Landmark UAE Ruling Empowers Cargo Interests in Multimodal Carriage Contracts

The Dubai court ruled on the 16th of May 2024 in the commercial appeals 106/2023 and 111/2023 that due to the recklessness of both carriers and their awareness of the likely damage, they forfeited their right to limit liability. The case progressed through all stages of the Dubai courts, ultimately affirming the initial judgment. This ruling found both the multimodal carrier and the sea carrier jointly liable, the former under contract and the latter for tort. Consequently, they were compelled to compensate our client for the complete value of the goods, multimodal carriage fees, economic losses, legal fees, and the full attorney fees as agreed upon with us.

‍Case facts:

Our  client, a prominent Dubai-based food and beverage trading company, purchased  a consignment of two 40-foot containers of antioxidant health drink from a  beverage supplier in a non-coastal city in the Netherlands. The transaction  was conducted on factory gate terms EXW with payment via confirmed letter of  credit (L/C) at sight.  

Our  client engaged in a multimodal carriage agreement with a Dubai-based freight  forwarder to pick up, ship, and deliver the containers to their warehouse in  Dubai. The freight forwarder in Dubai instructed its agent in the Netherlands  to collect the goods from the supplier on a specific agreed date. The agent  collected a set of shipping documents that specified the drinks would expire  seven months from the production date, which was 21 days prior. The drinks  were loaded equally into two 40-foot containers, transported by truck to the  agent's warehouse, and a clean house Bill of Lading was issued. The next day,  the agent arranged a booking with a sea container carrier to transport the containers  from Rotterdam port to Jebel Ali port on the next vessel, scheduled to sail  the following day with an estimated time of arrival (ETA) of 32 days.

However,  after the vessel departed, the master received instructions to sail towards  Singapore, its final destination, cancelling the transshipment at Jebel Ali  port. The containers were discharged at Singapore port, then reshipped to  Dubai on another vessel 35 days later, finally arriving at Jebel Ali port  after an additional 17 days. The freight forwarder staff decided to delay  customs clearance procedures due to the upcoming Eid Al-Adha national  holiday, which lasted four days. Consequently, they collected the delivery  order from the ship agent after the holiday and began customs clearance,  which took three days.

Unsurprisingly,  the Health & Safety Department of Dubai Municipality rejected the drinks  on the grounds that they did not comply with the requirement that any  imported consumer products must have at least 50% of their shelf life  remaining at the time of entry. The freight forwarder was given two options:  either destroy the shipment at their cost or re-export it.

Our  team was instructed by the client to identify the responsible party and  pursue legal action. The first question we had to address was: who should sue  whom and for what?