21 March 2024

Freight Forwarder Liability for Cargo Loss in Russia: Dispute Resolution

March 21, 2024

Forwarding is one of the most common contracts in logistics and freight transportation. Despite high demand, the qualification of this contract involves several issues and contradictions that require detailed consideration. Proper qualification of a forwarding contract allows for its differentiation from other agreements and determines which legal provisions should apply in each specific case.

The Civil Code of the Russian Federation (the "Civil Code") presents forwarding as an independent type of contract. In practice, however, forwarding services may combine elements of various obligations, such as agency, carriage, and the provision of services. In some cases, a contract labeled as a forwarding agreement is not one in essence: its subject matter and the nature of the parties' relationship fall under the rules regulating other types of legal relationships.

Forwarding is most frequently confused with contracts of carriage, service agreements, and agency agreements. Since the liability rules for a carrier, forwarder, service provider, and agent differ, distinguishing forwarding from related legal relationships is particularly relevant in situations involving the loss, shortage, or damage of cargo.

One can distinguish two primary models of a forwarder's contractual liability for cargo loss based on the nature of the parties' legal relationship:

1. Forwarder liability under the laws on forwarding activities. This applies when the forwarder is a so-called "contractual carrier" who enters into an agreement with an actual carrier and accepts the cargo but does not perform the carriage independently.

2. Forwarder liability under the laws on carriage. This applies when the forwarder performs the carriage itself (i.e., acts as the actual carrier) or when a carrier engaged by the forwarder is at fault for the cargo loss.

If a counterparty is named as a forwarder in the contract but does not essentially act as one and performs other functions (agent, service provider), it is liable to the client under the rules established for the provision of services, agency, or other related types of contracts; in such cases, forwarder liability measures do not apply.

Below, we examine how these liability models differ, which features characterize a forwarding contract, and how the qualification and terms of the contract influence forwarder liability for cargo loss.

What Constitutes Freight Forwarding Services?

The contract of freight forwarding is regulated by Chapter 41, Freight Forwarding, of the Civil Code, Federal Law No. 87-FZ dated June 30, 2003, On Freight Forwarding Activities (the "Law No. 87-FZ"), and the Rules for Freight Forwarding Activities approved by Decree of the Government of the Russian Federation No. 554 dated September 8, 2006, On Approval of the Rules for Freight Forwarding Activities (the "Rules").

Under a freight forwarding contract, the forwarder undertakes to perform or organize the performance of services related to the carriage of cargo (Cl. 1, Art. 801 of the Civil Code).

Law No. 87-FZ defines freight forwarding activities as the provision of services "for organizing the carriage of cargo by any means of transport and the processing of shipping documents, documents for customs purposes, and other documents necessary for the carriage of cargo." A similar definition is provided in Clause 4 of the Rules: "forwarding means services for organizing cargo carriage, concluding cargo carriage contracts, ensuring the dispatch and receipt of cargo, as well as other services related to the carriage of cargo."

The Civil Code distinguishes two categories of forwarding services: primary and additional (Cl. 1, Art. 801 of the Civil Code).

Primary forwarding services include:

organizing cargo carriage;
concluding a cargo carriage contract on behalf of the client or on one's own behalf;
ensuring the dispatch and receipt of cargo;
other obligations related to carriage.

Additional forwarding services are accompanying operations necessary for cargo delivery, such as:

obtaining or processing required documents;
performing customs and other formalities;
checking the quantity and condition of the cargo;
loading and unloading;
paying duties, fees, and other expenses;
cargo storage;
receiving cargo at the destination;
performing other operations and services involved in the carriage process.

Why Is Proper Qualification of a Forwarding Contract Important?

The law specifies certain actions (operations) that a forwarder may perform. However, a specific feature of forwarding relationships is that formal coincidence with one of the listed types of services is insufficient for proper qualification.

For example, if a contract provides for an operation that Cl. 1, Art. 801 of the Civil Code classifies as an additional service (including actions not expressly mentioned in said article), but without the obligation to ensure carriage, such a contract will not be considered a forwarding agreement and the rules on forwarding will not apply to it. This approach is established in Clause 9 of the Review of Judicial Practice on Disputes Related to Contracts of Cargo Carriage and Freight Forwarding, approved by the Presidium of the Supreme Court of the Russian Federation on December 20, 2017 (the "Review").

Additional services are auxiliary in nature; they do not independently form the composition of a forwarding contract and are qualified as forwarding only if they are present in the contract alongside primary services (organizing cargo carriage, concluding a carriage contract, ensuring dispatch and receipt).

This aspect is noted in legal literature: not every service related to carriage is considered a forwarding service. The subject matter of forwarding consists only of those measures that "relieve the client from performing obligations that it must fulfill under a contract of carriage or a contract for presenting cargo for carriage."[1] That is, a forwarding contract is concluded to relieve the customer of the formalities and burdens of carriage.[2]

As we can see, the concept of forwarding services contains many "pitfalls." When drafting a contract, it may be called "forwarding" simply because it is directly or indirectly involved in carriage. At the same time, the terminology in the text (the name of the contract and the parties) may not correspond to the actual nature of the relationship established by the contractual terms. For example, the parties in the contract may be named "agent" and "principal." However, if under the terms of the contract the agent accepts cargo for carriage and concludes a contract with a carrier on its own behalf, such a relationship is forwarding in nature and must be regulated by the rules of Chapter 41 of the Civil Code. The opposite situation occurs when parties position themselves in the contract as a client and a forwarder, but the subject of the contract actually constitutes a separate auxiliary operation (e.g., processing customs payments), which essentially is not forwarding and is qualified as the provision of services or agency.

The Supreme Court of the Russian Federation has repeatedly noted that when considering disputes arising from forwarding contracts and qualifying the legal relationship of the parties, one must proceed from the features of the contract provided for in the relevant articles of the Civil Code, regardless of the name of the contract or the parties (Cl. 8 of the Review; Cl. 25 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 26 dated June 26, 2018, On Certain Issues of the Application of Legislation on the Contract of Carriage of Cargo, Passengers, and Luggage by Road and on the Contract of Freight Forwarding (the "Plenum")).

Thus, for the correct qualification of a contract, it is necessary to establish the true nature of the relationship and the goal pursued by the parties upon its conclusion.

How to Distinguish Forwarding from Other Contracts?

The Supreme Court of the Russian Federation distinguishes two categories of forwarders (Cl. 8 of the Review; Cl. 25 of the Plenum):

the "actual carrier" (a forwarder who actually performs the carriage using its own vehicles);
the "contractual carrier" (a forwarder who issued a transport document, expressed an intent to guarantee the safe delivery of cargo, including assuming a guarantee for the performance of the carriage contract or other liability to the client for the carrier's actions).

It is the "contractual carrier" that is a forwarder in its classic sense. Such a forwarder bears liability for the loss, shortage, or damage (spoilage) of cargo under Cl. 2, Art. 6 and Art. 7 of Law No. 87-FZ.

Distinguishing features of a true forwarder (a "contractual carrier"):

the forwarder accepted the cargo for carriage and issued a supporting transport document to the client;
the forwarder assumed liability for ensuring the carriage;
the forwarder independently selects carriers and enters into contracts with them;
the price of the services provided by the forwarder is expressed as a fixed amount without highlighting carriage expenses and is comparable to market prices for the carriage of corresponding cargo;
the forwarder undertook to ensure cargo safety, even if such a contract was concluded via the Internet (Cl. 26 of the Plenum).

A unified opinion has formed in judicial practice: the main distinguishing feature of a forwarder as a contractual carrier is the fact of accepting cargo for carriage. This is what allows the client to hold the forwarder liable for cargo loss under the rules of Law No. 87-FZ.[3] However, the question of which documents can confirm the acceptance of cargo for carriage in court has not been definitively resolved to date.

Which Documents Allow Distinguishing a Freight Forwarding Contract from Related Agreements?

Clauses 5 and 12 of the Rules provide a list of forwarding documents:

forwarding instructions – determine the composition and terms for the provision of freight forwarding services;
forwarding receipt – confirms the fact of the forwarder receiving the cargo from the client for further carriage and grants the forwarder the right to possess the cargo until it is delivered to the consignee;
warehouse receipt – confirms the fact of the forwarder accepting the cargo from the client for warehouse storage.

Other documents may also be used in international carriage.

Thus, a forwarding receipt confirms the acceptance of cargo for carriage. However, this document is not the sole evidence of forwarding relationships. Two opposite opinions exist in judicial practice on this issue:

First approach: the forwarding receipt is exclusive and necessary evidence of accepting cargo for carriage. In the absence of this document, there are no grounds to hold the forwarder liable for cargo loss.[4]
Second approach: the fact of a forwarder accepting cargo for carriage may be confirmed not only by a forwarding receipt but also by other documents. For example, a waybill,[5] a service request combined with a transport invoice, or a handover certificate[6] may serve as evidence.

Courts note that the presence or absence of forwarding documents is not the only criterion for qualifying the parties' relationship. A forwarder's failure to fulfill the obligation to issue a forwarding document to the client does not refute the fact of accepting cargo for carriage if other documentary evidence exists.[7] All circumstances should be considered in aggregate, such as the forwarder's obligation in the contract to accompany the cargo during carriage or the instruction to deliver using specific carriers determined by the forwarder itself.[8]

Thus, a flexible approach to proving forwarding relationships is currently more relevant. However, to mitigate risks, it is recommended to properly execute a forwarding receipt when transferring cargo to a forwarder for carriage.

