Facts: on 15.07.2015, the Contract for Crab Delivery was concluded between CJSC ‘Pacific Marine’ (the Seller; Russia) and NIHONKAI KAISAN S.A. (the Buyer; Panama). ‘CFR’ was defined as the term of delivery.

On 20.12.2015, NIHONKAI KAISAN S.A. (the Assignor) transferred its rights from the Contract to SL Marine Co., Ltd. (the Assignee; Republic of Korea) to provide its performance of the Restructuring of Debts Agreement dated 30.10.2015 (the debt had been arisen under the Agency Agreement before).

On 22.12.2015, an Agreement for the Carriage of Goods was concluded between LLC ‘DV Akvaresours’ (the Carrier; Russia) and CJSC ‘Pacific Marine’ (the Shipper). The cargo was 23’907 kg of live opilio snow crab in vats with sea water. The port of unloading was specified as the port of Donghae (Republic of Korea).

On 21.12.2015, the vessel ‘Rapana’ (IMO: 8038247) accepted for carriage a cargo of live opilio snow crab, in the amount of 23,907 kg. The relevant on-board Bill of landing was issued.

On 10.12.2013, a Time Charter Agreement was concluded between LLC ‘Ostrov’ (the Owner; Russia) and LLC ‘DV Aquaresours’ (the Charterer). On the same day the Owner delivered the fishing vessel ‘Rapana’ up to the Charterer with crew, and sign the relevant Delivery Act.

On 24.12.2015, by the joint decision of I.P. Vishnevskiy – the captain of the vessel ‘Rapana’ (an employee of LLC ‘Ostrov’) and V.A. Kalashnikov – the director of LLC ‘Ostrov’, the vessel’s course was changed and the cargo was unloaded in the port of Rajin (DPRK). Subsequently, the Russian criminal court found them both guilty of the crimes of organisation of embezzlement and misappropriation of entrusted private property.

On 26.12.2015 LLC ‘DV Akvaresours’ (the Charterer) returned the vessel to LLC ‘Ostrov’ (the Owner) under the Return Act.

Due to failure to accept the cargo SL Marine Co., Ltd. filed a lawsuit to the State Commercial (‘Arbitrazhny’) Court of the Primorsky Krai (hereinbefore and after refererred to as the ‘AS PK’) against LLC ‘Ostrov’ as the actual carrier for recovery of damages in the amount of the price of the lost cargo (US dollars 215’163). The case number A51-10555/2016 was assigned; and both LLC ‘Akvaresurs’ and CJSC ‘Pacific Marine’ were brought to the proceedings as a non-party intervener on the defendant’s side.

Rulings of courts: on 20.05.2016 and 27.05.2016, the AS PK refused SL Marine Co, Ltd. to impose a writ of maritime attachment and several other restrictive measures regarding the vessel ‘Rapana’. On 25.07.2016 these Rulings were upheld by the Fifth State Commercial (‘Arbitrazhny’) Court of Appeal (hereinbefore and after refererred to as the ‘5 AAS’).

On 12.09.2017, the AS PK issued the Decision to dismiss the lawsuit in full.

The Decision was upheld, and the Claimant’s complaints were dismissed by the Ruling of the 5 AAS dated 02.02.2018 and by the Ruling of the State Commercial (‘Arbitrazhny’) Court of the Far Eastern Circuit (hereinbefore and after refererred to as the ‘AS DVO’) dated 15.06.2018.

On 10.07.2020, the AS PK cancelled the Decision of 12.09.2017 due to newly discovered circumstances (there were an entry into force of a criminal court sentence against the vessel’s captain and the Owner’s director).

On 09.02.2021, the AS PK issued the Decision to dismiss the lawsuit anew.

The Decision of 09.02.2021 was upheld and the Claimant’s complaints were dismissed by the Ruling of the 5 AAS dated 20.04.2021 and by the Ruling of the AS DVO dated 23.07.2021.

To substantiate their position, the courts have referred to the following:

1) there was no contractual legal relationship between SL Marine Co., Ltd. and LLC ‘Ostrov’ and, therefore, no contractual claims could be brought;

2) LLC ‘Ostrov’ did not actually operate the vessel ‘Rapana’ as of the dates of the disputed transportation, since it was provided to LLC ‘DV Akvaresurs’ under a time charter;

3) LLC ‘Ostrov’ is not liable for unlawful actions of its hired employees, since they went beyond their employment duties, they embezzled the property intrusted and they didn’t shared it with the company. Thus, there are no conditions for recovery of damages from LLC ‘Ostrov’;

4) SL Marine Co., Ltd. as the Assignee is not barred from claiming the appropriate compensation from the Assignor who assigned it the rights to the cargo, because the Assignee has not acquired the ownership of the goods (and therefore has not suffered any losses due to non-delivery). Based on the facts of the case as they has been indicated by the courts, we reckon this argument as highly controversial and would not consider it in this comment.

Comment: to resolve this case it is necessary (a) to provide legal qualification of the choice of the remedy, (b) to determine the applicability of the rules on the actual carrier, (c) to determine the actual user of the vessel, and (d) to specify the grounds of liability of the employer for unlawful behaviour of the employees hired by him.

As an initial matter, let us notice the choice of the remedy. The Buyer (the Consignee) of goods sued the Owner of the vessel as the actual carrier of the purchased goods, in the absence of a formalized contract of carriage and with a disputable (at least) position on whether it is possible to consider the Owner of the vessel as the actual carrier. We are of the opinion that the choice of such remedy might be caused by the fact that the Owner has an asset to satisfy the violated interest of the Claimant from the cost of it (the so-called ‘Deep Pocket Jurisprudence’), and the Claimant applied to impose a writ of maritime attachment and several other restrictive measures regarding the vessel during the proceedings, but the courts dismissed such applications.

