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Subbing out work under cabotage rules can save on your costs, but who pays up if the foreign vehicle is not roadworthy or an accident occurs? Operators using cabotage rules to offload 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. The rise in online freight exchanges for companies wanting to reduce empty running and subcontract work to minimise costs, coupled with escalating  fuel prices, means using continental hauliers is seen as making good business sense.

But transport lawyers say it is so difficult to bring foreign-based haulage companies before a UK court if they are involved in an accident while working on your behalf and 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. This means that 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. This limits liability of the haulier to any claim made against it and prevents it having to pay out excessive amounts of money to the customer in the event of an accident.

However, in the event  of an accident, this liability will come back to the UK haulier that agreed the delivery with the customer, not a foreign firm that was subbed the work, 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. Transport 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, too."

The scale of the problem is highlighted in Vosa's latest effectiveness report, which 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 also vastly increased from the last survey in 2004/05, which put the prohibition figure for foreign 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 is their maintenance system? How old are its vehicles? How many hours driving are its drivers doing a week? Have drivers had any training in the last year?

Jones says: "Go in with your eyes open. Do your own risk assessments. And go ahead if it's good business sense. But just imagine an operator in the dock the prosecutor will ask why you used a Polish company. You can give a million different reasons but the prosecutor will say you have done it to save on costs. It's a very bad jury point. He warns: "As easyJet's boss Stelios [Haji-Ioannou] says, if you think health and safety is expensive, try an accident."

Arguably of more concern to UK operators is their exposure to corporate manslaughter charges. Backhouse Jones lawyer Steven Meyerhoff says an anomaly in the law means foreign hauliers could get off scot free following an accident: "Corporate manslaughter doesn't cross borders," he explains. "The reality is that if you contract out to a haulier from Poland who comes with a full tank of fuel and he collides with someone and causes an injury, the regulatory authority can't get the foreign company to pay you will pay. You are the smoking gun."

The difficulty with carrying out checks on companies is that cabotage, for now at least, is supposedly ad-hoc. Therefore hauliers often use foreign companies on a 'last-minute' basis and may not have the time to investigate thoroughly 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, co-founder of Teesport-based supply chain business Global Transport Logistics, is in no doubt over who he'd pursue if 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 area that UK companies could fall foul of. According to Backhouse Jones insurers are increasingly looking to avoid paying out if they believe the conditions set out in their small print have not been complied with.

"If you are running goods from A to B and you sub and you think you are covered if the Polish vehicle isn't maintained properly, the small print could say you have not complied with the insurance conditions," says Jones. "The insurer could then withdraw indemnity, and what would have cost £10,000 could now cost £150,000. The consequences must be borne in mind if you are making a saving, because that saving could cost you a lot of money." Ultimately Jones and Meyerhoff say they are not trying to prevent UK hauliers from exploiting cabotage rules and if 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 wafer thin margins.

But they stress the importance of identifying the worst and then preparing for it. CMRs and conditions of carriage limit liability, but only if you've put in the ground work. As Jones says: "When any of our clients say to me 'this 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 fag packet you might not sleep as well at night and it could come back to haunt you."