How to Distinguish Freight Forwarding from Service Agreements and Agency Agreements?

The carriage process is always accompanied by related operations: packaging, labeling, loading and unloading, performance of customs formalities, warehouse storage, settlements with the carrier, and preparation of various documents.

Such services are additional and do not independently form the composition of forwarding legal relationships (Cl. 1, Art. 801 of the Civil Code). If the subject matter of the contract consists only of auxiliary services and the contractor's obligations do not include the carriage itself (concluding a carriage contract and taking possession of the cargo), such a contract is qualified as agency or the provision of services, and the rules of the law on forwarding activities do not apply to it.

This approach is established by the Supreme Court of the Russian Federation: a forwarder cannot be held liable for cargo loss if it performs only an agency function. Exceptions are situations where the forwarder failed to exercise due diligence in selecting a carrier or assumed a guarantee for the performance of the carriage contract (Cl. 9 of the Review; Cl. 25 of the Plenum).

Organizations operating in the freight transportation sector often provide a whole range of services within a single contract, including both auxiliary operations and the actual forwarding of cargo. Courts, when considering disputes from such contracts, take into account their mixed nature. The law allows for a combination of elements of various contracts in an agreement; in this case, the relevant rules apply to the parties' relationship (Cl. 3, Art. 421 of the Civil Code). Under such a mixed contract, the contractor bears liability to the client for cargo safety as a forwarder under the rules of Law No. 87-FZ. Courts reject attempts by forwarders to present such relationships exclusively as the provision of services and to delegate their liability to the actual carriers.[9]

The liability of an agent or service provider differs significantly from the liability of a forwarder to a client. A service provider or agent is not liable to the client for the carrier's actions or for a breach of cargo safety during carriage. In contrast, a forwarder who has entered into a carriage contract with a carrier on its own behalf bears liability to the client for the transportation and delivery of the cargo, its integrity, and its safety, even in cases where the carrier is at fault. When a forwarder has concluded a carriage contract on behalf of the client, it may bear joint and several liability with the carrier if the forwarder undertook to ensure cargo safety (Cl. 10 of the Review; Cl. 27 of the Plenum).

A forwarder is particularly often confused with a shipping agent, with attempts made to hold it liable for cargo lost or damaged during carriage as if it were a forwarder. The Merchant Shipping Code (the "MSC RF") distinguishes a special type of contract – maritime agency (Chapter XIII of the MSC RF). According to Art. 232 of the MSC RF, a shipping agent performs legal and other actions on behalf of the shipowner or on its own behalf upon the shipowner's instruction. The shipping agent performs various formalities related to a vessel's arrival at, stay in, and departure from a port; assists the ship's master; processes cargo documents; collects freight amounts; pays fees related to the vessel's stay in port; attracts cargo for carriage on a shipping line; collects freight; forwards cargo; and performs other actions (Part 1, Art. 237 of the MSC RF).

Furthermore, a shipping agent may, with the shipowner's consent, act in the interests of another party. That is, the law expressly grants this intermediary the possibility of simultaneous commercial representation for two parties (Art. 235 of the MSC RF). Being an agent for the carrier, a shipping agent may conclude agency service contracts with a client-shipper.

The peculiarities of the status and specific powers of a shipping agent have created a significant number of precedents in which a client files a claim for damages related to cargo damage or loss against the shipping agent as a forwarder. Consequently, judicial practice has formed criteria for distinguishing a shipping agent from a forwarder, which can be used as a universal formula for qualifying a forwarding contract. If an agent did not accept cargo for forwarding or carriage, did not conclude a carriage contract on its own behalf, and the cargo was not in its possession, such an agent is not a forwarder and bears no liability to the client for cargo safety.[10] In the absence of these features, the contract is not considered a forwarding agreement because no carriage relationship arises between the parties.[11]

What Liability Does a Forwarder Acting as a "Contractual Carrier" Bear for Cargo Loss?

The foundations of forwarder liability are defined in Chapter 41 of the Civil Code and Law No. 87-FZ. According to Art. 803 of the Civil Code and Law No. 87-FZ, a forwarder is liable to a client under the rules of Chapter 25 of the Civil Code, which establishes the debtor's obligation to compensate the creditor for damages (Cl. 1, 2, Art. 393 of the Civil Code).

It is important to note: by law, forwarder liability to a client for cargo loss is strictly enforced and does not depend on fault. There are three options for the compensation of damages:

in full;
in a limited amount;
exemption from liability.

