Marine cargo claims in Thailand

Advocates Moser & Partner specializes in marine cargo claims.

Why are marine cargo claims relevant in Thailand?

Thailand is a global maritime transportation hub. Thailand’s export-oriented economy alone accounts for a high outbound trade volume, and Thailand’s deep seawater port Laem Chabang is a gate to important trade routes not only in the ASEAN region but globally, trans-Pacific and Asia-Europe, not only for commodities but also for merchandise typically shipped in containers.

Among Asian carriers the use of negotiable bills of lading as opposed to seaway bills appears to be predominant. In our practice, we often see carriers and actual carriers sued by cargo interests namely shippers and consignees. However, in most maritime cargo claims cases the transport insurer subrogates the claim and acts as plaintiff in lawsuits regarding damaged or lost cargo.

What are marine cargo claims?

In the most typical scenario, the seller (shipper) hires a carrier to forward the sold goods to the buyer. The carrier issues a bill of lading upon receipt of the goods and ships the goods to the buyer. The bill of lading as a receipt, proof of amount and condition of the goods handed into the carrier’s custody, proof of transport contract (or even constitutive transport contract), and negotiable instrument is transferred to the buyer by endorsement and/or delivery. Thereby, the buyer becomes the consignee entitled not only to the shipped goods but also stepping into the shoes of a contracting party to the original contract between shipper and carrier.

If the cargo is discharged at the destination port short of what has been stated in the bill of lading and a marine cargo claim is filed, then it often becomes clear that even more parties are involved: if the shipper hired only a freight-forwarding or contracting carrier, this carrier might sub-contract an actual shipping carrier (called “actual carrier”) who often but not always owns the vessel. Shipper and consignee are collectively called cargo interests and have standing to file a lawsuit for damaged, lost or delayed cargo against either carrier, or actual carrier, or against both. The cargo interests might also include the cargo insurer of either the shipper or the consignee who “subrogates” the cargo claim. Under English law “subrogation” has a slightly different meaning to Thai law, but the result is nearly the same: The cargo insurer files the claim for the shipper or the consignee.

How are international marine cargo claims handled in Thailand?

Thailand’s Intellectual Property and International Trade Court (IPIT Court) has special jurisdiction over such claims. Even though the IPIT Court administers justice by panels including lay judges who are experienced business people, still the negotiation language is Thai only and foreign lawyers are not admitted. Thus, Thailand apparently did not attempt to establish an international trade forum hub such as Singapore, China or Dubai. Nonetheless, the IPIT Court aims to increase confidence in the country’s legal system not only of international investors but also of foreign importers using Thailand as a transportation hub.

From our experience, Asian cargo interests and carriers as well as the cargo and transportation insurers behind them still rely largely on state courts instead of international arbitration in transport contracts and bills of lading. This means they must trust that the competent state courts at the carrier’s place of domicile give effect to the terms stipulated in transport contracts and bills of lading, are independent from undue interference by the executive branch and economic interests, and ideally apply rules of international conventions such as Hague/Visby Rules in a predictable manner.

How effective and secure are legal remedies for cargo claims filed by foreign cargo interests against domestic carriers?

“On the high seas and in the courts of law, we are in God’s hands” (German proverb)

One pillar of trust of foreign merchants is that the judicative bodies at the carrier’s domicile do not exercise, openly or covertly, some form of home-bias in favor of domestic shippers or carriers. We believe that this is particularly true in international maritime cargo claims where the effectiveness of material law seated in Hague Rules, Hague/Visby Rules, or other conventions, as well as domestic codification of the international conventions depends finally on procedural rules of assumptions of liability, and of prima facie evidence in the local court room.

For example, subtleties in the application of “burden of proof” rules can have even larger effects in maritime cargo claims than in other areas of the law due to the specific risks and vagaries of maritime trading since historical times when (sailing) vessel, crew and cargo were isolated in surrounding waters often for weeks and months on end.

These peculiarities gave birth to an intrinsic interplay of “assumption of liability”, “seaworthiness” and “excepted perils”, for long time set forth in positive law internationally, but still highly disputed up to recent times not only to its details but also principally. While due to the cross-border nature of maritime law, fundamental principles have long been agreed upon in conventions widely accepted and globally ratified (see Hague/Visby Rules), the diverse opinions held by courts of different countries in the interpretation particularly of the burden of proof rules applied to maritime claims is a treasure chest of comparative jurisprudence.

The claims management of international cargo interests and their insurers is not only covered by the underlying sales agreement between seller (shipper) and purchaser (consignee) with its securing instruments such as letters of credit, but also by the transport agreement (charterparty) and the bills of lading. The cargo interests will finally try to recover damages from the carrier and the carrier’s vicarious agents (actual carrier, ship owner) if the loss or damage to cargo resulted from an incident while the cargo was in the carrier’s custody.

Does Thailand’s IPIT Court have a “home-bias”?

Based on our own (anecdotal) experience, Thailand’s IPIT Court must be acquitted of any suspicion of having a “home-bias” in favor of domestic carriers against foreign cargo interests. On the contrary, one could rather raise the question whether the IPIT Court has a “reversed home-bias” favoring foreign importers of Thai goods, especially in the court’s application of rules of “burden of proof” and “order of proof”.

If the plaintiff proves a clean bill of lading and a discrepancy upon discharge, then there is a presumption of liability on the carrier. The carrier then has to exonerate itself by proving an excepted peril (e.g. perils of the sea, force majeure). That much seems to be international consensus and is not different in Thailand. However, when the cause of the short cargo upon discharge is disputed and obscure, a situation seen in many if not most cargo claims cases, then the parties’ lawyers suddenly enter uncharted waters and need to be careful not to be shipwrecked.  For example, in a case where it is unclear whether the loss or damage was caused by the vessel’s unseaworthiness or by perils of the sea, or a concurrent combination of both, suddenly the highly disputed question arises which party has to prove -exactly- what fact and precisely in what order.

The suspicion that Thailand’s IPIT Court might favor foreign cargo interests is further corroborated by Thailand’s Carriage of Goods by Sea Act (COGSA). The COGSA is a hybrid act in combining principles from Hague-Rules, Hague/Visby-Rules and Hamburg Rules but leaning heavily towards the Hamburg Rules. This makes the COGSA a statute favoring cargo interests in multiple ways. One example in place of many: The COGSA does not recognize “navigational errors” as an excepted peril. In any case, foreign cargo interests, insurers of cargo and carrier’s liability and carriers, ship owners and actual carriers are well advised to navigate cases in Thailand’s IPIT Court assisted by experienced lawyers.