particular concerns - rotterdam rules

7/27/2019 Particular Concerns - Rotterdam Rules

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Particular concerns with regard to theRotterdam idesBackgroundApproximately six months ago with aview to pointing out concerns with theRotterdam Rules before the signingceremony held in Rotterdam on 23September 2009, six of us produced apaper and circulated it worldwide. Thethreshold for this Convention cominginto force is set fairly low withratifications by only 20 countries neededout of about 195 countries worldwide. Todate only 21 have signed and it remains

to be seen whether any of these 21 willratify by making the Convention law intheir respective countries. It may well bethat those 21 who signed are lookingover their shoulders and wonderingwhere the signatures of the rest of theworld are; and, whether they will beentered.Uniformity is the goal of this conventionbut already it is apparent that it is indanger of further splintering maritimelaw across the globe. All of thesignatories signed up between the dateof the signing ceremony on 23September 2009 and 29 September2009 apart from Mali which signed on 26October 2009. This illustrates that thosethat have signed already had a mind tosign before the signing ceremony tookplace. It also illustrates concern amongthe wealth of countries that did not sign.Why is there such reticence? Below weaim to set out some of the main reasonswhy the Convention is problematic. Inclosing we also answer the question thathas been raised by a number of thosethat support the Convention - what isthe alternative?

The application of theConventionWhereas the Hague Visby Rules applyto carriage by sea and contain a fewexceptions, e.g. charterparties, (notsurprisingly, as these are contracts ofhire as opposed to contracts of carriage)the Rotterdam Rules are designed toapply to a transport contract thatinvolves sea carriage in whole or in part.The exemptions are wide under Article 6and Article 80. Again charterparties areexcluded from application, but of moreconcern is the fact that particular typesof trade are exempted or have the powerto take steps to achieve exemption. Nonliner transportation is exempted in themain. The volume contract exemption isof particular concern and is dealt withlater on in this paper. Suffice it to sayhere that the exemption is effectively alicense to allow the big players to playby their own rules. This removes thecentral purpose of the Rules, which wasto bring back uniformity to carriage ofgoods by sea.

The Rules introduce the new concept ofthe "maritime performing party" This is aparty that conducts its business whollywithin a port area. Therefore, a partythat collects from the environs of the portand delivers inland is not a maritimeperforming party, whilst a port operatoris a maritime performing party providedits duties do not exceed the boundaries

of the port. It is, of course, not unusualfor a port operator to deal with oncarriage inland. The issuer of a transportdocument involving carriage wholly orpartly by sea, and the maritime


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performing party may both be sueddirectly: whereas, an inland carrier

involved in part of the internationalventure may not be sued directly. Thisis, again, a protection for certain sectorsinvolved in the carriage such as inlandwaterways, railways and inland roadcarriers. There are cases where somecarriers will be subject to anotherConvention that takes precedence overthe Rotterdam Rules under Chapter 17,but not always Where the carriage ofgoods involved is by a means other thanby sea which involves a partial seamovement another Convention mayoverride the application of the RotterdamRules. For example, a door to doorcarrier may carry goods from Germanyvia France via road to the UK inlandinvolving a channel crossing. If thegoods stay on wheels throughout thejourney, the CMR Convention wouldoverride the application of the RotterdamRules but if the goods come off wheelsfor the channel crossing, the CMRConvention would apply to the roadmovement from Germany to France butthe Rotterdam Rules would apply fromwhen the goods come off wheels for thechannel crossing though to the UKinland destination. Therefore, theRotterdam Rules fall short of creating afair and reasonable liability systemgoverning all those involved in thetransport venture. A full network liabilitysystem would have been fair andreasonable but unfortunately theConvention creates a partial networkliability system or, as some people havedescribed it, a maritime plus systemwhich causes unfortunate anomalies

such as that described in the exampleabove.

