Wilful Misconduct, Forum Shopping under the CMR and The Conflicts with the Brussels Regulation

Wilful Misconduct, Forum Shopping under the CMR and
The Conflicts with the Brussels Regulation


Wen-Cheng Huang

1. Introduction

If one of the goals of unification of the substantive law is to end the conflicts and diversities among national laws and to prevent lawyers and their clients from engaging in forum shopping[1], Article 29.1 of the Convention on the Contract for the International Carriage of Goods by Road (hereafter referred to as ‘CMR’) clearly opens the back door to national courts by interpreting what willful misconduct is and interpreting what fault is considered as equivalent to willful misconduct in accordance with the lex fori[2]. Through applying Article 29.1 of the CMR, national courts find the route to break the limits of liabilities imposed by Article 23.3 of the CMR, and thus divergent rulings occurred among between shippers-friendly courts like German and France on the one hand, and carriers-friendly courts like the Netherlands and the UK on the other hand. These differing rulings give lawyers and their clients the incentives to seek the forum that is most beneficial to their interests.

The situation even becomes worse when reading Article 31 of the CMR and Article 71 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (hereafter referred to as ‘Brussels Regulation I’) together. The Court of Justice of the European Union (hereafter referred to as ‘the Court’) in TNT Express Nederland BV v AXA Versicherung[3] attempted to solve the conflicts between the CMR and the Brussels Regulation I, while it is still unclear whether the national courts would solve these conflicts after this abstract ruling.

This contribution aims to explore forum shopping under the CMR, its conflicts with the Brussels Regulation I, and in the end to figure out the possible solutions. The author would like to first discuss the differing meanings of willful misconducts given by several national courts, in order to point out the problems of inconsistent interpretations of willful conducts and the like behaviors. Second, forum shopping under the CMR, the conflicts between the CMR and the Brussels Regulation I would be explored. In the end, the author would like to assess forum shopping in terms of Law & Economics.

2. Wilful Misconducts Under the CMR and Its Differing Interpretations

2.1 Interpreting Wilful Misconduct In terms of the Vienna Convention

Article 29.1 of the CMR provides that, the carrier shall not be entitled to avail himself of the provisions of this chapter which exclude or limit his liability or which shift the burden of proof if the damage was caused by his willful misconduct or by such default on his part as, in accordance with the law of the court or tribunal seised of the case, is considered as equivalent to willful misconduct. Article 29.2 of the CMR extends the scope of the application on agents and servants.

This provision confers the right to interpret wilful misconduct and its equivalent behaviors to national courts of the contracting states, and thus leads to great judicial divergences. It is extremely contrary to its original goal of pursuing legal certainty and the unification of law, which are both highly demanded by international commercial society. The preamble of the CMR in particular highlighted that, the search of unification of liability law was the main reason behind the conclusion of the CMR in the first place[4]. Despite the importance of seeking a uniform liability law aforementioned, when interpreting Article 29 of the CMR in the disputes, in practice, the national courts still treated them under the formative influence of domestic law and domestic law theories[5].

Since the CMR is also one of the international norms, it shall be first interpreted by Article 31 of the Vienna Convention, in order to find a potential unified interpretation. Article 31.1 of the Vienna Convention stipulates that, a treaty shall be interpreted in good faith with the ordinary meaning to be given to the terms in their context and in the light of its object and purpose. Article 31.2 provides that, the context for interpretation includes preamble. Therefore, if the aim of the CMR is to maximize the unification of transport liability rules by road as much as possible, even the national courts do have the power to explain wilful misconduct and the like behaviors in accordance with their national law, the approach they choose shall also be in line with the goal of the Convention.

Indeed, the words used in the treaty may have several ‘ordinary’ meanings. Nevertheless, Article 31 of the Vienna Convention requires the judges to interpret the treaty provision in the ordinary meaning to be given to the terms in their context and in the light of its object and purpose. The ‘ordinary’ meaning of the words used in the agreement cannot be ascertained without consulting the context.

Accordingly, in order to fully realize the objective of the CMR as the unification of the liability rule, the author suggested that, when interpreting Article 29 of the CMR, the national courts shall not expand the scope of the equivalent behaviors in accordance with their national laws, by lowering down the wrongful degree of wilful conduct[6].

