The
Rotterdam Rules
Speakers Panel
CIFFA AGM 13 May 2010
Gavin Magrath
Agenda
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How we got here and what’s next
What’s new for Shippers?
Concerns + Criticisms
Comments + Questions
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What Are The Rotterdam Rules?
• The Convention on Contracts for the
International Carriage of Goods Wholly or
Partly by Sea
• Negotiated through the United Nations
Commission on International Trade Law
(UNCITRAL) in co-operation with the
WTO
A Proposed Global Legal Regime for Multimodal Transport
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100 Years of Cargo Law
• Need for Harmonized System Recognized
• 1924: Hague Rules adopted (~58 ratify)
– 1936: largely adopted into US law
• 1968: Visby amendments added
– ~52 ratify, but never adopted into US law
• 1968: Negotiation begins at UNCITRAL
• 1978: Hamburg Rules established
– Only ~30 ratify, including 10 landlocked nations
– ~20 signed but did not ratify
• 1996: Proposal for a new convention adopted
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Failure of Hamburg left Many
Dissatisfactions with Hague Regime
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Application restricted to carrier BLs only
Liability from loading to discharge only
‘error in navigation’ defence
Low carrier limitations
No liability for delay
Very short notice period and short time bar
Increasing international fragmentation
Canada supported both Hamburg and the new Rules
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The Journey is almost Finished…
• 1980s: Hamburg Rules fail to achieve widespread
adoption
• 1996: Proposal for new convention adopted
• 2001: UNCITRAL Working Group formed
• July 2008: Draft convention adopted by UNCITRAL
• December 2008: Convention adopted by General
Assembly
• September 2009: Signing ceremony at Rotterdam
• October 2009: 22nd and most recent signature
• 2011+??: Coming-into-force
…but is there a light at the end of the tunnel?
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Rules Come Into Force One Year
After 20 Ratifications
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22 Signatures
May be made at
September/09 or later
Indicate intent to be bound
Not binding in domestic
law
Not sufficient for cominginto-force
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Zero Ratifications
Must be done by
domestic authority
Federal States clause
No Reservations
Optional Chapters 15
and 16
Are all ratifications really equal?
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What Will Canada Do?
Canada has not indicated an intention to sign…
• Convention has some benefits for shippers and
removes some defences for carriers;
• Convention has substantial untested provisions;
• CIFFA views some provisions as concerns; and
• ‘Volume contracts’ may eviscerate rules…
…but if USA signs, does the desire for uniformity trump
these concerns?
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Agenda
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•
•
•
How we got here and what’s next
What’s new for Shippers?
Concerns + Criticisms
Comments + Questions
All content © Copyright 2010 Magrath O’Connor LLP
Evolution of Limitations
SDR/kg
Package
Delay
H/V*
2
666.67 SDR
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COGSA
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USD$500
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Hamburg
2.5
835 SDR
2.5x Freight
3
875 SDR
2.5x Freight
Rotterdam
(Art. 59+60)
Art 61: Rotterdam Limit cannot be broken unless
damage is intentional or reckless!
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Scope of Application Extends
Beyond Bills of Lading
• For carriage under a ‘transport document’ (not
only a Bill of Lading);
• For carriage including an international sea leg (as
opposed to that portion of it);
– But “Door” provisions do not displace existing
international land conventions;
• Applies to carrier’s ‘maritime performing parties’
at ports;
• Where receipt, loading, discharge, or delivery are
in a contracting State (Art. 5)
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Responsibility Extended from
Tackle to Door
• Art 12: from the time at which the carrier or
performing party receives goods for
carriage and ending when goods are
delivered.
– …or when received from/delivered to a 3rd
party authorized by law
– But onus is now on the shipper to establish this
period of responsibility! (Art.17(1))
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Notice and Time Bar Extended
Notice (Art 23)
The obligation to provide
written notice so that the
carrier may preserve
evidence:
• At delivery or within 7 days
if hidden;
– Up from delivery/3 days;
• Failure not fatal;
• 21 days notice for delay;
• Notice is Joint + Several.
Time Bar (Arts 62-64)
The time before which a
claimant must file suit in a
competent court:
• Within 2 years (up from 1;
• May be extended in
writing;
• Permitting 90 days in
which to file suit seeking
indemnity for 3P claim.
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Jurisdiction and Arbitration
Ch 14: Jurisdiction
• Plaintiff may sue:
Ch 15: Arbitration
• Any place agreed under a
– In Carrier’s domicile
volume contract that is
– At place of receipt
– Individually
– At place of delivery
negotiated; or
– At Port of loading/discharge
– Contains a prominent
– In a competent Court
agreed under a Volume
statement and specifies
Contract
sections containing the
• Maritime Performing
arbitration agreement.
Parties sued only in their
Port or Domicile
States may opt-out of these Chapters!
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Volume Contracts Permitted
• “A contract that provides for the carriage of a
specified quantity [range] of goods in a series of
shipments during an agreed period of time...”
