The ruling of the Israeli Court of Uniform Contract in respect to FIATA Model Rules and FBL

Please find below a translation of a judgment given by The Israeli Court of uniform Contracts in connection to the Israeli forwarders´ request to approve FIATA Model Rules and FBL as a uniform contract:

The Court of Uniform Contracts Case 007029/99

Before: The honorable Judge Yehonatan Adiel
Prof. Steven Goldstein
Mr. Arye Bar-On Date: February 2, 2005

In the matter of: Transclal Trade Ltd.
The Applicant

– v. –

1. The Government Legal Advisor
2. The Israeli Consumers Council
3. The Consumers Protection Authority in the Histadrut
4. The Marine Transportation Users Union, at the Ministry of Industry and Trade
Judgment

Introduction
1. The Applicant is a company engaged in international forwarding of cargoes. It is applying to the court to approve a system of uniform provisions and rules which it is interested in applying to its engagements with its clients. Respondent 1 (hereinafter – the “Government Legal Advisor”), and Respondent 4, which is a union that organizes the users of international transportation (hereinafter – the “Union”), object to the Application.

2. The business activity of the Company, which engages in international forwarding, is consists of two functions.
In one function, the forwarding company acts as agent for its clients. The activities in this function include applying in the name of the clients to land, marine and air carriers (hereinafter – the “Actual Carriers”) to enquire into their transportation terms and prices. The clients’ engagement with the Actual Carriers goes through the forwarding company, the clients being a direct party to the engagement documents issued by the Actual Carriers. The Applicant’s functions in acting as agent are defined in this way in Chapter 3 of its summations.
In the second function, the forwarding company acts as principal. In this function a direct transport agreement is created between the forwarding company and its clients by means of a Bill of Lading issued by the forwarding company with respect to the cargo handed to it or its representative abroad, which is called the “Forwarder’s Bill of Lading (FBL)”. The cargo is delivered by the forwarding company, i.e. the contract principal, to the Actual Carriers against receipt of marine bills of lading or air-waybills from the Actual Carriers.

3. It is possible to learn of the international forwarder’s varied functions from the book by C. Hacham-Aharon, Marine Insurance and Claims (6th Ed. 5758-1998) (hereinafter – Hacham-Aharon), p. 310.

“Often, the freight forwarder issues a document called the “Contract Bill of Lading”, confirming the transportation contract between it as principal transportation contractor, and the owners of the goods, while on the other hand it enters into transportation agreements with the actual carriers. Another type of forwarder’s bill of lading is where the forwarder acts in the name of and for the cargo owner, and its whole function is reduced to communicating in the role of agent with certain carriers to execute the transportation.
The use of a forwarder’s bill of lading is suitable for consolidated shipments. The forwarder collects cargoes – usually small ones – from various exporters and forwards them all together in a single shipment. This method, called consolidation, makes the transportation fee much less expensive. The forwarder receives from the actual carrier a single collective bill of lading in its name. Against this it issues and delivers to the various cargo owners its internal bills of lading for each shipment delivered to it and this bill of lading reflects the transportation contract between them, not with the shipping company or the airline.”

4. Israeli law applies international norms to Actual Carriers, both sea and air, including limited liability clauses. Thus, the Marine Goods Transportation Ordinance (hereinafter – the “Goods Transportation Ordinance”) applies the Hague Regulations (hereinafter – the “Hague Regulations”) to bills of lading issued by marine carriers which include limited liability clauses. Limited liability clauses also apply to air carriers, by virtue of the convention for the unification of certain rules concerning internal air transportation (hereinafter – the “Warsaw Convention”), which was adopted in Israeli law by means of the Air Transportation Law, 5740 – 1980 (hereinafter – the “Air Transportation Law”). The Applicant argues that, while there has been a worldwide change in attitude to international forwarders, so that they are equalized in certain circumstances to principal carriers and the same duties and rights applicable to Actual Carriers are also applicable to forwarders, however in Israel, the inclination is to view the international forwarder as the agent of its clients, so that its obligations and rights, when acting as principal carrier, are unclear.

