Freight forwarding
The freight forwarder is at the heart of the (inter)national transport chain, a vital link between the shipper and the carrier. The freight forwarder enters into an forwarding agreement with its client (the shipper), where after it will enter into a contract of carriage with (inter alia) the carrier. If damage to the cargo would occur during the subsequent carriage the freight forwarder could remove itself from the equation regarding its client by issuing a ‘statement of forwarding agent’. The shipper can use that ‘statement of forwarding agent’ to go directly to the carrier to recover its damage/loss.
The other way around however, when the carrier has a claim, for example regarding, freight, demurrage or damage to the modality/ship caused by the cargo, the freight forwarder cannot just distance itself. This is because the freight forwarder has a completely different position towards the carrier than it has towards its own client. In regard to the carrier the freight forwarder will usually book the carriage not in the name of its client, but in its own name. If a freight forwarder books in its own name with a carrier the freight forwarder will be the carrier’s contractual counterparty. The carrier will therefore claim damage from the forwarder. Most forwarders shall have stipulated in their contract with the shipper that the FENEX-conditions are applicable. Under these general conditions the forwarder can redirect the claim from the carrier to the shipper. Amongst others the FENEX-conditions determine that all operations and activities shall be at the principals expense and risk. This however does not mean that the principal will act accordingly.
Reducing risk
There are ways in which the risks which freight forwarders are confronted with can be limited. For example by properly vetting the client. The level of professionalism, the country of origin and the financial capacity of the client are examples of factors that need to be weighed when accepting a freight forwarding agreement. An unreliable or barely solvent client could pose a potential threat to a freight forwarder. This applies all the more when the client is domiciled in an exotic country where it in practice is difficult the enforce a claim.
Furthermore it is of great importance to be careful with handing over the Bill of Lading to the client, doing so will leave the freight forwarder with few ways to enforce its rights. In many cases the client has no access to the cargo without the Bill of Lading. Retaining the Bs/L is therefore an ideal measure to press the client to perform. However, caution should be exercised in case the client would subsequently wait a long time with accepting the goods in the port of discharge, the carrier would confront the freight forwarder with (container) demurrage and storage costs. The freight forwarder has no power to end this situation by himself because it does not have the right to receive the goods. The freight forwarder has, based on the FENEX-conditions, a right of pledge and a right of retention on all the items, documents and monies that it has under it. The freight forwarder can use this right of retention to deny handing over the bill of lading until its client has paid, or has provided adequate security for a (impending) demurrage claim of the carrier.
Further, it is also of great importance for the freight forwarder to carefully decide whether or not to place a booking in its own name, or in name of the carrier. This second option ensures that the client of the freight forwarder will (also) be bound to the contract of carriage, as long as the freight forwarder possesses an adequate power of attorney. In case this would not be the situation the freight forwarder will still be liable towards the carrier due to unauthorized representation (article 3:70 Dutch Civil Code). If the freight forwarder books, with proper authorization, in the name of its client, the carrier can directly claim such things as freight or container demurrage from the shipper.
To summarize, in order to operate in a legally safe(r) manner as a freight forwarder it is important to know the client and to carefully choose which party to bind to the contract of carriage. It is also important to be careful in handing over the carriage documents. This will prevent the forwarder from getting trapped between the carrier and the shipper.