1. Liability in Full. If the forwarder is at fault for the breach of cargo safety, it must compensate the client for all damages in full (Art. 15 of the Civil Code; Cl. 1, 4, Art. 7 of Law No. 87-FZ), specifically:

Actual damage – all expenses the client has incurred or will have to incur in connection with the loss, shortage, or damage of the carried cargo.
Lost profits – unearned income that the client could have received under normal civil circulation conditions if its cargo had not been lost or damaged.

2. Limited Liability. A forwarder bears limited liability for cargo loss if the following conditions are met simultaneously:

the forwarder is not at fault for the breach of cargo safety (i.e., there is no intent, simple negligence, or gross negligence in its actions);
there is no force majeure event that would allow for a total exemption of the forwarder from liability.

Limited liability implies the compensation of only actual damage without lost profits. Furthermore, the damage is not compensated in its entirety because the law limits the maximum compensation amount (Cl. 1, Art. 7 of Law No. 87-FZ):

for the loss of cargo with a declared value – in the amount of the declared value in the event of total loss, or in the amount by which the declared value decreased in the event of damage;
for the loss of cargo without a declared value – in the amount of the actual (documentary confirmed) cost of the cargo in the event of total loss, or in the amount by which the actual (documentary confirmed) cost decreased in the event of damage.

3. Total Exemption of the Forwarder from Liability. The law establishes a presumption of the forwarder's fault, and only force majeure circumstances can exempt it from liability. This is because a forwarder is recognized as a professional market participant and bears entrepreneurial risks (Cl. 3, Art. 401 of the Civil Code). If "circumstances that the forwarder could not prevent and the elimination of which did not depend on it" are proven, it is exempted from the obligation to compensate the client for damages (Cl. 1, Art. 7 of Law No. 87-FZ).[12]

According to clarifications from the Supreme Court of the Russian Federation, "the requirement of extraordinariness implies the exceptional nature of the circumstance in question, the occurrence of which is not common under specific conditions. Unless otherwise provided by law, a circumstance is recognized as unpreventable if any participant in civil circulation engaged in an activity similar to the debtor's could not have avoided the occurrence of this circumstance or its consequences."[13] Force majeure differs from a mere accident due to the objective, rather than subjective, nature of unpreventability. An event is unpreventable if a person engaged in similar entrepreneurial activities could not have avoided the occurrence of this circumstance or its consequences.[14]

For instance, a situation where a forwarder released cargo to an unidentified person using forged documents or a forged signature is not recognized as a force majeure circumstance.[15] In this case, the forwarder was obliged to take the necessary measures to verify the documents and the identity of the consignee.[16]

The total loss of cargo resulting from a vehicle accident (e.g., a plane crash) also does not exempt the forwarder from liability. As the court notes, activities related to the use of inherently dangerous objects are characterized by a high probability of road traffic accidents or crashes. As a professional market participant, the forwarder knew or should have known about the possibility of an accident, as it assumed the risks of such an activity. For the same reason, a plane crash is not a ground for exempting a forwarder from compensating a client for damages.[17]

In road transportation, traffic accidents and vehicle fires are not recognized as force majeure; in such situations, the forwarder is liable to the client for cargo loss. The court justifies this as follows: "extraordinariness means exceptionality, going beyond the 'normal' or ordinary, being unusual for specific living conditions, which does not relate to life risk and cannot be accounted for under any circumstances."[18]

Theft of cargo or armed robbery also does not relieve the forwarder of liability, as it is obliged to take the value of the cargo into account and foresee the probability of such events.[19]

Is It Possible to Decrease, Increase, or Otherwise Change the Scope of Forwarder Liability in the Contract?

A forwarding contract may provide for an increased scope of liability compared to that established by law (Cl. 1, Art. 11 of Law No. 87-FZ).

The parties are not entitled to reduce the statutory scope of a forwarder's liability. An agreement of the parties to exclude or reduce the forwarder's liability is void (Cl. 4, Art. 7, Cl. 2, Art. 11 of Law No. 87-FZ; Cl. 29 of the Plenum; Cl. 16 of the Review of Judicial Practice of the Supreme Court of the Russian Federation No. 2(2022), approved by the Presidium of the Supreme Court of the Russian Federation on October 12, 2022). Courts emphasize that it is incorrect to define forwarder liability in a contract through a percentage rate or a fixed amount, as the legal requirements in this case are mandatory and cannot be changed by the parties' agreement.[20]

Must a Forwarder Return the Fee to the Client If Cargo Is Lost or Damaged?

