The COVID-19 pandemic outbreak, state of alarm declarations and consequential lockdowns have affected in several ways to the shipping international transport. One of its consequences has been a substantial increase of abandonment of the cargoes in Spanish Ports.
When this happens, and the consignee does not appear to collect the goods carried, one or several situations may occur: (i) On the one hand, the goods are abandoned without further ado; (ii) and on the other hand, besides the abandonment of the cargo, the freight and other related expenses are due to the carrier.
Articles 512 to 515 Spanish Maritime Navigation Act (“MNA”) contain the provisions on the deposit and sale of cargo and luggage in shipping carriage. Said articles establish that rules on deposit and sale of goods and luggage shall apply when the applicable law to the contract of carriage entitles the carrier to request said deposit and sale in case of any of the following three scenarios:
- When the consignee does not pay the freight, the passage or expenses related with the carriage.
- When the consignee does not appear to withdraw the goods carried.
- When the carriage cannot be concluded due to a fortuitous circumstance arising during the voyage, that makes its continuation impossible, illegal or prohibited.
Thus, when the consignee does not appear to collect the cargo carried, one or several scenarios may occur.
- Sea freight, passage or other carriage related expenses outstanding.
In the event the consignee not paying the freight, passage or other carriage related expenses, and, when the law applicable to the contract of carriage is the Spanish law, the carrier shall only resort to the deposit and sale proceedings of goods and luggages when the consignee and/or receiver of the cargo is bound to pay the freight, either because it has been agreed and stated in the bill of lading, or because the consignee is at the same the charterer.
In this regard, article 235 MNA provides that the charterer shall be bound to pay the freight under the conditions agreed. Notwithstanding, it may be agreed that the freight be payable by the consignee and/or receivers of the cargo, this being recorded on the bill of lading or consignment note. In this case, the consignee shall be bound to pay the freight if he accepts or withdraws the goods at destination. Should the consignee refuse or not withdraw the cargo, it shall pay the freight the party that contracted the carriage.
In this way, article 235 MNA provides that the charterer is obliged to pay the freight in the agreed conditions, however it may be agreed that the freight is payable at destination by the consignee and/or receivers of the cargo, being recorded in the bill of lading.
In the light of the above, it is clear that “freight payment on delivery by consignee” agreement does not mean that said consignee and/or receiver is liable to pay the freight in any case, but only when he accepts and pretends to withdraw the cargo, therefore, a default payment by the consignee and/or receiver it is not require to proceed with the deposit and sale of the cargo, but just that he has not paid said freight, with the limitation that the carrier may not exercise that right against a consignee and/or receiver other than the charterer, except if the bill of lading or consignment mentions that the freight is payable at destination.
Therefore, in the event of abandonment of cargo with the consequent freight outstanding, it shall be the charterer the liable party to pay said freight lastly, and no payment claim may be exercised against a consignee and/or receiver other than the charterer that does not withdraw the cargo. And the right of retention, deposit and sale of the goods for freight outstanding may only be exercised in case said freight payment corresponds to the consignee and/or receiver (either because it is expressly agreed in the bill of lading, either because the consignee is also the charterer).
The above is without prejudice the right of the carrier to resort to the “mere” deposit of goods abandoned (art. 228 MNA), which is the second scneario adressed in art. 512 MNA, but before this, just to mention that the above shall also apply for delays and other expenses -arising from their carriage- outstanding.
- Consignee not appearing to withdraw the goods carried.
The second scenario adressed in art. 512 MNA consists on the “mere” deposit of the goods abandoned, this is, when the consignee does not appear to withdraw the cargo but there is no outsanding payment on freight and other elated expenses. In such case, when the law applicabe to the contract of carriage is the Spanish law, art. 228 MNA shall be observed.
Said art. 228 reads that the carrier shall deliver the goods carried to the consignee and/or receiver authorised to receive the goods, without delay and pursuant to the terms agreed. However, if the consignee and/or receiver does not appears or refuses delivery, the carrier may store the goods until their delivery, at the expense of the consignee, or resort to their deposit.
In the light of the above, the carrier may be entitled to either resort to the deposit of the cargo, either to store said goods. In this regard, if the carrier seeks to avoid any aventual liability arising from the cargo´s custody, he should choose the desposit of the cargo rather than its storage.
Back to the deposit, as already mentioned, art. 228 MNA entitles the carrier to store the cargo or resort to its deposit if the consignee and/or receiver (i) does not appear or (ii) refuses delivery. This latter (refusal delivery) is not expressly mentioned in article 512 MNA, which only refers to the event of the consignee and/or receiver not appearing to withdraw the cargo. Different authors have rightly pointed out that it would be hard to believe that this second case should not fall within the scope of art. 512 et seq, therefore provision contained in art. 512 et seq. shall also apply in the event the consignee and/or receiver refuses delivery.
- Early termination of the contract of carriage.
Finally, art. 512 also reads that rules on deposit and sale of goods and luggage shall apply when the applicable law to the contract carriage entitles the carrier to request said deposit and sale when the carriage cannot be concluded due to a fortuitous circumstance arising during the voyage, that makes its continuation impossible, illegal or prohibited.
In this regard, and once again, when the law applicabe to the contract of carriage is the Spanish law, art. 274 MNA (“Impediments arising during the voyage”) shall be observed.
Art. 274 MNA reads that if circumstances were to arise during the voyage that make it impossible, unlawful or prohibit its continuation (or an armed conflict exists making the ship or cargo subject to risks not considered on entering into the contract), the carrier may call into the most convenient port for the common interest and unload the cargo at said port, demanding the charterer to take care of the cargo at that place.
Therefore, article 512 MNA (in accordance with said art. 274 MNA) confirms the right of the carrier to resort to the deposit of the cargo, not only at the agreed port of discharge, but at any other port that the carrier should have been forced to discharge the cargo as a result of the early termination of the contract of carriage due to a fortuitous circumstance arising during the voyage, that makes its continuation impossible, illegal or prohibited.
Art. 274 MNA also states that the carrier shall be entitled to the freight in proportion to the distance covered. So, it is to be understood that in the event the consignee/and or receiver does not pay the partial freight, the carrier may also resort to deposit proceedings and sale of cargo, requesting a notary public to sell the goods, with the same limitations with regard to a non-charterer consignee above mentioned.
Foreign law as the applicable law to the contract of carriage
However, generally speaking charter parties and/or bills of lading, in most cases, are governed by foreign laws -and not spanish law-, wich means that, pursuant to art. 512 et seq. MNA, the carrier who seeks the deposit of the cargo or the deposit and sale of the cargo, shall prove to the notary public (which is the competent to conduct the deposit and sale proceedings) that the foreign law applicable to the contract of carriage entitles the carrier to request said deposit and/or deposit and sale, unless the notary public knows the foreign law, wich, logically, is actually rather unlikely.
With regard the proof of the content and validity of the applicable foreign law, it is our view that it shall be not necessary a irrefutable evidence that the foreign applicable law to the contract of carriage entitles the carrier to request the deposit and sale of the goods, but prima facie evidence of said contents and validity of the foreign applicable law in a case-by-case basis. In any event, the notary public will be entitled to request information on the foreign law, in accordance with art. 35 of International legal cooperation Act.