To draw a further comparison with CMR,cargo may sue the first, last or actualcarrier, but those carriers may then suethe actual carrier under the successivecarrier provisions. Under the RotterdamRules, the choice is to sue the issuer ofthe transport document or maritimeperforming party, but those parties foundliable and wishing to sue the partyactually causing the damage forrecovery will have to rely on their termsof contract with the underlying carrierand perhaps suffer a serious gap in theextent of liability recoverable comparedwith the liability it faces pursuant to theRotterdam Rules.Article 12 raises some problems. Thisdeals with the period of responsibility ofthe carrier. The primary position is thatthe carrier is responsible for the periodcovered by the transport contract.However, Article 12(3) permits theparties to agree on the time and locationof receipt and delivery of the goods,although this ability is limited becausesuch agreement will be void if the time ofreceipt of the goods is subsequent to thebeginning of their initial loading underthe contract of carriage, or if the time ofdelivery is prior to the completion of theirfinal loading under the contract ofcarriage. In terms of a carriage by roadwith a long sea journey in between, e.g.inland UK by road to Liverpool and thenby sea to Shanghai with final delivery byroad to inland China, this exemptiondoes not mirror normal custom in terms

of who is responsible for loading anddischarge in road carriage. These dutiesare normally those of cargo unless thecarrier agrees to be responsible forloading and/or discharge. Therefore, themultimodal carrier that takes on

responsibility for this entire journey willbe responsible for loading and dischargewhereas the inland carriers in China andthe UK will probably not be responsiblefor loading and discharge. In such acase, the multimodal carrier will beresponsible to cargo for damage onloading and discharge. Although thisdamage may have been caused by the

inland carrier, the multimodal carrier willbe unable to pass down liability. This willmean that multimodal carriers will haveto reconsider all sub contracts to ensurethere are no such gaps in terms offlowdown of responsibility.However, as so often happens in thisoverly complex set of Rules, pursuant toArticle 13 whilst the Rules make thecarrier responsible to properly andcarefully receive, load, handle, stow,carry, keep, care for, unload and deliverthe goods pursuant to 13(1), 13(2)allows the shipper and carrier to agreethat loading, handling, stowing andunloading be performed by the shipper,the documentary shipper or theconsignee. Such an agreement has tobe within the contract particulars. Again,this will involve a wholesale review ofinland transport contracts with subcontractors by multimodal contractors

taking on primary responsibility door todoor, The problem with Article 13 is thatit does not deal with initial loading and


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final discharge as does Article 12, so amultimodal carrier can contract out ofresponsibility at any stage during thecarriage when the goods are beingloaded, handled and stowed or unloadedby express contractual provision. This isa watering down of the strict liabilityprovision under Article 3 of the HagueVisby Rules.Basis of LiabilityThe basis of liability is set out in Article17 and this is a good example of theexcessive and unnecessary complexitythat pervades the Rules. The onlysaving grace is the disappearance of theerror in navigation defence which waslong overdue for removal givenadvances in technology. However, theexceptions are maritime in nature anddo not pay heed to exceptions apparentin contracts and Conventions governingother modes. We expect the answer tothis point would be that otherConventions governing other modes aregiven precedence under Chapter 17, butthat is only in certain circumstances asexplained above. Furthermore, andsurprisingly, pursuant to Article 17.5(a)the Carrier is liable notwithstanding theexceptions if the Claimant proves thatthe loss, damage or delay was probablycaused by or contributed to by theunseaworthiness of the ship, impropercrewing, equipping and supplying of theship, or the holds or other parts of theship where the goods were carried werenot fit and safe for the reception,carriage and preservation of the goods.The burden of proof is invariably on the

party who has the ability to prove theissue in question. How would theshipper be able to prove the liability ofthe Carrier under this provision withoutthe full and detailed co operation of theCarrier? Even if the Shipper overcomesthis apparently insurmountable burden,the Carrier is then able to relieve itself ofliability if it can prove that none of thefactors in Article 17.5(a) caused the loss,damage or delay or it complied with itsobligation to exercise due diligence.Therefore the duty of due diligence iseffectively reduced from the standard setpursuant to the Hague Visby Ruleswhich would appear to be aretrogressive step.Articles 18 and 19 deal with liability ofthe Carrier for other persons and ofmaritime performing parties whichrespectively extend the liability of thecarrier for breaches by any performingparty and the ability of the shipper topursue another specific performing partywithin the transport venture. Thisappears to be an unnecessary extensionand is evidence of the Rules increasingthe duties of the carrier to cover otherprincipal parties yet not ensuring thatthose parties are governed under theConvention when it comes to dealingwith carriers' liabilities as betweenthemselves. It also gives the shipperanother party to sue that is not aprincipal carrier in the transport venture.

