Highway to Hull

Congestion and other problems in the South East have seen more companies basing their operations in Yorkshire and Humberside as the region becomes a focal point for logistics expertise. Dominic Ward reports

While globalisation has made logistics of crucial importance to the UK economy, congestion in the South East has meant that Yorkshire and the Humberside region have become more important to the sector than ever.

Despite recent major planning inquiries into new container terminals at Dibden Bay in Hampshire, Harwich Haven in Essex and the Thames Gateway, road congestion in the South East has led major retailers, including Ikea and B&Q, to move large parts of their import operation to Yorkshire and Humberside; while others, including supermarket chain Tesco, are in the process of doing so.

A further sign is the development of the new Logistics Institute at the University of Hull. The new venture, the first in England, involves a combined investment of £20m, including grant aid of £9m each from the Yorkshire Forward Regional Development Agency, a funding programme for small and medium-sized enterprises (SMEs), and the European Regional Development Fund.

The institute is a cross-disciplinary initiative led by the business school, but undertaken in conjunction with the departments of engineering and law. Its advisory board includes lawyers from two Yorkshire-based shipping and logistics firms. The institute’s launch conference took place in June, organised in conjunction with the Humber Trade Zone initiative – a partnership between Yorkshire Forward, the four unitary authorities which make up the Humber sub-region, and a wide range of private sector stakeholders.

A seminar programme commenced this autumn and will continue through to the spring. The programme covers a variety of topics ranging from management training through to protecting commercial data, marketing logistics, supply chain relationships and the movement of dangerous goods.

Although the institute will have national and international standing, the fact that it is located in Hull on the Humber Estuary is unsurprising: the Humber is the UK’s busiest estuary, accounting for nearly 20 per cent of the UK’s seaborne trade, and as well as in the UK generally, the theories researched and expounded by the institute will be put into practice directly on the institute’s doorstep.

CMR convention
The legal aspects of the development of logistics that accompany these are many and varied. They involve matters as diverse as planning and environmental law in relation to infrastructure projects such as new container terminals and roads, as well as construction and commercial property work in connection with the development of warehouses and distribution centres.

The preparation of commercial agreements between logistics suppliers and users, meanwhile, deals not only with the terms upon which companies receive, store and distribute goods, but also commonly feature licence agreements for software products dealing with stock control and customer information.

Once the goods are stored and distributed, legal disputes predictably emerge relating to the carriage of goods, delay in getting them there and, of course, the perennial problem of non-payment of the logistics provider’s charges.

Disputes often involve cross-border litigation, but particularly so if elements of the logistics chain have been subcontracted to other service providers, eg hauliers, for the transport leg. In such circumstances further complications arise as a result of dislocation of terms.

A common instance of this is when the main logistics contractor operates under a bespoke commercial agreement with the customer providing for English law and jurisdiction, while the haulier subcontractor operates under terms and conditions that incorporate the Convention on the Contract for the International Carriage of Goods by Road (the CMR convention).

The CMR convention can exclude or limit the carrier’s liability and contains provisions relating to the appropriate jurisdiction in the event of a dispute. The 12-month time limit for bringing claims is also much shorter than that contained in a normal commercial agreement. The subcontractor might even operate pursuant to institutional conditions such as British International Freight Association terms, which set an even tighter nine-month time limit.

Another major area for disputes is when a service provider subcontracts some of the haulage to a haulage contractor, the vehicles are late and, as a result, the customer deducts funds from the provider as it is in breach of the service level agreement.

When the service provider then tries to indemnify itself against the haulier, it discovers, to its frustration, that the haulier’s terms and conditions contain an exclusion for delay claims. The provider says that the haulier’s terms and conditions were not incorporated, and in any event the exclusion is unreasonable. The haulier, however, argues the opposite. In cases involving international haulage, the situation is further complicated by disagreement over which jurisdiction should then deal with the dispute.

A resulting development has been the trend for transport companies responsible for one link in the chain to become involved in other aspects of the logistics chain. Cobelfret, the Belgian ferry company, has traditionally operated ferries carrying trailers and other cargo across the North Sea and landing at Hull. As an increasing part of its business involved moving cars for a car manufacturer on their way from the factory to dealers, the company set up a car-finishing plant of its own in Belgium last year so it can now clean the cars up, fit ‘dealer-fitted extras’ itself, then deliver the vehicles directly to customers. It claims to now be one of the largest dealers in Europe.

Agreement networks
However, it is not just litigation that can be complicated. A typical project might involve the preparation of agreements to build and operate a brand new container terminal. This necessitates the creation of a network of legal agreements, beginning with the construction contract for the building of the terminal and the agreement for lease and draft lease for the occupation of the terminal by the operator.

In addition, operating agreements detail matters such as the container throughput of the terminal, the charges to be paid per unit handled and the results of various events occurring that might affect the ability of the operator to manage the terminal, ranging from flooding, leaks from containers, failure of equipment and compliance with the International Ship and Port Facility Security Code. As a consequence, this type of work requires input from a range of legal disciplines beyond logistics alone, including construction, environmental, commercial property and shipping.

With logistics of growing importance to the UK economy, and with the Yorkshire and Humberside region growing yet more important to logistics, the challenge faced by the region’s lawyers is greater than ever.

Dominic Ward is head of the dry unit in Andrew M Jackson’s shipping department