We have searched in the Russian Commercial Case File Database (kad.arbitr.ru) but we haven’t found any records on claims of the Buyer against the Seller in connection with non-delivery or against the Carrier in connection with the loss of cargo (pleading a statutory rules of Articles 166 and 173 of the MSC RF, as well as Article 403 of the Civil Code of the Russian Federation (hereinafter refererred to as the ‘CC RF’), if the consignee assumes that the shipowner was involved in the performance of the contract of carriage of the goods by sea). In this regard, we suppose that claims in the relevant Contract and Agreement might have been filed in another jurisdiction or in an arbitration court, but we have found no data on the recognition of such decisions and/or their enforcement in the RCCFD either.

Let’s notice that the choice of the lawsuit by the claimant is not predetermining for the State Commercial (‘Arbitrazhny’) Court in case. According to Articles 6, 133, 168 and 170 of the Commercial Procedure Code of the Russian Federation and the practice of the Supreme Court of the Russian Federation a state commercial (‘Arbitrazhny’) court is not bound by legal qualification of the filed claims (disputable legal relationship as it determined by a claimant), but a court must consider the claim proceeding from the subject matter and grounds (facts of the case), determining on its own initiative the scope of circumstances relevant to the dispute and to be researched, tested and established on the case, and to decide which rules of law are to be applied in the legal relationship in the case.

As a consequence of the mentioned above, the courts when considering cases could operate both on the norms of compensation for damages based on the contract law and as result of torts (non-contractual relations), having established the absence of relations from the agreement of carriage of goods by sea or sub-contract, etc. In our opinion, the reference to the absence of a contract should not prejudice the dismiss of a claim.

We consider that the Owner of the vessel cannot be called an actual carrier / performing party in this case (both in the context of Article 173 of the MSC RF and of Article 10 of the Hamburg Rules (the UN Convention on the Carriage of Goods by Sea, 1978 (Hamburg; it is not applicable in the case but we provide it here in the comparative law manner) because there is no contractual legal relationship between the Owner and the Carrier under which the Carrier could have given orders to the Owner or could supervise (control) his conduct.

In addition, Articles 166 and 173 of the MSC RF when read literally and in accordance with the general rule of Article 403 of the CC RF, establish only the carrier’s liability for the actions of persons involved by him to perform an obligation (including his subcontractors, agents or employees – this is culpa in eligendo doctrine, which provides for the debtor or creditor to bear the risk of dуfault of the person involved in the performance of obligations), but not the possibility of contractual claims directly to these persons bypassing the carrier.

Within time-charter relations, the orders of the charterer relating to the commercial operation of the vessel shall be binding on the master and other members of the vessel’s crew (§ 2 of Article 206 of the CMR RF). Thus, despite the fact that the master of the vessel and the Owner’s director conspired and misappropriated other’s entrusted property, the change of the discharge port and release of the cargo to a entity other than the Consignee specified in the Bill of lading were carried out in violation of the Charterer’s orders. Deviation from his orders itself mean neither termination of the Time Charter Agreement nor termination of the Charterer’s use of the vessel.

Finally, the culpa in eligendo doctrine conventionally does not include the liability of the employer for the behaviour of the employees hired by him. This is a general rule that employees, irrespective of the position they hold (in this case the director of the company and the master of the vessel), have no independent legal capacity for the purposes of civil transactions and are fully absorbed by the employer in relations with third parties. The actions of the debtor’s employees under his authority are deemed to be the actions of the debtor himself.

The employer (in this case, the Owner of the vessel) must exercise proper control over his employees and be responsible for this (the culpa in vigilando doctrine). Based on the latter, Russian court commercial practice cites the same Articles 402 and 1068 of the CC RF and is divided into two different ways of resolving the issue of employer’s liability for unlawful behaviour of his employees:

1) the employer’s liability is excluded if he proves (or, which is also likely, if the contrary is not proved by the claimant) that the damage is not related at all or is not related directly to the performance of labour (service, official) duties, the absence of benefit to the employer and the allocation of the benefit exclusively to the property of the employee. Considering these courts refer to the absence of a causal link between the damage and the actions of the employer, to the ultra vires and outside of the job description format of the behaviour of the direct tortfeasor and, therefore, to the independent legal capacity of the tortfeasor. Some of Russian legal publications also include the opinion (which we cannot support) that the recovery of damages should be limited to cases and the amount of possible recourse (which is largely excluded in employment relations);

2) the employer’s liability arises if the employee’s opportunity to commit an unlawful act was due to his presence at the workplace and performance of his job function (indeed, it’s unlikely that any labour contract could prescribe an obligation for the employee to commit an unlawful act or to cause a harm to the health or damage to the property of a third party), regardless of how the employee disposed of the benefit received as a result of the such infliction of a contractual or tortious losses, because these actions are beyond the control of the injured person.

In percentage terms, the first way of solving the stated issues is clearly dominant in the Russian courts.

At the same time, we believe that the discretion in these disputes should be eliminated to set a uniform and consistent judicial practice. Making of additions to the relevant § 9 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of 26.01.2010 No. 1 ‘On the application by courts of civil legislation governing relations on obligations resulting from harm caused to the life or health of a citizen’ may be a way to solve the problem. ■