This was a claim brought by Modul LLC (the claimant freight forwarder) against ITIRUS-Regiony LLC (the defendant client) for recovery of a debt under a freight forwarding contract. The defendant submitted a counterclaim for damages for late delivery of and damage to the cargo.

On 11 May 2021, the claimant and defendant entered into a freight forwarding contract. According to its terms, the claimant was required to render services related to carriage of goods by sea, including services for processing the goods for transportation and transportation of the relevant goods. The port of departure was Rizhao, PRC. The port of destination was Saint Petersburg, Russia. The vessel was the Nodus.

The vessel arrived at the port of loading on 20 July 2021. However, the vessel was involved in loading operations in respect of third party cargo, even though the defendant’s cargo had been in port storage since 13 July 2021. On 25 July 2021, a typhoon affected the loading area. The vessel had to leave, returning on 30 July 2021. Loading only recommenced on 3 August 2021. All of this resulted in delays. Upon loading, the claimant issued four bills of lading. The vessel with the cargo onboard finally departed from the port of loading on 7 August 2021.

The defendant contended that the cargo was damaged during transportation due to improper stowage. The defendant organised a cargo survey. The survey report confirmed that the cargo was damaged during transportation, as there was no indication of any damage on loading onto the vessel. Therefore, the defendant refused to pay the invoice issued by the claimant and claimed damages.

The Court of first instance partially allowed the claim and allowed the counterclaim in full. As a result, the defendant was required to pay the claimant damages of RUB 836,716.45 and a penalty of RUB 2,840,911.55. The Court of Appeal upheld the judgment of the Court of first instance. The claimant submitted a cassation appeal.

Held: The cassation appeal is allowed. The case is returned to the Court of first instance for reconsideration.

Regarding the claim, the Court of cassation found that it must be reconsidered because of calculation mistakes made by the Court of first instance.

As to the counterclaim, the Court of cassation found that under art 393 of the Civil Code of Russia (the CC RF), the debtor must compensate the full amount of damages caused by a breach of contract. Damages are determined in accordance with art 15 of the CC RF. Damages include the expenses the party incurred, or must incur, on the restoration of violated rights (real damages) and compensation for profits that would have been received if its rights were not violated (loss of profits). The claimant must prove that damages were caused to it, and their amount, the unlawful conduct of the party in breach, the causation link between the actions of the party in breach and the damage, and the fault of the party in breach. The lack of any of these elements would result in a refusal to satisfy the claims.

Under Art 805 of the CC RF, the freight forwarder may subcontract the fulfilment of its obligations to any third party if it does not contradict the terms of the particular agreement. At the same time, if the freight forwarder involves a third party in performing its obligations, the freight forwarder is not excused from its contractual liability. Therefore, if the freight forwarder accepts the contractual obligation to carry out the transportation and then contracts with an actual carrier to do so, the freight forwarder remains liable for the course of transportation towards its client.

According to art 166(2) of the Merchant Shipping Code of Russia (the MSC RF), the carrier is liable for delay if cargo is not delivered to the consignee in the time agreed in the contract, or in the absence of a relevant agreement, within a reasonable time. These provisions are not contained in the Hague or Hague-Visby Rules. In this regard, if the contract is concluded under the relevant Conventions, Russian law applies. Thus, the carrier's liability for the delay in the carriage should be determined pursuant to art 169 of the MSC RF.

The contract did not stipulate an exact delivery time. Instead, it stipulated that the cargo should be delivered in the period of '45 days +/-'. In this case, the provisions on a reasonable time contained in art 314 of the CC RF apply.

As the claimant was the freight forwarder who was obligated to carry out the carriage, it is liable for this carriage as an entrepreneur. This means that it is not necessary to prove the freight forwarder's fault. The only way to avoid liability in this case is to provide evidence of events which provide grounds for exemption of liability. The burden of proof is upon the freight forwarder (arts 401(3) and 1079 of the CC RF). A party is exempt from liability if damages were caused by force majeure.

The distinctive feature of force majeure is that it is unavoidable. This is tested objectively and not subjectively (Judgment of the Supreme Commercial Court of Russia No 3352/12 dated 21/06/2012). Therefore, the ground for exemption of the freight forwarder’s liability is founded in events that are outside its reasonable control, ie, circumstances which were not dependent on the freight forwarder's actions since they could not be reasonably taken into account when the agreement was concluded.

Finally, arts 6(3) and 6(4) of the Federal Law on Freight Forwarding Activity set out the limitation of a freight forwarder's liability in the amount of 666.67 SDRs. The same limitation is contained in art 170(1) of the MSC RF regarding carriers. Both provisions are based on the Hague-Visby Rules, under which the limitation of the carrier’s liability for damage to, or loss of, cargo is 666.67 SDRs per package or unit of the cargo, or 2 SDRs for 1 kg of the cargo. In other words, these statutes establish a 'double limitation' of the carrier’s liability. The carrier and freight forwarder may not rely on the limitation of liability if the damage to the cargo was caused by intention or gross negligence. So, the liability of the freight forwarder is generally limited. This circumstance was not assessed by the Courts of lower instances.

Based on the above, the judgments of the Court of first instance and the Court of Appeal are revised.