Defending cargo claims in Spain

EVERY year, a substantial volume of goods enters Europe through Spanish ports, giving rise to a significant number of cargo claims. Spain has ratified the Hague Rules and Visby protocol. When Hague-Visby does not apply, the provisions of the Commercial Code of 1885 are relevant.

But the peculiar manner in which Spain implemented both the Hague Rules and the Visby protocol has given rise to extensive academic debate about the implementation, derogation and modification of relevant domestic legislation. While this legislation has not undergone any recent changes, the provisions of other relevant legislation, and various decisions of the European Court of Justice and the Supreme Court, are highly relevant to cargo claims, and in particular to defendants to such claims.

Who is the carrier?

Although the jurisprudence on this issue is limited, academics agree that the signature on the bill of lading will be fundamental to determining the identity of the carrier. The signature of the master, or of the agent or charterers "for the master", will bind owners. It is also thought that the signature of the master "for the charterers" will bind owners if charterers are not clearly identified in the bill. A bill will be a charterers' bill if signed by them or another person in their name and as long as they are clearly identified.

The validity of a demise clause has divided academics. The majority view is that such a clause can operate as an aid to determining who is the carrier, but that it will be struck down if a defendant attempts to benefit from any ambiguity it introduces in order to be relieved from liability. Other aids that may be used to identify the carrier are the heading on the bill and the box marked "carrier". These general guidelines must be applied on a case-by-case basis.

The potential liability of the agent

A peculiarity of Spanish maritime law has been the Supreme Court's willingness to allow cargo claimants to claim against the vessel's port agent. This would protect the claimant against the possible insolvency of the carrier, and was also a means by which a claimant might bypass the effect of a jurisdiction clause. The Supreme Court has, at various times, based the liability of the agent upon the following grounds:

  1. Subrogation.
  2. Agency for an undisclosed.
  3. Bailmen .
  4. Article 586 of the Commercial Code, used to find the agent liable in circumstances in which it was unclear whether the damage to the goods was produced during the transport by sea, or during discharge, or while in the custody of the agent.

The Audiencia Provincial of Las Palmas, in a decision of May 17, 1999, stated that, as a general principle, an agent would not be personally responsible to third parties in respect of the fulfilment of obligations on behalf of its principle. The first two grounds listed above had no application whatsoever to the facts of the case, while the latter two would not be applicable in circumstances in which the agent did not personally intervene in the discharge and custody of the goods.

In a decision of December 29,1999, the Audiencia Provincial of Barcelona found that the doctrine of the Supreme Court that sought to identify the agent and the owners had been further put into doubt by a 1997 amendment to the Law of State Ports and the Merchant Marine, which provided that, while the agent is liable to the port for charges incurred by the vessel during its stay in port, this responsibility does not extend to the fulfilment of the obligations contracted by the carriers with the shippers or receivers of the goods carried on board.

If this issue does revisit the Supreme Court, it is to be hoped that they will uphold these well-grounded Second Instance decisions.

Challenging Spanish jurisdiction - the law

Traditionally, Spanish courts have been very reluctant to stay proceedings on the grounds of foreign jurisdiction clauses, regarding such clauses as an infringement of national sovereignty. But the decisions of the European Court of Justice (ECJ) on the application of Article 17 of the Brussels Convention on Jurisdiction and Enforcement in Civil and Commercial Matters to bills of lading are now applied in the lower Spanish courts, and have improved the position of parties seeking to rely on foreign jurisdiction clauses.

A jurisdiction clause in a bill of lading would comply with Article 17 if:

  • The parties agreed in writing with the terms and conditions of the bill of lading containing the clause, or
  • The jurisdiction clause was the subject of a previous verbal agreement between the parties referring explicitly to the clause and of which the bill of lading signed by the carrier is to be considered as the confirmation in writing, or
  • The bill of lading is part of the steady business relations between the parties and, as far as it appears, that such relations are governed by general terms and conditions containing such clause (see Trasporti Castelletti Spedizioni Internazionali S. per A. v. Hugo Trumpy S. p. A. (TCJE 1999, 63).

As between the carrier and a third-party holder of the bill of lading, the requirements of Article 17 will be met if:

  • The jurisdiction clause is recognised as being valid in relations between the carrier and the original holder, and
  • The third-party holder has, according to applicable national laws, entered into the original holder's rights and obligations upon receipt of the bill of lading.