By default, the law does not establish such an obligation for the forwarder. However, the parties may stipulate in the contract that, in the event of cargo loss, the forwarder returns the fee to the client in addition to compensating for damages, provided the fee is not included in the cargo's cost. The amount to be returned must be proportional to the value of the lost cargo (Cl. 3, Art. 7 of Law No. 87-FZ).

Forwarder Liability in International Carriage

In international carriage, specific limitations are established for forwarder liability (Cl. 3, Art. 6; Cl. 2, Art. 7 of Law No. 87-FZ):

for the loss, shortage, or damage (spoilage) of cargo, liability cannot exceed 2 units of account per kilogram of the total weight of the lost cargo, unless a higher amount is compensated by the person for whom the forwarder is responsible;
for the failure to perform other obligations under the freight forwarding contract, liability cannot exceed 67 units of account per package or other shipping unit.

A unit of account means a Special Drawing Right (SDR) as defined by the International Monetary Fund. The value of the ruble in SDRs is calculated in accordance with the valuation method applied by the IMF on the relevant date for its operations and transactions. Conversion into rubles is carried out on the date of the court decision or on a date established by the parties' agreement.

As the court explains, the liability limit of 666.67 SDR is a general ground for limiting forwarder liability and also applies when the forwarder compensates for cargo loss under Cl. 1–2, Art. 7 of Law No. 87-FZ. That is, a forwarder should not pay more than 2 SDR per 1 kg of lost (damaged) cargo and, in any event, should not pay more than 666.67 SDR per package or other shipping unit.[21]

These limitations apply when cargo loss arose due to an accident or simple negligence by the forwarder. If the forwarder fails to prove this, it must compensate the client for damages in full, including lost profits (Cl. 4, Art. 6; Cl. 5, Art. 7 of Law No. 87-FZ).[22]

For example, when an unforeseen natural impact on a vessel in maritime carriage ("significant mixed swell and squally winds") led to cargo loss, the court ordered the forwarder to compensate for the damage.[23] A storm at sea, although beyond the reasonable control of the forwarder, is not a force majeure circumstance and does not exempt the forwarder from liability.[24]

Thus, to apply limited liability to a forwarder in domestic carriage, there must be no intent, simple negligence, or gross negligence; in international carriage, there must be no intent or gross negligence.

Forwarder Liability Under Carriage Norms and Rules

In certain cases, a forwarder is liable for cargo loss under the rules regulating carriage relationships:

if the forwarder is the actual carrier itself;
if the forwarder is a "contractual carrier," but the actual carrier is at fault for the cargo loss.

Can a Forwarder Be an Actual Carrier?

The law allows a carrier to perform the duties of a forwarder (Cl. 2, Art. 801 of the Civil Code). Such a relationship can be structured in two ways:

the carrier concludes a mixed contract with the client, containing elements of both carriage and freight forwarding;
the carrier executes several contracts – carriage and freight forwarding – with the client for a single cargo shipment.

The Supreme Court uses the term "actual carrier" if the forwarder actually performed the carriage using its own vehicles (Cl. 8 of the Review; Cl. 25 of the Plenum).

It should be noted that the possibility of one person performing the duties of both a carrier and a forwarder (as a "contractual carrier") within a single shipment is questionable. A forwarder concludes a contract with a carrier as the client's representative. At the same time, Cl. 3, Art. 182 of the Civil Code prohibits a representative from entering into transactions with respect to themselves personally; thus, a carrier cannot conclude a contract with itself. Consequently, within a single shipment, a carrier can only provide the client with additional services of an auxiliary nature that are not strictly forwarding. The primary forwarding functions (accepting cargo for carriage, ensuring its delivery and safety during the carriage process) will be performed specifically as the actual carrier. "Thus, a carrier simultaneously performing the functions of a forwarder can perform any actual forwarding operations, as well as legal operations related to representing the client before third parties."[25]

In practice, situations also occur where, under a mixed contract, a forwarder acts as the actual carrier for only one stage of delivery. Such a contract is qualified as mixed.[26]

Correlation Between Forwarder and Carrier Liability to the Client

A forwarder is entitled to conclude a carriage contract either on behalf of the client or on its own behalf (Cl. 1, Art. 801 of the Civil Code). This determines who the client will file a claim for damages against.