• Ch. 16 Art 80 permits derogation from carrier
responsibilities where:
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The derogation is stated prominently
It is individually negotiated
The shipper has the opportunity to contract on Rules
The derogation is not incorporated by reference
Will Volume Contracts become the norm?
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Agenda
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How we got here and what’s next
What’s new for Shippers?
Concerns + Criticisms
Comments + Questions
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Some Untested Provisions
• Chapters 3 and 8 provide extensive
provisions for electronic documents;
• Chapter 9 codifies rights and obligations on
delivery;
• Chapter 10 codifies the rights of ‘controlling
parties’ and Chapter 11 governs the transfer
of those rights.
Uncertainty generally leads to Litigation
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Delay Provisions Lack Clarity
Art 21: “Delay in delivery occurs when the goods are
not delivered at the place of destination provided for in
the contract of carriage within the time agreed.”
• What delivery time is ‘agreed’?
– Where none specified, will a proxy be applied?
• What is the basis for liability?
– “loss resulting from” has been removed!
– Appears to be strict: must cargo prove loss?
– Due Diligence defence? If not, will carrier be diligent?
• How will delay claims proceed?
– Limited to 2.5x freight (below deductibles)
– Not economically viable to litigate but may ‘set-off’
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Ch 7: New Shipper Obligations
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Art 27: suitable packing
Art 28-29: communications and instructions
Art 32: Dangerous goods labeling
Art 33: Obligations extend to documentary shipper
Art 34: Shipper liable for acts of its servants and
agents who are not acting for the carrier
But Only the Carrier’s Liability is limited!
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Potential for Patchwork Application
of Door-to-Door Responsibility
• Door provisions do not oust existing
international conventions;
• Local subcontractor’s liability as per local
regulations or terms of subcontract
• Forwarder can be caught between limits
(weight and package)
Effective door-to-door responsibility
is seen as critical to Multimodal
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“Volume Contracts” may
Undermine Uniformity
• Most stakeholders perceive undue carrier influence (a
major reason for the Hamburg and Rotterdam Rules);
• Volume Contract provisions allow broad opt-outs;
• Carriers can be expected to bring economic pressure
to negotiate volume contracts with lower liability;
• Zero-liability volume contracts may therefore become
the industry norm.
“Freedom of Contract” was the price for US Support
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How Will ‘Standard’ Volume
Agreements be Made?
The Agreement must be:
The Agreement could be:
• for a quantity or range of
goods…
• …during an agreed
period of time…
• individually negotiated
• not incorporated by
reference
• stated prominently
• for between one and 208
shipments…
• …over the course of no
more than two years
• At zero-liability or for
double the freight charges
• Willingly accepted as a
condition of the relationship
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How Will ‘Standard’ Volume
Agreements Interact?
Standard forms already
cause legal problems:
• At the point of customer
interaction where the
consumer is not
sophisticated (ticket
cases);
• Where both parties are
sophisticated and both
mutually apply different
terms (battle of forms).
In Transport and under the
new Rules:
• Between inconsistent
shipper-side contracts
• Between inconsistent
Performing Party contracts
• In the context of agency
relationships
• In the context of Himalaya
clauses
• With contractual indemnities
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Insurers to the Rescue?
“Rotterdam Terms”
“Zero-Liability”
Freight Charges
High (“negotiated”)
Low (“volume”)
Policy Cost
Comparable to today
Higher
Insured Recovery
Full (within Policy)
Full (within Policy)
Insurer Recourse
As against any liable
parties
No recourse against
Carriers (or Performing
Parties)
As per Rules or local law
(breakable where
reckless)
N/A
Limitation
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Agenda
•
•
•
•
How we got here and what’s next
What’s new for Shippers?
Concerns + Criticisms
Comments + Questions
All content © Copyright 2010 Magrath O’Connor LLP
Final Thoughts
• The time for debating individual provisions has now
passed;
• Canada likely has little influence over adoption by
other States;
• The goal of uniformity (and economic reality) requires
adoption if US + EU adopt;
• “There is a certain weariness towards continuing any
discussion of reform of International Carriage by Sea
law and it is doubtful that further effort will be made
to restart negotiations in the event of failure.” - CMLA
Canada is a mouse sleeping with an elephant
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Thank you
Gavin Magrath, Partner
Magrath O’Connor LLP
Direct: 416-931-0463
email: [email protected]
Appendix:
Signatories to the Rotterdam Rules
(date marked where other than 23 September 2009)
Armenia (29 Sept/09)
Cameroon (29 Sept/09)
Congo
Denmark
France
Gabon
Ghana
Greece
Guinea
Madagascar (25 Sept/09)
Mali (26 Sept/09)
Netherlands
Niger (22 Oct/09)
Nigeria
Norway
Poland
Senegal
Spain
Switzerland
Togo
United States of America
Source: http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/rotterdam_status.html Last updated: 10 May 2010
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