Nevertheless, the structure of Article 29 of the CMR does lead the national courts to make their own adjustments concerning their understandings of the concept of default considered equivalent to wilful misconduct. After comparing with the similar provisions from the other international transport conventions, the author concluded the liability provisions of Article 29 CMR do not cover gross negligence but only contain the intent to cause the damage or an act or omission that was reckless and with knowledge that such damage would probably result[7]. Below we would like to observe the divergent interpretations given by several national courts.

2.2 The Divergent Interpretations Given by National Courts Regarding Article 29 of the CMR

2.2.1 German Court

In the beginning, when interpreting Article 29 of the CMR, the German court included the gross negligence within the scope of this provision[8].

Gross negligence, under the German law, has to fulfill both objective and subjective requirements. These were developed very early by the courts in construing general German civil law. From the objective side, there must be a serious violation of a duty of care going considerably beyond average carelessness. Form the subjective side, the individual wrongdoer shall be able to foresee and avoid that breach of duty, in particular by ignoring precautionary measures which would have been evident to anybody[9]. By applying the double tests, the Karlsruhe appellate court held that the mere fact of falling asleep while driving, without further indications in the facts, did not constitute an inference of the subjective requirements of gross negligence. As long as the German court apply the subjective test, it would be harder for the shipper to claim unlimited liability under Article 29 of the CMR.

Nevertheless, after the entry into force of the Transport Law Reform Act on 1 July 1998, the new Article 435 of the German Commercial Code and (HGB) states that, default is equivalent to wilful misconduct, if the damage was caused recklessly and with knowledge that damage would probably result. Therefore, a mere ‘gross negligence’ is no longer included within the scope of the CMR[10]. Here, we would like to define Germany as the shippers-friendly country, since German court is still likely to expand the scope of the default considered as equivalent to wilful misconduct under Article 29 of the CMR.

2.2.2 Dutch Court

According to Dutch law, the unlimited liability can only be relied on Article 29 of the CMR where there has been reckless conduct. Reckless means in the knowledge that damage would probably occur, and it is necessary that the wrongdoer knows the risk associated with such conduct and is aware that the danger of the risk occurring is much greater than the chance of it not occurring, while not allowing either of these possibilities to influence its behavior. By requiring the awareness of probability, Dutch court demands a higher burden of proof on the shipper side. It is therefore no doubt that the unlimited claims were rejected by the court in the context of loss due to the theft when the vehicle was parked[11]. Hence, the Netherlands can be classified as the carriers-friendly country.

2.2.3 English Court

In TNT Global SpA v Denfleet International Ltd[12], the judge ruled that the driver must have been aware that he was sleepy just before the crash and that, in these circumstances, his deliberate decision to continue to drive constituted ‘wilful misconduct’. However, the mere knowledge on the part of a driver that he was sleepy and a decision to continue to drive would not constitute wilful misconduct. The key question is whether the lorry driver must have known that he ought to stop because there was a risk of his failing to drive with proper care on account of tiredness[13].

Unlike the other countries, there is no like concept considered as equivalent to wilful misconduct under English law. The element of actual awareness required by English common law to constitute wilful misconduct is hard to prove. In this regard, the UK can be classified as the carriers-friendly country[14].

2.2.4 A Short Conclusion

In this section, we first indicate the necessity of interpreting Article 29 of the CMR in terms of Article 31 of the Vienna Convention, in order to realize the objective of the CMR. We then turn to discuss differing interpretations of wilful misconduct given by several national courts. At least, German court had ever included gross negligence within the scope of Article 29 of the CMR, while the insistence of requiring awareness by Dutch and English Courts makes it difficult for shippers to claim unlimited liability on the ground of wilful misconduct. Therefore, the differing rulings concerning ‘wilful misconduct’ among national courts do provide the strong incentives for lawyers and their clients to pursue forum shopping. The author even indicates that, by applying the objective test[15], German and Australian court are more shippers-friendly and attract more shippers to sue the carriers.

