Taking the silk rail-road: rail freight on track from China to the UK?

The carriage of goods between China and the UK offers some interesting legal challenges which should be addressed before each shipment of freight starts rolling.

The news has been buzzing with stories of a new rail link opening between China and the UK. Discussion on innovations in rail carriage and concerns about the carbon cost of road, sea and air carriage have accompanied the reports.

The carriage of goods between China and the UK offers some interesting legal challenges which should be addressed before each shipment of freight starts rolling. The parties involved need to consider the basis on which they will be contracting and the documentation which they intend to issue for the various legs of the journey.

(Not) Far From the Mad-ding Crowd

The first train to follow the rail link arrived in Barking on 18 January 2017 and we expect to see an increase in freight going in both directions.

The rail service is intended to be significantly cheaper, quicker, greener, more convenient and more reliable than carriage by air and sea. The whole journey takes around 17 days to complete and covers some 12,000 km. The attraction for forwarders and shippers is pretty clear.

In order to complete their journey, goods will need to:

  • Cross several states
  • Change rail gauge at least twice
  • Be subject to the legal regimes of various countries.

With the railroad running through China, Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France — before arriving in the UK — there exists a high possibility for the meeting of conflicting legal regimes.

With limited Chinese and UK rail hubs served by the route, there will almost inevitably be some road haulage involved somewhere along the line. The services themselves are still limited in number. It will take some time before traditional attitudes change and significant amounts of freight transfer across to rail.

As such, many forwarders are arranging for containers to be transported to a European rail hub (such as those in Poland) and then distributed to various destinations throughout Europe. This final distribution may occur by rail, but is often performed by road. It may even involve air or sea carriage.

Which regimes apply?

International rail freight is covered by a number of international conventions, two of which are of particular importance here.

The Intergovernmental Organisation for International Carriage by Rail (OTIF) introduced the Convention concerning International Carriage by Rail (COTIF) with the Uniform Rules Concerning the Contract of International Carriage of Goods by Rail (CIM) appendixed thereto. This applies to rail freight in Europe (and some other states). The CIM has been in place for a considerable period of time and is reasonably well known to those involved in carriage of goods throughout Europe. Although it has not been subject to much judicial consideration in England, similar regimes (such as the CMR) have been scrutinised in some considerable detail.

Between Eastern Europe and Asia, on the other hand, the legal system led by the Organisation for Co-operation between Railways (OSJD) has developed the SMGS Agreement for international carriage of goods by rail. This does not appear to have much judicial consideration in the states to which it applies. Some states are subject to both regimes.

Other regimes

The goods moving along the new rail route will frequently be subject to some other form of transport. Often, this will consist of road carriage on either a domestic or even an international basis. Carriers performing the domestic road leg will seek to rely upon their standard trading terms — often incorporating more restrictive limits of liability and time bar regimes. Both cargo owners and forwarders will need to be aware of the risk of such standard terms applying to legs of the carriage process.

In many instances, it will be convenient to move the goods by rail into Eastern Europe and then by road to its final destination in the UK. In such circumstances, there will be an international carriage of goods by road. This may be subject to the CMR (see Quantum Corporation v Plane Trucking Ltd [2002]) even if the cargo owner does not appreciate that its goods are moving by anything other than rail. Even this, however, depends on the interpretation of the CMR (and indeed the CIM) applied by the courts asked to decide the matter. Many European courts do not agree with the English court’s view of a contract for the carriage of goods by road.

Comment

The carriage of goods between China and the UK offers some interesting challenges and some substantial potential benefits to carriers, forwarders and to cargo owners.

Forum shopping will also play a part in any claims which follow. With so many different states involved, each with different regimes and interpretations of the applicable conventions, parties must be alive to the advantages offered by different jurisdictions.

If you are party to international trade including trans-continental rail freight, we are ready to assist you on the practical and legal matters which might arise and can advise you and your business regarding the movement of goods along the world’s largest railroad.

Read other items in the Marine Brief - September 2017