A New Basis For International Shipping

The Egyptian Center for Studies of Export & Import _,.aV _j.
la _o __o
www.ecsei.com www.ecsei-eg.com Email: info@ecsei.com info@ecsei-eg.com

The New Rotterdam Rules 2008
A New Basis for International Shipping
Legal Report

Summary Report

ECSEI report contains detailed information (legal framework) about:

United Nations Convention on Contracts for the International Carriage of
Goods Wholly or Partly by Sea 2008 (New Rotterdam Rules).
The Comit Maritime International (CMI).
Historic shipping convention signed in Rotterdam.
Describes the rights and obligations involved in the maritime carriage of
goods.
Responsibility and liability during the whole transport.
Rotterdam Rules Gain Momentum as 21th State Signs.
Importance of Internationally Applicable Rules for a Global maritime
Industry.
Worlds leading maritime organizations Support & opposition of New
Rotterdam Rules 2008.
Important Definitions in the Convention's.
Key provisions relating to carriage of goods conventions.
Special Drawing Rights (SDRs).
Matters not governed by this Convention (New Rotterdam Rules).
Background to the Current Basis for international shipping:
The Hague Rules.
The Hague-Visby Rules (incorporating the 1968 Visby Amendments).
The Protocol of 79
The Hamburg Rules

November 2009

General Manager
Medhat Saad Eldin
Legal Consultations
Direct: 0020-123514312

The Egyptian Center for Studies of Export & Import _,.aV _j. la _o __o

Shipping is thus truly a global industry

About 90% of world trade is carried by the international
shipping industry on some 50,000 merchant ships trading
internationally, transporting every kind of cargo.
The Rules that govern it must of necessity also be truly
international in the sense that they are widely accepted
across all the various jurisdictions in order to provide legal
certainty and uniformity, thereby reducing conflicts of rules
which would necessitate a variety of insurances at increased
expense and lead to confusion, An increase in litigation and
consequent legal and other costs.
This is of vital importance to all:
Stakeholders,
Shippers,
Carriers and
International trade at large

(UNCITRAL) United Nations Commission on International Trade Law

UNCITRAL's business is the modernization and harmonization of rules
on international business since resolution 2205 (XXI) of 17 December
1966, by which it Established the United Nations Commission on
International Trade Law with a Mandate to further the progressive
harmonization and unification of the law of International trade and in that
respect to bear in mind the interests of all peoples, in Particular those of
developing countries, in the extensive development of International trade,
The United Nations Commission on International Trade Law (UNCITRAL) is
the core legal body of the United Nations system in the field of
international trade law.
Its mandate is to remove legal obstacles to international trade by
progressively modernizing and harmonizing trade law.
It prepares legal texts in a number of key areas such as:
International commercial dispute settlement,
Electronic commerce, insolvency,
International payments,
Sale of goods,
Transport law,
Procurement and infrastructure development.
UNCITRAL also provides technical assistance to law reform
activities, including assisting Member States to review and assess
their law reform needs and to draft the legislation required to
implement UNCITRAL texts.
Concerned that the current legal regime governing the international
carriage of goods by sea lacks uniformity and fails to adequately take into
account modern transport practices, including containerization, door-to-
door transport contracts and the use of electronic transport documents.
At its thirty-fourth and thirty-fifth sessions, in 2001 and 2002, the
Commission decided to prepare an international legislative instrument
governing door-to-door transport operations that involve a sea leg.
The exhaustive discussions and negotiations that took place under the
aegis of the United Nations Commission on International Trade Law
(UNCITRAL) between 2001 and 2008 have culminated in the new
The New Rotterdam Rules 2008
A New Basis for International Shipping
Page (1)

international Convention on Contracts for the International Carriage of
Goods Wholly or Partly by Sea.
It was approved by the UNCITRAL Commission in July 2008 and adopted
by the UN General Assembly on 12 December 2008.

The Comit Maritime International (CMI)

The CMI, which was formally established in 1897, is the oldest
international organization in the maritime field. Although its foundation
followed that of the International Law Association (ILA) by several years,
and the CMI was perhaps in one sense a descendant of the ILA, the
Comit was the first international organization concerned exclusively with
maritime law and related commercial practices.
Following its 29th Session in 1996, UNCITRAL requested the CMI (as well
as other organizations) to gather information about current practices and
laws in the area of international carriage of goods by sea, with a view to
establishing the need for uniform rules in the areas where no such rules
existed. UNCITRAL noted that.
Preparatory work on the new Convention started with the CMI in 1996
The Comit Maritime International (CMI); its 2001 Memorandum of
Agreement with the World Shipping Council; and, as a private industry
advisor to the United Nations Committee on International Trade Law's
(UNCITRAL) Working Group.