Under Article 20, joint and severalliability is also provided for and thatlimits aggregate liability, so that if morethan one party is liable and that liabilityis aggregated, the Rotterdam Rules

liability prevails despite the fact that oneof those parties (pursuant to Article 61)may have agreed to pay increasedlevels of liability above those providedfor by the Rules.Article 25, dealing with deck cargo, issurprising in its distinction between deckcargo as required by law and inaccordance with the contract of carriageor custom, usages or practices of thetrade in question on the one hand; and,carriage in containers or vehicles fit fordeck carriage and the decks arespecially fitted to carry such containersor vehicles on the other hand. In respectof the former, the Carrier is not liable forloss and damage or delay in delivery ifsuch losses are caused by the specialrisks involved in their carriage on deckwhereas no such exemption from liabilityprevails in respect of the latter. One canonly wonder at the reason for suchdistinction. Given advances intechnology one would expect all cargo,whether on deck or under deck, to betreated with an even hand but such isnot the case.

Delivery and the carrier's rightto deliver the goods withoutthe surrender of an original billof ladingWhen encountering problems in findingout who is the consignee or thecontrolling party, the carrier may inaccordance with Articles 46 (b), 47.2 (a)and 55.2 request instructions from theshipper. Such practice may be


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appropriate when delivery is intendedstraight to the consignee but not whenthe goods will or may be sold in transit.INCOTERMS 2000 CFR/CIF Article 8provides that the document to betendered to the buyer must "unlessotherwise agreed, enable the buyer tosell the goods in transit by the transfer ofthe document to a subsequent buyer(the negotiable bill of lading) or bynotification to the buyer". The notificationprovision has been inserted in order toallow, for example an electronic bill oflading as referred to in the 1990 CM!Rules on Electronic Bills of Lading or theelectronic record as now referred to inthe Rotterdam Rules. The electronicprocedures rest on notificationstransmitted electronically.When the goods are intended to be soldin transit, it would be whollyinappropriate to ask a shipper havingsold the goods to a first buyer, forinstructions with respect to delivery if theultimate bill of lading holder or thecontrolling party does not appear tocollect the goods at destination. Indeed,such a procedure may even invite ashipper to collude with the first buyer inorder to defraud subsequent buyer(s)entitled to delivery.Although, in recent years, some shippinglines have included clauses in their billsof lading entitling them to deliver thegoods without the surrender of anoriginal bill of lading, it is unacceptableto support and further enhance suchmalpractice by statutory provisions in thenature of Article 47.2. This becomes

further aggravated by the carrier's rightto limit its liability for any breach of hisobligations including misdelivery (Article59.1) with the result indicated byProfessor Ramberg in his comments toArticle 47.2 at the CMI 2009 AthensSymposium (see CMI Yearbook 2009 atp. 264). Although the instructing shippermay be requested to provide "adequatesecurity" for the liability which the carriermay incur in relation to the rightful holderthis may be cold comfort for the holderwho may find himself in the unfortunateposition that he cannot get hold of thegoods and not even full compensationfor the loss of his right to get them.In cases where the goods are intendedto be sold in transit, a prospective holderhas not yet entered into a contractualrelationship with the carrier. However,Article 58.2 refers to liability imposed onit" under the contract of carriage.Although the holder does not incur anyliability to the carrier until he exercisesany right under the contract of carriage,Article 58.2 seems to be based upon thepeculiar idea that the contract ofcarriage as such may impose liability onprospective holders.

