Julian van de Velde and Iris Regtien were recently published in the Dutch Transport newsletter “Nieuwsblad Transport” with a brief article on the possibilities for logistical service provides (carriers, freight forwarders, terminal operators, etc.) to exercise a right of retention when being confronted with outstanding invoices as a result of the COVID-19 outbreak. We are pleased to provide you with a brief summary of the article below.

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Dealing with unpaid invoices can be a real headache for logistical service providers. That headache can turn into a full-blown migraine following the outbreak of COVID-19, as the extent of the unprecedented measures taken by public authorities has a great impact on maritime and transport business.

A valuable asset in the logistical service providers’ arsenal to combat unpaid invoices is the right of retention (also referred to as a possessory lien). When the right of retention is invoked, the goods belonging to the debtor are not released until payment of the outstanding invoice for freight and/or costs is received. This therefore increases pressure on cargo interests. If no payment is received after the right of retention is invoked, a petition can be filed with the court for permission for a judicial sale of the goods. Exercising a right of retention also grants the logistical service provider a special position in insolvency proceedings.

The right of retention may also be of aid to logistical service providers in dealing with unpaid invoices resulting from the outbreak of COVID-19. We are aware that various contracts have been cancelled arguing the existence of force majeure as a result of the COVID-19 outbreak. Force majeure does not directly inhibit a logistical service provider from invoking his right of retention. However, in view of the unprecedented measures taking by public authorities in respect of COVID-19, invoking a right of retention may be contrary to the principle of reasonableness and fairness that applies to contracts under Dutch law. If so, the right of retention cannot be invoked. A case by case assessment is therefore necessary to determine whether it is possible to exercise a right of retention in view of the measures taken to stem the spread of COVID-19.

Whether or not a right of retention is invoked is not merely a question of whether it is legally possible, but also of whether it is commercially desirable. This is the case in normal circumstances, but even more so during the current circumstances that have far-reaching consequences, also for the maritime and transport industry. It may therefore be reassuring and headache reducing to be aware that it may be possible to exercise a right of retention if invoices remain unpaid during the outbreak of COVID-19, or in the period that follows thereafter.

The article can be found online on the website of Nieuwsblad Transport: