Supply chain insights: Risk management and financial disputes
This is the first article in a series focussed on supply chains to help businesses consider their supply chains in an increasingly volatile global environment.
Supply chains are critical to the UK and global economy. In recent years, supply chains for goods destined for the UK or abroad have experienced significant shocks from domestic and global events and geopolitical tensions. These include continuing disruption from Brexit, the pandemic and fallout from the wars in Ukraine and Gaza. Against this backdrop, the risks to international trade and supply chains which businesses face have grown significantly.
Managing risks
Given the risks and pressures to supply chains today, it is important to ensure that fully comprehensive contracts are in place with each supplier, freight and warehousing business in the chain. This will help to minimise the risk of disputes arising later and to manage them in a commercially and sensible pragmatic way.
Liability
Liability along the supply chain
Where disputes do unfortunately arise in the supply chain, the question and extent of liability quickly comes into focus.
It is relatively standard in supply chain agreements to have a clause which limits the liability of the freight or warehousing party to the contract. The limitation clauses can be broad, save for where the law prohibits limitation. For example, no party can limit their liability in respect of death or personal injury caused by negligence.
Further, it is common for supply chain agreements to include mechanisms for parties to resolve disputes outside of court proceedings, which may be prohibited altogether. This can include forms of alternative dispute resolution like mediation, conciliation and/or arbitration. The subject of alternative dispute resolution will be examined in a separate article.
Liability with the goods
Where disputes are in relation to goods being damaged at source, or the goods suffer from an inherent defect, then any dispute is likely to be with the supplier. A claim in respect of this is also likely to involve a claim for breach of contract and/or negligence.
Insurance
In our experience, the argument by logistics companies for a low cap on limitation is to minimise the costs for their services. The share of risk is therefore borne more heavily by the businesses relying on the logistics company. As such, they should have adequate insurance in place to mitigate the effect of limitation clauses. This can present its own set of challenges, particularly in complex insurance claims and where insurers are reluctant to accept liability.
How can Ellis Jones help?
We provide a full-service legal offering for businesses and can advise on all aspects of a supply chain or insurance dispute.
Our expert Banking and Finance litigation team has substantial experience in advising on insurance, complex financial and commercial disputes.
If you like to seek advice or discuss the contents of this article, please contact William Fox Bregman or Wai Chan in our Banking and Finance Litigation Department on 01202 525333 or via email at banking@ellisjones.co.uk or by clicking on the “Make an Enquiry” button on our website.
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