BY: ECKHARD BOECKER

A new convention on international maritime transport, which was presented to the world in September last year, has attracted both critics and proponents. This article looks at the opportunities connected with the Rotterdam Rules, as well as at the concerns that have been raised about what will happen if they take effect.

The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, known as the Rotterdam Rules (RR), applies to intermodal contracts that include a sea journey, as well as to pure maritime transport. This was not the case with the Hague-Visby Rules adopted in 1968 or the Hamburg Rules of 1978.

In addition, the Rotterdam Rules aim to harmonise the world’s legal framework for the maritime carriage of goods. If adopted, the Rotterdam Rules will replace the earlier agreements mentioned above. They will also render obsolete the Maritime Code of China, the USA’s and Australia’s Carriage of Goods by Sea Acts (Cogsa), and other laws.

Nevertheless, it remains to be seen whether this bold effort will succeed. A number of hurdles have to be overcome before the Rotterdam Rules can take effect. A total of 21 countries have signed the convention since it was officially presented in Rotterdam in September 2009 (see box). One thing that stands out is that the signatories include a number of African nations, in addition to the USA and certain European countries.

But the signatures do not mean that the convention has actually been adopted by any of these countries. The Rotterdam Rules have to be ratified by at least 20 nations. They will become legally binding according to Article 94 RR only one year after the ratification documents have been officially filed with the United Nations. However, it is the opinion of this author that worldwide harmonisation of maritime transport regulations will not be achieved by the ratification of a mere 20 countries. The Rotterdam Rules also have to be adopted by other important players in international maritime trade, such as Singapore, China, Japan, the Latin American countries and Australia. European nations such as Great Britain, Italy, Spain and Germany also have to come on board.

What is new?

What would change if the Rotterdam Rules were adopted? They would eliminate the «nautical fault defence», which currently prevents carriers and crews from being held liable for negligent ship management and navigation. This is an item that always shows up in the general terms and conditions applicable to the bills of lading used by container shipping lines. In addition, the non-liability clause has been codified in the laws of many countries. In Germany, for example, article 607, paragraph 2 HGB of the German commercial code stipulates nautical fault as a reason for absolving a shipping line of liability. The Rotterdam Rules eliminate this. The new rule would require a vessel to be seaworthy during the entire ocean journey. Otherwise the shipping line is held responsible for any damage caused to the goods according to the Rotterdam Rules.

In addition, shipping lines will face higher penalties in case of loss or damage. Article 4a of the Hague-Visby Rules stipulates that a shipping line is liable for two special drawing rights (SDRs) per kilogram of the lost or damaged freight, or 666.67 SDRs per packed piece or shipped unit. This has been boosted to three SDRs per kilogram or 875 SDRs per package or shipped unit in Article 59 RR. It is not difficult to see that the change from the Hague-Visby Rules is significant. In addition, shipping lines are not permitted to limit liability at the expense of shippers in their general terms and conditions. Moreover, it will not be possible to exclude per piece liability in a contract with the aim of only having to pay three SDRs per kilogram in case of loss or damage.

Shipping lines will also be held accountable for failing to hold to the agreed transport times. Article 60 RR states that the shipping line must pay compensation for loss of or damage to goods due to delay. The liability is limited to an amount equivalent to two and a half times the freight payable on the goods delayed. This can obviously add up to tens of thousands of dollars or euros per event.

Criticism from Germany

As already pointed out at the beginning of this article, whether or not the RR will eventually rule the seas is still written in the stars. It is noteworthy that the RR have elicited some public criticism (such as from Germany), but Asia and Latin America have met them with almost complete silence.

Critics such as the German Bar Association (Deutscher Anwaltverein DAV) say that the Rotterdam Rules, with their 96 articles, have a difficult structure and are too complicated. The document is also marred by numerous references, exceptions and counter-exceptions.

It is not likely that Germany will sign the Rotterdam Rules in the near future. That is regrettable, despite the (valid) criticism. The attitude of the country’s ministry of justice is all the more to be deplored as this is probably the last opportunity for a very long time to unify the international framework for the maritime carriage of goods. Neither the Hague Rules of 1924 (with 52 ratifying countries), nor the Hague-Visby Rules (with 27 ratifications), nor the Hamburg Rules (20 ratifications) succeeded in achieving this up to now. Although Liberia, South Africa and Germany did not ratify the Hague-Visby Rules, they integrated them into their national laws.

Failure will cause legal uncertainty

If the Rotterdam Rules fail, the USA will go its separate way. That nation will resume its revision of the US Carriage of Goods by Sea Act, a task which had been suspended out of deference to the RR. Decades are sure to pass before another attempt is made to harmonise global shipping rules. In fact, the current already enormous divergence of maritime laws around the world is likely to increase still more. This will be reflected in corresponding legal uncertainties, especially in cases of loss or damage.

A commission in Germany has been working for some time to reform the maritime regulations in that country’s commercial code. A draft was presented to the public at the end of 2009. Leading German politicians in the ministry of justice, along with certain associations, primarily want to come up with a solution that can be happily proposed to other countries as an alternative to the Rotterdam Rules. This would not lead to increased international harmony, however. It is considered absolutely certain that the USA, as the world’s biggest economy, would adopt a separate approach.

Apart from that, cost conditions alone should prevent anyone from recommending the German proposal. It would make more economic sense for the world’s countries to sign and ratify the Rotterdam Rules. Dr Vanesa Goglar, a lawyer at the Swiss insurance company Allianz Suisse, has calculated that lack of legal harmonisation would generate significantly higher costs than would the adoption of the RR. She concedes that it will be necessary to clarify new legal uncertainties arising out of the Rotterdam convention at the beginning. But this process should not lead to the failure of the RR to establish themselves as a future legal framework.

Will those who start too late miss the boat? Many international transport law experts rightly say that it is too late for certain members of the EU to work out their own new laws.

The fact that many shipping lines are critical of the Rotterdam Rules is not surprising. This is connected with the enhanced liability that was outlined above. But their negative opinion is not shared by the protection and indemnity insurance associations (P&I Clubs). The latter think that harmonisation of maritime shipping regulations will lead to lower costs in the long term. It would also greatly accelerate cargo claim management, and it would establish more legal certainty.

Opportunity for unification

To sum up, six years were required to develop the Rotterdam Rules. Many countries were directly involved. It would certainly be a good thing if certain key points could be optimised, as some of the criticism is justified. But there are only two options on the table at the moment – to either accept or reject the RR. Given this choice I can only agree with the German Bar Association. We should not let the Rotterdam Rules fail. The opportunity to unify our maritime laws carries more weight than any of the valid criticism. That is why the German Bar Association is recommending that the German government sign the RR. The convention is designed to benefit industry and not politicians. So it is a positive sign that Singapore, for example, still home to one of the world’s busiest container handling ports, will probably embrace the RR in the near future.

www.rotterdamrules2009.com

Current signatories of the Rotterdam Rules

Armenia, Cameroon, Congo, Denmark, France, Gabon, Ghana, Greece, Guinea, Madagascar, Mali, the Netherlands, Niger, Nigeria, Norway, Poland, Senegal, Spain, Switzerland, Togo and the USA.