McAfee SECURE sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams
Print Email Download Reference This Send to Kindle Reddit This
submit to reddit

Example Law Essay

Fraud Order - 336884

This essay/coursework/dissertation was stolen from UK Essays, call 0115 966 7955 to speak to a Fraud Officer now for more details. We have made it available for use as a study resource.

United Nations Convention on Contracts for the International Carriage of Goods by Sea (the Rotterdam Rules)


On 23 September 2009, the opening ceremony took place for State representative to sign the United Nations Convention on Contracts for the International Carriage of Goods by Sea (the Rotterdam Rules). The Rotterdam Rules are the latest international rules on carriage of goods by sea. The Rules have been a response to calls for change existing Rules have not promoted uniformity of application. To this effect Makins (1991:45) indicates that the Hamburg Rules have not “ achieved UNCTAD’s objective of relieving the economic burden on developing countries and other shipper countries.” a year after the 20th UN member state has ratified the Convention, the Rotterdam Rules will become international law. Although 23 States have already signed the Convention, mere signing does not in any way imply that such states will definitely ratify the Rules but simply gives some indication of the intention to do so.

This Convention is designed to replace two earlier international conventions - the Hague Rules of 1924, with the Visby Amendments of 1968, and the Hamburg Rules of 1978. De Aguirre (2009:871) comments that the key goal of the new Convention as one of providing harmonisation and unification in the area of sea carriage. The Rotterdam Rules will apply to the international movement of goods “door to door,” that is from the seller to the buyer including the period or phase while the goods are in a port and not on the ship and subject to loading, storage, relocation, and unloading. Thomas (2008:190) has observed that the new Rules do not confine themselves to the contract of carriage of goods and immediately associated matters but extends its remit to cover areas such as ‘Transfer of Rights, ‘Jurisdiction’ and Arbitration.“
According to the preamble to the Convention, the aim of the new Rules is to improve efficiency and ensure legal certainty in international cargo carriage. The reason for the new Rules is clear which is to ensure that the industry is governed by one single multi-modal convention. According to Gonzalez (2010:38) “The pillar of the Convention is the promotion of international uniformity of legislation in the middle of an era of growing dissemination of regional and domestic rules and lack of uniformity in the particular field”

Key Changes Made by the Rotterdam Rules

Obligations, liabilities and limitations of carriers are extended to ‘maritime performing parties’. The Rotterdam Rules provisions, including carriers’ responsibilities and the limitations of liability and damages which apply to “carriers”, are extended to any “maritime performing party” who carries out any aspect of the carrier’s responsibility under a carriage contract, or does anything under the carrier’s supervision or at the carrier’s request. On this basis Fujita (2009:366) comments that the new Convention has a wider remit than its predecessors.

Terminal operators, stevedores, carriers exclusively within a port area, and other maritime agents or subcontractors of the shipment of goods from receipt by the carrier or its agent until delivery to the consignee are to be subject to the Rotterdam Rules and are entitled to the defences and limitations of the Rules. Inland carriers are not subject to the Convention’s provisions, and will continue to be governed by any applicable domestic or international law.

Hooper (2009:7) commenting on this position states that “The Rotterdam Rules recognise that many other parties participate in the performance of a contract of carriage, particularly in multimodal contracts of carriage. The Rotterdam Rules define maritime performing parties and non-maritime performing parties. The intention is that the Rotterdam Rules regulate maritime performing parties and not non-maritime performing parties.”

Period of application. The Rotterdam Rules apply to the responsibilities of carriers and maritime performing parties at all times the goods are being carried or stored under a contract of carriage. Lannan (2009:306) argues that “ one of the most significant changes made by the Rotterdam Rules to the existing law is the expansion of its scope of application to include door-to-door transport.” Article 12, COGSA/Hague-Visby govern from “tackle-to-tackle” of the carrying ship, but the Rotterdam Rules apply to the entire period the goods are under the control of the carrier, often “door-to-door”, manufacturer’s warehouse to consignees’s warehouse.

They apply from the point where a performing party receives the goods for carriage to the point where the goods are actually delivered to agreed location in an international cargo contract. Sturley (2009:434), commenting on this states that “The Convention, in one of its most significant innovations, adopts a door-to-door approach. The carrier is responsible under the new regime for the entire contractual period of carriage, which in a multimodal shipment will often be from the carrier’s receipt of the goods at an inland location in the country of origin all the way to the carrier’s delivery of the goods at an inland location in the country of destination.“

Contracts to which it applies. The Rotterdam Rules apply to all contracts of carriage when the place of delivery is in a different nation from the place of receipt and when one of the nations of receipt, delivery, or the contract of carriage provides for application of the Rotterdam Rules or the law of a nation which is a signatory to the Rotterdam Rules.