5. In the given legal situation, according to the Applicant, the client gains an advantage at the forwarder’s expense, in view of the fact that the client has the right to sue the forwarder for damage caused to his cargo in transit, while the forwarder cannot demand indemnification from the Actual Carriers, who are usually the cause of the damage, due to the latter being protected by the above-mentioned treaties and legislations. In this context, according to the Applicant, consideration should be given to the fact that the majority of its clients are commercial clients, who insure their cargos, their economic condition is good and they are knowledgeable with respect to transportation in general and the importance and terms of the bill of lading in particular. The Applicant further argues that it should also be taken into account that it faces a risk that is significantly higher than the remuneration it receives for its services. Thus, while the value of the cargoes it forwards from country to country ranges from thousands to millions of dollars, the commission paid to the Applicant for its services amounts to a few hundred shekels, while the costs is not derived from the value of the cargo, but from its weight. It is further argued that, due to the lack of limited liability terms in the relationship between the forwarder and its clients, the premiums demanded by the insurance companies are high, which raises the cost of the service to the clients.
In light of the above, the Applicant is interested that Israeli law should equalize the status of the forwarders to that of principals or, alternatively, to achieve this result in the transportation contracts. It should be stated right now, that the present proceeding is not the appropriate framework to consider any legislative changes.

6. For the purpose of equalizing the status of forwarders to that of principals, the Applicant requests the following of the court:
First, the court is requested to apply to the agreements the Applicant executes with its clients, in its function as agent, i.e. without issuing a specific bill of lading to its clients, rules known as the FIATA Model Rules for Freight Forwarding Services (hereinafter – the “Rules”). These Rules were established by the world union of international forwarding organizations (FIATA) and, according to the Applicant, the field of international forwarding, in all its forms, is covered by these rules.
Second, the court is requested to approve the terms appearing on the bill of lading which the Applicant issues to its clients in its function as principal. These terms, called FIATA FBL, were drafted by FIATA and, as contended by the Applicant, they are recognized by the U.N., the International Chamber of Commerce, and the national Chambers of Commerce.

7. The Union’s main argument is that there is no justification for the Applicant’s request. That is because, in acting as principal, the relevant norms equalizing its status to that of a marine or air carrier apply to the Applicant anyway, and it is protected just like any other international carrier. When acting as agent, the Applicant is not entitled to the protections granted to the principal, and therefore there is no reason to enable it to benefit from these terms. According to the Union, the terms which the Applicant is interested in applying to its engagements with its clients include discriminatory terms, giving it an unjustified advantage over the Actual Carriers and other forwarders in the world.

The Application to Apply the Model Rules to the Applicant’s Engagements with its Clients when Functioning as Agent
8. As aforesaid, the Applicant is interested in applying the Model Rules to its engagements with its clients when it functions as agent. That is to say, whenever it does not issue a bill of lading for the client, and its activity, as defined in its summations, consist of coordinating and making the connection with the Actual Carriers.

9. After examining the evidence brought before us, and reviewing the parties’ arguments, we reached the conclusion that the Application should not be approved, for the considerations set forth below:

(a) First, there are no grounds to approve the Rules under the Uniform Contracts Law 5743-1982 for the simple reason that no contract has been placed before us. The Rules, which the Applicant is interested in applying to its engagements with its clients when it functions as agent, do not, in themselves, constitute a contract between the Applicant and its client, but are designed to be attached to such a contract, which was not placed before us. Thus, for instances, these Rules do not detail the duties of the forwarder, when functioning as agent, nor which obligations he assumes vis-a-vis the client. This conclusion emerges from the Rules themselves. The following is stated in Clause 1 of the Rules:
“1.1 These Rules apply when they are incorporated, however this is made, in writing, orally or otherwise, into a contract by referring to the FIATA Model Rules for Freight Forwarding Services.
1.2 Whenever such reference is made, the parties agree that these Rules shall supersede any additional terms of the contract which are in conflict with these Rules, except insofar as they increase the responsibility or obligations of the Freight Forwarder.”
Since the full contractual framework applicable to the relationship between the Applicant and its client was not presented to us, we are unable to approve the application of the Rules to the Applicant’s engagements with its clients.

(b) As aforesaid, the Applicant’s precise function as agent in the relationship between it and its clients has not been clarified to us. At the same time it is clear that in this function, as agent, the Applicant is not acting as principal, and it is obvious that its function is epitomized by coordinating and making the connection between the client and the Actual Carrier and other functions, the nature of which was not clarified in the Application, and in any event, the contractual framework which regulates these functions was not presented to us. Therefore, it is unclear on what grounds it is necessary to apply to the Applicant’s engagements with its clients Rules that were designed to apply to Actual Carriers, the content of which is derived from the principal’s function. Thus, for instance, why should the Applicant be given contractual discretion with respect to the manner of transporting and storing the cargo. Similarly, since the Applicant operates solely as agent, what grounds or justification could there be for applying Clause 4 of the Rules, enabling the forwarder to dispose of the cargo, or leave it in a safe place in certain circumstances, to its engagements with its clients? For similar reasons, in circumstances where the Applicant’s activity is limited to coordinating and making contact with the Actual Carrier, it is unclear to us what justification or grounds there could be for applying Clause 7 of the Rules, defining the forwarder’s responsibility when functioning as principal, to the Applicant’s engagements with its clients. To these questions we found no response in the Applicant’s arguments.

