Essay: Need for Rotterdam Rules – comparison with Hague Visby

Why a new set of Rules (RR) were needed?
I will start by examining and providing a brief overview of why there was a pressing need for another new International Convention governing sea Carriage despite the HVR being present and effective? Accordingly, I have summed up the reasons in a few points which are as follows:
– For years, sea carriers have been abusing their superior bargaining powers: the fact that carriers are usually big International companies and corporations when compared to an individual cargo-owner/shipper puts the carrier in a more advantageous position. Carriers today try to exclude liability for anything and everything with the help of appropriately drafted clauses in the contract of carriage and the loopholes present in the law governing International Sea Carriage i.e. the HVR.
– Many areas are left unregulated by the HVR such as:
o it only applies to tackle-to-tackle (i.e. carrier is liable from the time the goods are put on board till the time they leave the ship) without any provisions on who would be liable before or after loading of goods;
o HVR only applies to sea-carriage whereas today transport often takes place with the use of more than one mode of transport (multimodal transport)87. As such, when cargo-damage issue arises, problems arise in determining which convention is applicable since different sets of rules exist for different modes of transport.88 ;
o HVR does not regulate liability for delay/ carriage of cargo on deck; and
o issues of jurisdiction/electronic alternatives to the traditional bill of lading etc. are also not addressed by HVR.
Things like Containerisation, Multimodalism, Electronic Communication, E-commerce and Globalisation has drastically changed the shipping needs of today from the time of the Hague/Hague-Visby Rules. HVR has also been criticized by some as being too pro carrier.
– The legal regime governing liabilities in maritime trade is a mess today: There is the Hague Rules, the amended version of Hague Rules i.e. HVR and finally the Hamburg Rules. Moreover, in practice there are lots of different versions of the Hague Rules as each country interprets it according to its own convenience, further the fact that those that are Hague Visby countries are in practice fully not Hague Visby countries. The law on carriage of goods has become very non-uniform in an international perspective with large differences between different jurisdictions.
– Even though attempts have been made by the International Community to sort out the problems of International Sea Carriage by creation of the Hamburg Rules (have been ratified by 34 countries46), up until now there is not a single large/important maritime nation among them. These nations instead took steps themselves and tried to modernize and update their own national regimes governing sea carriage in connection with the modern day needs which in turn has created further uncertainty and non-uniformity in this area of law with the existing International Conventions.
– The Hague Rules date back from 1924. Its old age coupled with lack of connection with the modern transportation needs, non-uniformity in application and failure to accurately balance different party interests (those of shipper, carrier and cargo-owners) has necessitated the need for a new Convention governing International Carriage of Goods by sea.
– The drafting of the RR is the result of the realization of the International Community to assure few things:
o Most importantly, to establish uniform rules to harmonize and modernize the rules governing carriage of goods by sea ;
o Allocation of Risks of different parties to be balanced in accordance with their different commercial needs and practices and prevention of abuse and protection of parties in a weaker bargaining position.
If the law is uniform, litigation will be less necessary and transportation costs lower, since the law would be more predictable which would result in an overall benefit to all the parties concerned and thus smoother trade.
The RR is the result of a series of intensive discussion aimed at making a legal regime suitable to govern the carriage of goods by sea needs of the 21st century The work of a new legal regime was carried out by the Comité Maritime International (CMI) in cooperation with the United Nation Commission on International Trade Law (UNCITRAL) which led to the finalization of a draft text of a new convention. In December 2008, the UN General Assembly formally adopted the Convention known as the United Nation Convention on Contracts for International Carriage of Goods wholly or partly by sea. The Convention was opened for signature on 23rd September 2009 in Rotterdam, Netherlands and since then has been popularly been known as the Rotterdam Rules. The Rotterdam Rules will go into force on the first day of the month following the expiration of one year after the deposit of the 20th instrument of ratification, acceptance, approval or accession. The Rotterdam Rules have already been signed by twenty-five States and ratified by three.
COMPARISON BETWEEN THE HAGUE-VISBY AND ROTTERDAM RULES
This part of the essay concentrates on a comparative analysis between the HVR and RR and most importantly attempts to answer how the carrier’s obligations has/will be changed under the RR:
• Extending the duty of seaworthiness throughout the voyage and Delay Issue:
Under HVR, the duties of the Carrier before loading and after discharge will need to be agreed upon separately by the parties since the rules only regulate carrier duties tackle-to-tackle (i.e. carrier will only be liable from the period the goods are loaded till the time they are discharged from the ship) . RR, by contrast, adopts a door-to-door approach which means carrier’s obligations extend from the receipt of the goods from the shipper until delivery to the receiver (i.e. a door-to-door approach)
Furthermore, the carrier under the RR has to exercise due diligence to ensure that the ship is seaworthy throughout the voyage unlike the HVR where the carrier should exercise due diligence only during the starting of voyage to make the ship seaworthy.
