Decisions on the Carrier's Liability in the Freight Contracts Rendered in 2020 and 2021

31.10.2022 Tolga Sevinir

Introduction

The Turkish Commercial Code No. 6102 ("TCC") regulates maritime trade contracts under the fourth part of the fifth book of the Code. Among the types of contracts regulated in this section, the most frequently used contract in international maritime transport practice is the freight contract regulated under Articles 1138 et seq. in the third section.

Decisions on the Carrier's Liability in the Freight Contracts Rendered in 2020 and 2021
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Contract of Affreightment, Parties and Liabilities

Pursuant to Article 1138 of the TCC, a contract of affreightment is a maritime commercial contract whereby the carrier undertakes, in exchange for freight: (i) in the case of a voyage charter contract, to carry the goods by allocating the whole or a part of the ship or a certain place of the ship to the charterer, or (ii) in the case of a contract in shipping liner trade, to carry the distinguished goods by sea.

The carrier, as one of the parties to the freight contract, is an important subject in the liability regime of freight contracts. Articles 1178 to 1207 of the Code regulate this liability regime. In this article, important decisions of the Court of Cassation and Regional Courts of Appeal rendered in 2020 and 2021 regarding the liability of the carrier in the freight contract will be discussed.

The liability imposed on the carrier under the freight contract is based on the duty of care and diligence set forth in Art. 1178 of TCC. The first two paragraphs of the Article introduce the basic principle and hold the carrier liable for damages arising from loss of, or damage to, or late delivery of the cargo. The exceptions to this liability are explained in the paragraphs and articles following Art. 1178.

The decision of the 11th Civil Chamber of the Court of Cassation dated 25.02.2020 and numbered 2018/4517E., 2020/2010K, discusses this basic principle. The case involved damage to goods loaded on deck. The defendant claimed that the bill of lading excluded liability for damage caused during the carriage of the goods on deck, and claimed the existence of a special situation that constituted an exception to the basic liability regime under Art. 1138 of TCC. However, the defendant’s claim was rejected and the carriers were held liable for the damage to the goods, based on Article 1112 of the TCC, which states that the carrier's liability under Article 1178 of the TCC cannot be limited directly or indirectly in advance.

In another decision dated 16.11.2020 and numbered 2020/691E. 2020/5087K., the Court discussed the most important condition for the carrier's liability; namely, the notification obligation from Article 1185 of the TCC, and the effect of the mode of delivery of the goods on the carrier's liability. In the decision, although the defendant carrier claimed that the notification stated in Article 1185 of the TCC was not made on time, the Court of Cassation stated that it was confirmed that the goods were damaged at the time of delivery, and in this case, the claimant did not need to prove that the goods were damaged during carriage.

However, the Court also stated that the goods were carried in a container, but the container was delivered to the defendant carrier with the lids open, and it emphasized that the carrier would be liable for the damage to the goods in the container delivered without sealing the lid. In a container carriage, it is important whether the container lids are sealed and closed or not at the delivery to the carrier. In the decision, the Court ruled that the carrier cannot be held liable since the container was delivered to the carrier sealed and closed beforehand.

Not fulfilling the obligation to notify the damage, introduced under Article 1185 of the TCC, completely reverses the liability for loss and damage imposed on the carrier, and leads to the presumption that the goods were duly delivered and undamaged during transportation. Although it is undoubtedly possible to prove the contrary of this presumption, it is necessary to prove precisely at which stage of the carriage (pre-loading land transportation, loading - stowage stage, maritime transportation or after delivery) the goods were damaged. In the decision of the 43rd Civil Chamber of the Istanbul Regional Courts of Justice dated 21.06.2021 and numbered 2020/330E. 2021/773K., the Court did not accept the minutes kept between the truck driver and the warehouse manager, which were presented by the plaintiff as a notify transaction in the case at hand, as notice in accordance with Article 1185 of the TCC, and stated that the plaintiff had to prove at which stage of the transportation the damage to the goods occurred. In this case, even though it was clear that the container was perforated and therefore the goods were damaged by getting wet, the plaintiff was obliged to prove that the stage in which the goods got wet was maritime transportation.

In addition to the liability of the carrier for damages that may occur to the goods during maritime transportation, the law also grants a number of rights to the carrier. The most important of these rights is the carrier's right of lien for the receivables arising from the freight contract as regulated under Art. 1201 TCC. Accordingly, the carrier may, at his option, use the right of lien on the goods under articles 950 to 953 of the TCC for all receivables arising from the freight contract, and, even after delivery, he may use his rights arising from the lien, provided that an application is made to the court within thirty days and the goods are still in the possession of the consignee. Following this basic principle regarding the lien, Article 1202 of the TCC stipulates that in the event of a dispute, the carrier must deliver the goods by depositing the disputed amount at the place to be designated by the court. However, in practice, there is uncertainty regarding the fate of the right of lien in cases that cause a deficiency in the conditions of the right of lien or that result in the receivable being secured in another way. In this regard, the Istanbul Regional Courts of Justice issued a noteworthy decision in 2020. In the decision numbered 2019/1384 E. 2020/120 K. and dated 30.01.2020, the court stated that one of the conditions for the forfeiture of the goods for which the right of lien is used is the failure to show sufficient security. The court discussed whether the right of lien would end in the event that sufficient security was later deposited for the receivable, as well as the nature of the creditor's right over the security. The Court held that the security replaces the right of lien and terminates the right of lien, that the creditor has a statutory pledge right over the security, and therefore the court's order to provide security does not cover an interim injunction.

Conclusion

In conclusion, it would be useful to mention the limitation period for compensation claims under the carrier's liability. Article 1188 of the TCC stipulates that any claim against the carrier must be applied to a judicial remedy within one year, and the person held liable is allowed to file a recourse action after the limitation period, but a period of 90 days has been introduced. The expression "to apply for a judicial remedy" used in the text of the article, while defining the limitation period, causes confusion in practice. The controversy arises as to whether only the lawsuit is meant by the term "judicial remedy" or whether the initiation of enforcement proceedings is also considered as a judicial remedy. In its decision dated 05.02.2020 and numbered 2019/2645E. 2020/132K., the 13th Civil Chamber of the Istanbul Regional Courts of Justice, while interpreting the expression "application for judicial remedy" in Article 1188/1 of the TCC, accepted the initiation of enforcement proceedings as an application for judicial remedy, and calculated the prescription period based on this date. The Court stated that the enforcement proceeding interrupts the statute of limitations and held that the statute of limitations begins to run again upon the defendant debtor's objection to the enforcement proceeding pursuant to Article 157/2 of the Turkish Code of Obligations.

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