Force majeure with regard to service providers’ liability (Ukrainian practice)
4 November, 2014
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General view on service providers’ liability in Ukraine
Ukrainian Law does not contain specific provisions as for the service providers’ liability. Such is regulated by general provisions stipulated by the law for the liability of the forwarders and/or the carriers and/or the warehouse operators as the case may be.
The issues of the liability of forwarders/carriers/warehouse operators are regulated by the Civil Code of Ukraine, the Commercial Code of Ukraine, the Law of Ukraine “On Transport-Forwarding activity” dated 1 July 2004 No. 1955-IV and other legal acts.
According to the Law of Ukraine ‘On Transport-Forwarding Activities’ (Article 14) the forwarder shall be liable to the client for the number of load places, weight, if control weighting was held at presence of a carrier’s representative, due packing according to transport documents signed by the carrier’s representative, unless otherwise is stipulated by the forwarding agreement.
The forwarder shall be liable for activities and omissions of the third persons engaged to performance of the forwarding agreement in the same way as for its own actions.
Pursuant to Article 924 of the Civil Code of Ukraine the carrier shall be liable for the safety of cargo, luggage, post from the moment of its acceptance for transportation and up to the moment of its delivery to the receiver or to the person legally authorized to receive the cargo or the luggage, unless he proves that the loss, shortage or damage of cargo, luggage or post took place due to the circumstances the carrier could not have prevented, and their elimination was beyond his control.
According to Part 1 of Article 314 of the Commercial Code of Ukraine the carrier shall be held liable for the loss, shortage, spoilage or damage to cargo, luggage and post accepted for transportation, unless he proves that those happened not through his fault.
As per Article 950 of the Civil Code of Ukraine, a l warehouse operator shall be liable for loss or damage to the goods accepted for storage under the general rules of law and unless proves that such loss or damage happened due to an act of force majeure, or due to such nature of the goods of which the Warehouse operator did not or could not know when accepting the goods for storage.
Ukrainian legislation therefore provides only general rules for the forwarders/carriers/warehouse operators liability exclusions. All specific requirements in respect of their liability are to be determined by the carriage or forwarding or logistics service agreement.
Nuances in agreements with non-residents
On the one hand, the agreements, which are usually concluded between the non-residents and Ukrainian service providers, do not contain any kind of exclusions/release of/from liability, as well as due to an act of force majeure, so the non-residents feel safety signing them. On the other hand, the civil liability for damages is not absolute according to the Law of Ukraine.
Effective laws provide the grounds whereby the party can be released from the duty to compensate the damages. One of the grounds for such exemption is an act of force majeure.
According to the general rule that can be found in article 617 of Civil Code of Ukraine (Grounds for releasing from liability for the breach of obligation), a person which breached the obligation shall be released from responsibility for such breach if it proves that the breach was caused by an act of force majeure.
In the meantime, the Civil Code of Ukraine does not contain the definition of an act of force majeure. The Commercial Code of Ukraine somehow clarifies this point. Pursuant to article 218 of the Commercial Code of Ukraine (Grounds for economic-legal liability) unless otherwise is provided by the law or contract, an entity that breached the obligation shall be liable for such breach unless it proves that the breach was caused by an act of force majeure, that is extraordinary and unavoidable circumstance under the existing conditions.
Such vague wording leads to disputes between the parties in Ukrainian courts and each situation is reviewed on a case-by-case basis.
Wider interpretation can be found in the court decision of Supreme Commercial Court of Ukraine dated June 11, 2012, case No.5015/7352/11:
“The three-judge panel considers necessary to note that the act of force majeure can be recognized as extraordinary and unavoidable circumstances under the existing conditions. The act of force majeure is characterized by two main features. First of all it is an extraneous factor as to the relationships between the parties, which could not be prevented by them. Such circumstances usually are natural (earthquakes, floods, fires) and social (wars, strikes, acts of government, etc.). The second one is unavoidability. It means that circumstances are not normal, they go beyond the ordinary. So, the fire may be deemed as an act of force majeure only in case it was the external factors that make it impossible to execute the debtor’s duties”.
In general, in practice the person can be released from liability even if the definition of such unforeseeable circumstances were not agreed by the parties.
How the party should prove the Force majeure in Ukraine
Force majeure circumstances shall be confirmed by the proper evidence in the order the parties may set by themselves.
The Law on Procedure of Settlements in Foreign Currency states that confirmation of force majeure circumstances is a certificate of the Chamber of Commerce and Industry of Ukraine or any other authorized organization of the country where the contract party or the third party is located according to the contract terms.
The Order of the Cabinet of Ministers on Approval of the List of Circumstances which Evidence Threat of Tax Debt and Evidence of such Circumstances No.1235 dd. 27 December 2010 says that the evidence of force majeure circumstances in the context of tax debt collection means the Act of the Chamber of Commerce and Industry of Ukraine or the President of Ukraine on declaring separate regions as zone of extreme ecological situation or war zone approved by the Verkhovna Rada (the Parliament) of Ukraine.
The Chamber of Commerce and Industry of Ukraine is the authority officially entitled to confirm force majeure circumstances. In compliance with the Article 14 of the Law on Chambers of Commerce and Industry of Ukraine it confirms force majeure circumstances according to foreign trade contracts, international agreements of Ukraine and contracts of business entities for construction works (customers, builders).
At first sight it seems that authority of the Chamber of Commerce and Industry of Ukraine in this issue is limited to foreign trade activity and construction works. But it’s not like that! As per the principle of contractual freedom parties (with or without foreign element) may agree that force majeure circumstances are confirmed by the Act of the Chamber of Commerce and Industry of Ukraine. There is no difficulty to obtain same. But there are some peculiarities. Courts recognize only certificates (reports) of the Chamber of Commerce and Industry of Ukraine (central office) as the evidence of force majeure circumstances. The judges consider that the reports of local chambers of commerce and industry do not have evidential effect (e.g. Ruling of the Higher Commercial Court of Ukraine No.2/54 dd. 27 September 2011, Ruling of the Supreme Court of Ukraine No.3-6031k09 dd. 19 January 2010).
So to carry out an expertise for force majeure circumstances and to obtain a corresponding certificate the interested party should provide written application to the Chamber of Commerce and Industry of Ukraine, copy of the contract and evidences of force majeure circumstances (certificates of hydrometeorological center on weather conditions, acts on accidents etc.).
The example can be found in the decision of Commercial Court of Odessa region dated May 05, 2014, matter № 916/341/14, where the carrier (respondent) referred to an act of force majeure and asked the court to discharge him from the obligation to compensate the damages. In this matter the fire damaged the goods in trucks left on the territory of the warehouse. The goods were insured by the forwarder and payment of an insured amount was made. The Insurer filed a regress claim against the carrier, and the court decided that “the references of the defendant to an act of force majeure are groundless, because of the breach of clause 5.3. of the contract of carriage – the certificate of the Chamber of Commerce and Industry of Ukraine had not been obtained”.
What should be additionally noted
It is common knowledge that unlike continental legal systems, there is no doctrine or concept of the force-majeure in English law. A force-majeure clause should be included in the contract and so that will have the force determined by the parties and English case law.
A force-majeure clause is interpreted as an agreement between the parties which releases one or both parties from liability under the contract in cases when the performance of the contract is impossible due to force-majeure circumstances listed in the clause. Such failure to execute is not considered as the breach of the contract and will not cause reimbursement of damages caused thereby.
Such differences between the approaches in English and Ukrainian law may cause some of problems with compensation for damages from the Ukrainian service providers when the contract is concluded under the provisions of Ukrainian law.
Published in Forwarderlaw.com
