The Appeal Court of Turku in its judgment nro 294, dnro S 13/2163 evaluated whether under the Finnish Road Carriage Act (345/1979) (”RCA”) a performing road carrier is liable to a party or its underwriter who has ordered the carriage from a seller and who on the other hand has chosen to use an independent road carrier (performing carrier) to carry out the carriage. At the time of publication of this article the judgement is not final and is subject to appeal to the Supreme Court of Finland (”Supreme Court”) until 19.5.2015, however, the subject and questions raised by the court are noteworthy.
Non-contractual liability in road transport
In Finnish contract law the principle of privity applies. Under this principle a contract as such creates obligations and liabilities only to the parties of the respective contract. Therefore under this principle, liability to a party outside the contractual relationship is not as such possible in a so-called contractual chain situation.
However, under the RCA the following exceptions apply. The first of exceptions is stated in the RCA. Under the RCA that enacts the rules of CMR Convention into Finnish law, section 45 (CRM article 34) foresees that in case of successive carriage claiming of compensation from the party outside the direct contractual relationships is possible. The second is the principle established by the Supreme Court e.g. in the decision 2013:33. In the judgement the Supreme Court confirmed that liability over a direct contractual relationship could be possible without the support of legislation in case substantial justifications for such liability exist.
Under the section 45 of the RCA, in case of successive carriage each road carrier shall be responsible for the performance of the whole operation, the second carrier and each succeeding carrier becomes a party to the contract of carriage, under the terms of the consignment note. Further, under section 47 of the RCA (CMR article 36), legal proceedings in respect of liability for loss, damage or delay may only be brought against the first carrier, the last carrier or the carrier who was performing that portion of the carriage during which the event causing the loss, damage or delay occurred; an action may be brought at the same time against several of these carriers. Therefore, in case of successive carriage there is a legislative base to claim damages over so-called direct contractual relationship and therefore such claim succeeds under the RCA.
However, in cases that are not based on successive carriage the question whether legal proceedings can be initiated successfully against the performing carrier, which has allegedly caused the damage but there is no contractual relationship between the parties, is based on legal practice. In such cases the Supreme Court prejudicate judgements become relevant.
The judgement of the Appeal Court of Turku, (nro 294, dnro S 13/2163), highlights that the principle of privity of contracts as such is the main principle under Finnish contract law and cannot be bypassed without substantial justifications. The Court of Appeal judged that in the case at hand there were no grounds to accept the claim as it was not based on contractual or legislative grounds nor there were substantial justifications to approve it.
In the case at hand, it was undisputed that the carriage was not a successive carriage. Therefore, the performing road carrier was not liable to the orderer of the carriage under the rules of RCA regarding successive carriage. Further to this, based on the judgement it was undisputed that the orderer of the carriage and the performing road carrier had not made an agreement regarding a road carriage. Therefore, the Appeal Court of Turku had to consider whether there were present substantial justifications to accept liability over direct contractual relationship based on the argumentation of the Supreme Court judgement 2013:33.
Facts of the case
The present case however differs from the above-referred Supreme Court judgment 2013:33. In the case at hand the performing carrier was liable for the whole carriage and a consignment note was issued between the parties.
Under the RCA section 1 the Act is applicable for the carriage of goods by road in vehicles for reward. However, the orderer of the transport did not reward directly the performing road carrier but instead his contractual party. Based on the documents reviewed, no evidence indicated in the case at hand that the performing road carrier had made contract of carriage directly with the orderer of the transport. Even though the provided consignment note determined the terms of the carriage as such, however, it did not create a contractual relationship between the orderer of the transport and the performing road carrier.
Further, the Appeal Court stated that under the RCA section 41 (CMR article 32) the orderer of the road transport, however, could have claimed damages from its contractual party in the present case. The Appeal Court pointed out that in the case at hand was not presented that the orderer of the transport services would have loose its right to claim compensation from the organiser of the carrier due to actions of the performing road carrier. It was pointed out in the judgment that the seller of the transport services was not insolvent at the time when the orderer of the transport could have initiated legal proceedings against the contractual party under the RCA.
Based on the above argumentation the Appeal Court of Turku came to the conclusion that in the present case there were no grounds to apply exception from the principle of privity of contracts. Therefore, the underwriter or the orderer of the road carriage had no rights to claim damages directly from the performing road carrier under the principle of substantial justifications confirmed by the Supreme Court. Further, this judgement confirms that the courts in practise interpret strictly the meaning of substantial justifications. Insolvency of a contractual party is not as such “substantial justification” itself under the judgement of the Appeal Court.
Conclusions and reference to the Nordic approach
Even though the judgement is not currently final it is evident that the current legal praxis of the court is strict in respect to accepting liability over direct contractual relationship in case the applicable legislation does not support such action.
As a conclusion, it is to be pointed out that to some extent the Finnish legal praxis regarding liability in non-contractual relationship under road carriage differs from the Nordic approach approved in the Nordland case (ND 1995.238. NSC Nordland, a judgement of the Supreme Court of Norway). In Finnish legal literature, based on the Nordland judgement, has been argued that the contractual carrier as well as the subcontractor could be directly liable over contractual relationship under the legal praxis accepted by the Supreme Court of Norway in the Nordland case. Based on the judgement of the Supreme Court of Norway no transfer of consignment note was needed or that the subcontractor was the last or performing carrier for confirming the liability of the subcontractor.
However, the present Appeal Court of Turku judgment confirms that the Nordic approach is not followed in Finland. Based on the current Finnish legal praxis it can be argued that the Finnish approach is stricter than e.g. the Supreme Court of Norway’s regarding accepting subcontractor’s liability towards the contracting carriers contractual party. This is something that the parties subject to road carriage should be aware of. The question whether a party to a road carriage can claim damages over direct contractual relationship becomes relevant especially in insolvency cases which was the case in the present Appeal Court of Turku judgment.
Therefore, it is of essence for business using regularly road carriage services to consider and review beforehand thoroughly which party is subject to freight contract.