About Rotterdam City:

Rotterdam is a City and municipality in the Dutch province of
South Holland, Situated in the west of the Netherlands.
The municipality is the second Largest in the country, with a population of
584,046 as of January 2007.
The Port of Rotterdam is the largest in Europe from 1962 to 2004; it was
the world's busiest port it was then superseded by Shanghai.
The name Rotterdam derives from a dam in the Rotted River
The signing took place in Rotterdam, the city after which the UN
convention is named.
Historic shipping convention signed in Rotterdam

On Wednesday23 September2009, sixteen countries have officially
expressed their support for the new UN Convention 'Rotterdam
Rules' during the official Signing Ceremony in Rotterdam, the
Netherlands.
These States signed the Convention, which describes the rights and
obligations involved in the maritime carriage of goods.
Important seafaring nations such as the United States, Norway,
Denmark, Greece, France and the Netherlands are among the
signatories.
The Rotterdam Rules bring more clarity regarding who is
responsible and liable for what, when, where and to what extent
when it comes to transport by sea.

Page (2)


Importance of Internationally Applicable Rules for a Global
maritime Industry

The Rotterdam Rules will give world trade a boost considering that 90% of
world trade is conducted by sea.
If the same law applies all over the world, this will facilitate international
trade by making its underlying contracts and documentation more efficient
and clearer.
The Rotterdam Rules are the first rules governing the carriage of goods by
sea and connecting or previous transport by land.
This used to require separate contracts.
Also, responsibility and liability during the whole transport process are
clearly demarcated.
Furthermore, the convention puts in place the infrastructure for the
development of e-commerce in maritime transport.
This will mean less paperwork.
The shorter turnaround times will reduce the chance of errors and lower
costs.
The Rotterdam Rules provide a legal framework that takes into account
the many technological and commercial developments that have occurred
in maritime transport since the adoption of those earlier conventions,
including:
The growth of containerization,
The desire for door-to-door carriage under a single contract, and
The development of electronic transport documents.

United Nations Convention on Contracts for the International
Carriage of Goods Wholly or Partly by Sea

The Convention Entry into force

According Arcle 94 the UN convention will not take immediate effect.
Only one year aer 20 countries have raed it the Rotterdam Rules will officially
Come into force.

Article 94 Entry into force

This Convention enters into force on the first day of the month
Following the expiration of one year after the date of deposit of the
twentieth instrument of ratification, acceptance, approval or accession.
For each State that becomes a Contracting State to this Convention
After the date of the deposit of the twentieth instrument of ratification,
Acceptance, approval or accession, this Convention enters into force on
The first day of the month following the expiration of one year after the
Deposit of the appropriate instrument on behalf of that State.
Each Contracting State shall apply this Convention to contracts of
carriage Concluded on or after the date of the entry into force of this
Convention in Respect of that State.

Page (3)


The Convention Status Signatories:

Convention Status: Signatories (21)
Until : 1 November 2009

No

Participant

Signature
1 Armenia 29 Sep 2009
2 Cameroon 29 Sep 2009
3 Congo 23 Sep 2009
4 Denmark 23 Sep 2009
5 France 23 Sep 2009
6 Gabon 23 Sep 2009
7 Ghana 23 Sep 2009
8 Greece 23 Sep 2009
9 Guinea 23 Sep 2009
10 Madagascar 25 Sep 2009
11 Mali 26 October 2009
12 Netherlands 23 Sep 2009
13 Niger 22 October 2009
14 Nigeria 23 Sep 2009
15 Norway 23 Sep 2009
16 Poland 23 Sep 2009
17 Senegal 23 Sep 2009
18 Spain 23 Sep 2009
19 Switzerland 23 Sep 2009
20 Togo 23 Sep 2009
21 United States of America 23 Sep 2009

Rotterdam Rules Gain Momentum as 21th State Signs

VIENNA, 23 October (UN Information Service) - The United Nations
Convention on Contracts for the International Carriage of Goods Wholly or
Partly by Sea, known as the Rotterdam Rules, has received its 21th
signature just one month after it first opened for signature. Niger became
the 20th and Mali became 21th signatories to the Rotterdam Rules.
The 21 signatories represent a mix of developing and developed countries,
including several major trading and maritime nations. Together, the 21
represent over 25 per cent of current world trade volume according to the
United Nations 2008 International Merchandise Trade Statistics Yearbook.
The Convention needs 20 ratifications to enter into force.
A rapid ratification of the new regime by major trading nations, such as
the US, will determine the shape of international transport law for most
important markets in maritime commerce and will pave the way to achieve
the worldwide uniformity.
The Rules will take effect after 20 countries not only have signed them but
have ratified them as a treaty under their internal constitutional processes.

