Why Enact the Rotterdam Rules?

Francisco A. Laguna & Ryan Hatley

More than 3 years after the Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules), was adopted by the United Nations, only two countries, Spain and Togo, have adopted it. Initially, it seemed that the Convention might enter into force more quickly than other treaties:  17 states signed the Convention when opened – a record number for any convention developed by the United Nations Commission on International Trade Law (UNCITRAL). Those first 17 states included major world traders like the Denmark, France, Greece, the Netherlands, Norway and United States.

Photo Credit: Stan Shebs via Wikimedia Commons

Photo Credit: Stan Shebs via Wikimedia Commons

In all, the states that signed onto the Convention on the first day represent over 25% of the current world trade volume.  While this is an impressive percentage in its own right, it is even more impressive when compared to the prior UN convention in this area of law, the Hamburg Rules, which has 34 contracting states that only represent 5% of trade volume.

The Belgian delegate to the signing ceremony touted the virtues of the Rules: “International trade will of course be the first beneficiary. But worldwide harmonised rules are also an essential factor in the development of a sustainable mobility and transport, because worldwide harmonised rules will enable a better integration of sea transport in the multimodal transport, which is essential to reach that objective of sustainable mobility and transport.”

Photo Credit: Nasa via Wikimedia Commons

Photo Credit: Nasa via Wikimedia Commons

In today’s global marketplace, world trade movements invariably involve a maritime sector. It is important for cargo and carrier interests to know that the same legal and commercial provisions apply regardless of where the cargo is shipped from or received.  Business likes certainty.  Under the Rotterdam Rules, shipping costs will be lowered because carriers will no longer have to insure against the most expensive legal liabilities and or worry about forum shopping.

Even if the required 20 states ratify the Convention, the future of the Rotterdam Rules lies with the United States. Major shipping nations, such as China, Japan, and many European states, have either adopted a “wait and see” approach or not made little comment about their intentions. It is believed they are waiting for the U.S. to ratify. Without these major commercial powers, the Rules simply will not work. Interestingly, the U.S. took a leading role in the treaty negotiations, and the positions taken by the U.S. delegates were generally widely backed by interested industry representatives.  In fact, much of the Convention tracks a similar effort initiated in the U.S. several years ago by the Maritime Law Association to remake the United States Carriage of Goods by Sea Act (“COGSA”), and although that statute was never enacted, the final agreed-upon language submitted to Congress was similarly viewed as a reasonable compromise among the various U.S. shipping interests.

Photo Credit: Grolltech via Wikimedia Commons

Photo Credit: Grolltech via Wikimedia Commons

In February of this year, the National Industrial Transportation League, World Shipping Council, and Maritime Law Association of the United States called on the United States State Department to approve the Rotterdam Rules. The American Bar Association urged the Senate to ratify the Rules in 2010.  While it is still widely believed that the U.S. will ratify the Rotterdam Rules, the remaining maritime nations are waiting for the U.S. to act. Given that many provisions of the Rules were adopted for the U.S.’s benefit, it is anticipated that the Rules will benefit the U.S., and the global maritime community, greatly.

Unfortunately, the reality is that it took nearly thirty years to move past Hamburg, and another ten years to get the Rotterdam Rules on the table. If the Rules are not widely adopted, there will likely be no further effort at international harmonization for decades, if ever. If major trading nations decide to support and adopt the Rotterdam Rules, the overarching desire for certainty and uniformity will outweigh the practical concerns and uncertainty.

Translegal assists clients with their global trade and customs matters.  Contact us with questions you may have about the laws and regulations of the countries where you would like to market your goods and services.

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