(c) Although the Applicant argues that, despite its function as agent, the clients come to it with complaints, even when the responsibility lies on the Actual Carrier, however, the Applicant did not satisfy us that these complaints by the clients are based on a contractual or legal responsibility which could apply to it in its relationships with its clients. The very fact that the Applicant actually constitutes the address for the clients’ complaints does not justify approval of a contract which contains a wealth of discriminatory provisions, mainly limited liability clauses, while the Applicant’s activity does not place it at any risk justifying the granting of such exemptions.
It would appear that the correct legal situation, to which the Applicant did not relate at all in its summations, is that, in its function as agent, the Applicant is not responsible for the activities of the Actual Carriers. This consideration is of decisive importance with respect to approving the Application, since the principal grounds on which the application for approval of the contract was based are that the Applicant must cover itself against clients’ claims in order to prevent a situation where it might be liable vis-a-vis its clients, but it will not be able to recover its losses from the Actual Carriers although it was they who caused the damage.
Adv. E. Sagi referred to this matter, when he explained that when acting as its client’s agent, and not as principal, the Applicant constitutes the client’s agent. When an agency relationship is created between the client and the Actual Carrier, by means of the Bill of Lading, the Applicant “is out of the picture”, and is not personally liable for any damage caused to the cargo, unless the Applicant deviated from its authority, or committed a tortious offense constituting the basis for its personal liability (E. Sagi, “The International Forwarder, Outdated Legal Status Compared with the New Reality”, Iyunei Mishpat 14 (5749) 549, 548).
The grounds on which the above conclusion is based stems from the fact that when acting as agent, the Applicant’s relationship with the Actual Carrier is that of client – independent contractor, and not a principal – agent relationship (or more precisely, agent – sub-agent). The distinction between a principal-agent relationship and a client – independent contractor relationship is not easy, however, based on tests customarily used in the rulings, an agent operating independently vis-a-vis the principal, for whom the activity contemplated by the agency is its occupation, and who executes the agency in its own name or on behalf of a client, shall be considered an independent contractor and not an agent. Thus it was established:

“If Reuven gives Shimon his belongings in order to transfer them from Tel Aviv to Jerusalem, is Shimon serving as his agent or will he be considered an independent contractor? The answer depends on Shimon’s status vis-a-vis Reuven, and the extent of his independence from him. Where it can be said that the transfer of the belongings is Shimon’s occupation, which he executes in his own name, in order to deliver them to Reuven when they reach their destination, Shimon will be considered an independent contractor. Where it can be said that Reuven transferred the belongings, and was assisted by Shimon, who served as his long arm, Shimon will be considered an agent…. The distinction will be similar to the distinction familiar from contracts law: Did so-and-so act in his own name, or on behalf of another? In the first case he was a contractor, and in the second – an agent”.
(Civil Appeal 404/54 D.M. Gordin v. A. Pilarsky et al., PD 9 1429, 1435).

And further: “A” will be considered the long arm of “B” – and therefore his agent with respect to agency liability in torts – if “A”’s activity is not performed independently, as his own, but it is performed in the framework of “B”’s business activity, in such a way that it does not constitute an external service given to “B”, but an activity constituting an internal and integral part of “B”’s business activity; in such a situation, “A”’s activity is an internal part of “B”’s overall activity.”
(Civil Appeal 502/78, State of Israel v. Yeruham Nissim et al., PD 35(4), 748).