The extension of theRotterdam Rules to covermore than loss of or damageto goods and delayThe Rotterdam Rules extend theimposition of liability on the carrier alsofor other loss than loss of or damage togoods and delay. This follows from

Article 11 stipulating that " The carriershall, subject to this Convention and inaccordance with the terms of thecontract of carriage, carry the goods tothe place of destination and deliver themto the consignee" as well as the specificobligations in Articles 24,25,28,35-36,38,40 and 45-48. The carrier'sbreach of these obligations may result ineconomic loss for the shipper, e.g. whenthe purchaser justifiably refuses toaccept a bill of lading as being dated toolate or otherwise not conforming to thecontract of sale. Customary bill of ladingclauses exempt the carrier from"consequential" or "indirect loss" butsuch clauses now seem invalidatedunder Article 79. In turn, the carrier hasa right to limit his liability according toArticle 59.1 for "all breaches of itsobligations under this Convention". Thisraises the question as to which limitapplies. Should it be the SDR unitlimitation, when the dispute does notrelate to the goods as such ("weight ofthe goods that are subject to the claim ordispute") but rather an economic loss forthe shipper because of his buyer'srepudiation of the contract? Should thelimit specifically relating to "loss causedby delay" in Article 60 be used, as this isthe only article relating to "economicloss"? Article 60 seems to relate only todelay in delivery, but could possibly beused to cover loss due to delay inshipment as well, at least by analogy.Nevertheless, in case the carrier inflictseconomic loss on the shipper in othercases, such as providing incorrectinformation (Article 28), refusal to issuea negotiable transport document upon


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demand (Article 35) or to enter therequired particulars (Article 36) or failingto sign (Article 38), what is the limit?Furthermore, what is the basis ofliability? Would it be possible to use thebasis of liability in Article 17 when thecarrier refuses to issue a negotiabletransport document upon demand? Theanswer may well be negative, as a clearbreach of such nature may require astrict liability under general principles ofcontract law.Apparently, the extension of theRotterdam Rules to cover more than thetraditional types of losses (loss of ordamage to the goods and delay) was notfollowed up by decisions on theseimportant questions. It will be the task ofcourts of law to find appropriatesolutions and Article 2 on theinterpretation of the Convention willprobably not provide a sufficient impetusto ensure international uniformity.

Period of time for suitThe Rotterdam Rules provides a two-year time limit for filing suit, but refers tojudicial or arbitral proceedings not being"instituted" after the expiration of aperiod of two years. The term"instituted" is derived from Article 20 ofthe Hamburg Rules and is vague andunclear. It is apparent that Article 62was drafted in this way to make the timebar procedural, rather than substantive,but it would be preferable to haveconsistency by setting the effective dateof the limitation to the bringing of suit,which must be achieved through

commencement of the proceedingsvalidly in accordance with therequirements of the relevant jurisdictionin which the proceedings arecommenced. In that context, it wouldhave been clearer to use the phrase"unless suit is brought", as used in theHague Rules and the Hague-VisbyRules.Article 62.3 is confusing in that it impliesthat one party can still make use of atime-barred claim by offsetting it againstthe timely claim made by another party.Whilst such an action may not beextinguished (being procedural only), itstill cannot be enforced, so it is not clearhow Article 62.3 will work in practice.

Action for IndemnityClaims in relation to Indemnity(recourse) may be made beyond the twoyear period provided it is made within:(a) the time allowed by the applicable

law in the jurisdiction where theproceedings are instituted; or

(b) within 90 days commencing fromthe day when the party institutingthe claim either settled the claim orwas served with process in anaction against itself, whichever isthe earlier.

Article 64 adopts the wording of Article20.5 of the Hamburg Rules by referringto that party seeking the indemnity asthe "person held liable" which isobviously inconsistent with the fact that

such a party can "institute" the action forindemnity in circumstances where therehas been no finding or declaration ofliability at that time. Again, wordingsimilar to Article III Rule 6 bis of theHague-Visby Rules "an action forindemnity against a third person may bebrought..." would have been clearer.