Moreover, the carrier under the HVR is only liable for loss/damage of goods if the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo. There is no liability on the carrier if the goods are delivered late or if the voyage takes longer than contracted. The HVR did not address the issue of delay anywhere. This is clearly not in line with modern day business practices as financial losses arising for delay is a very important factor/liability in modern day trade and clear provisions should be present on who should be liable when? The carrier who is in a higher degree of control of the vessel should not be so easily exempted from liability. RR does just that. Under Art. 17 the carrier could be held liable for delay in delivering the goods if the claimant can prove that the delay was caused/contributed or took place during the carrier’s period of responsibility.
As such, the Carrier under the RR would find it hard to escape liability as his obligations and duties have been significantly been widened now.
• The Multimodal Aspect and Broader Scope of Application:
The RR provides for carriage of goods wholly or partly by sea . It extends the definition of the contract of carriage to other modes if the parties to agree and unlike the HVR, it applies not only to outgoing but also incoming maritime carriage.
By contrast, The HVR applies only to outbound carriage from a contracting state and operates only for sea carriage . It merely connects the notion of contract of carriage to the document issued thereunder i.e. a bill of lading. This is why the HVR has been said to have adopted a documentary approach whereas the RR has adopted a contractual approach as focus is more on contracts here (no matter what type of documents are used) and less on documents. Some even describe the RR as adopting a hybrid of the previous two regimes (HVR and Hamburg) which uses a trade approach .
Then again, the RR necessitates the requirement of an international sea leg in the whole carriage and as such it is argued that it is strictly not a fully-fledged multimodal regime but a maritime plus concept . The effect is such that the RR will apply to to a multimodal carriage by sea and road but will not apply to carriage by air and road. Nevertheless, It is presents a step forward as it is the first convention covering a multimodal aspect.
The broad scope of the Convention however may give rise to other problems such as conflicts with other laws/conventions, in particular with unimodal regimes such as CMR, CMNI, COTIF/CIM etc. but these conflict of law issues are addressed by the RR too (such as Articles 26, 82 and 89) which will be examined below.
• Deleting the error in navigation and fire fault exemptions:
Art. IV.2(a) of the HVR expressly allows the carrier to exclude liability for losses arising from navigational error i.e. loss from any act, neglect or default of the pilot, master or mariner in navigating the ship and Art. IV.2(b) allows the carrier to exclude liability for fire unless caused by the carrier’s actual fault or privity. One of the most significant changes brought by the RR is the abolition of these two exceptions. This provision has changed the basis of liability of the Carrier from Incomplete Fault Liability System to Complete Fault Liability System which can be accurately be demonstrated by the case of CSAV v. Sinochem where a container vessel was damaged due to the self-ignition of calcium hypochlorite that was stowed in the container near a heated bunker tank. It was alleged that the carrier caused the loss who admitted that the heating of the container was a failure on their part but the act of heating the cargo was held to be an \”act, neglect or default in the management of the vessel \”, on which the carrier could escape liability. Had this case been decided under the RR, the carrier’s defence would have been unavailable and he would have been held liable.
• Maritime Performing Parties Defined and protection of third parties:
The HVR does not regulate rights and obligations of people like port operators and there is no concept of actual carrier under the rules . It is essential for the cargo-owner as to who the actual or legal carrier is in the event he needs to sue any of them. On the other hand, RR clearly defines maritime performing parties and their rights and obligations . In essence, this is a win-win situation for all as claimants now have an additional person to sue other than the carrier if something goes wrong as maritime performing parties are entitled to the same defences and obligations and liabilities as that of carrier now under RR.
Legal certainty is further restored by the provisions of Art. 4.1 RR which offers automatic Himalaya type protection for third parties (that includes maritime performing parties, their employees etc.) that assist the carrier in performing the contract of carriage. Disputes have arisen over the years in determining who is able to rely on the statutory Himalaya type protection and the RR without referring general group of people like “agents” or “independent contractors” provides much more clarity.
• Burden of proof:
The burden of proof in RR is kept similar to that under HVR . In both cases the Carrier can only rely on the exemptions once the Claimant has proved that loss resulted from the Carrier’s fault.
Although Art. 17 eliminates some of the complexities of the previous regimes, it still remains vague and unclear as to who will be liable where a combination of causes results in loss/damage/delay while exempting some but not all as excepted perils. Ncertainty may nevertheless arise when there is a combination of causes for the loss although Art. 17 refers to carrier’s relief from “all or part of its liability” or for carrier’s liability for “all or part of the loss. ”
• Deck Cargo Issues:
RR is the first international convention expressly allowing for carriage of goods on deck of ship when such carriage is required by law, agreed in contract, by way of custom and practice etc. or when such goods are carried in containers fit for deck carriage or the deck is fit to carry such containers. By contrast, the HVR state that the rules do not apply if cargo is stowed on deck. This is in line with the modern day shipping transportation needs where majority of the space for keeping cargo on a vessel is usually on deck and Art. 25 accurately lists the rights and obligations of carrier considering deck carriage. Art. 25 is supplemented by the carrier’s duties to exercise due diligence before and during the voyage to keep the ship seaworthy and to make and keep the holds and parts of the ship safe for reception, carriage and preservation of the goods.
