Love them or loathe them, the Rotterdam Rules relating to sea carrier liability are now on their way. Following original drafting work undertaken by the Comite Maritime International (CMI), in 2009 a Working Group set up by the United Nations Commission on International Trade Law (UNCITRAL) finalised the terms of a new international convention formally known as the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2009 (Convention).
The new Convention is now known as the Rotterdam Rules (Rules).
Since the 23 September 2009 signing ceremony in Rotterdam, 19 countries have signed the Convention and only one more signature is needed for the Rules to take effect one year later.
There has been considerable international debate about the acceptability of the new Convention, and Australia and New Zealand have not supported it to date.
Signatories (As At 2 October 2009)
Armenia, Cameroon, Congo, Denmark, France, Gabon, Ghana, Greece, Guinea, Madagascar, The Netherlands, Nigeria, Norway, Poland, Senegal, Spain, Switzerland, Togo and the United States of America.
The Rules will apply to contracts of carriage between States if:
- the place of receipt;
- the port of loading;
- the place of delivery; or
- the port of discharge is in a contracting State (Article 5, Rule 1).
They will not apply to charterparties or other contracts for use of a ship in liner transportation nor to contacts of carriage in non-liner transportation unless there is no charterparty or other contract for use of a ship and a transport document (or electronic record) is issued (Article 6 Rules 1 & 2).
The Rules will apply to contracts of carriage of goods wholly or partly by sea (Article 1).
The Rules aim to provide the same status to electronic documents as to paper documents.
Freedom Of Contract
Although there is a greater degree of freedom of contract than under existing carrier liability regimes, Article 79 renders void any term in a contract of carriage that excludes or limits the carrier's liability under the Convention or excludes, limits or increases the obligations or liability of the shipper or consignee's liability under the Convention.
A 'volume contract' (defined in Article 1 as 'a contract of carriage that provides for the carriage for specified quantity of goods in a series of shipments during an agreed period of time') may provide for greater or lesser rights, obligations or liabilities than those imposed by the Convention (Article 80).
Notably, however, a volume contract must be individually negotiated or prominently state that it derogates from the Convention (Article 80 Rule 2) and the shipper must be given an opportunity to contract on the basis of the Convention.
The generally frame work on liability is similar to previous regimes. The carrier is liable for loss of or damage to goods and for delay if the claimant proves the loss, damage or delay took place during the carrier's period of responsibility (Article 17 Rule 1). There is a similar list of carrier exemptions to those in the Hague Rules, save for the removal of the controversial "nautical fault" defence (Article 17 Rule 3).
In addition, the carrier has an ongoing duty to make and keep the ship seaworthy and to properly crew, equip and supply the ship (Article 14).
Limitation Of Liability
Limits of liability are increased to the higher of 875 special drawing rights (SDRs) per package or other shipping unit or 3 SDRs per kilo of the gross weight of the goods affected (Article 59 Rule 1).
The past doubts regarding whether a container is shipping unit are removed by Article 59 Rule 2 which deems it a shipping unit only if the number of packages or other units within it are not enumerated in the contract particulars (Article 59 Rule 2).
Compensation for loss caused by delay is limited to the lower of 2 ˝ times the freight payable on the goods delayed (Article 6) or the amount payable for the total loss of the goods.
Entitlement to limit is lost if it can be proved that loss was attributable to an intentional or reckless act or omission with knowledge that loss would probably result (Article 61 Rules 1 & 2).
Time For Suit
A two year time bar will operate from the day the goods were delivered or should have been delivered (Article 62). A carrier then has a further 90 days after service of suit or settlement of the claim, whichever is earlier, to institute an action for indemnity (Article 64).
The chapters of the Convention on jurisdiction and arbitration are optional, with the expectation that many countries are unlikely to opt into the provisions.
The Future - Will Australia And New Zealand Adopt The Rotterdam Rules?
National legislation is still required to give effect to the Convention and it may be that after signing the Convention some States back away from formal ratification.
At this stage, neither Australia now New Zealand have signed the Convention and have shown a generally negative response to it. However, with support from a number of Australia's major trading partners (including most significantly the United States of America) there will be considerable pressure to reconsider the stance adopted to this point.
Although the Convention is generally far more complex than previous carrier liability regimes, there are some provisions that are more favourable to trading nations such as ours and some provisions that are less favourable. Time will tell if a decision is made to 'take the good with the bad' for the sake of wider international uniformity in relation to carrier liability. The outcome will also depend on the future decisions made by States such as the United Kingdom, Germany, India and China, each of whom have not yet signed the Convention. One would think that if these States come on board, the case for support from Australia and New Zealand might become hard to resist.
Even if Australia and New Zealand do not adopt the Convention, the Rules are likely to have an increasingly significant effect as they will apply to shipments into Australia from the States who have adopted the Convention.
It is accordingly suggested that all companies involved in the international transport of goods, be they importers, exporters, carriers or insurers, will need to be aware of the Rules and should begin to prepare for their operation and effect.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.