Actions against the personidentified as the carrierUnder Article 37.2, it is presumed thatthe registered owner of the carryingvessel is the carrier, unless he can rebutthe presumption by establishing apresumption in relation to a bareboatcharterer or that another party was infact the carrier. In turn, the presumptionin relation to the bareboat charterer maybe rebutted in the same manner. In anyof these circumstances, the claim maybe instituted beyond the two year timelimit in Article 62, provided that it isinstituted within:

(a) the time allowed by the applicablelaw and the jurisdiction where theproceedings are instituted; or

(b) 90 days commencing from the daywhen the carrier has beenidentified, or the registered owneror bareboat charterer has rebuttedthe presumption that he is thecarrier, whichever is the later.

Whilst this qualification seeks to protectclaimants where the identity of thecontractual carrier is not ascertaineduntil late in the day and, possibly, only


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after the claim has been initiallyinstituted against the wrong defendant, itplaces the correct defendant carrier at adistinct disadvantage in circumstanceswhere national laws overrule the twoyear time bar in the period in theConvention, giving claimants aconsiderably longer period for institutingproceedings where the party that issuedthe transport document failed to complywith Article 36, paragraph 2(b) in failingto disclose the name and address of thecarrier in that document. There is no

ustification for referring to the nationallaws overruling the convention time barperiod, particularly as so many commonlaw jurisdictions provide for a six yeartime limit from accrual of the cause ofaction for breach of contract. 90 daysfrom the date of notification would havebeen more than sufficient to protect suchclaimants.Actions against the carrierArticle 66 does not apply where "thecontract of carriage contains anexclusive choice of court agreement thatcomplies with Article 67 or 72".Provided there is no such exclusivejurisdiction agreement, the claimant canelect to sue the carrier in a competentcourt where the carrier is domiciled, orone of the four places which are thetrigger for the application of theRotterdam Rules in Article 5, that is, theplace for receipt of the goods agreed inthe contract of carriage, the place ofdelivery agreed in the contract ofcarriage, the port where the goods areinitially loaded on to a ship or the port

where the goods are finally dischargedfrom a ship, or in a competent court orcourts agreed between the shipper andthe carrier for the purpose of decidingclaims against the carrier that may ariseunder the Rotterdam Rules.Where the parties conclude a jurisdictionagreement after the dispute has arisen(Article 72. 1), is not clear how such ajurisdiction of agreement would complywith Article 66 where the contract ofcarriage did not have a jurisdictionagreement that was exclusive. In suchcircumstances, it is arguable that theclaimant could still bring proceedings ina competent court and one of the fourplaces identified in Article 66, althoughnot in the court agreed by the partiesafter the dispute has arisen. Such aclaimant may or may not be met with ananti-suit injunction, if available to theother party to the dispute. Article 66would need to be interpreted broadly toinclude jurisdiction agreementsconcluded after the dispute has arisen.Choice of court agreementsUnder Article 67.1, an exclusivejurisdiction clause between the shipperand the carrier will only be binding if it isin a volume contract, the parties agreeon exclusive courts jurisdiction, thevolume contract clearly states thenames and addresses of the parties andeither:(i) is individually negotiated; or

(ii) contains a prominent statementthat there is an exclusive choice ofcourt agreement and specifies thesections of the volume contractcontaining that agreement, andclearly designates the courts ofone contracting state or one ormore specific courts of onecontracting state.

In relation to a carrier and a third party(but not a maritime performing party), anexclusive jurisdiction clause will only bebinding if it is in a volume contract andsatisfies the requirements of Article 67paragraph 1 above, together withadditional requirements s et out in Article67, paragraph 2, being :(a) the court is in one of the places

designated in Article 66subparagraph (a);

(b) the agreement is contained in thetransport document or electronictransport records;

( c ) that person is given timely andadequate notice of the court wherethe action shall be brought andthat the jurisdiction of the court isexclusive; and

(d) the law of the court seizedrecognises that that person maybe bound by the exclusive choiceof court agreement.

