The transport of goods is generally divided into international and domestic transport, with international road transport governed by the CMR Convention, also known as the Convention on the Contract for the International Carriage of Goods by Road. In the following article, we will take a closer look at aspects of road freight transport, specifically how you can claim compensation if your goods were damaged, stolen, delivered late, or similar during transport.
Transport law is a branch of law that governs the legal relationships arising between the carrier—that is, the person responsible for the physical movement of the goods (consignment) from the place of dispatch to the place of destination, and the consignor, who undertakes to pay the carrier an agreed fee—the freight charge—for the performance of the transport; in practice, other entities involved in the transport often enter into this relationship as well, particularly freight forwarders.
The field of transport law is regulated at both the national and international levels. At the national level, this is primarily the Civil Code and the Commercial Code, which regulate, in particular, contractual relationships based on a contract of carriage (Section 610 et seq.) and on a forwarding contract (Section 601 et seq.), whereas at the international level, the governing legal instrument for road transport is the Convention on the Contract for the International Carriage of Goods by Road (CMR), which was adopted in Geneva on May 19, 1956 (hereinafter the “CMR Convention”).
In the course of transport operations, it often happens in practice that the legal relationship itself is not governed by an individually concluded contract of carriage, but is instead replaced by the general terms and conditions of the carrier or the shipper. These general terms and conditions must also be drafted in accordance with applicable laws and must reflect the provisions of the CMR Convention, as this Convention applies to such a legal relationship whenever transport is carried out between two Member States. According to Article 1 of the CMR Convention, which states: This Convention applies to every contract for the carriage of goods by road for reward, provided that the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different States, at least one of which is a Contracting State to this Convention. This provision applies regardless of the permanent residence and nationality of the parties.
During the actual performance of the transport, situations may also arise in which one of the contracting parties suffers damage. This situation may arise, for example, due to damage to the goods being transported, their theft, late delivery, and the like. It is therefore essential that transport law also regulate the possibilities for compensation for damage.
Liability for damage applies in both cases, i.e., in the shipper–carrier relationship as well as in the carrier–shipper relationship. Under the CMR Convention, the shipper is liable to the carrier for damage incurred, for example, due to the inaccurate or incomplete provision of information required to be included in the consignment note. The shipper is also liable to the carrier for damage caused to persons, to equipment, or to other shipments due to defects in the shipment’s packaging, as well as for all expenses incurred for this reason.
The carrier’s liability for damage can be described as more extensive; under the CMR Convention, the carrier is primarily liable for the total or partial loss of the shipment or for its damage occurring from the moment the shipment is accepted for transport until the moment of its delivery, as well as for exceeding the delivery time. A ground for exemption, whereby the Carrier would be relieved of liability for damage, is if it proves that the loss of the shipment, its damage, or the exceeding of the delivery time was caused by the Consignee, an order of the Consignee that was not caused by the Carrier’s negligence, a defect in the shipment itself, or circumstances that the carrier cannot avert and whose consequences are beyond the carrier’s control.
Since we are dealing with international law, it is essential to note that the CMR Convention itself also stipulates the method, calculation, and limitations regarding compensation for damage or loss of the shipment. Generally, compensation is calculated based on the value of the shipment at the place and time of its acceptance for transport. The value of the consignment is subsequently determined based on the stock exchange price; if there is no stock exchange price, then based on the current market price; and if neither a stock exchange price nor a current market price is available, then based on the general value of goods of the same nature and quality. The CMR Convention, in its original Article 23(3), provided that: Compensation for damages shall not exceed 25 francs per kilogram of missing gross weight. A franc is defined as a gold franc weighing 10/31 grams and of a fineness of 0.900. This provision was relatively crucial, as it limited the amount of compensation payable by the carrier in the event of loss of goods. However, due to the changing value of the franc and the overall monetary policies of the Contracting States, it was necessary to amend the cited provision, and the limitation on compensation is now determined differently. Based on the amendment to the CMR Convention implemented through the Protocol to the CMR Convention, it now applies that compensation for damages may not exceed 8.33 units per kilogram of the missing total weight, where “unit” in this case refers to Special Drawing Rights (Special Drawing Right, - SDR), as defined by the International Monetary Fund. A similar provision applies in the field of transport law regarding air, rail, and maritime transport.