• Delivery and Deviation:
The HVR do not contain any provisions as to the delivery obligations of the carrier i.e. to whom he shall deliver but instead in most maritime jurisdictions the carrier can only deliver against the Bill of lading. This causes considerable trouble in situations where goods are not delivered against the Bill of Lading because, here the carrier remains liable for wrongful delivery claims and such claims may be without any limits of liability. RR, by contrast recognizes the important role of e-documents and e-commerce to modern day trade practices and provides options for delivery without the presentation of negotiable transport documents whilst also protecting the interests of all parties accordingly .
Considering Deviation, Art. 24 RR provides that when a deviation constitutes breach of carrier’s obligations this itself does not deprive the carrier/maritime performing party from raising any defence or limits of liability (subject to Art. 61). Such clear provision is absent in HVR.
• Financial Compensation limit and Time Limit for Bringing Claims:
RR increases the limits of liability of carriers to 875 units of account per shipping unit or three units of account per kg of gross weight i.e. an overall increase of 31.25% per package limit and a 50% increase for the per kg limit from the HVR. Furthermore under RR, where the carrier is liable for economic loss from delay, he may limit his liability to 2 ½ x the freight but subject to a maximum overall cap of the compensation limits for physical loss or damage. The right to limit liability under HVR is limited to claims for loss or damage in connection with the goods which has always caused confusion when there has been no physical damage to goods as such e.g. wrongful delivery which is interpreted differently in jurisdictions. The wording in RR is much clearer.
The time limit for bringing suits under RR further been extended to two years (from date after goods are delivered or should have been delivered) within which action may be brought against the carrier compared to HVR which is one year and this applies only to claim brought against the carrier.
• Volume Contracts:
In the HVR, the provisions of liability of the carrier is mandatory. They do not contain provisions on volume contracts. In the RR, in cases of volume contracts, the parties under have the scope of derogating from the provisions of the Convention which gives the parties more freedom of contract. This is better for both the Carrier and other parties involved as they are free to negotiate and adjust their needs more freely considering the fact that volume contract involves a series of shipments and/or over a period of time. Then again, this unlimited type freedom from derogating from the provisions of the convention has its problems too.
It is estimated that around 90 per cent of the world\’s containerised cargo moves under \’service contracts\’ that are likely to meet the requirements of a volume contracts and consequently this means that the volume contract exclusion could allow carriers to exclude many of their shipments from the Convention. This puts doubt on uniformity and balancing of interest issues which form the very basis of RR.
Furthermore, although there is freedom to deviate in cases of volume contracts, the question remains who would be ultimately benefited? The shipper in most cases remains the party in a weaker bargaining position and this like the previous regimes again puts the Carrier in the more advantageous position.
• E-commerce and Jurisdiction Issues:
It is agreed that the RR has modernized and broadened the scope of maritime leg by incorporating provisions for electronic documents rather than a specific requirement of bill of lading as under HVR .
Furthermore Jurisdiction and Arbitration issues are specifically addressed under RR which is not covered by any other existing regimes.
HVR is silent in both the above cases. HVR done not at all provide for electronic documents to be used which is clearly not in line with modern day shipping practices. The Hague Convention leaves the matter of jurisdiction exclusively to be determined by national laws. These new incorporations would definitely be beneficial to all parties to facilitate the modern day trade. Then again, It is also doubtful whether harmonization can be achieved given that provisions on jurisdiction and arbitration are not mandatory, allowing member states to opt-out of this section of the Rules.
• Conflicts of Laws Addressed:
The HVR does not address conflict of law issues at all. Art. 26 in conjunction with Arts. 82 of RR addresses Conflicts of Law Issues. The broad scope of the application of RR may give rise to potential conflict with other legislations in particular, unimodal regimes like CMR, CMNI, COTIF/CIM and that is why these Articles determine in what situation the Convention gives away its effect wholly or partly to provisions of other instruments?
Art. 26 adopts a limited network system because it is already preferable to the industry by way of contractual provisions. It basically provides that when loss/damage to cargo occurs solely before loading or after discharge the provisions of RR do not prevail over another international instrument having effect at that time (subject to Art. 26(a)-(c)). It must be noted that national laws do not prevail over the convention to maintain uniformity .
Art. 82 supplements Art. 26 by addressing the status of the four international unimodal conventions in Article 82, which contains savings clauses assuring the validity of each of the four existing unimodal conventions, including any future amendments in the face of the RR. These four savings clauses broadly validate each of the four conventions insofar as they `regulate the liability of the carrier for loss or damage to the goods\’.
So, when there is a conflict, first Art. 82 has to be considered because all provisions of another convention can prevail over the RR Convention. If the Convention is still applicable, then consideration has to be given to Art. 26 to decide which liability regime has to be used? Then again, Art. 26 only provide a limited framework for resolving conflicts between Conventions as it is only applicable to provisions of carrier’ limitation of liability and time for bringing suit. Further, considering door-to-door delivery, If the whole journey is governed under one contract, the liability applying to road transport will vary and thus maritime liability should be aligned with other modes of transport.