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Foreign Liability

24th July 2008, Page 20
24th July 2008
Page 20
Page 21
Page 20, 24th July 2008 — Foreign Liability
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Which of the following most accurately describes the problem?

Subbing out work under cabotage rules can save on your costs, but who pays up if the foreign vehicle is not roadworthy or a collision occurs?

Words: Chris Tindall

OPERATORS USING cabotage rules to offload UK domestic work on to foreign hauliers and save money are being warned they are setting themselves up for "astronomical" liability costs, unless they do their homework first.

There's been a rise in online freight exchanges for companies wanting to reduce empty running and sub-contract work to minimise costs. That, coupled with escalating fuel prices, has led to using Continental hauliers being seen as making good business sense.

But transport lawyers say it is difficult to bring foreign-based haulage firms before a UK court if they are involved in a incident while working on your behalf. It is very likely your customer will pursue you instead.

And alarmingly. due to a legislative loophole, foreign companies remain outside of the scope of the Corporate Manslaughter Act. If they are involved in a death on UK roads, you could find yourself facing manslaughter charges.

Hauliers carrying out cabotage journeys in this country operate under the conditions of carriage used by the UK operator, which often are the Road Haulage Association's own guidelines. These limit the liability of the haulier to any claim made against it, and prevents it from having to pay out excessive

6.1 amounts to the customer in the event of a collision. However, if there is an incident, this liability comes back to the UK haulier which agreed the delivery with the customer, rather than the foreign sub-contractor — not least because of the complexities involved in chasing them for money. In addition, if you contract out work to a company without checking whether they are maintaining their vehicles adequately or are making drivers work 20-hour days. limited liability flies out the window,

Lawyer Ian Jones of Backhouse Jones, explains: "If you have been utterly reckless and hired someone without caring if they are running legally. liability could be astronomical if the goods are expensive. And you could spend thousands on lawyers to defend it."

Roadworthiness

The scale of the problem is revealed in Vosa's latest effectiveness report. It shows that. during 2006/07. the roadworthiness prohibition rate for foreign vehicles was 22% —two and a half times more than the figure for UK vehicles. at 8.9"'.. It has rocketed since the previous survey in 2004/05, which put the figure for overseas vehicles at 8.6%.

Jones says the solution is to go back to basics before subbing out any work. Ask yourself what you know about the company: how effective its maintenance

system is: how old its vehicles are: how many hours its drivers do in a week: and what training they've received in the past 12 months.

Jones says: "Go in with your eyes open. Do your own risk assessments —and go ahead if it's good business sense. But imagine an operator in the dock. The prosecutor will ask why you used a Polish company. You can give a million reasons but the prosecutor will argue you did it to save on costs. It's a very bad jury point. As easyJet's boss Stelios [Haji-loannou] puts it, 'If you think health and safety are expensive, try an accident.' He has a point."

Arguably of more concern to UK operators is their exposure to corporate manslaughter charges. Backhouse Jones lawyer Steven Meyerhoff says thal, due to an anomaly in the legislation, foreign hauliers could get off scotfree following a collision: "Corporate manslaughterdoesn'tcross borders." he explains. ''The reality is this. You contract out to a haulier from Poland who comes with a full tank of fuel, collides with some one and causes

an injury. if the regulatoryauthor

ity can't get the foreign company to pay, you will. You are the smoking gun."

The difficulty with carrying out checks on companies is that cabotage, for now at least, is supposedly ad-hoc. So hauliers often use foreign companies on a 'last-minute' basis and might not have the time to thoroughly investigate the credentials of their subbie. Jones sympathises, but adds: "Get preferred suppliers — have them checked out. That should be enough to satisfy you, should there be an incident.''

Gary Smith is co-founder of Teesportbased supply chain business Global Transport Logistics. He is in no doubt over who he would pursue il his goods were damaged: ''It will end up with the guy we have employed," he says. -If we ask a haulier to do some work and

he subs it out. that's his risk.

"It makes sense from an insurance point of view and also continuity; we very rarely see the same foreign haulier twice." Insurance is another which could trip up UK firms. According to Backhouse Jones, cover providers are increasingly looking to avoid payouts if they believe the conditions set out in their small print have not been met.

Cover

"II you are running goods from A to B. you sub and you think you are covered, if the Polish vehicle isn't maintained properly. the small print could state you have not complied with the insurance conditions," says Jones. ''The insurer could then withdraw indemnity and what would have cost £10000 might now set you back E150,000.

"Such consequences must be borne in mind if you are making savings, because that saving could cost you a lot of money."

Ultimately Jones and Alleyerhoff point Out they are not trying to prevent UK hauliers from exploiting cabotage rules, As long as your checks are adequate and prove positive, there's no reason why you shouldn't make the most of the work, particularly in these times of shrinking margins.

But the lawyers emphasise the importance of identifying the worst potential outcome and then preparing for it. CWIRs and conditions of carriage limit liability, but only if you've put in the ground work beforehand.

Jones says: -When any clients say to me theirs is a handshake business, it makes my skin crawl. Get a contract legally drawn up: it's a level of insulation. If it's on the back of a lag packet you might not sleep as well at night, and it

could come back to haunt you."

Cabotage legal feature.


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