In the circumstance of the present case, it appears, prima facie, that the relationship between the Applicant and the Actual Carriers is that of client-contractor. The Actual Carrier did not act as the long arm of the forwarder, who functioned as agent, but independently and disconnected from the forwarder’s activity, while the forwarder’s activity amounts to referring the client to the most suitable carrier for his needs. In addition, the bill of lading is issued by the Actual Carrier directly to the client, and the forwarder is not a party to this bill of lading. This conclusion is reinforced in view of the fact that the transportation of goods is the core of the Actual Carrier’s occupation. Assuming that the relationship between the forwarder and the Actual Carrier is that of employer-contractor, this relationship is governed by Section 15 of the Torts Ordinance [New Version], which exempts the forwarder from liability for the actions or omissions of the Actual Carrier. In these circumstances, there is no justification to apply to the engagement between the Applicant and its clients rules exempting it from liability for damage caused to the cargo while it was in the possession and under the responsibility of the Actual Carrier.

(d) The Applicant endeavored to convince the court that the Rules had been approved in various countries worldwide, and argued that, in order to create uniformity with these countries, the Rules should also be approved in Israel. From the evidence presented to us we have not been persuaded that the Rules have been applied worldwide, and that the failure to apply them to forwarders in Israel would be detrimental to their international activities.

10. In light of these considerations, we believe that there is no reason to approve the Rules as a uniform contract with no discriminatory provisions, even without making a pertinent examination of each of the said Rules.

The Application to Apply the Terms of the Bill of Lading (FIATA FBL) to the Engagements of the Applicant in its Function as Principal
11. As aforesaid, the Applicant is interesting in applying the terms of the bill of lading to its engagement with its clients when it functions as principal, and it requests the court to confirm that the bill of lading (contract) contains no discriminatory provisions.

12. As argued by the Applicant, since it issued a bill of lading to its clients and it assumed responsibility for transporting the cargo, it is appropriate to apply to it the legislations applicable to the Actual Carrier, which include various exemptions from liability. In this context, the Applicant refers the court to foreign judgments and legislations, which apply the international treaties applicable to Actual Carriers to international forwarders functioning as contractual carriers. However, according to the Applicant, the application of the treaties relevant to Actual Carriers to the international forwarder has never been decided in Israeli law. In this situation, the Applicant is interested in applying to its engagements with its clients, by means of the bill of lading, clauses that will equalize its status to that of Actual Carriers. Here also, its aim is to prevent a situation where it will be liable vis-a-vis its clients, but will have no recourse to the Actual Carrier, due to the fact that the latter is protected under the international treaties applicable to air and sea transport.

13. The Union, as already stated, argues that the Applicant’s request to make its status equal to that of the Actual Carrier by means of the bill of lading is superfluous. That is because when it functions as a contractual carrier, the treaties applicable to the Actual Carriers also apply to the Applicant anyway.

14. The question of whether the international treaties relevant to Actual Carriers apply to the international forwarder when it functions as the contractual carrier is not a simple one. In the context of marine transportation, regulation I(a) of the Hague Regulations defines “carrier” as including the “owner or charterer of the vessel engaged in a transportation contract with the shippers of the goods”. According to this definition it appears, prima facie, that the international forwarder is not considered a “principal”, since it is not the owner or charterer of the vessel, and therefore it does benefit from the protections granted to the marine carrier under the Hague Regulations. Civil Appeal 58/89, Yardenia Insurance Co. Ltd. v. Ricegrowers, Co-Operative Milis Ltd., PD 46(2) 613, stipulated that “when the drafters of the treaty [the Hague Regulations] included the “charterer” in the above definition, they were referring to a case where the charterer, and not the owner of the vessel, is responsible for the transportation contract, i.e. a case of charter by an “entity”, or a case where the charterer signs a bill of lading which he himself issued”. This judgment attributes importance to the issue of the bill of lading, a condition with which the Applicant complies. On the other hand, the judgment relates to a bill of lading issued by the vessel operator, owner or charterer, a condition that does not exist in the Applicant’s case. The question of the applicability of the international treaties to an international forwarder, functioning as a principal, is not simple even in connection with air transportation. That is because the Warsaw Convention does not define what “principal” is.

15. In the circumstances of the case before us, we found no need to decide on the question of the applicability of international treaties relevant to the activities of Actual Carriers to the international forwarder functioning as a contractual carrier. In our opinion, and in this we accept the Applicant’s position in principle, whether or not these treaties apply to the international forwarder, the demand to equalize the status of the international forwarder concerning its contractual liabilities vis-a-vis its clients in connection with the transport of cargo to that of the Actual Carriers is a reasonable one. The concern is to prevent a situation where the forwarder becomes liable for damage caused to the cargo which is in the possession of the Actual Carrier, although the prevention of such damage is the responsibility of the Actual Carrier and not the forwarder, and despite the fact that the Actual Carrier itself is exempt from liability for this damage (subject to the provisions of the treaties), and the forwarder has no recourse to the Actual Carrier. This position is also acceptable to the Union, which argued, as aforesaid, that the treaties applicable to the Actual Carriers also apply to the forwarder when it functions as principal. Nor does this result discriminate against the client, since his situation would not have improved if the bill of lading had been issued by the Actual Carrier and not the forwarder. Even then the provisions of the treaties, exempting the Actual Carrier (within certain limits stipulated in the treaties) from liability, would have applied to the bill of lading. Unfortunately, the position of the Government Legal Advisor on this issue was not presented to us, because his representative believed, for some reason, that there was no need to submit summations on his behalf in this file.