Moreover, compared with the English version of Article 29 of the CMR, the French version is that the carrier loses his right to limited liability if he causes the loss intentionally (dol) or with a negligence (faute) that is considered to be equal to intent. French and Swedish courts have found that the concept gross negligence (faute lourde) is equal to intent and that it is not required that the carrier was aware of the risk at the time when he caused the damage. Hence, it seems that the shipper and his lawyer have more incentives to sue their carriers before French and Swedish courts than English and Dutch courts[16].

3. Forum Shopping under Article 31 of the CMR

Article 31 of the CMR provides a wide choice of forums in which legal proceedings might be initiated. This includes the places of ordinary residence, principal business, the presence of branch or agency, or the place where the goods were taken over by the carrier or the place designated for delivery is situated. In addition, Article 31.1 of the CMR provides that, an action can be brought in any court or tribunal of a contracting country designated by the parties[17]. Therefore, the parties may choose a forum which lacks the genuine link with the deal.

Although the author states that, Article 31 of the CMR does not apply when a claim by a carrier for declaration that it is not liable[18], it is quite common for carriers to seek a negative declaration, which excludes the liability of carriers, in the Netherlands. However, in a decision of 20 November 2003 the Bundesgerichtshof (BGH) decided that a declaratory action did not constitute a pending action under Article 31.2 of the CMR and did not prevent the plaintiff from initiating further proceedings in Germany.

Also, as explained above, the differing rulings among national courts regarding Article 29 of the CMR provides another incentive for lawyers and their clients to engage in forum shopping. In addition, another example can be used to illustrate why the elaboration of the uniform texts by itself does not create uniformity. Article 41 of the CMR makes the CMR a mandatory convention by requiring that any stipulation derogating from the provisions of the CMR shall be null and void. Nevertheless, the Italian court still insists that, the CMR only applies when the parties expressly referred to the application of the CMR in the consignment note[19].

With regard to the relation between the CMR and the other Conventions, in the past, the CMR displaced those international rules in place in contracting states, including the Brussels Convention[20]. The Court in NÏrnberger Allgemeine Versicherungs AG v Portbridge Transport International BV[21] ruled that, Article 57 introduces an exception to the general rule that the Brussels Convention takes precedence over other conventions signed by the Contracting States on jurisdiction and the recognition and enforcement of judgments. The purpose of that exception was to ensure compliance with the rules of jurisdiction laid down by specialized conventions, since when those rules were enacted account was taken of the specific features of the matters to which they relate[22].

4. The Conflicts between the CMR and the Brussels Regulation

The Court first in TNT Express Nederland BV v AXA Versicherung[23]found that, it does not have jurisdiction to interpret Article 31 of the Convention on the Contract for the International Carriage of Goods by Road, as amended.[24] Therefore, it is not possible for the Court to unify the differing rulings given by the courts of Member States of the European Union.

Second, the Court restricted the application of the specialized convention under Article 71 of the Brussels Regulation I in cases internal to the European Union[25]. In a case such as the main proceedings, the rules governing jurisdiction, recognition and enforcement that are laid down by a convention on a particular matter, such as the lis pendens rule set out in Article 31(2) of the CMR, and the rule relating to enforceability set out in Article 31(3) of that convention, apply provided that they are highly predictable, facilitate the sound administration of justice and enable the risk of concurrent proceedings to be minimized and that they ensure, under conditions at least as favorable as those provided for by the regulation, the free movement of judgments in civil and commercial matters and mutual trust in the administration of justice in the European Union[26].

According to this ruling, first, in order to ensure mutual trust in the administration of justice in the Union, judgments given in a Member State shall be recognized automatically without the need for any procedure except in cases of dispute. Therefore, according to Article 35.3 of the Brussels Regulation I, the Dutch Court shall not be allowed to review the German ruling, by virtue of Article 31.2 of the CMR.

Second, the negative declaration obtained from the Dutch court would not constitute a pending action under Article 31.2 of the CMR and did not prevent the plaintiff from initiating further proceedings in the other Member States, since recognizing this kind of declaration would not minimize the risk of concurrent proceedings.

Third, the Dutch court could not refuse to recognize and enforce the German ruling by virtue of Article 34.1 of the Brussels Regulation I, since the recognition of the judgments of the Landgericht München is not manifestly contrary to public policy in the Netherlands[27].

