Francisco A. Laguna & Ryan Hatley
In December 2008, the United Nations adopted the final draft of the Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, known as the Rotterdam Rules. The Rotterdam Rules were assembled by the United Nations Commission on International Trade Law (UNCITRAL) to extend and modernize international rules already in existence and achieve legal uniformity and certainty in the field of maritime carriage. When they come into effect, the Rotterdam Rules would replace much of the Hague Rules, Hague-Visby Rules and Hamburg Rules. The Rotterdam Rules have 24 signatories (representing 25 percent of world trade by volume), including the United States, and 2 ratifying states (Spain and Togo). Twenty states must ratify the Rules before they enter into force.
The Rotterdam Rules have a number of prominent supporters such as the World Shipping Council (a trade group representing the carriers of 90 percent of global container shipments), which heralds the Rules as a means of achieving international cargo liability reform. The Nonetheless, there are at least an equal number of critics, many of whom point to the potential that the Convention will reach beyond maritime shipping. The European Shipper’s Council says that the Rotterdam Rules could potentially conflict with other rules in place and could put some shippers in a worse position than they were in prior to the introduction of the original Hague Rules. Additional criticism has come from domestic road, air, and rail transporters who claim the Rotterdam Rules impinge too far into their transport roles because of their application to the multimodal carriage of goods when one leg involves international maritime transport.
One major impact of the Rotterdam Rules is that they extend the period during which carriers are responsible / liable for goods: The new period begins when cargo is received by the carrier and ends when it is delivered. They also extend the carrier’s obligation to provide a properly crewed, equipped and seaworthy ship and to keep holds fit for cargo throughout the sea voyage.
Other impacts on liability include a provision which increases the amount by which carriers can limit their liability to 875 units of account per package or shipping unit, or three units of account per kilogram of gross weight. The Rotterdam Rules would also remove the ‘nautical fault defense’, potentially rendering carriers liable for the negligent navigation or management of the ship.
The Rotterdam Rules, however, allow parties to ‘volume’ contracts (contracts that provide for the carriage of a specified quantity of goods in a series of shipments during an agreed period) to ‘opt out’ of much of the convention’s liability regime.
A positive aspect of the Rules is that they seek to treat paper and electronic documents consistently.
Critics of the Convention, including major insurance companies, argue that it would conflict with other conventions, present unequal obligations and liabilities between shippers and carriers, present a risk that carriers may significantly reduce their own limits of liability and obligations under so-called ‘volume contracts’, make proving fault harder for the shipper, make it increasingly difficult for shippers to successfully make a claim for damages, make shipper obligations far more onerous and may deter shippers from integrating short-sea shipping into their door-to-door logistics due to obligations and limits of liability being worse than under individual modal conventions.
Whether a particular individual or group supports or opposes the Rotterdam Rules depends largely on that particular individual or group’s role in the transport industry. Shippers generally support the rules while land and air transporters typically criticize the rules. Ultimately, the Rotterdam Rules do seek to make shipping standards’ more uniform and if properly ratified, it will achieve that goal – at least among the signatory states.
TransLegal assists clients with international trade issues. Last month, we helped a major US food company obtain the release of a cargo of canned foods that had been detained by the Brazilian health authorities. Contact us with your questions concerning international trade in specific countries.