16. We do not accept the position of the Union in this matter, whereby the fact that the forwarder is protected as principal under the treaties (assuming that is the legal situation) makes the bill of lading redundant, and therefore approval of the contract is unjustified.
Even if the bill of lading is redundant, in the sense that it does not confer on the forwarder any protection beyond that conferred on it anyway under the treaties, we see no flaw in the forwarder’s including these provisions in the bill of lading, thus notifying its clients of their rights, or its own rights under the treaties. Even if you say, as per the Union, that the bill of lading is redundant, the principle of freedom of contract confers on the Applicant the right to execute a contract with its clients, even if the Union considers that contract unnecessary. The court’s role is limited to approving or disaproving discriminatory terms. The fact that the contract is superfluous does not make it a discriminatory one, and does not confer on the court any authority not to approve it for that reason.

17. In light of this point of departure, the principal question left for examination is whether the bill of lading complies with the treaties and, to the extent it deviates therefrom, is such deviation justified?

18. However, after examining the evidence presented to us and the parties’ arguments, we reached the conclusion that the material before us, especially that presented by the Applicant, is deficient, and does not enable us to approve the Application, even with reservations. In these circumstances, the Applicant has not complied with its responsibility of proving that the contract – bill of lading does not contain discriminatory terms, on the following grounds:

19. First, it is not clear what wording in the bill of lading the Applicant wishes the court to approve. On May 19, 1999, the Applicant submitted to the court, as part of an amendment to its Application, the 1992 edition of the bill of lading. On the other hand, in Appendix 2 in the references file attached to its summations, the Applicant attached another bill of lading, that of 1984. These two bills of lading are not identical. Since the 1984 bill of lading is the one attached to the summations, and that is the one to which the Union referred in its summations, that is what we shall relate to, although it is not clear that the Applicant is particularly interested in approving the old bill of lading.

20. Second, the bill of lading submitted by the Applicant states that it is subject to the ICC rules. That is to say, it is not an independent contract, but a contract that is subject to a certain system of rules. In these circumstances, in order to approve the contract – bill of lading, it is necessary to confirm that these rules also contain no discriminatory provisions. This was never requested by the Applicant. In any event, the rules were indeed submitted to the court, but their nature was never clarified to us.

21. Third, the full contractual set of contracts connected with the transportation of cargoes was not presented to us. According to the precedents, from the legal aspect the bill of lading fulfills three functions: Firstly, it constitutes receipt from the principal to the sender of the cargo, evidencing delivery of the cargo to the principal. Secondly, it constitutes evidence of a transportation contract between the principal and the sender of the cargo. Thirdly, the bill of lading is a “document of title”, conferring on the holder thereof the right to demand and receive possession of the cargo recorded therein (Civil Appeal 6260/97, Polska Morska v. Banque Nationale de Paris – New York, PD 57(5) 193). Indeed, the bill of lading in itself constitutes a uniform contract (Civil File (Tel Aviv) 529/65, Helvetia v. Borchard Lines Ltd., PM 62 211, 216), however the bill itself, even if it has an independent status, constitutes part of the basic transaction regulating the terms between the parties. The Applicant itself admits, on p. 10 of its summations, that the bill is prima facie evidence of the existence of a contract. It also admits in its summations, that it provides additional services to its clients, besides handling the transportation, such as customs clearance. The services provided by the international forwarder to its clients in addition to transportation, as emerges from Clause 2.1 of the Rules, also include storage, packing, distribution, tax consulting, and the like. The full contractual relationship between the Applicant and its clients, relating to the bill of lading, and comprising the range of services which the Applicant provides to its clients, were not presented to us, nor were they properly defined. We are also doubtful as to whether it is reasonable to approve as a uniform contract only one part of the contractual system between the Applicant and its clients. Especially since, in such circumstances, the impression may be created that approval of the bill of lading also applies to the full contractual arrangement between the Applicant and its clients.