Based on the successive rules of the Brussels Convention, the Court indicated that, interpretation provided by the Court in the relevant provisions of the Brussels Convention is also valid for those provisions of Brussels Regulation I, whenever those provisions may be regarded equivalent[28].

Compared with Article 57 of the Brussels Convention, the use of ‘or will be’ has not reproduced in Article 71 of the Brussels Regulation. Consequently, this provision precludes Member States to introduce new rules to prevail over the provisions of the Regulation, by concluding new specialized conventions or amending convention already in force[29]. The ruling confirms that Member States no longer have the right to conclude the international agreements affecting those rules, while the CMR has already bound in Member States before the Brussels Regulation I entered into force and shall be applied[30]

Nevertheless, it is still abstract when reading the ruling that Article 31.2 and Article 31.3 apply provided that they are highly predictable, facilitate the sound administration of justice and that they ensure, under conditions at least as favorable as those provided for by the regulation, the free movement of judgments in civil and commercial matters. This abstract ruling may produce more legal uncertainties in the future.

5. Conclusion: Assessing Forum Shopping In terms of Law & Economics

Compared with the promoters of Europeanization, the economists would like to ask a contrary question: why do we need to uniform a law? Does the unification of the law really contribute to the sound operation of the internal market?
Take the US for example, 100 years ago corporate laws still belonged to state laws and varied. Today, there is still no uniform federal code of corporate law. Nevertheless, through regulatory competition, the differences between state corporate laws increasingly become minimal and Delaware corporate law still plays a leading role in the new development of the US corporate law[31]. The outcome of regulatory completion may sometimes lead to race to top, not race to bottom.

The key question is whether a specific regulation shall be addressed at the centralized/federal/European level or the decentralize/state/Members level. By applying Tiebout’s theory[32], economists argue that, competition between local authorities, under certain restrictive circumstances, would lead to allocation efficiency, provided that well-informed citizens would vote with feet to seek their personal preferences[33]. Therefore, economists in general oppose the unification of law.

Applying the above theory in the context of Article 29 of the CMR, on the one hand, the promoters of unification of law condemn this provision and require the national courts to interpret wilful misconduct and the likes as consistent as possible, in terms of Article 31 of the Vienna Convention. On the other hand, shall we rethink that these divergences are necessary for the domestic legal systems of contracting states? Because each jurisdiction has its historical approach to develop its own rules to fit its individual needs, which cannot be attained by the uniform law. We see the differences of the interpretation of ‘wilful misconduct’ between the UK and France, and each state would choose to be carrier-friendly or shipper-friendly taking into account its domestic sectors.

In the end, the Court in TNT Express Nederland BV v AXA Versicherung[34] restricted the application of the CMR. To what extend the demerits of forum shopping has been eliminated by this ruling. However, the abstract ruling may lead to more uncertainties in the near future.



Reference
Books
Baughen, Simon, (2009), Shipping Law, 4th ed., Routlegde-Cavendish.
Stone, Peter, (2006), EU Private International Law, Edward Elgar Publishing.

Articles/Journals
Chuah, Jason, (2005), ‘Apparent Conflict of Jurisdiction between the CMR and the Brussels Regimes on Civil and Commercial Jurisdiction’, JIML 11 (1).
Clarke, Malcolm, (2008), ‘The Convention on the Contract for the International Carriage of Goods by Road 1956: wilful misconduct again - and again’, JBL.
Dore, (1983), ‘Choice of Law under the International Sales Convention: A U.S. Perspective’, AJIL.
Faure, M., ‘How Law and Economics may contribute to the Harmonization of Tort Law in Europe’.
Ferrari, Franco, (2002), ‘Forum Shopping’ Despite International Uniform Contract Law Conventions”, ICLQ, vol. 51.
C Jung, C., (1997), ‘Convention on the Contract for the International Carriage of Goods by Road (CMR): Survey, Analysis and Trends of Recent German Case Law’, 2 Unif. L. Rev.
Romano, Roberta, (1985), ‘Law as a Product: Some Pieces of the Incorporation Puzzle’, 1 J. I. Econ. & Org.
Schelin, Johan, (2002), ‘CMR Liability in a Law & Economics Perspective’, (2002), downloaded from http://www.juridicum.su.se/transport/Forskning/elad_ned.htm
Tiebout, C., (1956), ‘A Pure Theory of Local Expenditures’, JPL.
Tuma, J. Otmar, (2006), ‘The Degree of Default under Article 29 CMR’, 11 Unif. L. Rev.