Page (4)

Worlds leading maritime organizations Support & opposition
of New Rotterdam Rules 2008

Support Maritime Organizations

ICS / ECSA / BIMCO / WSC Press Release THE ROTTERDAM RULES
Wide Support by States at Signing Ceremony in Rotterdam

The International Chamber of Shipping (ICS), the European Community
Shipowners Associations (ECSA), BIMCO and the World Shipping Council
(WSC) are very pleased with the significant level of support given by so
many States, including EU Member States, the United States and many
other States representing between them shipper and carrier interests.
ICS, ECSA, BIMCO, WSC therefore call upon States which have not yet
signed the Rotterdam Rules, including some EU Member States, to sign
the Convention and urge all States to ratify and apply these rules as soon
as possible.
There is no global uniform alternative for those seeking a real international
solution.

Notes:

ICS, ECSA and BIMCO and WSC are international trade associations that
collectively represent about 90% of the global shipping industry.
The International Chamber of Shipping (ICS) and the European
Community Shipowners Associations (ECSA) represent the worlds
national shipowners associations.
BIMCO has a wide international membership of individual shipping
companies, operating the majority of the world merchant fleet in all
sectors and trades.
The World Shipping Council (WSC) represents the interests of global
containership operators.

Industrys view of the Rotterdam Rules

Ship-owners will see a significant increase in the cost of cargo liability
claims due to certain provisions of the Convention, namely:

Loss of the right to the nautical fault defense.
Extension of the obligation to exercise due diligence to make the ship
Seaworthy.
Higher limits of liability;

Page (5)

Balanced against the increased liability for ship-owners, however, the
Convention contains many valuable provisions that seek to facilitate and
regulate modern trade practices and ship-owners welcome the following:

As stated, the Convention modernizes the liability regime for carriage of
goods By sea and also, importantly, addresses the lacuna that presently
exists for Maritime carriage where there is also multimodal carriage and a
sea leg, and Regulates such carriage.

The Convention will extend not only to outgoing maritime carriage but also
to incoming maritime carriage.

The beneficial aspects of existing non-maritime conventions which are
known and well-understood and applicable to EU Member States in
particular, are retained.
Specifically, the new Convention adheres to the concept of
network "liability whereby liability and the applicable limits of
liability for loss and damage to the goods occurring before or after
the sea-leg will be determined by any unimodal Convention
compulsorily applicable to the relevant mode of transport where the
loss or damage occurs, e.g. CMR and COTIF.

The Convention provides a much needed solution for the problem of how
to deal with concealed damage during multimodal carriage by providing
that where it is not known when the damage took place and on which
mode of transport, the Convention will govern liability and limits of
liability, etc.

The Convention makes provisions for and regulates e-commerce.
In particular, the Convention gives functional equivalence to
traditional bills of lading and other transport documents such as
way bills and electronic trading systems.
In this way, e-commerce will no longer be impeded by shipper
rights to demand paper documentation before delivery.

The use of encrypted electronic systems will help to reduce fraudulent
transactions while instantaneous transmission means that documentation
will no longer be delayed in postal systems.
This will go a long way toward overcoming the age-old problem often
leading to pressure on carriers to release cargo without surrender of
documentation.

The Convention applies to all transport documents in liner trade, not only
bills of lading, and provides detailed rules on all documentary aspects
thereby ensuring uniformity and certainty in an area which has been
dominated by divergent national rules and court decisions.

The Convention allows parties in the liner trade greater freedom of
contract where this is appropriate while at the same time giving
mandatory protection where needed.
For example, it permits volume contracts in liner traffic to derogate from
the Convention by contractual arrangement and according to certain strict
conditions to ensure that all parties are adequately protected before
embarking on terms outside of the Convention.

Page (6)


The Convention applies to cargo whether carried on or under deck and
thereby avoids the legal difficulties which follow from the Hague and
Hague Visby Rules general exclusion of deck cargoes from the scope of
those conventions.
The Convention provides for a much improved regime for deviation when
compared with the Hague Visby Rules, in that where under a national law
there is a deviation, the Convention will not deprive the shipowner of the
right to defences and limitations.
The Convention contains comprehensive and more systematic provisions
on carrier and shipper liability and provides a balanced allocation of risk
between these parties.
Where the consignee has not obtained possession of a negotiable
transport document, the Convention permits the carrier under certain
circumstances, to deliver the goods without presentation of the negotiable
transport document while at the same time protecting the interests of all
the parties involved.
The Convention deals with jurisdiction and arbitration, however the
provisions are subject to an opt-in by States.
It is most unlikely that EU Member States will opting whereas the
US is expected to exercise the option to opt-in.