22. Fourth, in the Applicant’s summations there is no specific reference to the clauses specified in the bill of lading. The Applicant settled for a general contention that it is proper to equalize the status of the forwarder, as the contractual carrier, with that of the Actual Carrier. The reason for this, as has already been mentioned, is that under the bill of lading the forwarder undertakes all the principal’s liabilities, on the one hand, and on the other – it is exposed to customers’ claims without having any grounds for indemnification vis-a-vis the carrier, who benefits from exemptions pursuant to international treaties.
However, in order to justify approval of the contract on these grounds, the Applicant should have shown that the provisions of the bill of lading do indeed comply with the various international treaties, as adopted in the local legislation with respect to the Actual Carrier. The Applicant made no reference to this matter in its summations. Nor did it respond to the Union’s arguments whereby the terms and exemptions under the bill of lading are different from and broader than those conferred on the carrier under the treaties. With respect to the majority of the terms stipulated in the bill of lading there is also the probability of discrimination, by virtue of Section 4 of the Uniform Contracts Law, and since the Applicant did not refer to these clauses, it did not discharge its duty to contradict the probability of discrimination.

23. Fifth, there is indeed a similarity between many clauses in the bill of lading and certain clauses of the Rules to which the Applicant alluded in its summations. However, in the absence of equivalence between the Rules and the bill of lading, the allusion to the Rules did not exempt the Applicant from also referring to the terms in the bill of lading, especially those to which the Union explicitly objected.
Thus, for instance, both Clause 4 in the bill of lading, to which the Applicant did not refer, and Clause 4 of the Rules, to which it did refer in its summations, deal with the handling of hazardous cargos. However, the wording of the two is not identical. Therefore, the Applicant should have referred specifically to Clause 4 in the bill of lading, and not only to Clause 4 of the Rules, even if they deal with similar issues. The same is the case with respect to Clause 8.3 in the bill of lading and Clause 8.3.1 of the Rules, dealing with the limits of the compensation amount; Clause 9 of the bill of lading and Clauses 8.1.2 and 8.1.3 of the Rules, dealing with exemption for liability for indirect and consequential damage; Clause 11 of the bill of lading and Clause 12 of the Rules, exempting the Applicant’s agents and contractors from liability; Clause 12 of the bill of lading and Clause 5 of the Rules, dealing with the method and route of the transportation; Clause 15 of the bill of lading and Clause 15 of the Rules, dealing with the forwarder’s withholding right; Clause 18 of the bill of lading and Clause 8.3.1 of the Rules, dealing with the date on which the cargo may be pronounced lost; and also with respect to Clause 19 of the bill of lading and Clause 10 of the Rules, dealing with the limitation period. In all the said matters there is a certain similarity between the bill of lading and the Rules, however in the absence of equivalence between the Clauses, the Applicant should have referred to each of the documents separately, and not leave the court to engage in the work of comparing the Rules with the bill of lading, and examining them against the Union’s contentions, to which no response came on behalf of the Applicant.