Carriers’ obligations. A carrier is required to exercise due diligence to (1) make and keep the ship seaworthy, (2) to supply, equip and crew the vessel and should keep the ship so equipped and well-supplied throughout the voyage, ensure the holds and all other parts of the vessel is safe and fit for the reception and carriage of the goods. The COGSA/Hague-Visby only impose a duty on the carrier to use due diligence in ensuring seaworthiness of the vessel at the commencement of the voyage. The Rotterdam Rules requires the carrier to use due diligence to make the vessel and its holds seaworthy for the entire period the goods are in the control of the carrier.

Carrier’s obligations extend to containers. The Rotterdam Rules provide that the carrier shall exercise the appropriate level of care in making the vessel seaworthy, and well-equipped. The carrier also has to ensure that the vessel and containers that carry the goods are strong and fit for the carriage.

Defences to liability. Under Article 17, the carrier is not liable for cargo loss or damage if it meets its burden of proving that the loss was not the fault of the carrier or a performing party. Absent proof to the contrary, it is presumed that the carrier or a performing party was not at fault if the loss, damage, or delay was caused by: (a) an act of war, hostilities, armed conflict, piracy, terrorism, riots and civil commotion; (b) a peril of the seas, (c) quarantine restrictions or other interference by or impediments created by governments, including interference by legal process or pursuant to a legal process; (d) act or omission of the shipper or consignee; (e) strikes, lockouts or other labour disputes; (f) saving or attempts at saving life or property at sea; (g) fire in the ship; (h) t defects that cannot be discovered by due diligence; (i) acts of omissions by the shipper; (j) wastage in bulk or other damage that arise from defects in the quality of the goods; (k) acts of third parties for whom the carrier is not responsible (not a “performing party”); (l) defects in the conditions under which goods were packed or marked; or (m) the way goods were handled, loaded, stowed or unloaded by the shipper or on his behalf.

To this effect Ziel (2009:381) observes that “ The carrier’s liability for loss of or damage to the goods or for delay in delivery resulting from its failure to comply with the instructions of the controlling party in breach of its obligation ..... and shall be subject to articles 17 to 23, and the amount of the compensation payable by the carrier shall be subject to articles 59 to 61”.

Measure of damages for loss or damage. Under Article 22, compensation for loss or damage is calculated by the value of the goods at the time and place where they are delivered, referring to a commodity exchange price, market price. Where that is not possible, then the value of similar goods, of the same quality will be used at the place of delivery.

Damages due to delay in delivery. If the delay in delivery of goods amounts to loss which does not arise from destruction of or damage to the goods, damages are limited to a multiple of 2.5 times the freight that is payable on the delayed goods. Notice of delay must be given within 21 days of the date the goods should have been delivered. In the words of Batrinca (2009:59) “The Rotterdam Rules include a specific limit of liability for loss caused by delay. The convention provides that liability for economic loss due to delay is limited to an amount equivalent to two and one-half times the freight payable on the goods delayed”.

Carriage of cargo on deck. Article 25 provides that cargo may be carried on deck where the containers carrying deck cargo are specially fitted to carry such goods, Thus, COGSA concepts of deviation has been preserved in essence, but, the carrier is not to be deprived of exemptions from liability and limitations of liability under the Rotterdam Rules, unless the parties specifically agree that the cargo shall be carried under deck.

Limits of liability/number of packages or shipping units. Article 59 provides for a per package limitation of 875 SDRs (currently about US$1,330), and 3 SDRs per kilogram (about US $4.55) of the total weight of the goods which are damaged or lost, whichever of the two is the higher, unless the shipper has declared the nature and value of the goods before shipment and included it in the contract of carriage particulars. Packages which are stated in contract document as included in or on a container are deemed packages or shipping units. Where there has not been such indication then the goods in or on a container are deemed one shipping unit.

Intentional act or reckless conduct. Article 61 provides that a carrier or performing party has no right to limit liability where the claimant shows that the delay or loss was as a result of the act or omission of the person claiming the right to limit or was done with the intention of causing the damage or loss , or recklessly knowing that such loss or damage would occur. A personal act or omission would include acts that constitute management failure in a corporate carrier.

Effect of deviation. Article 24 states that “where, under national law a deviation of itself constitutes a breach of the carrier’s obligations, such breach only has effect consistently with the provisions of this instrument.” The intention of this provision is that misperformance by the carrier, whether geographical or otherwise, does not displace the exemptions from liability or limitations of liability of the carrier or the performing parties.

