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Devised to provide predictability and uniformity in an area characterised by uncertainty and indistinctness, Rotterdam Rules might, on the face of it, seem a challenge for maritime trading nations. But, a pragmatic approach can quell fears.

by Radhika Rani G.

Rotterdam Rules represent an evolution of existing regimes into the modern era rather than a revolution, says Prof Michael Sturley in the opening chapter of his book ‘A New Convention for the Carriage of Goods by Sea – The Rotterdam Rules’. Mr Sturley, the maritime law expert at the Texas School of Law, played a key role in negotiating and drafting the new rules and is deemed as the ‘father’ of Rotterdam Rules!

Technically called the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, the new regime was ratified by 16 countries in Rotterdam recently. It describes the rights and obligations of parties involved in the carriage of goods by sea.

The agreement aims to provide more clarity about who is responsible for what, when and where in maritime transport and how far these responsibilities extend. “To the extent that generalisation is possible, the Rotterdam Rules draw largely on the Hague-Visby and Hamburg Rules, incorporating significant elements from each,” Prof Sturley says.

Gertjan van der Ziel, professor emeritus of Transport Law at Erasmus University Rotterdam, who has been involved with theproject from its very beginning,  clarifies further. He says, “it was never intended that the Rotterdam Rules would be ‘an acceptable mechanism for dealing with multimodal transport’. The intention was to replace the outdated Hague Rules, Hague Visby Rules and Hamburg Rules with a new convention that would reflect the needs of the modern maritime transport.”
The application of the Rotterdam Rules therefore facilitates international trade and leads to savings in costs. In the case of a stranded ship, a stolen container or damage to a shipment, the rules establish clearly who is responsible and accountable for what.

Increased liability

However, unlike the old conventions like the Hague Rules (1924), the Hague-Visby Rules and the Hamburg Rules (1978) that governed cargo traffic, other parties in the chain such as stevedores may now be jointly liable with the carrier. This implies that the carrier’s liability for damage to the cargo has been increased. But the new regime codifies decades of case law and industry practice, and clarifies earlier texts where necessary, say experts.

Also, the shipper’s obligations are more clearly defined, such as its obligation to have the goods ready for transport in a timely manner. Goods loaded in containers and trailers must be stowed in a way that they withstand sea voyage. In addition, in case of damages the claims procedure is made easier. Also, the name and address of the carrier must be stated on the transport document.

Having 96 articles as against 10 in the previous regime, the new rules are a long-drawn exercise. The convention is the culmination of more than six years of intensive international negotiations taking Prof Sturley to meetings around the world. As many as 80 states and several observers from international governmental bodies and industry organisations were involved in the project. The Rules will therefore not only update international regimes written decades ago, but also unify aspects of transport law that international agreements never addressed, say experts.

Port operators for the first time have a potential, legal liability towards owners of cargo, who will be recognised as part of the supply chain under the term ‘maritime performing parties’.  

As per the current practice, insurer-approved regulations and standard operating terms govern port operators and in the event of any liability, they are slanted in favour of the ports. But the new regime is going to change all that and ports could be liable for loss damage and delays. On the other hand, when a consignee fails to collect its cargo in time, carriers and terminals have more options for storing cargo outside the port area and thereby prevent port congestion.

The over-riding characteristic of the rules, says Prof Sturley, was pragmatism and clarity, right from the negotiation to accomplishment stage. And so, countries with one or other of the current transport liability regimes have little to fear from their introduction, he adds.

Multimodal transport

With regard to shipment of goods by sea and even land transport, the new rules provide legal certainty and also uniformity, say shipping lines. As multimodal carriage of goods too comes under the purview of the new rules besides the modern liability regime, they hope things will be streamlined once the regime is in force. Multimodal transport can be carried out under a single contract with just one statutory regime applying to it.

Commenting on the dire need for door-to-door carriage, Dutch transport minister Camille Eurlings says, “In the absence of a truly global instrument, there is a strong risk that countries might undertake to regulate multimodal transport on a national level or to develop regional approaches. Neither of these possibilities is desirable in terms of global efficiency, predictability and lower overall trade costs.”

Since a real international solution is only wishful thinking, the shipping industry calls upon nations to ratify the rules for the benefit of international trade and transport. The new rules, say shipping companies, aim to address gaps that presently exist, including the facilitation of e-commerce solutions and allocation of risks between both shipowners and shippers. Introduction of electronic transport documents is also possible under the regime and this ensures an entirely document-free transport.

With the use of IT, shorter processing times and reduced chance of errors are likely to lower costs. But, exporters and importers feel the rules will expose them to considerably higher insurance premiums. In the wake of contradicting views being expressed, the new rules are likely to have a large impact on the industry. This wait-and-watch attitude seems to hold back four more countries to ratify the regime, which will be activated only a year after the final signature.

While the new convention represents a timely step forward intending to cover the entire supply chain with one single set of rules, one only hopes it will help the world economy on its way upward.