If the forwarder concluded the carriage contract on behalf of the client, the carrier is directly liable to the client for cargo safety. However, if under the terms of the contract the forwarder undertook to ensure cargo safety, it will bear joint and several liability with the carrier (Cl. 10 of the Review; Cl. 27 of the Plenum).
If the forwarder concluded the carriage contract on its own behalf, the forwarder bears liability to the client for the carrier's actions. In accordance with Art. 805 of the Civil Code, a forwarder's delegation of obligations to a third party does not exempt it from liability to the client. Therefore, when the carriage contract is concluded in the forwarder's name and the carrier loses or damages the cargo, the forwarder's liability to the client is determined by the special transport rules established for carriers (Art. 803 of the Civil Code; Cl. 2, Art. 6 of Law No. 87-FZ). In turn, the forwarder is entitled to demand compensation from the carrier for actual damage related to cargo loss, regardless of whether the forwarder has compensated the client for the corresponding harm.

Note that a forwarder cannot, in a contract with a client, waive liability for the carrier's actions or reduce its scope in any way. Such a term contradicts mandatory legal provisions and will be considered void (Cl. 2, Art. 11 of Law No. 87-FZ). However, a client may demand that the forwarder assign its rights under the carriage contract to the client for the purpose of filing corresponding claims directly against the carrier (Cl. 27 of the Plenum).

Thus, if cargo is lost or damaged due to the carrier's fault, the forwarder is still obliged to compensate the client for the losses. In this situation, however, one must consider the industry-specific rules regulating freight transportation by a particular mode of transport.

Determining the Scope of Damage for Cargo Loss by a Carrier

The general methodology for determining damage in the event of cargo loss, shortage, or damage is identical for both forwarders and carriers:

if the cargo has a declared value – the damage is compensated in the amount of the declared value;
if the cargo is accepted for carriage without a declared value – the damage is compensated in the amount of its cost, which is understood as the price specified in the contract or invoice.

This framework is universal; it is established in the Civil Code, Law No. 87-FZ, and industry transport codes and charters, and it applies to road, rail, sea, and air carriage.

However, if information about the cargo price is missing from the documents, the procedure for establishing its cost differs under the laws on forwarding versus carriage. Specifically, according to forwarding rules, if the cargo price is missing from the contract or invoice, the actual (documentary confirmed) cost is established based on the "average price for an analogous product existing in the place where the cargo was to be delivered, on the day of voluntary satisfaction of such a claim or, if the claim was not voluntarily satisfied, on the day of the court decision" (Cl. 1, Art. 6 of Law No. 87-FZ). A similar concept is contained in Cl. 2, Art. 119 of the Air Code of the Russian Federation (the "Air Code").

The rules of carriage law regulate this issue differently: the scope of damage is determined "based on the price that, under comparable circumstances, is usually charged for analogous goods" (Cl. 2, Art. 796 of the Civil Code; Art. 95 of the Railway Transport Charter of the Russian Federation (the "RTC"); Cl. 8, Art. 34 of the Charter of Road Transport and Urban Surface Electric Transport (the "CRT")).

A special procedure for calculating damage for cargo loss is established for maritime carriage:

Firstly, the cargo cost is determined at the place and on the day the cargo was unloaded or should have been unloaded from the vessel, based on the price determined at commodity exchanges, or the existing market price, or the usual cost of cargo of the same kind and quality (Cl. 2, Art. 169 of the MSC).
Secondly, if the kind, type, and value of the cargo were not declared, the carrier's liability for cargo loss "cannot exceed 666.67 units of account per package or other shipping unit or two units of account per kilogram of gross weight of the lost or damaged cargo, whichever is higher" (Cl. 1, Art. 170 of the MSC).

Note that in air carriage, the amount of damage compensation for cargo loss without a declared value is limited to no more than 600 rubles per 1 kg of weight (Cl. 1, Art. 119 of the Air Code).

In addition to compensating for damages, the carrier returns the cargo carriage fee to the client if it is not included in the cargo's cost (Cl. 3, Art. 796 of the Civil Code; Cl. 1, Art. 169 of the MSC; Art. 96 of the RTC; Cl. 9, Art. 34 of the CRT). This obligation of the carrier is mandatory, meaning it cannot be waived by contractual agreement, unlike the forwarder's obligation to return the fee, which is discretionary and applies only if expressly provided for in the contract.

When Is a Carrier Exempted from Liability?

The basic model of liability for cargo loss is established in the law identically for both carriers and forwarders:

a carrier, like a forwarder, is considered a professional market participant, bears entrepreneurial risks, and is liable for cargo regardless of fault, including for accidents (Cl. 1 of the Review);
to be exempted from liability, a carrier (like a forwarder) must prove that the destruction or damage of the cargo arose from causes that the carrier "could not prevent and the elimination of which did not depend on it" (Cl. 1, Art. 796 of the Civil Code; Cl. 1, Art. 7 of Law No. 87-FZ; Cl. 6, Art. 34 of the CRT; Art. 95 of the RTC).

A carrier is liable for cargo loss resulting from improper packaging if the packaging function was assigned to it – this rule applies to all modes of freight carriage (Cl. 2 of the Review).