However, this limitation on liability is not absolute, and in practice, situations arise where the carrier is liable even beyond the aforementioned amount. This occurs when the total value of the shipment is stated in the consignment note, which, under the CMR Convention, serves as evidence of the conclusion of the contract of carriage. If the value of the shipment stated in the consignment note exceeds the amount the carrier would be obligated to pay under the rules described above, the carrier is obligated to pay the total value of the shipment, i.e., the value stated in the consignment note. In this context, it is also necessary to note the provision of the CMR Convention under which the carrier may not claim a limitation of liability for damages pursuant to Article 23(3) in cases where the damage was caused intentionally or by such fault that, under the law of the court hearing the case, is considered equivalent to intent (a fault often referred to as gross negligence).
Another situation in which this limitation is waived is when the bill of lading or the contract of carriage specifies a special interest in delivery, expressed as a specific amount. In such a case, the carrier may be required to pay compensation for additional proven damages up to the amount specified.
However, if neither the consignment note nor the contract of carriage specifies a special interest in delivery or the value of the shipment, the amount of compensation shall be limited in accordance with Article 23 of the CMR Convention; that is, compensation shall not exceed 8.33 units per kilogram of missing gross weight. Furthermore, import duties, customs duties, and other expenses incurred in connection with the carriage of the consignment shall be reimbursed in full in the event of total loss and on a pro rata basis in the event of partial loss.
At this point, we would also like to draw attention to the provision of Article 41 of the CMR Convention, which states: Any agreement that directly or indirectly deviates from the provisions of this Convention is, with the exception of the provisions of Article 40, void and of no legal effect. The invalidity of such agreements does not result in the invalidity of the other provisions of the contract.
We consider it important to highlight the existence of this provision, as the CMR Convention contains comprehensive provisions on liability for damage and compensation for damage; nevertheless, in practice, it is almost the norm that when concluding transport contracts, contractual penalties are also agreed upon in the event of a delay in the delivery of the shipment. However, the validity of such a contractual penalty raises certain doubts, as we have already noted several times in this article, since the carrier’s liability is limited by the CMR Convention, which establishes specific procedures and methods for addressing individual liabilities, including liability for delay. According to Article 23(5) of the CMR Convention, quote: If the delivery period is exceeded and the claimant proves that damage has resulted from this, the carrier is liable only up to the amount of the freight charge.
In our view, this provision is crucial, as it clearly limits the amount of damage the carrier is obligated to compensate. At the same time, in connection with Article 41 of the CMR Convention, it can be argued that holding the carrier liable in a manner whereby it would compensate for the damage up to the amount of the freight charges and at the same time be obligated to pay a contractual penalty is contrary to the provisions of the CMR Convention, and therefore it must be considered invalid in accordance with Article 41 of the CMR Convention, as evidenced by numerous foreign court rulings.
Foreign legal practice also increasingly points out that contractual penalties under which the carrier would be obligated, for example, to pay EUR 50 for each commenced hour of delay in unloading the goods are unenforceable. The carrier’s liability can only be quantified with regard to the actual damage incurred in a specific case due to the delay. Foreign legal practice therefore also tends to hold that such flat-rate contractual penalties, which the carrier would be obligated to pay even in cases where no damage occurred, are invalid.
However, the situation must be viewed differently when the contracting parties agree on a contractual penalty for a breach of an obligation not specifically regulated in the CMR Convention. In such a case, we consider this to be a validly agreed contractual penalty that is also enforceable. An example is a contractual penalty for failure to comply with the loading time. In such a case, this is a situation not explicitly addressed by the CMR Convention, and therefore it is up to the contractual freedom of the parties to decide whether or not to agree on a contractual penalty for such a breach of obligation.
In conclusion, it can be stated that contractual penalties that do not conflict with Article 41 of the CMR Convention—that is, those that do not directly or indirectly conflict with or circumvent any of the other provisions of the CMR Convention— may be agreed upon, and such contractual penalties will be valid and, at the same time, enforceable (in the event of a breach of the obligation to which they apply). However, when assessing contractual penalties on a case-by-case basis, it is necessary to consider whether the contractual penalty imposes liability beyond the scope of the CMR Convention, as in such a case it would be invalid even in light of foreign case law. In this context, one must also not forget the court’s right of moderation (in the case of the application of the Slovak legal system), which, in the event of a dispute over the payment of a contractual penalty, may proportionally reduce such penalty if the agreed contractual penalty was disproportionate in relation to the obligation it was intended to secure.