Whilst private international law willcontinue to evolve, Chapter 14 of theRotterdam Rules will add an additional


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layer of complexity for parties seeking torely upon choice of jurisdiction clausesas they must now also establish that therelevant contract is a volume contract,and that it was individually negotiatedetc. For third parties, however, Article67 adds even further complexity wherethe court seized must recognise that thethird party may be bound by theexclusive choice of court agreement.Obviously, the law will differ from stateto state as to whether such a third partyis bound by such a clause (Article67.2(d)) leading to further disputes andlitigation. Potentially there will bedifferent results in different contractingstates, depending on whether theyregard the question as one of procedurallaw or substantive contract law, leadingto potential problems of enforcement.The third party will require preliminaryadvice as to whether they are bound bythe exclusive choice of agreement whichwill depend on which law is applicable.This may, in turn, depend upon whetherthe procedural or substantive law of thecontract is applicable.

Actions against the maritimeperforming partyA claimant can only bring proceedingsagainst a maritime performing partyeither where the m aritime performingparty is domiciled or where that partyreceives or delivers the goods, orperforms its activities in respect to thegoods, unless the parties agree someother court after the dispute arises(Article 72.1), or the m aritime performingparty subm its to the jurisdiction of

another court without contesting itsjurisdiction (Article 72.2). Significantly,maritime performing carriers, such asstevedores, terminal operators andwarehouseman, cannot be bound by anexclusive jurisdiction clause in thecontract of carriage - Article 69 providesthat a maritime performing carrier cannotbe sued anywhere other than theseplaces. Accordingly, a claimant who issubject to an exclusive jurisdictionclause in the contract of carriage can beprevented from suing the maritimeperforming carrier in the chosenjurisdiction. Article 71 permitsconsolidation of actions (and removal ofactions through declaration of non-liability) when the relevant jurisdictionsatisfies the dual tests of Articles 66 and68, so article 71 is superfluous.

N o additional bases ofjurisdictionAs Chapter 14 is optional for contractingstates, it is unclear what purpose Article69 seeks to achieve. The contractingstates that adopt Chapter 14 will belimited to courts designated in Articles66 and 68 and the contracting stateswho do not adopt Chapter 14 will followtheir respective national laws in decidingjurisdictional issues.

Arbitration AgreementsArticle 75 permits the parties to refer anydispute that may arise relating to thecarriage of goods under the RotterdamRules to arbitration. Chapter 15 issimilar to Chapter 14 in that it draws a

distinction between volume and othercontracts and between the parties to theagreement and a person who is not aparty to the Volume Contract, save forthe fact that the applicable law permitsthat person to be bound by theArbitration Agreement, rather than thelaw of the forum which applies to courtsjurisdiction clauses (Article 67.2(d)).Any term of an arbitration clause that isinconsistent with these provisions is void(Article 75.5).Apart from the possibility of havingarbitration taking place in a number ofdifferent possible locations will reducecommercial certainty, the contractingstates that adopt Chapter 15 may ormay not be properly equipped or havethe expertise or experience to handlemaritime disputes, nor have a courtsystem which will support thosearbitration proceedings.Article 75.4(d) provides for theapplicable law to determine whetherarbitration agreement is binding on athird party. Potentially there will bedifferent results in different contractingstates, depending on whether theyregard the question as one of procedurallaw or substantive contract law, leadingto potential problems of enforcement.The third party will require preliminaryadvice as to whether they are bound bythe arbitration agreement which willdepend on which law is applicable. Thismay, in turn, depend upon whether theprocedural or substantive law of thecontract is applicable.


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Article 78 makes the arbitrationprovisions of chapter 15 binding only onstates that declare under article 91 thatthey will be so bound. It echoes the opt-in provision in article 74 regarding courtjurisdiction in chapter 14. Each opt-inprovision in Rotterdam decreasesuniformity of law, introducing uncertaintythat will discourage internationalcommerce. In a particular claim, even ifall relevant jurisdictions adopt Rotterdamit will still not be clear which arbitral foraare permitted. This will encouragedisputes about jurisdiction, which areexpensive distractions from dealing withthe merits of the claim.