The reduction or exclusion of carrier liability in a contract is invalid unless such a possibility is expressly provided for in the transport code or charter (Cl. 2, Art. 793 of the Civil Code). For example, the liability limits of a maritime carrier can be restricted by contract, but only under certain conditions listed in Cl. 2, Art. 175 of the MSC.

Note that industry transport rules specify grounds for exempting a carrier from liability.

Thus, when delivering cargo by road, the carrier must prove one of the following circumstances:

a force majeure event;
an official restriction or ban on the movement of vehicles;
the fault of the shipper, including if the cargo was not preserved due to improper packaging;
natural weight loss of the cargo.

Accidental vehicle fires, traffic accidents, and illegal actions by third parties (e.g., cargo theft) do not exempt a road carrier from liability.

In railway carriage, the nature of the carried cargo is of great importance when establishing liability. Its special natural properties, deficiencies in containers and packaging, and exceeding the permissible moisture level of the cargo are taken into account (Art. 95 of the RTC).

The legislation establishes a specific list of grounds that allow for the exemption of a railway carrier from liability (Art. 118 of the RTC). For example, such a circumstance is the accompaniment by a representative of the sender or recipient during the carriage process; incorrect information in the documents; or damage to cargo carried in an open wagon due to natural causes. However, if the carrier's fault is proven, these circumstances will not relieve it of the obligation to compensate for the damage.

For a maritime carrier, the list of grounds for exemption from liability is significantly broader compared to other modes of transport. In addition to hidden defects of the cargo and its natural loss, deficiencies in containers and packaging, and actions of the sender or recipient, such circumstances include "perils or accidents at sea," fire (if the carrier is not at fault), strikes, and measures to save people or property at sea (Art. 166 of the MSC). Furthermore, a maritime carrier is not liable for a nautical fault committed by the master, pilot, or the ship's crew (Art. 167 of the MSC).

Special rules for exemption from liability are defined for an air carrier, which must prove one of the following circumstances (Art. 118 of the Air Code):

the carrier took all measures to ensure cargo safety;
it was impossible to take measures to prevent cargo loss;
cargo loss was not the result of the carrier's intentional actions;
cargo loss occurred outside the scope of air carriage.

In conclusion, several recommendations can be made regarding the execution of a freight forwarding contract that will help reduce the client's risks during the damage compensation process for cargo loss or damage.

1. The following terms should be clearly reflected in the forwarding contract:

the forwarder is obliged to accept cargo from the client for further carriage;
the forwarder independently selects the carrier and concludes a contract with it;
the forwarder ensures the carriage and safety of the cargo.

If a contract is named an agency or service agreement but contains the aforementioned terms, it is essentially a forwarding contract, and the contractor under such an agreement is liable to the client for cargo loss.

2. Proper execution of forwarding documents should be monitored. A written instruction should be issued to the forwarder, and a forwarding receipt should be demanded from it. This will help the client prove the fact of cargo transfer and reduce the forwarder's chances of contesting the damage compensation claims filed against it for cargo loss.

3. It is recommended to specify in the contract that in the event of cargo loss, shortage, or damage, the forwarder returns the paid fee to the client in addition to compensating for damages. Otherwise, it will be impossible to file such a claim against the forwarder.

4. The forwarder's liability for cargo safety should not be reduced or excluded in the contract compared to what is established by law. Such a term will have no legal force.

5. The forwarder is liable to the client for the actions of the carrier with whom it concluded a contract. If the carrier is at fault for the cargo loss, industry transport rules should be considered when holding the forwarder liable.

6. If a client requires an auxiliary service during the carriage process without the performance of primary forwarding functions (i.e., without ensuring carriage, concluding a contract with a carrier, and accepting the cargo), it is recommended to structure such an agreement as a service contract or an agency agreement, depending on the terms. Such a contract is not a forwarding agreement in essence.

______________________________

References

[1] On the issue of the legal construction of the freight forwarding contract. Sapega V.A. // "Law and Economics," 2022, No. 3.

[2] Concept and legal nature of the contract for organizing cargo carriage by rail (freight forwarding). Grigoryan A.A. // "Economy and Law," 2022, No. 5.

[3] Ruling of the Supreme Court of the Russian Federation dated June 1, 2015, No. 304-ES15-1942 in case No. A45-3880/2014; Ruling of the Supreme Court of the Russian Federation dated February 5, 2018, No. 307-ES18-515 in case No. A56-2933/2016; Ruling of the Supreme Court of the Russian Federation dated April 1, 2022, No. 307-ES22-3125 in case No. A56-100933/2020.