Opposition Maritime Organizations

The European Shippers' Council represents

The European Shippers Council represents the freight transport
interests of some 100,000 companies, whether manufacturers,
retailers or wholesalers, throughout Europe whose goods move
across EU and international borders (imports and exports) by any
mode of transport.
ESC has taken a strong interest in the UNCITRAL process in recent
years. It is the aim to ensure that any new international convention on
maritime liability would provide shippers with basic protection when involved in
international trade.
ESC takes issue with many of the features of the new regime, known
today as the Rotterdam Rules, which has yet to be ratified, and fears that
it could put some shippers in a worse position than that of the pre-1924
liability environment, before introduction of the original Hague Rules.
The European Shippers Council contests that the new convention is
flawed, puts shippers at greater risk, potentially unknowingly, and would
do little to facilitate door-to-door co-modal transportation in European
trades.
The ESC argues that the interests of exporters and importers should be
given their due weight by EU member state governments, and that this
Convention should not be supported.
ESCs position in brief about the new Rules

Conflict with other conventions.
Present unequal obligations and liabilities between shippers and carriers.
Present a risk that carriers may reduce significantly their own limits of
liability and obligations under so-called volume contracts.
Make proving fault harder for the shipper.
Make it increasingly difficult for shippers to successfully make a claim for
damages.
Page (7)

Make shipper obligations far more onerous.
May deter shippers from integrating short-sea shipping into their door-to-
door logistics due to obligations and limits of liability being worse than
under individual modal conventions.
The administrative burden of freight forwarders will increase significantly
with any entering into force of the Rotterdam Rules.

International Federation of Freight Forwarders Associations
(FIATA)

FIATA Working Group Sea Transport recommends that Association
members should advise their governments not to accept the Rotterdam
Rules.

In general, the Convention is far too complicated this leads to additional
transaction costs and invites misunderstandings and misinterpretations.
At worst, the Convention States may end up with different
interpretations, so that the Rotterdam Rules will fail in reaching
their main objective to unify the law of carriage of goods by sea.

Although freight forwarders, as carriers or logistics service providers, gain
from the benefits according to carriers by the Rotterdam Rules such as
the right to limit liability not only for loss of or damage to cargo but for
any breach (Art. 59.1) and no liability for delay unless agreed (Art. 21)
the Rotterdam Rules work to the disadvantage of freight forwarders when
acting as shippers or when demanding compensation from the performing
carriers.
It is expected that the expansion of freedom of contract in case of volume
contracts (Art. 1.2 and Art. 80) will lead to additional difficulties in getting
compensation from the performing carriers.

As shippers, freight forwarders will be liable without any right to limit
liability for incorrect information to the carriers (Art. 79.2(b)), although
the carriers enjoy the right to limit their liability for incorrect information
to the shippers (any breach).

Freight forwarders are frequently engaged in various capacities in the
Seaports Such activities will expose them to liability as maritime
performing parties (Art. 1.7 and Art. 19). At present, stevedores and
warehousemen enjoy freedom of contract allowing them to escape liability,
at least to the extent that their customers are or could be covered by
insurance for loss or damage.
In countries where stevedoring and warehousing enterprises are
owned or controlled by governments or municipalities, any moves towards
ratification of the Rotterdam Rules would for this reason presumably be
strongly opposed in order to avoid escalation of liability insurance
premiums.
Multipurpose cargo terminals engaged as distribution centres in logistics
operations would strongly oppose a sort of maritime law injection into
their business, which presumably will be governed by more sophisticated
liability regimes.

Page (8)


Important Definitions in the Convention's

For the purposes of this Convention:

Contract of carriage

Means a contract in which a carrier, against the payment of freight,
undertakes to carry goods from one place to another.
The contract shall provide for carriage by sea and may
provide for carriage by other modes of transport in addition to the sea carriage.

Volume contract

Means a contract of carriage that provides for the carriage of a specified quantity
of goods in a series of shipments during an agreed period of time.
The specification of the quantity may include a minimum, a maximum or a certain
range.

Liner transportation

Means a transportation service that is offered to the public through publication or
similar means and includes transportation by ships operating on a regular
schedule between specified ports in accordance with publicly available timetables
of sailing dates.

Non-liner transportation

Means any transportation that is not liner transportation.

Carrier

Means a person that enters into a contract of carriage with a shipper.

