As of 11 th January 2003 Brazilian law underwent a major transformation in its civil and commercial legislation with the coming into force of the new Brazilian Civil Code.
Until then Brazilian legal tradition had always distinguished between civil and commercial legislations. This was reflected in the existence of two separate Codes, the Civil one dated 1916 and the old Commercial Code of 1850. The new Code, however, breaking away from this tradition, was designed to unify all general principles and rules in both civil and commercial areas.
On account of that the 1916 Civil Code is now revoked, the same applying to approximately half of the Commercial Code containing the general rules of commerce (its Part I), the dispositions of which are now completely replaced by the new set of rules of the new Civil Code.
The changes are obviously immense and affect many legal matters. Therefore, doubts will inevitably exist and it will be some time until legal doctrine and court precedents help in establishing the prevailing interpretation on controversial issues. Notwithstanding, in the meantime, the maritime community involved with the effective or potential application of the Brazilian law must comply with the new regulations in a safe manner. Thus, our purpose is to provide basic information on the fundamental changes concerning two specific topics of most interest to maritime community: contracts of sea carriage and time limits .
I - CONTRACTS OF SEA CARRIAGE
I.1. S cope of application . The new Civil Code contains a whole chapter dedicated to Contracts of Carriage (articles 730 to 756). It contains some general principles applicable to any kind of carriage and two separate sections on carriage of passengers and of cargo, respectively.
The dispositions contained in the new Code apply to any type of carriage (general cargo, containers, bulk carriage and multimodal transportation), and do not revoke any statute or international treaty on this subject, provided that the provisions of these are not in conflict with those of the Civil Code. In other words, in case of conflict the dispositions of the new Code shall prevail over those of specific statutes or treaties.
From a practical point of view, the most important consequence is that the Multimodal Transportation Act of 1996 remains in force and applies, since the Civil Code has only
two articles on this subject, basically repeating the broad principle already stated in the Multimodal Statute itself that carriers performing this type of contract are joint and severally liable for damages to or losses of cargo.
I.2. Cargo misdescription . One significant change has to do with cargo misdescription by cargo interests. While the new Code expressly states the general principle that cargo interests are responsible for proper and correct description of the goods that will be shipped, on the other hand it also establishes a very short term for the carrier to claim compensation from cargo interests in the case of cargo misdescription. This type of claim must be filed within 120 days and such time limit cannot be extended by any means. The rule is not entirely clear, but it seems to indicate that the 120 day period should count from cargo misdescription itself, i.e., normally the date when the bill of lading is issued.
This means that in the event of damages to a ship or other cargoes on board, or even pure economic losses (such as the delay to deliver other cargoes at destination), the carrier must bring the relevant action for compensation within that period of time, or, otherwise, the claim will be definitively time barred.
This very short legal term will certainly be a problem. Within such a period damages or losses often are not yet assessed in a final manner and sometimes technical investigations are not even completed so as to attribute the damage or loss to cargo misdescription.
We are of the opinion that the starting point of this legal period should be construed in some other manner. Perhaps counting from the date that the carrier becomes aware of cargo misdescription. Or at least from the date when the incident with the misdescribed cargo occurs. But until this aspect is further considered by our legal commentators and Brazilian Courts, it is advisable to try to finish all technical investigations and file the claim for compensation within 120 days from the date that the relevant bill of lading was issued. If the damages or losses are not yet quantified the action may be brought in this way, thus leaving quantification for a later stage.
I.3. Defences . Another point of interest is the defence available to the sea carriers under the Brazilian law.
Article 102 of the old Commercial Code (located in its first part) expressly limited the defences under the Brazilian law to two alternatives: fortuity/force majeure and inherent vice of cargo. Insufficiency/deficiency of packing was deemed equivalent to inherent vice.
This article is now revoked. But, surprisingly, the new Civil Code, in its dispositions on “Contract of Carriage” does not establish the defences allowed to carriers. This point is simply omitted.
As aforementioned, multimodal transportation is regulated by a specific statute, which supplements the Civil Code. This area will not be affected by this omission because the Multimodal Transportation Act has a provision listing the following circumstances as carrier's defences: a) fact or act that may be attributed to the shipper or cargo receiver, which caused the damage or loss; b) inadequacy of package, when this may be attributed to shippers; c) inherent vice of cargo; d) handling, loading, stowing or discharge carried out by the shipper, consignee or receiver, or their agents, which caused the damage or loss; e) fortuity or force majeure.
However, on the other hand, all non-multimodal transportations — all of them not regulated by supplementary statutes — are indeed within the “uncertainty zone” created by such absence of statutory provision in the Civil Code.
Thus, the point in respect of non-multimodal transportations will be to persuade the Courts that the new legal regime has not become stricter and that the defences must still contemplate at least the traditional alternatives of force majeure/fortuity, inherent vice and inadequacy of packing.
The argument for that will be the use of analogy, which is the first means in Brazilian law to sort out legal gaps. And the analogy with other statutes on contracts of carriage does demonstrate that those three defences are generally available to carriers. This can be seen in the two legal regimes that are closest to sea carriage, that is, the Multimodal Transportation Act aforementioned and the Brazilian Code of Aeronautics in its article 264 which exempts the carrier from liability if he proves: a) inherent vice of cargo; b) defective packing; c) act of war or armed conflict (which is a type of force majeure in our law), or; d) act of public authority in relation to cargo (again, another type of force majeure named by us factum principis ).
But we will have to wait and see how the Courts will react to the controversies that will certainly arise from the legal omission.
