷

A passenger contract

11.117 Article 5(2) applies to any contract for the carriage of passengers by any mode of transport. The Rome I Regulation does not provide an autonomous definition of a contact for the carriage of passengers (‘passenger contracts’) nor does it give any particular guidance as to its interpretation.

11.118 A passenger contract should depend on the existence of a legally enforceable agreement where the carrier has undertaken the contractual obligation of providing a means of (p. 482) transport to the passenger. Article 5 is likely to be interpreted as relating ‘only to carriage of passengers…performed by the carrier’²³⁸ and is therefore narrower in scope than, for example, ‘contracts for the provision of transport services’ found in the Distance Selling Directive (97/7).²³⁹ Thus, a person who hires a self-drive car may be acquiring a means of transport, and thus ‘carriage’ for themselves or other passengers, but they are not entering into a contract for the carriage of passengers within the meaning of Article 5(2).²⁴⁰ Such an approach is consistent with the ‘main purpose’ requirements for the carriage of goods discussed by the Court in ICF.

Parties: passengers and carriers

11.119 Article 5(2) only applies to contracts of carriage between passengers and carriers. Perhaps, as in other EU instruments, the concept of ‘passenger’ was not considered to need any further definition.²⁴¹ Only a natural person can sensibly be classified as ‘a passenger’. The purpose of a passenger’s travel is irrelevant. There is no distinction drawn between private and business travel.

11.120 Questions may arise if the passenger in question is not the person who entered into the contract of carriage with the carrier. This may happen where a person is travelling as part of a group and one of the group purchased the tickets and entered into the contract; or where the passenger is an employee or agent for a company who contracted with the carrier. There appears to be two possible solutions. The first option would involve limiting the application of Article 5(2) to persons who are the original parties to the contract of carriage, because ‘in this situation, it is neither possible to apply the law of the habitual residence of the actual voyager nor the law of the habitual residence of the contractual party’ and thus the law of the carrier’s habitual residence should apply.²⁴² The second option would allow all passengers who are lawfully entitled to be carried under a contract, entered into by themselves or another on their behalf, should be entitled to the protections granted by Article 5(2). It is submitted that the second option is the better option. It is more consistent with the realities of modern passenger travel and with the protective purposes of Article 5(2).²⁴³ The habitual residence to be applied in such circumstances would be that of the actual passenger, rather than say their employer who paid for the tickets.

11.121 The term ‘carrier’ is also undefined in relation in relation to passenger contracts. It is submitted it will be defined as the party to the contract who undertakes to carry the passengers whether or not he performs the carriage himself, even though Recital (22) of the Regulation only confirms that to be the case in relation to carriers in contracts for the carriage of goods. It is extremely difficult to see any sensible basis for drawing a distinction between the two, and there was no apparent discussion of a possible distinction that left any trace in the legislative record.

(p. 483) Selecting the applicable law for passenger contracts

11.122 Article 5(2) makes provision for three ways for selecting the applicable law to govern a contract for the carriage of passengers, which seeks to establish the balance between the interests of a carrier and those of a passenger by adopting a three-stage approach to determining the applicable law of passenger contracts.

Party autonomy: a permitted choice of law?

11.123 The first stage adopts restricted form of party autonomy for contracts for the carriage of passenger. It was well recognized during the legislative development of Article 5(2) that is common for the carrier to make a choice of law in standard terms and conditions and effectively impose it on the passenger.²⁴⁴ The provisions of Article 5(2)(a)–(e) were designed to prevent a choice of law that bore no real connection with the circumstances of the underlying contract. This was emphasized by the Presidency in putting forward their amended proposals for draft article 4(a)(2) on 20 September 2007 and reflects the purpose of these limitations.²⁴⁵

11.124 If the contract is a passenger contract, the first question for a court to determine is whether or not there has been a permitted choice of law within the provisions of Article 5(2)(a)–(e) of the Regulation. These permitted choices can be grouped into three categories.

11.125 The first group of permitted choices is the law of the country where either the passenger or the carrier has his habitual residence.²⁴⁶ For carriers, their habitual residence will be determined in accordance with Article 19, with the habitual residence of companies and other bodies unincorporate being their place of central administration, with the relevant point in time being the conclusion of the contract.²⁴⁷ If the contract is concluded in the course of operations of a branch, agency or other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where that other entity is located shall be treated as the place of habitual residence.²⁴⁸ For habitual residence of a natural person acting in the course of his business activity shall be his principal place of business at the time of the conclusion of the contract.²⁴⁹ For natural persons not acting in the course of their business activity their habitual residence will be determined as discussed earlier in this volume in Chapter 5.

11.126 The second group of permitted choices is the law of the ‘place of departure’ or the ‘place of destination’²⁵⁰ which are equally clearly intended to cover the locations envisaged under the terms of the contract between the carrier and the passenger.

