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A carrier undertaking the delivery of a consignment expects payment. If this does not occur, in specific cases as provided by law, they have the right to use the right of lien and detain the shipment. What does the lien look like in national and international transportation, and what should one know to enforce their rights effectively?
What is a lien?
A lien (pledge) is one of the most popular methods, alongside a mortgage, for securing receivables. It can only be established on movable property and certain rights. The lien on a consignment arises by operation of law, but all regulations regarding contractual liens apply to it, pursuant to the provisions of Article 326 of the Civil Code, which include regulations from Articles 306 to 325 of the Civil Code.
The essence of a lien is that the creditor (lien claimant) can seek satisfaction from the property regardless of whose possession it has become and with priority over the personal creditors of the owner of the property, except those creditors who have a special priority by operation of law. If several liens are established on the same property, the lien established later takes precedence over the one established earlier, unless the lien claimant acted in bad faith.
The lien claimant cannot undertake an obligation to the lien not to dispose of or encumber the property before the lien expires. Such a reservation is absolutely invalid. It is important to note that the statute of limitations on a receivable secured by a lien does not affect the lien’s right to satisfy themselves from the encumbered property. Therefore, even if the carrier’s claim for payment becomes time-barred, they can still enforce their rights through the lien.
Satisfaction from the secured property is based on the rules of judicial execution. This means that the carrier cannot sell the lien property themselves to satisfy the receivable; they must follow execution procedures. It is necessary to obtain a final judgment from the court and have it declared enforceable. Afterward, an application is made to the bailiff with the enforcement title to initiate the execution. Only after the execution is carried out, does the carrier receive satisfaction of the claim from the proceeds obtained by the bailiff from the sale.
Lien in Domestic Transport
In domestic transportation, the institution of lien is governed by two legal acts: the Civil Code and the Transport Law Act. According to Article 790 §1 of the Civil Code, the statutory right of lien on a consignment is granted to the carrier to secure claims arising from the carriage contract, notably:
- Carriage fees.
- Warehousing fees.
- Customs duties and other expenses.
- To secure claims against previous forwarders or carriers.
The statutory list is open-ended, which means that in legal doctrine, it is pointed out that the carrier can use the right of lien to satisfy all costs related to the execution of transportation.
These costs can include expenses incurred in connection with cargo handling, inspection, or arising from changes in transport parameters (e.g., changes in the destination of the shipment) or damages incurred as a result of such changes. Therefore, if due to the fault of the consignee’s employees, damage occurs to the vehicle used by the carrier, the right of the lien will also secure the claim for damages, provided that the carrier has not released the shipment earlier. In cases that raise doubts, it is advisable to seek advice from a law firm experienced in providing legal services to entities in the transportation industry.
The carrier can exercise the right of lien as long as the shipment is in their possession or in the possession of someone holding it on their behalf, or as long as they can dispose of it through documents. The right of lien arises when the shipment is handed over to the carrier and expires only when it is handed over to the consignee.
According to Article 314 of the Civil Code, the lien satisfies not only the principal receivable but also the interest on it for the last three years before the sale of the property in the execution proceedings.
The statutory right of lien covers the entire consignment. Therefore, the number of elements making up the transported goods is irrelevant. The consignee cannot demand the release of only a part of it, even if the remaining elements in the carrier’s possession are sufficient to satisfy their claims.
In addition to the carrier, the right of lien on the consignment can also be exercised by a freight forwarder under Article 802 §1 of the Civil Code. This provision allows for the satisfaction of claims such as:
- reimbursement of expenses receivables arising from other forwarding orders,
- against previous forwarders or carriers.
Just like in the case of the carrier, the right of lien here is granted as long as the shipment is in the possession of the forwarder, someone holding it on their behalf, or can be disposed of through documents. The legislator did not use the term “in particular” in this provision, suggesting that the list of claims is exhaustive.
Lien in International Transport
In international transportation, the right of lien is regulated by the provisions of the CMR Convention. According to Article 13 section 1 of CMR, upon arrival of the goods at the designated place for delivery, the consignee has the right to demand delivery from the carrier upon presenting the second copy of the consignment note and the goods. If the goods are found missing or if they do not arrive within the time specified in Article 19 (defining delay), the consignee can assert their rights under the carriage contract on their behalf.
Under paragraph 2 of this provision, a consignee who asserts their rights under the carriage contract is obligated to pay the carrier the amount of charges specified in the consignment note. In case of a dispute on this matter, the carrier is not obliged to release the goods unless the consignee provides security.
In other words, the carrier has the right to exercise the right of lien and refrain from releasing the shipment only when it is not apparent from the content of the consignment note that the consignee is entitled to receive the shipment or in situations where the consignee does not pay the specified charges mentioned in the consignment note or provide adequate security (e.g., by issuing a bill of exchange).
Flawed Execution of the Right of Lien by the Carrier under CMR Regulations
A carrier who decides to execute the right of lien unlawfully and refuses to release the goods despite the absence of conditions specified in Article 13 of the CMR Convention may cause delays in delivery. In such a situation, Article 23 section 5 of the CMR Convention comes into play, which states that in case of delivery delay, if the entitled party can prove resulting damage, the carrier is obligated to pay compensation, which cannot exceed the carriage charges (i.e., freight). It is worth noting Article 23 section 6, which allows for the possibility of seeking higher compensation in two situations:
- Declaration of the value of the goods.
- Declaration of a special interest in the delivery of the goods.
In addition to liability for damages, the unwarranted application of a lien on goods may be seen by the consignee as a failure by the carrier to comply with the content of the consignment note, in accordance with Article 12 section 7 of the CMR Convention, resulting in the carrier’s liability for damages. Therefore, it is crucial to include all details regarding the shipment’s delivery and the payment amount in the consignment note.
In legal doctrine, it is also argued that failure to comply with the content of the consignment note is equivalent to gross negligence. The CMR Convention clearly states in Article 29 that the carrier cannot limit their liability or shift the burden of proof to the other party to the contract if the damage results from the carrier’s bad intent or negligence.
Detention of Goods by the Carrier and Criminal Liability
Regardless of the compensation, when the carrier unlawfully detains a shipment, the consignee has the right to report the crime of misappropriation of property under Article 284 of the Penal Code to law enforcement authorities. According to this provision, anyone who misappropriates someone else’s movable property or property rights is subject to imprisonment for up to 3 years, and if the property was entrusted to them, imprisonment for 3 months to 5 years. Only in cases where the criminal court deems the offense to be of lesser gravity, a milder penalty such as a fine, restricted liberty, or imprisonment for up to 1 year may apply.
Taking appropriate actions by a carrier who must decide whether to release or withhold a shipment requires a thorough understanding of applicable national and international regulations. Therefore, in contentious situations, it is advisable to seek the assistance of a law firm that can help find a solution to the problem.
National regulations and the CMR Convention aim to protect the interests of transportation companies engaged in the carriage of goods. However, it is essential to remember that the right of lien should be executed in accordance with the applicable regulations. A carrier who withholds goods, fearing non-payment or attempting to compensate for an economic loss in this manner, exposes themselves to severe legal liability. It is also important to note that international law restricts the use of the right of lien far more than domestic transport law. Therefore, it becomes even more critical to draft a carriage agreement that safeguards the interests of both parties and to complete the consignment note accurately.