Exclusions of liability and thevolume contract exemptionArticle 79 laudably follows the principleof the Hague Rules, making void anyterm of a contract of carriage thatexcludes or limits the liability of thecarrier (or excludes, limits or increasesthe liability of the shipper) beyond thoseallowed by Rotterdam.However, article 80 undermines theprinciple in article 79 for "volumecontracts" and is the most objectionablepart of Rotterdam according to manycommentators. Rotterdam createstheoretical door-to-door uniformity oflaw, but at the unacceptably high cost ofreviving the chaotic freedom of contractwhich necessitated the creation of theHague Rules in 1924.Article 80 allows parties to derogate theirobligations under Rotterdam in "volume

contracts", which are extremely broadlydefined in article 1:

"Volume contract" means acontract of carriage that providesfor the carriage of a s pecifiedquantity of goods in a series ofshipments during an agreed periodof time. The specification of thequantity may include a minimum, amaximum, or a certain range.

Shippers will find this definition toobroad and unspecific. It includes anycontract for more than one shipment inany period of time, for example, acontract to ship two packages over aperiod of three years with an option tocancel the second shipment.Article 80 contains controversialminimum requirements that the carriermust meet in order to have a contractqualify as a "volume contract". In theory,these should give the shipper anopportunity to negotiate a higher freightrate for a higher liability underRotterdam. In practice, creative carrierswill use contractual forms that arguablycomply with Rotterdam, but without realnegotiation. The requirements are:

Article 80. Special rules for volumecontrac ts1 . Notwithstanding article 81, as

between the carrier and theshipper, a volume contract towhich this Convention appliesmay provide f or greater or lesserrights, obligations and liabilities

than those imposed by thisConvention.

2. A derogation pursuant toparagraph 1 of this article isbinding only when:

(a) The volume contract contains aprominent statement that itderogates from this Convention;

(b) The v olume contract is (i)individually negotiated or (ii)prominently specifies the sectionof the volume contract containingthe derogations;

(c) The shipper is given anopportunity and notice of theopportunity to conclude acontract of carriage on terms andconditions that comply w ith thisConvention without anyderogation under this article; and

(d) The derogation is not (i)incorporated by reference fromanother document or (ii) includedin a contract of adhesion that isnot subject to negotiation.

A typical multi-modal container shipmentwould almost certainly be a "volumecontract" and thus subject to thefreedom of contract which, even now,often leads to com plex contractualarrangements with many layers of sub-contracts, making claim outcomesdcut opedc. Roedamwworsen this problem.


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Rotterdam may apply to inland transit instates where there is no "internationalinstrument" affecting inland transit underarticle 26, for example, in NorthAmerica. There are serious issuesabout whether Rotterdam applies toinland transit damage. The Rotterdamlimits differ from existing inland regimes.For example, they are higher than theCanadian motor carrier statutory limit ofCdn $4.41 per kilogram. A containerwith 1,000 packages weighing 10,000kilograms would allow the motor carrierto limit liability to Cdn $44,100 under theCanadian motor carrier regime.However, the Rotterdam limit for thatcontainer is 875,000 SDR's (about Cdn$1.4 million dollars). The limit under theCMR Convention (road) for thatcontainer is 83,300 SDR's (about Cdn$133,000) and under both the Cotif/CIMConvention (rail) and the MontrealConvention (air) is 170,000 SDR's(about Cdn $270,000). These differentliability limits, for the same claim, willencourage multi-modal carriers underRotterdam to seek "volume contracts"that reduce their liability to below Cdn$44,100, often to zero. Cargo interestswill then sue motor carriers, freightforwarders, and all other availabletargets seeking to avoid either the lowmotor carrier limit, or the zero limitpermitted by Rotterdam, There will beuncertainty about the effect ofRotterdam, and much litigation withunpredictable results in differentcountries.Freight forwarders will probably facemore law suits under Rotterdam than at

present. Rotterdam is more likely toallow the ocean carrier to avoid liabilityunder "volume contracts", leavingforwarders more exposed to cargoclaims because forwarders have more,.one off' (not "volume") contracts withshippers than do carriers.

Special AgreementsArticle 81(b) allows freedom of contractfor "special agreements", beingagreements unrelated to ordinarycommerce and where no negotiabledocument is issued. Although thisprovision has the potential for abuse bycarriers in some circumstances, thatpotential is entirely overshadowed by the"volume contract" freedom of contractproblem in Article 80.