11.127 The final category in Article 5(2)(c) enables the law of the country where ‘the carrier has his place of central administration’ to be the applicable law. The provision was intended to meet the point first raised by the United Kingdom at the Rome I Committee meeting of the 25 September 2007,²⁵¹ when they were concerned that Articles 5(2) and 19, when read (p. 484) together, could cause problems in practice for branches or subsidiaries of multinationals, as without this option Article 19(2) of the Regulation could result in a carrier’s habitual residence being treated as wherever they sold the ticket to the passenger, which may be particularly troublesome because of the increased use of e-commerce and e-ticketing. The United Kingdom proposed an amendment to the text which suggested inserting a new permitted choice of the law of the country where the carrier has his principal place of business.²⁵² The ‘place of central administration’ was preferred by most delegations.²⁵³ This location may not be connected at all with where the passenger bought their ticket. In relation to single-ship companies their place of central administration may well be found in the country from which they are managed.²⁵⁴

11.128 These amendments permitted a carrier to choose the law of the country of either his ‘habitual residence’,²⁵⁵ or of his ‘place of central administration’²⁵⁶ as valid choices of law in passenger contracts. It will be a very uniformed and ill-advised carrier who fails to make a valid choice of either in their standard terms and conditions of the contract of carriage.

If no permitted choice has been made

11.129 If no, or no permitted, choice of law has been made, then the second, default rule in Article 5(2) is that the law of the country where the passenger has his habitual residence shall apply, provided that either the place of departure or the place of destination is situated in that country. Those terms are intended to refer to the contractually agreed place of departure and destination, and the primary source of identification will be the contract itself.²⁵⁷ This is consistent with the approach in international carriage conventions which locate the places of departure or destination by reference to the contract of carriage.²⁵⁸

11.130 In a single contract, the fact that travel involves using, for example, a hub airport in a different country, does not alter the position. A passenger from Manchester who flies to Paris to board a different flight to Turkey, still has a place of departure in England and destination in Turkey.²⁵⁹ Other difficulties arise in relation to ‘hop-on/hop-off’ travel arrangements, whether round the world tickets or more local variations which pose greater problems with carriers drafting standard terms. Those problems were mentioned in the Rome I Committee discussions on 25 April 2007 but there is no record of any firm conclusions being reached at any stage as to what to do if a permitted choice has not been made. In ‘round trip’ tickets, it must be the best solution to treat the point of departure and the point of return (which are (p. 485) the same country) as providing the applicable law.²⁶⁰ This would accord with the passenger protection objectives of the Regulation which are recognized in Recital (32).

The fall-back rule in Article 5(2)

11.131 If the special connecting factors in the second rule are not met, then the third fall-back rule in Article 5(2) is that the law of the country where the carrier has his habitual residence shall apply, which will be determined in accordance with Article 19 in almost all conceivable cases.

The legislative development of Article 5(2)

11.132 The Finnish Presidency’s 12 October revisions had sought to maintain one rule to govern both contracts of carriage and of passengers but tentatively introduced conditions on the application of the carrier’s law that required the place of departure, destination, or habitual residence of the consignor or passenger to also be situated in the same country.²⁶¹

11.133 The Swedish proposal of 15 November 2006, separated out contracts for the carriage of passengers from those of goods, and suggested that a contract for the carriage of passengers shall be governed by the law of the country where the passenger has his or her habitual residence, provided that the place of departure or the place of destination is situated in that country.²⁶² The Swedish delegation argued that passengers should be entitled to the protection of the law of their own habitual residence in circumstances where the contract of carriage began or ended in their own country. They argued that:

If for example a Finn buys a ticket from Finland to Germany the applicable law to the contract will be Finnish law. However, if the same person buys a ticket for a transport between Germany and France the applicable law will be determined pursuant to Article 4(2) or (3).

11.134 Sweden did not draw any distinction between travelling consumers and businessmen, as ‘business passengers are in need of the same protection as consumers. Within modern transport law these two categories are usually equally protected’. By example, they referred to the equal treatment given to all passengers by ‘a consumer-orientated legislation like the EC-Regulation on denied boarding (261/2004)’.²⁶³ The Swedish delegation thought that under their proposal a balance of interests between passengers and carriers might thus be maintained, and this would enable the continued exclusion of carriage contracts (other than package travel contracts) from consumer contract protection under the proposed Regulation.²⁶⁴

11.135 At the Rome I Committee meeting of the 17 January 2007, there were concerns over the prospect of multiple laws being applied in passenger cases, and several delegations suggested distinguishing between consumers and other passengers.²⁶⁵

(p. 486) The new draft article 4(a)(2): four options

11.136 The German Presidency’s 2 March 2007 revisions introduced a proposed new draft article 4(a)(2).²⁶⁶ The Presidency put forward four possible options to determine the applicable law in the absence of choice in contracts for the carriage of passengers:

