Counting the cost of Operation Stack to the UK food industry
George Frier of Shepherd and Wedderburn discusses the financial implications of Operation Stack – an emergency procedure that queues lorries travelling towards Europe on the M20 in Kent.
Suppliers and their customers should prepare for the long haul in sorting out wrangles over financial loss due to disrupted deliveries.
In July and August, perishable goods destined for continental markets, particularly seafood and shellfish, were held in the stack for periods far longer than ever anticipated.
At present there is limited hard information about likely financial losses.
Suppliers can reasonably expect cancellation of orders in hand/in transit, or rejection of goods on delivery, if no longer sellable, or only at a reduced price due to reduced shelf life.
Wholesalers may find themselves caught with an inability to supply customers, be they processors or caterers/restaurateurs, with fresh food.
For seafood producers there is a collateral risk to brand reputation given the emphasis on freshness and speed from "catch to plate" which justifies premium pricing. Certainty of fast, continuous delivery is a must for such supplies.
Claiming for damaged goods
Claims for damaged goods will no doubt arise under insurance, but claims for loss of profit/sales by wholesalers may follow. Whether these can be brought will turn on the term of the supply contract: if these are "spot" trades based on industry practice, the terms of supply (or purchase) may be loose and uncertain.
Suppliers and (wholesale) customers may want to check:
- Whose conditions (of supply or purchase) apply – and who is responsible for carriage?
- Is the time of delivery specified?
- What rights of rejection are there?
- What if food was despatched in good time and then sits for too long? What is the carrier's liability? Most goods will be transported subject to Road Haulage Association conditions of carriage.
- What exclusions or limitations of liability on loss apply?
Longer-term/formal contracts may contain force majeure clauses – usually designed to protect suppliers against 'acts of god' or other interventions interrupting or preventing supply. Often overlooked, these clauses can be helpful, but should only be invoked when there is no realistic alternative supply option. A force majeure event must be one "beyond the reasonable control of the affected parties".
On the face of it, such is the case, but force majeure needs to be specified in a contract to be a ground for excusing non-performance. Often, performance is only suspended for the duration of the force majeure event, but this is likely only to be relevant if there were a longer-term supply arrangement and the supplier failure were likely otherwise to place it in material breach.
Clearing the jam
At the time of writing, Kent police were reported to be prioritising clearance of "priority" perishable shipments, requiring a specific Convention on the Contract for the International Carriage of Goods by Road (CMR) declaration (which follows a standard set of international transport and liability conditions) by the haulier to expedite movement of such consignments.
Other routes are being investigated, such as via Boulogne and other channel ports. However, suppliers and customers may want to review their legal position under their contracts, including with hauliers, before making any claim, and certainly on being notified of one.
George Frier is a corporate partner and head of food and drink with Shepherd and Wedderburn LLP. This Law Column article is produced in association with Shepherd and Wedderburn. It first appeared in the September 2015 edition of The CA magazine.