[4] Resolution of the FAS of the Volga-Vyatka District dated June 21, 2011, in case No. A43-13480/2010; Resolution of the FAS of the Moscow District dated November 17, 2010, No. KG-A40/14063-10 in case No. A40-149451/09-65-809.

[5] Resolution of the Arbitration Court of the Volga District dated April 28, 2021, No. F06-3461/2021 in case No. A55-12030/2020.

[6] Resolution of the Arbitration Court of the Urals District dated August 19, 2020, No. F09-1430/20 in case No. A60-19668/2018.

[7] Resolution of the Arbitration Court of the Far East District dated April 17, 2015, No. F03-1105/2015 in case No. A73-10667/2014.

[8] Resolution of the Eighteenth Arbitration Court of Appeals dated May 21, 2019, No. 18AP-4309/2019 in case No. A47-4054/2018.

[9] Resolution of the Eighteenth Arbitration Court of Appeals dated May 21, 2019, No. 18AP-4309/2019 in case No. A47-4054/2018; Resolution of the Arbitration Court of the Urals District dated September 10, 2019, No. F09-5096/19 in case No. A47-4054/2018.

[10] Ruling of the Supreme Court of the Russian Federation dated June 15, 2018, No. 307-ES18-7203 in case No. A56-41031/2015; Ruling of the Supreme Court of the Russian Federation dated August 5, 2020, No. 307-ES20-10541 in case No. A21-8646/2019.

[11] Ruling of the Supreme Court of the Russian Federation dated October 30, 2017, No. 307-ES17-15986 in case No. A56-32899/2016.

[12] Ruling of the Judicial Chamber for Civil Cases of the Supreme Court of the Russian Federation dated December 15, 2020, No. 45-KG20-18-K7, 2-1691/2019.

[13] Clause 8 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated March 24, 2016, No. 7, On the Application by Courts of Certain Provisions of the Civil Code of the Russian Federation on Liability for Breach of Obligations.

[14] Ruling of the Supreme Court of the Russian Federation dated March 24, 2015, No. 306-ES14-7853.

[15] Ruling of the Judicial Chamber for Civil Cases of the Supreme Court of the Russian Federation dated December 15, 2020, No. 45-KG20-18-K7, 2-1691/2019.

[16] Ruling of the Judicial Chamber for Civil Cases of the Supreme Court of the Russian Federation dated April 19, 2022, No. 5-KG22-14-K2.

[17] Resolution of the Eighteenth Arbitration Court of Appeals dated May 21, 2019, No. 18AP-4309/2019 in case No. A47-4054/2018.

[18] Resolution of the Arbitration Court of the West Siberian District dated March 16, 2022, No. F04-817/2022 in case No. A03-1320/2021.

[19] Resolution of the FAS of the Urals District dated May 31, 2011, No. F09-11047/10-S; Resolution of the FAS of the Moscow District dated January 26, 2006, No. KG-A40/14025-05; Ruling of the Supreme Court of the Russian Federation dated November 24, 2020, No. 347-PEK20 in case No. A21-2566/2018; Ruling of the Supreme Court of the Russian Federation dated July 24, 2015, No. 303-ES15-8281 in case No. A73-10667/2014; Ruling of the Supreme Arbitration Court of the Russian Federation dated March 26, 2013, No. VAS-3075/13 in case No. A40-74061/12-125-326.

[20] Resolution of the Arbitration Court of the Urals District dated September 10, 2019, No. F09-5096/19 in case No. A47-4054/2018.

[21] Resolution of the Thirteenth Arbitration Court of Appeals dated December 29, 2020, No. 13AP-15694/2020, 13AP-30323/2020 in case No. A56-118342/2018.

[22] Clause 4 of the Informational Letter of the Supreme Arbitration Court of the Russian Federation dated August 5, 2003, No. S5-7/UZ-886, On the Federal Law On Freight Forwarding Activities.

[23] Resolution of the Arbitration Court of the Far East District dated August 16, 2019, No. F03-3354/2019 in case No. A51-11990/2018.

[24] Resolution of the Arbitration Court of the North-Western District dated December 23, 2021, No. F07-18657/2021 in case No. A56-100933/2020; Ruling of the Supreme Court of the Russian Federation dated April 1, 2022, No. 307-ES22-3125 in case No. A56-100933/2020; Ruling of the Supreme Court of the Russian Federation dated August 9, 2021, No. 307-ES21-12463 in case No. A56-118342/2018.

[25] Subject of the freight forwarding contract: problems of law enforcement. Danilina I.E. // "Transport Law," 2005, No. 2.

[26] Resolution of the FAS of the Moscow District dated November 28, 2013, No. F05-14235/2013 in case No. A41-44239/12.