I.4. Protest. The new Civil Code has not changed the general principle that cargo damage or disappearance of goods at destination must be characterised by means of a proper remark by the terminal at the time of discharge. But it has introduced a new period for protest when the problem is not perceptible at first sight. According to the old rules, the receiver had 5 days to present this protest. But now the period has been extended to 10 days counting from delivery.
I.5. Liability. The Civil Code states that the carrier's liability is limited to the value of cargo appearing in the bill of lading (article 750). Therefore, apparently, any other losses such as warehousing costs and loss of profits would be excluded.
In spite of that, we have reservations on whether or not such a literal interpretation of the disposition will prevail. Brazilian law and jurisprudence are presently living a moment of extreme protection towards consumers of products and services. In this context various judgments on air carriage by our highest Court in the matter of federal law (Superior Tribunal of Justice) have even held that the Code for Protection of Consumers prohibits any type of limitation of liability to the detriment of consumers. In consequence, one can expect much debate on this question of limitation of liability before the Brazilian Courts.
However, one must bear in mind that most bills of lading have no declaration as to the cargo value. What happens then ? The Civil Code has no provision in this respect.
In such circumstance we understand that the principles existing under the old Civil Code are still in operation. Therefore, regarding multimodal transportation , there is a legal limitation in the Multimodal Transportation Act equivalent to 666.67 SDR per package/unit or 2 SDR per kilo of gross weight, whichever is higher. Concerning non-multimodal transportation the Courts have been accepting “per package” limitation clauses inserted in the bills of lading, provided that the resulting compensation is not deemed “derisive” — in which case they are held tantamount to illegal non-compensation clauses, null and void of effect. “Derisive” is clearly an “indeterminate concept” as it is termed under Brazilian law and this broad notion has the deliberate purpose of leaving freedom for the Courts to establish, in each particular case, the amount which is acceptable or not. Considering the existing precedents from the S.T.J., limitations up to 8%-10% of cargo value have been considered “derisive”.
II - TIME LIMITS
II.1. Time extension . Firstly, if in the past it was debatable whether or not parties might extend time limits by mutual agreement, the new Code has definitely put an end to any controversy. In accordance with article 192 time limits established by law cannot be changed by agreement of the parties involved.
As a result, if parties wish to prevent time barring, the usual way to achieve this is by means of a judicial protest, however, with one important limitation: unlike the old Civil Code, the new one limits the number of time extensions to one only .
This restriction of time to pursue rights under the Brazilian law is clearly double-edged towards the shipowners. It can be to owners' advantage in relation to disputes where they are in the position of defendants to actions (for instance, cargo claims). But, conversely, the provision puts them at a disadvantage in case they are in the position of plaintiffs (freight and demurrage disputes, recovery actions, etc.). The shorter the particular time period, the greater the advantage or disadvantage involved, respectively.
II.2. Particular time limits. The new Civil Code has introduced several significant changes in the particular time limits that apply to different types of disputes in maritime law.
II.2.a. Personal Injuries. The time limit concerning personal injuries is traditionally subject, in our law, to the greatest period of all. While in the old Code this period was 20 years, the new Civil Code has reduced it to a half, that is, 10 years. Although this may still be greater than the time limits existing in other jurisdictions, the reduction was indeed substantial. Chiefly the P&I Clubs will benefit from this change as they were obliged to keep records and documents during two decades regarding accidents leading to personal injuries, so as to be in a position to oppose any claims from the victims or their next-of-kin, which not rarely are brought just a few months or even days before the 20 years deadline.
II.2.b. Cargo claims. The Civil Code does not contain any provision concerning time limit for cargo claims arising from contracts of carriage. But a specific statute concerning loading/discharge operations in Brazilian ports (Decree-Law no. 116 of 1967) supplements the new Civil Code, as it is not incompatible with the new regime. And this statute establishes that cargo claims are subject to one-year time bar. Thus, in principle, the situation seems unaltered.
However, it must be noted that irrespective of the regime contained in Brazilian civil legislation , there has been instead a tendency by the Superior Tribunal of Justice to apply the 5 years time limit of the Code of Protection to Consumers to air transportation. Recently, in one precedent, the same understanding was extended to a cargo dispute resulting from a contract of sea carriage . But this was a first precedent, from one of the two Chambers of the S.T.J. dealing with private law, taken by majority of votes only (3 x 2) and, anyway, a final appeal against the decision is still pending. Until we have more precedents repeating the same position so that it becomes the prevailing interpretation of our federal law on the matter (Brazil, be it remembered, is not a judge-made law system), it must be understood that the one year time limit still applies.
II.2.c. Other contractual disputes. The part of the Commercial Code that was revoked contained a number of dispositions on time limits for maritime claims, such as freight, demurrage, collisions, etc. The new Civil Code, however, makes no reference to maritime disputes at all. Instead, all those claims seem to fall under the general pattern of “claims for civil compensation” referred to in article 206, § 3, item V, and the applicable time limit is now three years.
II.3. Rules of transition. Article 2.028 of the new Civil Code sets out an important rule of transition between the old system of time limits and the new one. The old time limits apply when: a) these were reduced by the new Civil Code, and, additionally; b) in January 2003 (date when the Civil Code came into force) more than half of the particular time limit under the old regime had already elapsed. Otherwise, the new time limits apply to all cases.
In view of the coming into force of the new Civil Code, old procedures, strategies and legal schemes must be readjusted accordingly so as to comply with the new rules. This broad view intends to assist shipowners, charterers, P&I Clubs and foreign maritime lawyers to be on the safe side when making their decisions. Future issues of this newsletter will update this matter as developments come up, mainly from the Brazilian Courts.