[1] Dore, ‘Choice of Law under the International Sales Convention: A U.S. Perspective’, AJIL (1983), at p. 521.
[2] Franco Ferrari, “ ‘Forum Shopping’ Despite International Uniform Contract Law Conventions”, ICLQ (2002), vol. 51, at p.702
[3] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010.
[4] The Preamble reads "The contracting parties, having recognized the desirability of standardizing the conditions governing the contract for the international carriage of goods by road, particularly with respect to the documents used for such carriage and to the carrier's liability, have agreed as follows’…
[5] Otmar J. Tuma, ‘The Degree of Default under Article 29 CMR’, 11 Unif. L. Rev. (2006), at p. 586.
[6] Otmar J. Tuma, ‘The Degree of Default under Article 29 CMR’, 11 Unif. L. Rev. (2006), at p. 591.
[7] Otmar J. Tuma, ‘The Degree of Default under Article 29 CMR’, 11 Unif. L. Rev. (2006), at pp. 592-593.
[8] Bundesgerichtshof, 14.7.1983 – (I ZR 128/81), NJW 1984, 565. And it was the mainstream opinion since 1983, see C Jung, ‘Convention on the Contract for the International Carriage of Goods by Road (CMR): Survey, Analysis and Trends of Recent German Case Law’, 2 Unif. L. Rev. (1997), at p. 159.
[9] C Jung, ‘Convention on the Contract for the International Carriage of Goods by Road (CMR): Survey, Analysis and Trends of Recent German Case Law’, 2 Unif. L. Rev. (1997), at p. 160.
[10] Otmar J. Tuma, ‘The Degree of Default under Article 29 CMR’, 11 Unif. L. Rev. (2006), at p. 595.
[11] Ibid, at p. 598.
[12] TNT Global SpA v Denfleet International Ltd [2007] EWCA Civ 405; [2007] 1 C.L.C. 710.
[13] Malcolm Clarke, ‘The Convention on the Contract for the International Carriage of Goods by Road 1956: wilful misconduct again - and again’, JBL (2008), at p. 186.
[14] Ibid, at p.187.
[15] Ibid, at p. 187. While, German scholars point out that they also apply the subjective test.
[16] Johan Schelin, ‘CMR Liability in a Law & Economics Perspective’, (2002), downloaded from http://www.juridicum.su.se/transport/Forskning/elad_ned.htm
[17] Franco Ferrari, “ ‘Forum Shopping’ Despite International Uniform Contract Law Conventions”, ICLQ (2002), vol. 51, at p.693.
[18] Simon Baughen, Shipping Law, 4th ed., Routlegde-Cavendish (2009), at p. 197.
[19] Franco Ferrari, “ ‘Forum Shopping’ Despite International Uniform Contract Law Conventions”, ICLQ (2002), vol. 51, at pp. 704-705
[20] Ibid, at p.693.
[21] Case C-148/03 NIrnberger Allgemeine Versicherungs AG v Portbridge Transport International BV (28 October 2004).
[22] Jason Chuah, ‘Apparent Conflict of Jurisdiction between the CMR and the Brussels Regimes on Civil and Commercial Jurisdiction’, JIML 11 (1) (2005), at p. 68.
[23] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010.
[24] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010, para. 65.
[25] Peter Stone, EU Private International Law, Edward Elgar Publishing, 2011, at p. 46.
[26] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010, para. 65.

[27] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010, para. 27.
[28] Ibid, at para. 35.
[29] Ibid, at para. 38.
[30] Ibid, at para. 39.
[31] Roberta Romano, ‘Law as a Product: Some Pieces of the Incorporation Puzzle’, 1 J. I. Econ. & Org., (1985), at pp. 227-229.
[32] C. Tiebout, ‘A Pure Theory of Local Expenditures’, JPL (1956), at p. 416.
[33] M. Faure, ‘How Law and Economics may Contribute to the Harmonization of Tort Law in Europe’, at pp. 7-8.
[34] C-533/08, TNT Express Nederland BV v AXA Versicherung, ECJ 04 May 2010.