(a) Performing party

means a person other than the carrier that performs or undertakes to perform
any of the carriers obligations under a contract of carriage with respect to the
receipt, loading, handling, stowage, carriage, care, unloading or delivery of the
goods, to the extent that such person acts, either directly or indirectly, at the
carriers request or under the carriers supervision or control.

(b) Performing party

does not include any person that is retained, directly or indirectly, by a shipper,
by a documentary shipper, by the controlling party or by the consignee instead of
by the carrier.

Maritime performing party

means a performing party to the extent that it performs or undertakes to perform
any of the carriers obligations during the period between the arrival of the goods
at the port of loading of a ship and their departure from the port of discharge of a
ship. An inland carrier is a maritime performing party only if it performs or
undertakes to perform its services exclusively within a port area.

Page (9)

Shipper

means a person that enters into a contract of carriage with a carrier.

Documentary shipper

means a person, other than the shipper, that accepts to be named as shipper
in the transport document or electronic transport record.

Holder

means:

(a) A person that is in possession of a negotiable transport document;
and
(i) if the document is an order document, is identified in it as the shipper or
the consignee, or is the person to which the document is duly endorsed; or
(ii) if the document is a blank endorsed order document or bearer document, is
The bearer thereof; or

(b) The person to which a negotiable electronic transport record has been issued
or transferred in accordance with the procedures referred to in article 9,
paragraph 1.

Consignee

means a person entitled to delivery of the goods under a contract of carriage or a
transport document or electronic transport record.

Right of control of the goods

means the right under the contract of carriage to give the carrier instructions in
respect of the goods in accordance with chapter 10.

Controlling party

means the person that pursuant to article 51 is entitled to exercise the right of
control.

Transport document

means a document issued under a contract of carriage by the carrier that:

(a) Evidences the carriers or a performing partys receipt of goods under a
contract of carriage; and
(b) Evidences or contains a contract of carriage.

Negotiable transport document

means a transport document that indicates, by wording such as to order or
negotiable or other appropriate wording recognized as having the same effect
by the law applicable to the document, that the goods have been consigned to
the order of the shipper, to the order of the consignee, or to bearer, and is not
explicitly stated as being nonnegotiable or not negotiable.

Page (10)

Non-negotiable transport document

means a transport document that is not a negotiable transport document.

Electronic communication

means information generated, sent, received or stored by electronic, optical,
digital or similar means with the result that the information communicated is
accessible so as to be usable for subsequent reference.

Electronic transport record

means information in one or more messages issued by electronic communication
under a contract of carriage by a carrier, including information logically associated
with the electronic transport record by attachments or otherwise linked to the
electronic transport record contemporaneously with or subsequent to its issue by
the carrier, so as to become part of the electronic transport record, that:

(a) Evidences the carriers or a performing partys receipt of goods
under a contract of carriage; and
(b) Evidences or contains a contract of carriage.

Negotiable electronic transport record

means an electronic transport record:

(a)That indicates, by wording such as to order, or negotiable, or
other appropriate wording recognized as having the same effect by the law
applicable to the record, that the goods have been consigned to the order of
the shipper or to the order of the consignee, and is not explicitly stated as
being non-negotiable or not negotiable; and

(b) The use of which meets the requirements of article 9, paragraph 1.

Non-negotiable electronic transport record

means an electronic transport record that is not a negotiable electronic transport
record.

The issuance of a negotiable electronic transport record

means the issuance of the record in accordance with procedures that ensure that
the record is subject to exclusive control from its creation until it ceases to have
any effect or validity.

The transfer of a negotiable electronic transport record

means the transfer of exclusive control over the record.

Contract particulars

means any information relating to the contract of carriage or to the goods
(including terms, notations, signatures and endorsements) that is in a transport
document or an electronic transport record.

Page (11)

Goods

means the wares, merchandise, and articles of every kind whatsoever that a
carrier undertakes to carry under a contract of carriage and includes the packing
and any equipment and container not supplied by or on behalf of the carrier.

Ship

means any vessel used to carry goods by sea.

Container

means any type of container, transportable tank or flat, swap body, or any similar
unit load used to consolidate goods, and any equipment ancillary to such unit
load.

Vehicle

means a road or railroad cargo vehicle.

Freight

means the remuneration payable to the carrier for the carriage of goods under a
contract of carriage.

Domicile

Means:
(a) a place where a company or other legal person or association of natural or
legal persons has its
(i) Statutory seat or place of incorporation or central registered office, whichever
is applicable,
(ii) Central administration or
(iii) Principal place of business, and

(b) The habitual residence of a natural person.

