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Forwarder or Carrier? Liability of a Freight Forwarder Under Latvian law

Forwarder or Carrier? Liability of a Freight Forwarder Under Latvian law

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The law on carriage of goods is a well-harmonized area of international law –  a streamlined set of rules that allows cargo owners and carriers to save valuable time and resources. While freight forwarders are an important element of every consignment it is surprising that many elements of forwarder’s liability are still regulated by national law.

And in some important ways, forwarder’s liability differs in Latvia from that in other countries.

Freight forwarders tend to have dual liability. Unless the parties have expressly agreed otherwise, the forwarder may either be liable only for its own mistakes or may assume the liability of other parties that have been involved in the consignment by the forwarder.

Generally, a forwarder’s liability is limited to arranging the consignment in a diligent and prudent manner. However, under Latvian law forwarders also assume the liability of other parties involved in the consignment if the forwarder has expressly or impliedly assumed the liability of the carrier; the forwarder determined the fee for a carriage; the forwarder issued a consignment note in its own name; or the carriage takes place exclusively via road transport.

These conditions for extended forwarder liability can be easily met. Forwarders often set the carriage fees, exclusively use road transport, or otherwise engage in carrier functions that give rise to implied liability. As a result, in most occasions forwarders assume the full liability of carriers, warehouse operators, and other parties involved in a consignment.

The law limits the maximum amount of forwarder’s liability to 8.33 special drawing rates (SDR) for each gross mass kilogram of freight. What is peculiar about forwarder’s liability under Latvian law, however, is that the liability limit operates irrespective of the type of carriage used for the consignment. That means that when the carriage takes place by means of transport that has higher or lower liability limits, the forwarder may have a higher or lower liability limit than the limit used for the particular industry. For example, if the loss of cargo occurs within an air consignment, then the forwarder’s liability will remain capped at 8.33 SDR instead of the 19 SDR for each gross mass kilogram that is the liability limit for air transport.

These liability limits apply only to cases of cargo loss or damage, but not to cases of delayed delivery, in which the forwarder may potentially be liable for the full amount of the loss. This conflicts with the overall transport industry standard, in which carrier liability is limited to the amount of the fee received for the carriage.

Where the consignor has not set a specific cargo delivery deadline, the forwarder shall be responsible for the delivery of the cargo within a reasonable time. On the other hand, if a specific delivery deadline was set by the consignor, then the forwarder shall be liable for any delay that could have been avoided by an honest and careful merchant. That means that the forwarder must follow a very high degree of care and may become liable for any negligence or wilful misconduct that contributed to the failure to meet the agreed-upon delivery date.

Similarly, as in other countries, Latvian law provides that claims against forwarders expire within one year, except for claims of wilful misconduct or gross negligence, which expire in three years. Recent case law from Latvia’s Court of Appeal has provided valuable guidance as to what actions of a forwarder may constitute gross negligence under Latvian law.

In the matter considered by the court the cargo was delivered late and part of the cargo was stolen when the carrier’s vehicle experienced technical problems during the carriage. Even though the carrier informed the forwarder about the need to carry out roadside repairs, the forwarder ignored this information for over one month. The court established that the forwarder’s degree of care required the forwarder to engage proactively with the carrier and facilitate the safe delivery of the cargo. The court held that the forwarder’s failure to demonstrate any interest in the carrier’s technical difficulties qualified as gross negligence.

By Gatis Flinters, Partner, Cobalt Latvia

This Article was originally published in Issue 6.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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COBALT is a closely integrated alliance of top-tier law offices across the Baltics, uniting more than 250 attorneys and support staff. During 25 years of experience, we have become a strategic partner to our clients in handling both daily matters and complex large–scale transactions and disputes.

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COBALT has been named Baltic Law Firm of the Year 7 times receiving Chambers Europe, IFLR, The Lawyer and Mergermarket awards, and we are regularly listed amongst the top-performing M&A legal advisors in the Bloomberg, Refinitiv and Mergermarket deal tables. Recognized as the No.1 Lithuanian law firm in the Prospera Law Firm Review 2021 and No. 1 law firm in Latvia in 2022, 2020, 2019, and 2018 client satisfaction surveys. We were recognized as a Baltic-wide Law Firm of the Year at the 2022 Chambers Europe Awards ceremony and named the Baltic States Tax Firm of the Year and Pro Bono Firm of the Year at the annual ITR EMEA Tax Awards 2021 ceremony. 

More information on COBALT can be found at www.cobalt.legal.