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Scopelitis International News - November 2019

by Braden K. Core, Jacob R. Fisher, Nathaniel G. Saylor

November 22, 2019

Scopelitis International News - November 2019

Scopelitis has a long history of assisting transportation and logistics clients in an array of international matters including regulatory compliance, licensing, air cargo security, legal due diligence, commercial transactions, and freight charge and cargo disputes. Members of the Firm’s international practice have experience handling transactions involving more than 100 countries and have the ability to call upon nearly 300 legal and accounting firms around the world.
 
For more information on the latest in international transportation law, contact a member of Scopelitis’ International Transportation & Logistics Law Team.

Sharper Focus on Shipping Sanctions

U.S. authorities are ramping up their focus on shipping companies’ possible violations of sanctions programs. Reuters reports that, at a recent event in London, David Peyman, with the U.S. Bureau of Economic and Business Affairs, said ships are a “key artery to evade sanctions” and that shipping lines must do more to ensure they don’t run afoul of U.S. sanctions programs. He made clear this includes increased investment in due diligence on customers and more comprehensive compliance programs. Peyman’s comments come on the heels of the U.S. sanctions on COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co., and related entities in late September. These entities were added to the Specially Designated Nationals and Blocked Persons List by the Office of Foreign Asset Controls for their alleged involvement in transporting Iranian oil.
 
Peyman strongly suggested that U.S. transportation companies and their subsidiaries beef up investment in business due diligence and take proactive measures to avoid being caught up in sanctions breaches given the rapidly evolving compliance environment.

ICAO Increases Liability Limit Under Montreal Convention

The International Civil Aviation Organization (ICAO) recently conducted a review of the limit-of-liability provisions of the Montreal Convention, which sets limits of liability concerning loss or damage to baggage and cargo. Instead of using a national currency, the Montreal Convention uses a unit called a Special Drawing Right (SDR), which is essentially a unit consisting of a mix of currencies which was created by the International Monetary Fund. The value of an SDR fluctuates with the value of the underlying currencies. The current limit of liability for cargo damage is 19 SDRs per kilogram and was set in 2009. Effective December 28, 2019, it will increase the limit to 22 SDRs per kilogram. 1 SDR is equivalent to about $1.37. Thus, the new limit will increase from about $26.00 per kilogram to about $30.00 per kilogram.

International forwarders should ensure that their service terms and conditions or other contracts are updated to account for this change to avoid any gaps in cargo loss or damage liability.

Assessing the Risk of Anti-corruption Violations

Compliance officers often view countries with a documented history of corruption, such as those appearing on the Transparency International’s Corruption Perceptions Index, as the main focus of their international anti-corruption compliance programs. However, the “Doing Business 2020 Report” from World Bank Group offers a more comprehensive picture that compliance officers can use to make better-informed risk assessments. The report compares business regulation in 190 economies and charts them all on an “ease of doing business” index. The result is a user-friendly tool with information about doing business in a large number of economies that enable compliance officers to do their important work more effectively.

Contract Review Tip  

It is common to see a provision such as “Neither party shall be responsible for any consequential, incidental or indirect damages” in all types of contracts. In theory, that type of provision protects each party from exposure to unforeseeable damages that could be disproportionate to the compensation or benefit it is receiving for performing the contract. However, it is not always reasonable to accept such a limitation. When the activities covered by a contract include the provision of proprietary information which the receiving party is obliged to keep confidential, the damage resulting from the receiving party’s unauthorized disclosure of the confidential information may be largely or even entirely consequential in nature, and the owner of the information could be left with only limited remedies.
 
In every contract, it is prudent to consider whether the harm that could result from a breach of the contract by the other party would or would not most likely be direct damages. In many situations, it is useful to exclude a breach of confidentiality obligations from any consequential damages limitation in order to provide an adequate remedy that is proportionate to the harm caused by the breach.