Liability of the principal shipper to the actual carrier

Analysis of Supreme Court Ruling 699/2020, Civil Chamber, of 29 December 2020, declaring the main shipper liable to the actual carrier even though the latter had paid the price of the transport to the contractual carrier.

The Supreme Court, in Ruling 699/2020, Civil Chamber, of 29 December 2020, has resolved a complicated dispute that has a major impact on the logistics and transport sector.

The conflict in question arises between a company (main shipper) that orders transport services from another company (contractual carrier) which in turn subcontracts the transport services to another company (actual carrier). In the case in question, the actual carrier brings a direct claim action against the main shipper, based on the 6th Additional Provision of Law 9/2013, of 4 July, amending Law 16/1987, on the organisation of land transport, as the latter did not receive payment for the services provided by the contractual carrier, which is in voluntary insolvency proceedings.

It should be noted that, in the insolvency proceedings of the contractual carrier, the main shipper deposited all the amounts due for the contracted transport.

The plaintiff (main carrier) bases its claim on the direct action granted by the 6th Additional Provision of Law 9/2013, of 4 July, which establishes:

“Direct action against the principal shipper in cases of intermediation. In cases of intermediation in the contracting of land transport, the carrier who has actually carried out the transport will have direct action for the unpaid part, against the main shipper and all those who, where appropriate, have preceded him in the chain of subcontracting, in the event of non-payment of the price of the transport by the person who has contracted it, except in the case provided for in article 227.8 of the revised text of the Public Sector Contracts Act, approved by Royal Legislative Decree 3/2011, of 14 November”

At first instance, the Court dismissed the claim as it considered that the defendant had paid the price of the transport, so that double payment was not possible, and that it was not possible to exercise the direct action when the contractual carrier was in insolvency proceedings. Subsequently, on appeal, the Provincial Court upheld the plaintiff’s claims, considering that the direct action brought is immune to the payments of the main shipper, as well as to the insolvency situation of the contractual carrier.

In cassation, the main carrier alleges that the direct action established in Additional Provision 6 should not have been admitted for processing as it was filed once the insolvency of the contractual carrier had been declared, and therefore infringes article 136.1.3 of Royal Legislative Decree 1/2020, of 5 May, which approves the revised text of the Insolvency Act ” 1. From the declaration of bankruptcy and until the date of effectiveness of the agreement or, if the agreement has not been approved or the approved agreement has not been complied with, until the conclusion of the proceedings… 3. The judges of first instance shall not admit for processing any claims filed in which the direct action recognised for those who put their labour and materials into a work adjusted by the contractor in an unlawful manner is exercised against the owner of the work”

The Supreme Court rejects the arguments of the main carrier on the following grounds:

• The direct action referred to in the Insolvency Act refers to that contained in article 1597 of the Civil Code (works contract) “Those who put their labour and materials into a work adjusted by the contractor have no action against the owner of the work but up to the amount owed to the latter when the claim is made” and does not cover the direct action of the 6th Additional Provision of Law 9/2013, of 4 July, exercised by the actual carrier. The exercise of the direct action of Article 1597 of the Civil Code by the subcontractor once the insolvency proceedings of the contractor have been declared would yield in favour of the active mass of the insolvency proceedings of the latter.
• The protection provided by Article 1597 of the Civil Code is to facilitate the collection of the debt, but it does not grant the privilege or preference enjoyed by the aforementioned Additional Provision 6. While with article 1597 of the Civil Code, the main shipper is only liable up to the amount owed to the contractual carrier, with the regime of the 6th Additional Provision the direct action of the actual carrier does not operate such a limitation, that is, it can be exercised regardless of whether or not the main shipper has paid the carriage to the contractual carrier, without prejudice to a subsequent right of recourse against the contractual carrier for the return of what has been paid to the actual carrier.
• The principal shipper is directly jointly and severally liable for payment against the claim of the actual carrier, and is so because it is so provided by law, regardless of what is in the contract between the principal shipper and the contract carrier.
• The direct action established in the 6th Additional Provision of Law 9/2013 of 4 July has a greater scope than the content of article 1597 of the Civil Code, because, among other things, it is outside the insolvency proceedings of the contractual carrier.

With this Ruling, the 6th Additional Provision of Law 9/2013, of 4 July, stands as a legal weapon in favour of subcontractors, who enjoy total immunity in the situation of insolvency before the contractual carrier, and regardless of whether or not the main shipper has paid the transport services to the contractual carrier. Likewise, the aforementioned 6th Additional Provision makes the main shipper a joint and several guarantor against the actual carrier.

The Ruling has come at a time when the logistics sector and the transport of goods are major players in the crisis caused by COVID-19, so that the main shippers will have to be more cautious when contracting with the contractual carrier, and to a certain extent, will have to adopt measures that imply a series of additional guarantees that ensure the fulfilment of the pecuniary obligations between the contractual carrier and the actual carrier, or prohibit subcontracting.