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LexisNexis Legal Editor/Site Coordinator LexisNexis International & Foreign Law Center
Rotterdam Rules – OK? A Brief Update on the Upcoming UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the “Rotterdam Rules”)
The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly By Sea, to be known as the Rotterdam Rules, was adopted on 11 December 2008 during the sixty-third session of the
General Assembly by resolution A/RES/63/122. Article 88 (1) of the Convention states that it will be open for signature by all States next week at Rotterdam, the Netherlands, on 23 September 2009. This new set of Rules governing the allocation of risk in the transit of goods wholly or partly be sea has been long awaited. Its principal goals are to bring order and balance to the regimes governing international water-borne liner shipping that have been outpaced by rapid advances in the technologies of transport and communication. It does not apply to charterparties or bulk cargo carriage.
The Rotterdam Rules are intended to supplant a venerable list of predecessor rules each of which was conceived to deal with the growth of trade and the development of more efficient technologies: The Hague Rules (1924) , the Hague Rules as amended by the Brussels Protocol of 1968 (the “Hague-Visby Rules”) (1968) and the Hamburg Rules ( 1978 ). It is however fair to say that the perceived need for any of the early rules was not as great as that which the Rotterdam Rules are addressing. While the earlier rules taken together with the international trade terms governing the passage of title and hence risk of loss of goods (“Incoterms”) attempted to bring order for purposes of clarifying the burden of loss for shippers, owners of goods and their marine insurers, they began to be rendered inadequate and containerization and multi-modal transport of goods from door-to-door began to change the traditional transfer of title references. The Rotterdam Rules will regularize the rules pertaining to shipping of goods through inter-modal transportation (vessel, rail and/or road), while also incorporating rules to provide uniformity in the use of electronic documentation used in connection with goods shipped in whole or in part by maritime transport and a regime for the negotiability of such e-documentation. This latter feature shows how far international trade has come since the paper days of the Hague Rules, whose formal title was “The Hague Convention for the Unification of Certain Rules relating to Bills of Lading”.
The Rotterdam Rules provide for a uniform regime of liability throughout the transportation chain, and treat all those who handle the goods in transit as related parties responsible in sequence, each of whom may bear liability for the loss of or damage to the goods if they are proven to be responsible, but also entitled to the protection of the provisions of the Convention (e.g., Art. 19). Calculation of compensation for loss (art. 22) is updated to incorporate market valuation if declared in the transport documents or otherwise agreed, but the Rotterdam Rules retain the notion of a package or unit limitation (art. 59) as in the Hague Rules, where no such value is previously declared or agreed. The amount of the package limit became a matter of constant contention throughout the life of the Hague Rules. In an attempt to keep this amount market sensitive and avoid the problems of the Hague package limit, the Rotterdam Rules establishes the package limit as 875 units of account per package or other shipping unit or 3 units of account per kilo of gross weight (art. 59(1)). The unit of account thus referenced is defined as (Art. 59(3) the Special Drawing Rights (SDR) of the International Monetary Fund; the amounts referred are to be converted into the national currency at its rate against the SDR on the date of the judgment or award, or the date as agreed by the parties. For nations not members of the IMF, the valuation will be according the calculation used by that state.
Whether the Rotterdam Rules will achieve their goal is doubted by many. Supported by many trade organizations, the International Chamber of Commerce (ICC), the World Shipping Council (carriers sailing to/from US), the Comité Maritime International (CMI), the National Industrial Transportation League (US shippers), the International Chamber of Shipping (ICS), the European Community Shipowners’ Associations (ECSA), and the shipping organization BIMCO have already recommended governments to accept the Rotterdam Rules. However, many maritime lawyers are already concerned that the Rotterdam Rules will fail to achieve their goals due to inadequate drafting, being too long and verbose, focusing more on overall contractual issues than upon the carriage of goods, and allowing too many opportunities for opting out. Most if not all agree that a new legal regime is needed, but they appear leery of this Convention . How well the Rotterdam Rules will work in practice clearly remains to be seen.