Convention overview
A new international convention making ports and terminal operators subject to an onerous compulsory liability regime has been approved by the United Nations Commission on International Trade Law (UNCITRAL) and will soon be ready for adoption by governments.
The convention ("Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea"), will probably be referred to in industry circles as the "Rotterdam Rules" in recognition of the signing ceremony which will take place in September 2009 in Rotterdam.
Primarily designed to govern the liability of carriers providing "wet multimodal transportation", the convention also applies to cargo and delay claims brought by shipping lines against terminal operators acting as sub-contractors.
The convention also introduces new terminology including "maritime performing parties". Terminal operators will fall within this definition. The convention makes all maritime performing parties jointly and severally liable to cargo interests for cargo claims, which means that cargo interests will, in due course, have several targets to pursue if cargo is damaged. The days of terminals relying on their own standard conditions (further to the doctrine of "bailment on terms") or excluding liability altogether (further to the carrier's Himalaya Clause) are probably numbered.
As compared to the Hague/Visby Rules, key features of the new convention include an enhanced limitation of liability regime for cargo claims (875SDRs per package or 3SDRs per kilogram, whichever is the lower), a two year time limit for claimants to bring claims and limited rights to contract out. The convention also makes it impossible for carriers' bills of lading to exclude liability for cargo damage pre or post "ship's rail".
Commercial impact
Terminal operators partially price their services by reference to the risks involved in providing their services; and many operators minimise risk by adopting terminal friendly liability regimes which protect claims' records and minimise liability insurance spend. For many terminals, the new convention will therefore mean accepting greater risk and the probability of higher insurance spend.
HFW tip
Terminal operators need to start thinking now about the impact that the new convention will have on their portfolio of contracts with shipping lines and cargo interests. Will their risk profile increase or are the majority of their services already customer friendly? They should also ask shipping line customers for their own assessments of the impact that the convention will have on cargo claims. Are carriers expecting to pass on more claims to terminals?
Terminal insurers need to think about the impact that the convention might have on pricing risk and they should open early dialogues with brokers and assureds to identify value adding solutions (risk management, revised deductibles, etc.) to avoid deteriorating claims records and/or potential hikes in insurance spend.
Finally, all participants in the industry need to bring themselves up to speed on the convention detail. To help with this, HFW Partner, Craig Neame, will be making a presentation later in the year to coincide with the signing ceremony.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.