(a) Option 1: the contract was to be governed ‘by the law of the country where the carrier has his habitual residence’.
(b) Option 2: the contract was to be governed ‘by the law of the country where the passenger has his habitual residence’. No choice of law would be permitted which derogated from this rule: ‘The law applicable pursuant to this paragraph may not be derogated from by a choice of law pursuant to Article 3.’
(c) Option 3: the applicable law would be the law of the country where the carrier has his habitual residence ‘provided that the place of departure or the place of destination is also situated in that country’. If those requirements were not met, the contract was to be governed ‘by the law of the country in which it is most closely connected’.²⁶⁷ Option 3 was the converse of option 2 and effectively adopted the principles of Article 4(4) and alternatively Article 4(2) of the Rome Convention and applied them to contracts for the carriage of passengers.
(d) Option 4: was a revision of Option 3, selecting the law of the country where the passenger (rather than the carrier) has his habitual residence but only if the same additional connecting factors that either the place of departure or the place of destination was situated in that country were fulfilled. If those connecting factors were not present the contract would be governed by ‘the law of the place where the carrier has his habitual residence’. As with option 2, party choice was to be excluded: ‘The law applicable pursuant to this paragraph may not be derogated from by a choice of law pursuant to Article 3.’

11.137 When this text was considered at the Rome I Committee meeting on the 25 April 2007, the Chair had also emphasized that, in relation to contracts for the carriage of passengers, ‘it was necessary to find an appropriate balance of the interests of passengers and carriers’,²⁶⁸ whilst respecting and maintaining cohesion with existing international transport conventions. At this meeting, a majority of delegations agreed it would not be appropriate to distinguish between passengers who are consumers and those who are not. Some delegations disagreed, and considered that the consumer protection provisions should apply where a consumer concluded a contract of carriage.

11.138 As for the four options presented by the Presidency in their 2 March 2007 Proposal, the majority of the delegations were in favour of a revised version of Option 4; with an amendment providing for a limited choice of law by the parties, perhaps limited to the place of departure or place of destination. One delegation did however, point to practical difficulties for a carrier in creating general terms and conditions which could adequately provide for such limited choice of law agreements in circumstances where there were multiple places of departure or destination: eg where a train passed through several countries, allowing passengers to get on and off at various stops.

(p. 487) 11.139 However, there was no firm consensus on which option should be selected. Several delegations supported either the Commission’s Proposal, or Options 1 or 3. No delegation however, supported Option 2 of the Presidency’s Proposal, and the Chair recorded that Option 2 was rejected. In summarizing the mood of the meeting, the Chair noted that the majority was in favour of Option 4 as the basis for further discussion, with many delegations supporting the proposal to add a limited choice of law. It was also noted that there was a certain tendency not to apply the consumer protection provisions to passengers but rather to cover all aspects of carriage in draft article 4a.²⁶⁹

11.140 In the light of these discussions, on the 25 June 2007 the German Presidency and the incoming Portuguese Presidency issued a revised proposal. Their new draft article 4(a)(2) reduced the potential options for a rule relating to the carriage of passengers from four to three.²⁷⁰ The original Option 2 was deleted, with the former Option 3 taking its place (as Option 2). The most significant amendments were to the original Option 4, which now became new Option 3:

OPTION 3 (formerly Option 4)

A contract for the carriage of passengers shall be governed by the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated in that country. If these requirements are not met, the contract for the carriage of passengers shall be governed by the law of the place where the carrier has his habitual residence.

~~The law applicable pursuant to this paragraph may not be derogated from by a choice of law pursuant to Article 3.~~

The parties may choose as the law applicable to the contract in accordance with Article 3:

(a) the law of the country where both the carrier and the passenger have their habitual residence;

(b) the law of the country where the place of departure is situated;

(d) the law of the country where the passenger has his habitual residence;

(e) the law of the country where the carrier has his habitual residence, provided that either the place of departure or the place of destination is situated in that country.

11.141 These revised proposals were discussed at the meeting of the Committee on 3–4 July 2007.²⁷¹ There was criticism of the suggested limitations on party choice contained in the indents of Option 3(a)–(e) for party choice of law, in particular, it seems the restrictions on the ability of the carrier to choose the law of its own habitual residence.²⁷² The Council minutes of the meeting provided to the author by the Commission records:

Several delegations pointed to the lack of clarity of the terms ‘place of departure’/‘place of destination’ and wondered whether for instance in a case of a hop-on/hop-off cruise, they included the places of ‘initial departure’ and ‘final destination’. One delegation underlined the practical need to ensure that a carrier could choose one single law for each trip. Some said that the different options in the list of eligible laws in option 3 were partly redundant. The Commission representative proposed reverting the order of the first and second (p. 488) subparagraphs, thus starting with the limited choice of law and ending with the rule on the law applicable in the absence of choice. He also proposed deleting subparagraph (c). Other delegations suggested deleting subparagraph (d). Some suggested using option 3 as a basis, but allowing for an unlimited choice of law.

A number of delegations supported option 1 in document 11150/07 and considered option 3 to be unacceptable because it restricted party autonomy in an inappropriate manner and made it nearly impossible for a carrier to determine in advance w

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