Notice of loss or damage, presumptions. Under Article 23, it is presumed that the carrier would have delivered the goods in accordance with their description, absent proof to the contrary, unless notice of loss or damage to the goods was given to the carrier or the performing party with some indication of the nature of the loss or damage, within seven working days from the date when the goods are delivered. Berlingieri (2009:16) has rightly observed that by this provision, “The Rotterdam Rules regulate the consequence of the failure to give such notice by providing that the failure does not affect the right to claim compensation and the allocation of the burden of proof set out in article 17”

Defences and limits apply whether action is in contract or in tort. The defences and limits of liability will apply to actions against a performing party or a carrier where the action is one based in contract or tort. This addresses issues of priority of maritime liens and whether the Rotterdam Rules’ provisions apply to performing parties who are not in privity of contract with the party seeking recovery.

Shipper’s obligations. Under Article 27, the shipper’s obligations include to deliver the goods for carriage in a condition that the goods will endure the intended carriage. If the goods are in a container packed by the shipper, the goods must be stowed, lashed and secured in a manner that the they will endure the carriage, and will not harm persons or property.

Qualifications in contracts of carriage relative to description of goods, quantities. Article 40 provides that a carrier may qualify the goods’ description in the contracts to a limited extent. For non-containerised goods, where the carrier can demonstrate that there was no means of verifying the information furnished by the shipper, a qualifying clause may be included in the particulars of the contract. An appropriate qualifying clause may be included in the contract particulars by the carrier where goods are to be delivered in a closed container with regards to the marks on the goods.

Time bars. Article 62 provides a time bar on any suit of two years from the day on which the delivery of the goods had been completed by the carrier or, where there is no delivery, on the last day on which the delivery of the goods should have taken place. An action for indemnity may be instituted after two years of the later of the time allowed by the applicable law of the jurisdiction where proceedings are instituted, or 90 days of the date the person seeking indemnity has settled the claim or has received the process relating to the action against itself.

Burdens of proof. Under COGSA/Hague-Visby, proof of delivery in good order (a clean bill of lading is prima facie proof of delivery in good order) and received in damaged condition creates a prima facie case of liability of the carrier that can be rebutted by the carrier showing that the damage fell under one of the exceptions to liability. The Rotterdam Rules provide that a claimant establishes a prima facie case of liability of the carrier if the consignee proves (1) that it has given notice of loss or delay as required by Article 23, and (2) that the loss occurred during the period that the carrier was responsibility for the goods.

Apportionment of fault and damage. Under Article 17, the carrier is liable for all of the loss unless and to the extent it can show that some aspects of the loss was as a result of an event for which the carrier was not liable. Where it meets that burden, the burden of proof shifts to the party seeking to recover to prove that the loss was as a result of an action for which the carrier is liable.

Anti-derogation clause. Any contractual term that derogates from the stipulations of the Rotterdam Rules will be null and void if it works to limits, reduce or increases the liability for breach of any obligation a performing party, the carrier, the shipper, a consignee or a controlling party. A carrier or performing party may increase by contract its responsibilities and obligations. A volume contract may validly provide for modification of rights, obligations and liabilities (but not essential provisions such as seaworthiness of the ship) only if the contract prominently states that it derogates from the Rules and meets the other requirements of Article 80.

Choice of forum. Article 66 limits contractual choice of forum for litigation, allowing a cargo claimant a choice of permissible forum against the carrier from a list that includes (1) the domicile of the carrier, (2) the place of receipt of the goods as delivered in the contract of carriage, (3) the place of delivery indicated in the carriage contract, (4) the initial port where the cargo are put on a vessel or the port where the cargo are unloaded from a vessel, or (5) a court designated in the contract of carriage. The limitations on forum do not apply to qualified volume contracts. Actions against a maritime performing party may be brought where it is domiciled or the port where it received or delivered the goods, or where activities were performed with respect to the cargo.

Arbitration. Article 75 generally recognises the enforceability of arbitration clauses. With an important change from COGSA precedents, it allows the places where arbitration may take place, at the option of the claimant, at:

1. Any place so designated in the arbitration agreement;
2. Any other place in the country where any one of these is located:
(a) The domicile of the carrier;
(b) The agreed place of receipt as indicated in the contract of carriage;
(c) The agreed place of delivery of the goods; or
(d) The port were the goods are initially loaded on a vessel or where the goods are eventually off-loaded from the vessel.
The Rotterdam Rules permit the contracting state to opt-out of these provisions.

Provisions for volume contracts. Article 80 proposes that volume contracts covered by the Rotterdam Rules may provide for lesser or greater duties, obligations, rights and liabilities but only if the volume contract (1) prominently states that it derogates from provisions of the Rotterdam Rules; and, (2) the volume contract either is individually negotiated or specifies the part of the volume contract that contains the derogations.

A “volume contract” is defined as one “that provides for the carriage of a specified quantity of goods in a series of shipments during an agreed period of time,” Any such volume contract must be a separate document and may not be part of the carrier’s tariff or regular transport document. Importantly, not all obligations of carriers may be disclaimed and although volume contracts permit carriers and cargo to derogate from many of the provisions, but not fundamental obligations such as seaworthiness.