24. Sixth, the principal grounds on which the Application is based was, as aforesaid, the need to equalize, by means of contractual tools, between the status of the forwarder and that of the Actual Carrier. These grounds do not apply where there is a difference between the terms of the bill of lading and the provisions of the treaties and laws adopting them, and the Applicant did not comply with its responsibility of showing why the difference between the bill of lading and the provisions applicable to Actual Carriers is justified.
Thus, for instance, there is no equivalence between the text of Clause 4 of the bill of lading and the wording in Clause IV(6) of the Hague Regulations, concerning hazardous cargos. While the Union argues that Clause 4 of the bill of lading confers on the forwarder discretion that is too sweeping on the matter of cargo abandonment, compared with the Hague Regulations, the Applicant settled for the argument that Clause 4 of the Rules correlates with the Hague Regulations, and presented no grounds justifying the difference between the texts of the bill of lading, the Rules and the Hague Regulations.
As a further example, it is possible to refer to Clause 8.3 of the bill of lading. This Clause limits the rate of compensation which might be due from the Applicant to an amount equal to 2 calculation units per kg of the weight of the goods, which is different from the specifications in Regulation IV(5)(a) of the Hague regulations, which limits the maximum compensation to an amount equivalent to 666.67 calculation units per unit, or to 2 calculation units per kg, whichever is higher. From this one can learn that the compensation limit contained in the bill of lading could be lower than the one applicable to the marine carrier, under the Hague Regulations, while no justification was found in the Applicant’s summations for the difference between the bill of lading and the Hague Regulations. In his testimony, Mr. Pintov explained the rationale for the difference between the limit specified in the Hague Regulations and that specified in the bill of lading, such that limiting liability in accordance with cargo units, as was done in the Hague Regulations, is problematic, particularly on the grounds that an interpretation dispute might arise on the question of the nature of a cargo “unit”. This explanation does not justify exempting the forwarder from liability more broadly than the exemption granted by law to the marine carrier, especially since the liability is according to the higher between the tests.
Another example can be seen in Clause 11 of the bill of lading, limiting the liability of agents and sub-contractors acting on behalf of the forwarder. Contrary to that Clause, Clause IVA(2) of the Hague Regulations, protects only the agent of the marine carrier, and not the subcontractors acting on his behalf. Thus, also, Clause 20(1) of the Warsaw Convention, which limits the liability of the air carrier’s “servers and agents”, making the liability limit dependent on the servers and agents having “taken all means required to prevent the damage or having …… no possibility of taking them.” The Applicant did not comply with its responsibility of showing the justification for including in the bill of lading a text different from and more sweeping than that stipulated in the international treaties relevant to the Actual Carrier. Nor did it try to do so. In general, the justification for limiting the liability of sub-contractors, for whose actions the agent is not responsible anyway, is unclear to us.
In addition to the examples given above, the Hague Regulations contain no provision corresponding to Clause 9 of the bill of lading, explicitly limiting the Applicant’s liability for indirect and consequential damage. True, there may be an interpretive opinion whereby Regulation IV(5)(a) of the Hague Regulations limits the liability of the marine carrier solely to direct damage. However, in light of the rationale on which the Application is based, we see no reason to adopt a text for the bill of lading which is different from the text of the treaties, since that might open the way to unnecessary ambiguities and disputes.
In this matter, great importance is given to the existence of probable discrimination due to these terms under Clause 4(1) of the Uniform Contracts Law. Justification for the clause, according to the Applicant, lies in the inability to anticipate indirect damage. Indeed, actual implementation of the test of expectations could lead to the conclusion that the damage usually “anticipated by the defaulter” is direct damage, and in the absence of information on the purpose of the transaction and the results that the injured party could have derived therefrom with outside parties if the contract had been fulfilled, is not included in the scope of damage which the defaulter could have anticipated. However, from the legal aspect, one must not exclude the indirect damage from the damage which the defaulter, in principle, could have anticipated on which compensation is due under the contracts and torts laws. This will be so in cases where the defaulter has information concerning the purpose of the transaction, and the results which the injured party could have derived from transactions with outside parties if the contract had been fulfilled (Appeal (Jerusalem) 195/97 The Government Legal Advisor v. Bank Leumi (unpublished); Civil Appeal 8556/96 Lubianker v. Ministry of Finance, PD 56(5) 289). Under the relationship between the forwarder and the client, one should not exclude the possibility that, in certain cases, the forwarder will have information on the purpose of the transportation, which will enable him to anticipate indirect damage, such as loss of profit and loss of market. In the absence of compliance with the Hague Regulations, the Applicant did not comply with the responsibility of contradicting this probable discrimination.
Among the clauses in the bill of lading, as distinct from the clauses included in the international treaties applicable to Actual Carriers, one may also mention Clause 12 of the bill of lading, which confers on the forwarder broad discretion in the matter of the method and route of transportation, and has no parallel in the Hague Regulations. In addition, nothing in the Hague Regulations and the Warsaw Convention corresponds to Clause 14.5 of the bill of lading, imposing liability on the client concerning misleading particulars given with respect to the cargo, without requiring any causal relationship between the misleading particulars and the damage caused to the cargo. Furthermore, nothing in the Hague Regulations corresponds to Clause 18 of the bill of lading, which stipulates a date for declaring the cargo as lost. With respect to all these clauses, as well as the clauses mentioned above, the Applicant did not explain the nature of the difference between the bill of lading and the international treaties. Nor did it refer to the Union’s contentions on these matters.