An example of the application of these principles by the Spanish courts is the decision of the Audiencia Provincial of Cantabria of June 9, 2000. A third-party holder had sought to bring proceedings in Spain despite the presence of a clause in the bill of lading providing for French jurisdiction. The court upheld the jurisdiction clause, for the following reasons:

  1. The clause was in writing and had been accepted by the original bill of lading holder, who had signed the bills.
  2. Although typed in small print, the clause was clear and perfectly understandable.
  3. The fact that the clause had been drafted in English did not provide a ground for the claimant to challenge it, as the use of English was customary in international trade.
  4. The clause was not abusive, but common for this sort of contract, such clauses being anticipated by international legislation.
  5. As the clause was binding upon the original holder of the bill, it became binding upon the third-party holder as soon as the bill was endorsed to him, in accordance with Article 708 of the Commercial Code.

For Article 17 to be applicable, it is necessary that one of the contracting parties is domiciled in a Convention state and that the clause is in favour of a court in a Convention state. When these requirements are not met and Article 17 does not apply, the doctrine of the Spanish Supreme Court may be applied in preference to the decisions of the ECJ. These decisions are inconsistent:

  • A body of jurisprudence has held that for a jurisdiction clause to be binding, there must be a clear and express submission to the foreign jurisdiction that this requires the signature of the interested parties, and that the signature of the master on behalf of one of the interested parties is insufficient.
  • However, other decisions have referred to Article 22 of the Law of Judicial Powers of 1985, which provides that Spanish courts will have jurisdiction when the parties expressly or tacitly submit to the Spanish courts, and have held that, on the principle of reciprocity, the Spanish courts should recognise agreements that seek to confer exclusive jurisdiction on the courts of other states.

It is to be hoped that Spanish courts will follow the latter line in all cases in which there is a foreign jurisdiction clause, and reject the jurisdictional imperialism which has characterised their approach to this issue in the past.

But what if the bill of lading contains an arbitration clause? Arbitration clauses are not subject to the same strict criteria that the Supreme Court has applied to foreign jurisdiction clauses. The applicable legislation in determining the validity of the submission to arbitration will be the New York and Geneva conventions on international arbitration, and Law 36/1988 on arbitration. Such clauses in bills of lading are generally upheld, but the position is more complicated if the bill purports to incorporate such a clause contained in a charter party.

The Audiencia Provincial of Valencia, in a decision given in May 2001, found that a bill of lading holder was not bound by a jurisdiction clause contained in a charter party, on the ground that the incorporating clause did not clearly express the wish of the parties to submit their differences to arbitration. This was despite the fact that the bill of lading was a Russwoodbill which stated "All terms and conditions … contained in the charter party are deemed incorporated herein, including .. Law and Arbitration (Clause 26)".

It is to be expected, therefore, that courts will be reluctant to find third party bill of lading holders bound by jurisdiction clauses contained in charter parties, which the bill of lading purports to incorporate.

Challenging Spanish jurisdiction - procedure

Law 1/2000 of Civil Procedure (LEC), in force since January 2001, has significantly altered the procedures for challenging the court's jurisdiction. Article 39 provides that such a challenge may be made on the ground that another court is exclusively competent, or that the parties agreed to submit their disputes to arbitration. Article 64 of the LEC provides that, in all cases, a submission for the court to decline jurisdiction must be made within the first ten days of the time given to the defendant to file a defence. This submission will have the effect of suspending the main action until the question of jurisdiction is resolved.

If the court finds that it lacks jurisdiction on the basis that the courts of another state, or an arbitration tribunal, have exclusive jurisdiction, it will issue an order to this effect and stay the proceedings. Article 66 of the LEC provides that the claimant will have a right of appeal against this order, in which case the proceedings will remain stayed while the appeal is being resolved. If, on the other hand, the court finds that it has jurisdiction, a party may only apply to the judge who made the order for it to be "re-put". There will be no right of appeal to a higher court on the issue of jurisdiction until after judgment in the main claim has been delivered.

These procedures represent a substantial improvement on those contained in the previous Law of Civil Procedure. But the fact that there is no appeal to the Second Instance Court against an order in which the judge finds that he has jurisdiction except as part of an appeal against the judgement on the merits is open to criticism.

Generally, recent developments in Spanish law have been to the benefit of carriers faced with cargo claims. They are increasingly able to successfully challenge Spanish jurisdiction and less likely to be locked into Spanish jurisdiction as a result of the claim being simultaneously brought against the port agent. On the other hand, however, it is increasingly difficult to successfully argue a time-bar defence to claims to which the Hague-Visby regime does not apply.