Electronic records

One of the novelties in the Rotterdam Rules is the regulation of the electronic alternative to the transport document. In view of the continuous development of electronic communications and the fact that so far the attempts to create a workable system allowing the replacement of paper documents by electronic records have not been successful, the provisions regulating such possible replacement have been drafted in such a way as to allow their application whatever future system may in the future be envisaged.

This has been achieved through the addition of a short chapter three which provides for the equal value of transport documents and their electronic equivalent. They set out the basic conditions for the use of the electronic transport records and the rules governing the replacement of transport document with electronic transport records. Throughout the Convention there is reference to electronic transport records in all the provisions in which reference is made to transport documents. Alba (2009:405) sees this as an attempt by the new Convention to “regulate the issuance of electronic transport records in negotiable form, their operation, and, to a certain extent, their effects.”

Concerns About the Rotterdam Rules

A major for concern is the size of the new Convention as it is viewed that the Rules are long and too complex to have the required effect. Questions have been raised as to the ability of the Convention to provide worldwide uniformity in the regulation of carriage of goods by sea. Schelin (2009:322) has questioned the ability of the new Convention to lead to an increased harmonisation in international carriage of goods by sea?

The aspect of the Rotterdam Rules that has been most criticised is provision on volume contracts – which are carriage contracts that provide for the carriage of identified quantity of goods in a number of shipments for a stipulated time period. Article 80 enables anyone carrying goods under a volume contract to opt-out of the Convention as long as a prominent statement has been included in the contract of carriage to that effect. The act of opting out implies that the Convention would have no effect on the consignment of such carriers. It is believed that around 90 per cent of containerised cargo worldwide are transported under 'service contracts' that may fulfil the requirements of a volume contract under these new Rules. Thus there is the potentially, that such a high percentage of carriage contracts could be excluded from the provisions of the Convention. When the Rules are adopted, this provision may have the effect of rendering the Rotterdam Rules a failure in its aim to bring about worldwide unification of carriage of goods by sea.

Articles 66 - 78 of the new Rules which cover the issue of jurisdiction are optional thus leaving it to each contracting states to decide whether to 'opt in' or not. Where parties to a carriage contract have already chosen a jurisdiction as the ‘situs’ in their contract, the provisions of the Rotterdam Rules will not apply. Where the contract of carriage does not contain an exclusive jurisdiction clause, proceedings can be commenced by the claimant in a court of competent jurisdiction at the place of receipt of the goods, the place where the goods are delivered, the carrier’s place of domicile or the port where they are loaded or discharged.

For the parties who are not party to the original contract to apply exclusive jurisdiction clause, the clause must fulfil the requirements of Article 67(2). As the issue of jurisdiction in international carriage of goods is already a complicated matter, it is important for parties to have a clear knowledge of the jurisdiction that will apply under their carriage contracts when disputes arise.

Some have expressed their concern over the issue of arbitration and the practical application of the provision on arbitration. Alcantara (2010:12) is of the view that although the new rule “permits the parties to refer any dispute that may arise relating to the carriage of goods under the Rotterdam Rules to arbitration.....the possibility of having arbitration taking place in a number of different possible locations will reduce commercial certainty, the contracting states that adopt Chapter 15 may or may not be properly equipped or have the expertise or experience to handle maritime disputes, nor have a court system which will support those arbitration proceedings.”

Concluding Remarks

There is no doubt, from what have been highlight above, that cargo owners are the group that benefit most from the Rotterdam Rules. Apart from the carrier’s obligation being extended by the new Rules to cover the whole period of the voyage, the Rules give cargo owners the right to choose the jurisdiction where legal action can be taken in the event of a dispute. Where the ‘volume contract’ requirement has been met in any contract of carriage, a carrier can contract out of the Rules. As the Rules opens up the possibility for individual States to opt-out of the jurisdiction provisions, they will work to exclude carriers in such States from applying these provisions of the new Rules.

Although the new Convention has a wide remit yet the question that has often been asked is if these new Rules will fulfil their ambition of providing worldwide unification in international cargo carriage? Article 94(1) provides that the Rotterdam Rule will on the first day of the month one year after the 20th ratification come into force. At the time of writing, no state has ratified, and the most recent – 23rd - signatory on October 26, 2009 was Mali. It has to be noted that signature, of course, is far less significant than the act of ratification. With powerful trading and sea-faring nations in support of the new Rules and with the 23 signatories so far received which represents about 25 per cent of the world trade volume, it is hoped that the Rotterdam Rules will be ratified so that it can enter into force sooner rather than later.

Law Essays - Find your free law essays...

We have a large assortment of free essays available to use as research material. Visit our law essays from our free essays section.

>> Back to the example essays section...