Supreme Court provides certainty on recoverability of excise duty under the CMR

JTI POLSKA Sp. Z o.o. and others (Respondents) v Jakubowski and others (Appellants) [14.06.23]

The Supreme Court in JTI POLSKA v Jakubowski has today put the question of the recoverability of excise duty under the CMR beyond any doubt and reintroduced certainty as to the English Courts’ position on this point. Moreover, it has provided useful guidance as to how to determine what additional “charges” can be recovered from a carrier under Article 23.4 of the CMR, in addition to the limits of liability.

Excise duty can form a very substantial proportion of the loss on goods such as tobacco and alcohol. Indeed, duty on a container full of cigarettes may run into the millions of Euros. When such goods are carried across Europe, the excise duty may be suspended (according to the relevant tax legislation) until the goods reach the point at which they are to be released into distribution.

If, however, an “irregularity” occurs in transit and the goods are considered to be released into circulation, then the duty may become payable at the place at which the irregularity occurred. This demand for duty represents a very substantial loss for the owner of the cargo.

Background to legal position

Article 23 of the CMR sets out the damages recoverable in the event of a claim for loss or damage to goods. Article 23.3 limits the carrier’s liability to 8.33 SDRs (Special Drawing Rights of the IMF) per kilogram of the goods lost or damaged.

Article 23.4 allows the cargo owner to recover certain further losses in addition to the limit of liability. It provides:

In addition, the carriage charges, customs duties and other charges incurred in respect of the carriage of the goods shall be refunded in full in case of total loss and in proportion to the loss sustained in case of partial loss, but no further damages shall be payable.

In James Buchanan & Co. Ltd v Babco Forwarding & Shipping (UK) Ltd [1978], the House of Lords considered the words “other charges incurred in respect of the carriage” in the context of excise duty which had been suspended during carriage. 

The House of Lords adopted what is now considered to be the “wide” interpretation of Article 23.4. By a majority of three to two, the Law Lords held that excise duty was a charge incurred in respect of the carriage.

International criticism - and support

The Buchanan decision has been subject to academic criticism and comment from the outset. There have been concerns that the wide approach could result in claims for all manner of consequential losses, thereby opening the floodgates to losses which would otherwise be considered too remote as a matter of English law.

A number of significant jurisdictions have decided that a narrower interpretation should be adopted, including Germany, Holland, and more recently, Sweden. This narrower interpretation allows a recovery of only those charges which would have been incurred if the carriage had been properly performed. 

However, despite the criticism, the decision has found support in other, equally significant, jurisdictions. These include Denmark, Italy and the Czech Republic where the wide approach adopted in the Buchanan decision has also been adopted.

In England, a number of academics and practitioners have expressed concerns about the wide interpretation and this criticism found further support in the Court of Appeal decision of Sandeman Coprimar S.A. V. Transitos Y Transportes Integrales S.L. and Others [2003].  Lord Phillips MR said of the Buchanan decision:

For our part we do not consider that the decision should be applied any more widely by the courts of this country than respect for the doctrine of precedent requires.

The JTI Polska decision

The Supreme Court, in the JTI Polska decision, did not share the concerns of the critics of Buchanan that the wide approach might allow all manner of consequential losses to be recovered. The Supreme Court considered that the words in Article 23.4 are self-limiting as the Article only allows recovery of “charges incurred in respect of the carriage”. 

Thus, the loss in the Sandeman decision (a liability under a guarantee to tax authorities) was not a recoverable “charge”. Similarly, the Supreme Court indicated that liability for liquidated damages will also fall outside the meaning of the word “charge” and, as such, would not be recoverable under Article 23.4.

However, the Supreme Court considered that return carriage charges and survey costs (which have been held to be recoverable in earlier decisions) were reasonably foreseeable losses which should properly fall on the carrier.


The decision in JTI Polska, therefore, goes further than simply endorsing the Buchanan decision and upholding the earlier position. It provides some useful clarification as to what the Supreme Court does not consider to be a “charge” and how the wide interpretation of Article 23.4 can be applied in a commercial and limited context.

However, even with the benefit of this explanation, the wide interpretation will likely give rise to some cases which are difficult to categorise. For example, when dutiable goods are moved with the duty suspended, the relevant tax authorities often require a guarantee to be in place for the duty. Does the recoverability of that duty from the carrier under Article 23.4 depend on whether the tax authorities demand a payment of duty or pursue the payment under the guarantee?

Notwithstanding such difficulties, the JTI Polska decision has reintroduced certainty on the English Courts’ approach to Article 23.4. The Supreme Court has made it very clear that it is the Sandeman decision which should be distinguished and the comments criticising Buchanan which should be disregarded. Whilst there will, no doubt, continue to be criticism of the wide approach adopted by the House of Lords in Buchanan and endorsed by the Supreme Court in JTI Polska, the approach is clearly one which can be supported by the wording of the Convention and an impressive body of judicial consideration.

Chris Chatfield and Sara Askew for Kennedys represented the successful respondent. Counsel for the successful respondents were Stewart Buckingham KC and Ben Gardner of Quadrant Chambers.

A more detailed analysis of this decision will follow shortly.

Related item: One to watch – Supreme Court to consider 45 year old judgment on payment of excise duty under the CMR

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