Ground Breaking Judgment in Israel– The International Forwarder is Entitled to the Defences of an Air Carrier Including a Shortened Limitation Period

A ground breaking judgment has held that an international forwarder, represented by Adv. Roy Gilad of the law firm Grossman, Zinger, Gilad & Co., is entitled to the defences of an air carrier, including a shortened limitation period of two years. The shorter limitation period provided for in the Warsaw Convention applies to an international forwarder and overrides the provisions of the general Prescription Law, so that the former cannot be overridden even within the framework of a counterclaim.

On 10 February 2010 the Magistrate’s Court of Tel Aviv gave a judgment dismissing in limine a claim brought by an exporter against an international forwarder represented by our firm. The claim was for delay in a shipment of cargo destined for an exhibition abroad. The court held that the international forwarder had acted as an air carrier and that his liability was subject to the Warsaw Convention which provides for a shortened limitation period of two years.

The international forwarder provided international forwarding services consisting of the air freighting of a cargo to an exhibition in the United States. According to the exporter, he incurred a loss due to the late arrival of the shipment and consequently he refused to pay the international forwarder for his services. The international forwarder filed a monetary claim against the exporter for the debt. The exporter filed a statement of defence and counterclaimed for the loss allegedly caused to him as a result of the late arrival of the shipment. The counterclaim was filed more than two years after the date of arrival of the cargo at its destination.

The international forwarder applied to dismiss the counterclaim in limine on the ground that the limitation period had passed. The forwarder argued that he had acted as a contractual carrier and that the relationship between him and the exporter was subject to the Warsaw Convention which provides a limitation period of two years, both under the Carriage by Air Law and under the conditions of the bill of lading issued by the forwarder in respect of the carriage. The forwarder further contended that the provisions of the Convention regarding the shortened period of limitation overrode the provisions of the general Prescription Law.

The exporter contended that his claim was not prescribed in view of Section 4 of the Prescription Law which states that “in an action concerning a claim which has not been prescribed… a plea of prescription…against a counterclaim relating to the same subject-matter and arising from the same circumstances as the claim, will not be heard”.

The exporter further argued that the international forwarder was not an “air carrier” as defined by the Warsaw Convention and that therefore the Convention did not apply in the instant case.

As noted, the court accepted the arguments of the international forwarder and dismissed the counterclaim in limine. The court held that the provisions of the Warsaw Convention regarding the shortened limitation period overrode the provisions of Section 4 of the Prescription Law and referred in this regard to the Israeli Supreme Court’s ruling in Further Hearing 36/84 Rajin Tichner v. Air France: “The Convention for the Unification of Certain Rules Relating to International Carriage by Air (hereinafter: the Warsaw Convention) states in Article 29(1) that the right to damages shall be extinguished if an action is not brought within two years. The provision was applied to Israel by the Carriage by Air Law – 1962 (hereinafter: the Carriage by Air Law). When calculating this period should account be taken of the provisions of the Prescription Law – 1958, which would extend the period of two years? The question was considered by the Supreme Court (Civil Appeal 83/20, Leave to Appeal 371/83*). The Supreme Court (Justices D. Levin, Bach, Netanyahu) replied to this question in the negative, holding that the period set out in the Warsaw Convention is ‘absolute and cannot be extended by the provisions of local law’”.

Moreover, the court held that the international forwarder acted as an “air carrier”.

In this context, the court referred to the definition of the term “carriage” in the Israeli Aircraft (Processes for Documenting Aircraft and their Parts) Regulations – 1977: “carriage” – commercial carriage for the purpose of transporting passengers or the carriage of cargo for reward or flying for the purposes of business or the provision of services” and held that the international forwarder was a commercial body which received consideration for the transport of goods by means of an aircraft and performed air carriage within the definition of the Carriage by Air Law and the Convention.

In our opinion, the decision is important for a number of reasons: first, the court expressly held that an international forwarder who acts as a contractual carrier for the purpose of exporting a cargo by air is subject to the limitations of liability set out in the Warsaw Convention including its shortened period of limitation. Second, as far as we are aware, this judgment held for the first time that the limitation period in the Convention overrides Section 4 of the Prescription Law which states that a claim of limitation will not be heard against a counterclaim if the main claim is not prescribed. As a result of this ruling, a customer’s claim against an international forwarder who acted as an air carrier was prescribed after two years even if the claim was filed as a counterclaim within the framework of the main action brought by the forwarder against the client for a monetary debt (the claim to recover the debt was subject to a prescription period of 7 years).

The court dismissed the claim in limine and ordered the exporter to pay legal costs.

* Civil File 161220-09 (Magistrate’s Court of Tel Aviv) Custom Agents and Amit Transport Ltd. (represented by Adv. Roy Gilad of Grossman, Zinger, Gilad & Co.) v. Barzilai Designers Ltd. (represented by Adv. Aharon Kaufman of Epstein, Chomsky, Osnat & Co.).

Adv. Roy Gilad