25. The only issue on which a partial explanation as to the difference between the bill of lading and the international treaties was given in the Application, was the Paragraph relating to the issue of limitation. Clause 19 of the bill of lading specifies a limitation period of 9 months, while the air carrier enjoys a limitation period of two years under Clause 29 of the Warsaw Convention, and the marine carrier is given a period of one year under Regulation III(6) of the Hague Regulations. According to the Applicant, the purpose in stipulating a limitation period of 9 months is to give the forwarder time to file a third party notice against the marine carrier in the case of a claim being filed against the forwarder.
This explanation is unsatisfactory, in light of Clause III(6a) of the Hague Regulations. According to this Clause, “a claim for indemnification against a third party may be filed even after the end of the year specified in Clause 6, if it is filed within the period permitted for filing under the law prevailing in the court considering it, provided it is no less than three months after the date on which the party claiming indemnification settles the claim or on which a court summons is delivered to him in a claim filed against him.”
In Civil Appeal 9444/00 Bellina Maritime S.A. Monrovia v. Menorah Insurance Co. Ltd., PD 56(4) 788, Judge T. Strassburg-Cohen explained the significance of Clause III(6a) of the Hague Regulations:

“This Clause – stipulating a deviation from the short one-year limitation period specified in the Clause III(6) – was designated to apply in situations where, in addition to the cargo carrier with whom the shipper of the goods executed the transportation contract, there is a third party, such as a sub-carrier, who is liable to indemnify the cargo carrier with respect to the compensation which the latter is required to pay the shipper of the goods for any damage. In such a situation, the concern is that the shipper of the goods will file his claim against the carrier close to the end of the limitation year stipulated in Clause III(6), so that the carrier will not have sufficient time to file his claim against the third party. Clause III(6a) prevents the realization of this concern.”

From the aforesaid it emerges that the forwarder may file a claim for indemnification against the Actual Carrier with respect to liabilities due from the forwarder to its client under the bill of lading issued by the forwarder, at least if the latter is considered a “principal” under the treaties, after the lapse of one year from the date of transportation of the cargo. Since that is the case, there is no reason to limit the period of limitation of the client’s claim against the forwarder to a period shorter than as stipulated in the Hague Regulations and the Warsaw Convention.

26. Seventh, in certain matters there is a difference between the Hague Regulations applicable to a marine carrier, and the Warsaw Convention, applicable to an air carrier. The Applicant’s bill of lading, as we understand, applies to transportation by both air and sea, with no distinction between them. Consequently, a situation may arise where the exemption given to the forwarder, although corresponding to the exemption from liability conferred on one carrier, is broader than the one conferred on the other.
Thus, for instance, although Clause 4 of the bill of lading, conferring on the forwarder discretion with respect to abandoning hazardous goods, is similar to Clause IV(6) in the Hague Regulations, thus ostensibly equalizing the forwarder’s status to that of the marine carrier, however a clause such as this does not seem to appear in the Warsaw Convention. Consequently, the forwarder, in functioning as a contractual air carrier, is allowed broader discretion than the Actual Carrier is allowed, without presenting to us any grounds justifying such a distinction. Another example can be found in Clause 8.3 of the bill of lading. This clause is supposed to be similar to the Warsaw Convention clause, which limits the amount of compensation for which the carrier will be liable in accordance with the weight of the cargo. However it is different from the Hague Regulations, which also limit the amount of the compensation in accordance with the number of cargo units, as distinct from its weight. The justification for distinguishing, in this context, between the marine carrier and the forwarder, functioning as the contractual marine carrier, is unclear. Another difference between the Warsaw Convention and the Hague Regulations, which we have already mentioned above, concerns the limitation period. While the Hague Regulations stipulate a limitation period of one year, the Warsaw Convention allows a 2-year limitation period. We see no justification for stipulating a limitation period of 9 months in a bill of lading designated for air transportation, while the Warsaw Convention allows a limitation period of two years.

27. In light of the above, we are not convinced that the bill of lading contains no discriminatory terms, and that it should be approved as a uniform contract devoid of discriminatory terms.
For the removal of doubt we would state that nothing in the aforesaid prevents the Applicant from filing a new application to approve the bill of lading. This is in light of the above statement whereby, in principle, there is no discrimination in applying the terms of the treaties to the bills of lading issued by the Applicant relating to transportation in accordance with those treaties.

28. Subject to the aforesaid, the Application is denied. There is no order for costs.

Given this day, 23rd Shevat, 5765 (February 2, 2005), in absentia.

The Secretariat will furnish a copy of the judgment to the parties’ representatives.
Y. Adiel, Judge
Presiding
Prof. S. Goldstein
Member
Mr. A. Bar-On
Member