RatificationArticle 94(1) provides that Rotterdamcomes into force on the first day of themonth one year after the 20thratification, a day that the authors of thispaper hope never comes. At the time ofwriting, no state has ratified, and themost recent (21st) signatory on October26, 2009 was Mali. Signature, ofcourse, is far less significant thanratification.

SummaryIn summary, Rotterdam contains severalterms, notably "volume contracts", thatwill make Rotterdam a difficult sell tomany governments. These terms wereadded at the USA's insistence, and

based on the USA negotiators' advicethat the USA would ratify Rotterdam onlyif these terms were present. If the USAratifies, then many countries willseriously consider Rotterdam in order toachieve uniformity with the USA, despiteits flaws. If the USA does not ratify, theneveryone will be disappointed with aconvention with unacceptable flaws dueto the USA's terms, and years of workwill have been wasted.

What Alternative?There is a lot to be said for not throwingaway that which has not ceased to work.There is also a lot to be said forsimplicity. With less than 20 articles, theHague-Visby Rules has been a verylong lived and successful Conventionand Protocol. With over 90 articles andmany new concepts we are of the viewthat the Rotterdam Rules should notprosper as we do have the makings of anetwork liability system in Conventionsthat are long lived, well used andrelatively simple.

The work of CMI initially involvedcomparing and contrasting Hague,Hague-Visby and Hamburg Rules with aview to bringing back uniformity tointernational maritime law. That workshould be used as a core base to createthe maritime core. Inevitably due tomodern technology the error innavigation clause in the Hague-VisbyRules should be removed and theelectronic documentation provisionsfrom the Rotterdam Rules could beincluded. The Montreal Convention for


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air carriage and CMR Convention forroad and CIM-COTIF for rail could all beadopted on a wider basis. CMR andCIM-COTIF are European Conventionsbut there is no reason why they shouldnot work across the globe. A suitableclause to deal with any potential clashesbetween the conventions would not betoo complex to draft. Indeed the CMRConvention already has such a clausedealing with when the convention shouldapply and when not when the goodsbeing carried are on water. As long asthe goods remain on wheels then theConvention applies.These conventions covering the fourmajor transport modes that arespecifically tailored to deal with thesemodes (which the Rotterdam Rules isnot) have been long tried and tested andwork well with many countries acrossthe globe having ratified in largenumbers. Why reinvent the wheel? Ifthese conventions were offered for wideracceptance with a view to uniformity withan agreement that any gaps would bedealt with by national law we would havea tailored worldwide system alreadywidely in use rather than a more

fragmented system than that already inplace which the Rotterdam Rulesappears to be heading for creatinginstead of reaching its goal of uniformity.We urge those countries that havesigned and those that have not toconsider the many problems with theRotterdam Rules and the potentialalternative we have in the form ofcurrent conventions meshed togetherwith national law.To reach overall global uniformity alongthe lines of the conventions dealing withnon maritime transport may well becumbersome. However, the main meritsof the Rotterdam Rules (the deletion ofthe error in navigation defence andintroduction of the electronic record)could easily be saved by protocols to theexisting maritime conventions. Thiswould leave the field free for adopting amore suitable international regime thanthe Rotterdam Rules to govern transportin the modern era of transport logistics.The Rotterdam Rules are clearly indanger of causing further splintering ofinternational maritime law despite theintention of the same to bring back

uniformity. There is no doubt thatuniformity is what is needed andfurthermore all stakeholders need to bedealt with fairly under any internationalregime. The central issue with theseRules is the fact that certainstakeholders are able to contract out orare not even covered and once liabilityas between cargo and Carrier has beendealt with there are no provisions fordealing with liability between carriersinvolved in the contractual chain toensure that the actual liable party endsup paying for the loss. The volumecontract exemption is a most worryingdevelopment that favours the large scalestakeholders and allows them to maketheir own rules. Allowing such freedomon an international basis in the bankingsector recently created a worldwidefinancial crisis. We could end up with thelarge scale stakeholders gaining suchsufficient market power to enable themto hold the international supply chain toransom. Do we really want to facilitatewhat happened in the banking worldbecoming a potential reality in the fieldof international transport?

particular concerns - rotterdam rules

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