Competent court

means a court in a Contracting State that, according to the rules on the internal
allocation of jurisdiction among the courts of that State, may exercise jurisdiction
over the dispute.

Key provisions relating to carriage of goods conventions

The Rotterdam Rules will:

Provide legal certainty and uniformity with regard to the carriage of goods
by sea and connected transport.
With about 90% of world trade being transported by sea on some 50,000
merchant ships that trade internationally and transport all types of cargo,
shipping is a truly global industry that needs to be governed by widely
accepted international rules;
Modernise the liability regimes that currently apply to the carriage of
goods by sea;
Page (12)

Cover multimodal carriage of goods that involve a sea leg while respecting
existing unimodal conventions which also regulate multimodal transports
in some aspects;
Address gaps that presently exist, including the important introduction of
provisions to facilitate e-commerce;
Strike a balance between the interests of shipowners and shippers in
terms of liabilities and the allocation of risks between both parties, a
feature that is recognized by shipowners and shippers, including major
European shippers.

Significant Provisions

The new Convention will apply to the period of carriage from 'door to door'
Accordingly, Article 12 of the Convention states:

"The period of responsibility of the carrier for the goods under this
Convention Begins when the carrier or a performing party receives the
goods for carriage and ends when the goods are delivered".

This is an extension of the current regime under the Hague-Visby Rules
which essentially govern the carriage of goods from loading on the ship
until discharge.
The 'door to door' coverage of the new Rotterdam Rules does not
completely displace other 'non sea' Conventions such as CMR or CIM given
that:
The Rotterdam Rules will only apply if there is a sea leg (Article 6); and
Where loss, damage or delay occurs within the carrier's period of
responsibility but solely before or after the sea leg, the Rotterdam Rules
will not prevail (subject to certain conditions) over other applicable
Conventions (Article26).
The Convention maintains a fault-based liability regime. The starting point
for the burden of proof under the Rotterdam Rules is that the carrier is
held liable where the claimant can prove that the loss damage or delay (or
the event that caused or contributed to it) took place during the period of
the carrier's responsibility (Article 17).
However:
The carrier will be relieved of all or part of its liability if it can prove that
the cause of the loss is either not attributable to its fault (or the fault of
one of the persons referred to in Article 18 including a performing party,
Master, crew or employee of the carrier), or falls within a list of defences
including, for example, fire and perils of the sea.
To the extent that the Claimant can prove that the fault of the carrier (or
any of the persons referred to in Article 18) caused or contributed to the
loss, notwithstanding an applicable defence, the carrier remains liable for
all or part of the loss.
In a case involving fire, the carrier can rely on the defence wherever there
is damage caused by fire on board the vessel, but to the extent that the
Claimant can prove that the loss by fire was caused or contributed to by
the fault of the carrier, Master, crew, performing party or any employee of
the carrier, then the fire exception is reduced or eliminated (Article 17).
This significantly limits the scope of the fire exception as currently applied
under the Hague Visby Rules.
The defences available to the carrier have been significantly weakened by
the removal of the "error of navigation" defence.
Page (13)

Where the carrier is relieved of part of its liability under one of these
defences, the carrier will remain liable for only that part of its liability to
which the defence does not apply.
This may well lead to complex disputes over apportionment.
In addition to allowing the traditional route of claiming against the carrier,
the Rotterdam Rules also extend to any operator defined as a Maritime
Performing Party' this may include, for example, stevedoring companies
and cargo terminal operators at sea ports.
If certain conditions are met, Maritime Performing Parties have the same
obligations and liabilities as a carrier, but would also be entitled to the
carrier's defences and limitations (Article 19).
The obligation contained in the Hague-Visby Rules to exercise due
diligence to make the ship seaworthy before and at the beginning of the
voyage has been extended.
Under the Rotterdam Rules the carrier is bound "before, at the beginning
of, and during the voyage by sea" to exercise due diligence to "make and
keep the ship seaworthy" (Article 14, emphasis added).

It is important to note that there is an increase in the limits of liability
under the Convention as illustrated in the following table (Article 59):

Limit per Package
(SDRs)

Limit per Kilo (SDRs)

Regime

666

2

Hague-Visby Rules

835

2.5

Hamburg Rules

875

3

Rotterdam Rules

Special Drawing Rights (SDRs)

Definition

The SDR (Special Drawing Right) is an artificial "basket" currency used by the
IMF (International Monetary Fund) for internal accounting purposes. The SDR is
also used by some countries as a peg for their own currency, and is used as an
international reserve asset

The value of an SDR

Initially, the value of the SDR was defined in terms of one US-$,
which in turn was defined in terms of an ounce of gold.
The SDR has been defined in terms of a basket of currencies.
This basket consisted initially of 16 currencies and was reduced to 5 in
1981.

Page (14)

Matters not governed by this Convention( New Rotterdam Rules)

Article 82

International conventions governing the carriage of goods by other modes of
transport

Nothing in this Convention affects the application of any of the following
International conventions in force at the time this Convention enters into force,
Including any future amendment to such conventions, those regulate the liability
of the carrier for loss of or damage to the goods:

(a) Any convention governing the carriage of goods by air to the extent
that such convention according to its provisions applies to any part of the
contract of carriage;

(b) Any convention governing the carriage of goods by road to the extent
that such convention according to its provisions applies to the carriage of
goods that remain loaded on a road cargo vehicle carried on board a ship;

(c) Any convention governing the carriage of goods by rail to the extent
that such convention according to its provisions applies to carriage of goods
by sea as a supplement to the carriage by rail; or

(d) Any convention governing the carriage of goods by inland waterways
to the extent that such convention according to its provisions applies to a
carriage of goods without trans-shipment both by inland waterways and sea.

Article 83

Global limitation of liability

Nothing in this Convention affects the application of any international convention
or national law regulating the global limitation of liability of vessel owners.

Article 84

General average

Nothing in this Convention affects the application of terms in the contract
of carriage or provisions of national law regarding the adjustment of general
average.

Article 85

Passengers and luggage

This Convention does not apply to a contract of carriage for passengers and
their luggage.

Page (15)

Background to the Current Basis for international shipping

The international legislation which apply to the bill of lading:

1. The Hague Rules.
2. The Hague-Visby Rules (incorporating the 1968 Visby Amendments).
3. The Protocol of 79
4. The Hamburg Rules.

Check which countries ratified each Rule and/or Protocol.

The Hague-Visby Rules MUST be applied to a negotiable bill of lading
if it has in fact be negotiated thus, if a third party is involved.
The Hague-Visby Rules MAY be applied and even adapted to a non-
negotiable bill of lading or any other contract of carriage.

The Hague Rules

Accepted at the International Convention of Brussels on the 25th of
August 1924 as the International Convention for the Unification of Certain
Rules of Law relating to Bills of Lading and known as the Hague Rules.
For many years, a large proportion of the carriage of goods by sea has
been governed by a legal regime centred around the International
Convention relating to the Unification of Certain Rules relating to Bills of
Lading, adopted by "Hague Rules".
The Hague Rules establish a mandatory legal regime governing the liability
of a carrier for loss of or damage to goods carried under a bill of lading.
They cover the period from the time the goods are loaded onto the ship
until the time they are discharged.
According to their provisions, the carrier is liable for loss or damage
resulting from his:
Failure to exercise due diligence to make the ship seaworthy,
To properly man,
Equip and supply the ship or to make its storage areas fit and
Safe for the carriage of goods.
However,

The Hague Rules contain a long list of circumstances that exempt the
carrier from this liability.
Perhaps the most significant of these exemptions frees the carrier from
liability if the loss or damage arises from the faulty navigation or
management of the ship.

The Hague Rules have been amended twice since their adoption

First in 1968
By means of a protocol hereinafter referred to as the "Visby Protocol".

Second in 1979
By means of a protocol hereinafter referred to as the "1979 Additional Protocol".

These amendments deal mainly with the financial limits of liability under
the Hague Rules.
They do not alter the basic liability regime of the Hague Rules or the
allocation of risks effected by it.
Page (16)

The Visby Amendments

On the 23rd of February 1968 a Protocol was signed at Brussels to amend
the Hague Rules. This Protocol is known as the Visby Amendments.
On the 21st of December1979 a new Protocol was adopted which modified
article 4, paragraph 5 of the 1924 Convention as modified by the 1968
Visby Amendments.
It mainly deals with limitation of liability where the limits of the carriers
liability are tied to the IMFs Special Drawing Right (SDR), which is tied
to a basket of the main currencies and is quoted daily in the financial
press.
The Hague Rules together with the Visby Amendments are called the
Hague-Visby Rules (HVR)
The Hague Rules and their Protocols must be considered from three
different angels as not every country adopted the Visby Amendment of
1968 and/or the Protocol of 1979.
For the range of application of the relevant Rules, see the "Paramount
Clause" on the back of the bill of lading.
In principle, the provisions of the Hague-Visby Rules
Are only applicable on a negotiable and shipped bill of lading (and which in
fact has been negotiated).
As the Hague-Visby Rules are of public order they are only mandatory
towards a third holder.
The provisions of the Hague-Visby Rules belong to the imperative law.
Consequently parties may not deviate from them and their main purpose
is to protect a third holder who had no knowledge of the agreements made
between the original shipper and the receiver of the goods.
If the holder of the bill of lading, who is in fact the receiver of the goods,
also is the shipper of these goods, the bill of lading has not been
negotiated and no third holder was involved so that the Hague-Visby Rules
do not apply.
As long as there is no third party involved, parties may, may agree to
whatever they want (as long as they don't agree to something immoral or
indecent or if what they agree is not against any other law) or even apply
the Hague-Visby Rules to their contract of carriage.
They may even modify or adapt the text to their personal needs if they
wish to do so.

Dissatisfaction with the Hague Rules system

There emerged over the course of time increasing dissatisfaction with the
Hague Rules system.
This dissatisfaction was based in part upon the perception that the overall
allocation of responsibilities and risks achieved by the Hague Rules, which
heavily favoured carriers at the expense of shippers, was inequitable.
Several provisions of the Hague Rules were regarded as ambiguous and
uncertain, which was said to result in higher transportation costs and to
add further to the risks borne by shippers.
The dissatisfaction with the Hague Rules was also based upon the
perception that developments in conditions, technologies and practices
relating to shipping had rendered inappropriate many features of the
Hague Rules that may have been appropriate in 1924.

Page (17)


Background to the Hamburg Rules

The United Nations Convention on the Carriage of Goods by Sea1978

The United Nations Convention on the Carriage of Goods by Sea, 1978
"Hamburg Rules") was adopted on 31 March 1978 by a diplomatic
conference convened by the General Assembly of the United Nations at
Hamburg, Federal Republic of Germany.

The Convention is based upon a draft prepared by the United Nations
Commission on International Trade Law (UNCITRAL).

The Hamburg Rules establish a uniform legal regime governing the rights
and obligations of shippers, carriers and consignees under a contract of
carriage of goods by sea.

Their central focus is the liability of a carrier for loss of and damage to the
goods and for delay in delivery.

They also deal with the liability of the shipper for loss sustained by the
carrier and for damage to the ship, as well as certain responsibilities and
liabilities of the shipper in respect of dangerous goods.

Other provisions of the Hamburg Rules deal with transport documents
issued by the carrier, including:
Bills of lading,
Non-negotiable transport documents,
Limitation of actions, jurisdiction,
Arbitral proceedings under the Convention.

The Convention entered into force on 1 November 1992 for the following
twenty States:

Barbados, Botswana, Burkina Faso, Chile, Egypt, Guinea, Hungary,
Kenya, Lebanon, Lesotho, Malawi, Morocco, Nigeria, Romania,
Senegal, Sierra Leone, Tunisia, Uganda, United Republic of
Tanzania, and Zambia.

As of 1 August 1994, an additional two States, Austria and
Cameroon had become party to the Convention.

Page (18)


Conclusion

There seems little doubt that, if the Rotterdam Rules are not ratified, the
status quo of existing regimes will not remain because they do not meet
the needs of todays trading environment, the likelihood being, in
particular, that the USA would enact its own domestic legislation.

The National Industrial Transportation League in the U.S. has strongly
supported to New Rotterdam Rules and the U.S. right now is the only pro-
Rotterdam country with a large continental landmass, and thus an
extensive inland transportation network.

The vocal opposition has come from the European Shippers Council and
the large rail and trucking industries in the countries (and Europe) have
little to gain from actively supporting Rotterdam also the Rules are
opposed by the International Road Union, which is a worldwide
organization made up of the national trucking, bus and taxicab
associations in more than 100 countries including the European Union, all
the Western Hemisphere countries

The Asian shipper organizations will stay on the fence while a regional task
force studies the Rules

The Attitudes in Canada and Australia are said to range from skeptical to
hostile

The Brazil is on the fence, and that its trucking association is strongly
opposed to Rotterdam.

The China would sign, but this did not happen today.

The positions of Russia and India are unknown at this time, but they were
not heard from at the signing ceremony.

In fact, nevertheless, the list of initial signers may portend a better result
for Rotterdam than for the 1978 Hamburg Rules, UNCITRAL prior effort to
harmonize maritime cargo liability, Hamburg never was ratified by a single
major seafaring or industrialized country such as the eight that have
signed on for Rotterdam thus far and over time, it may turn out that the
U.S. and the seven European signers can leverage further support for
Rotterdam in parts of the world that are staying uncommitted for now. The
limited impact of Rotterdam on inland transportation may actually help in
this regard.

A possible explanation is that the intermodal uniformity that energized
early UNCITRAL efforts was largely negotiated away.

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Summary Report

Page (19)

A New Basis For International Shipping

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