Introduction to the Rotterdam Rules
On 11 December 2008 the General Assembly of the United Nations adopted the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea and authorised a ceremony to be held on 23 September 2009 in Rotterdam, the Netherlands, for the opening for signature of the Convention. The UN recommended that the rules embodied in the Convention be known as the “Rotterdam Rules”.1
The Convention requires ratification or other mode of adoption by at least 20 states, no reservations are permitted2 and ratifying or adopting states are obliged to denounce earlier conventions on the international carriage of goods by sea to which they may be party, namely the Hague Rules, the amending Protocols (the Hague-Visby Rules) and the Hamburg Rules.3
At the signing ceremony in Rotterdam 16 states signed the Convention, including the United States of America, Norway, Denmark, Greece and the Netherlands (all important trading and maritime nations), along with Congo, France, Gabon, Ghana, Guinea, Nigeria, Poland, Senegal, Spain, Switzerland, and Togo. Together the signatories account for approximately one-third of world trade. The Convention will enter 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.4 To date, 21 states have signed the Convention, with the land locked African state of Mali being the most recent state to sign.5
Whilst the Convention has received the minimum number of signatories, it remains to be seen how many countries will ratify the Rotterdam Rules. Many states will be required to conduct public consultations into the Rotterdam Rules before ratifying them, the effect being that ratification by individual states may take between one and three years. Given that a number of states (such as Denmark, Holland and the United States) have already consulted widely, ratification by these states could take place by late 2010 or 2011. If a sufficient number of states that do not require consultation similarly ratify the Rotterdam Rules, it is possible that they may come into wider use by 2012. However, the United States, by way of example, has a history of failing to ratify important treaties, which means that even those states that are signatory to the Rotterdam Rules may yet fail to see them ratified for some time.
Development of the Rotterdam Rules
The Rotterdam Rules have undergone a long period of development due to the increasing recognition, in many sectors, of the limitations of the Hague and Hague-Visby Rules’ ability to properly regulate issues connected with the carriage of goods by sea in the 21st century. Subsequent efforts at modernising the rules governing the international carriage of goods by sea have not yielded any material success. The Hamburg Rules failed in the sense that major shipping nations were not prepared to ratify them, and the Multimodal Convention 1980 similarly failed to achieve the necessary support.
The concept that led to the Rotterdam Rules was borne out of an original initiative of the Comité Maritime International (“CMI”) in 1996 to produce a standpoint concerning new rules for the international carriage of goods by sea. The result was the “Draft Instrument for the Carriage of Goods [Wholly or Partly] by Sea” in 2001. The aim of this draft was not to produce an amendment to the existing carriage regimes, but to produce a completely new regime. Following the work of the CMI, the United Nations Commission on International Trade Law (“UNCITRAL”) prepared the “UN Convention for the International Carriage of Goods Wholly or Partly by Sea”, which was approved at the Commission’s 41st session in July 2008, and the Convention was adopted by the General Assembly in December 2008.
The underlying premise of the Convention is that it will replace the existing versions of the Hague Rules and the Hamburg Rules and establish a single uniform international legal regime for the carriage of goods by sea. The Convention is divided into 18 Chapters and contains 96 Articles and is designed to 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 containerisation, the desire for door-to-door carriage under a single contract and the development of electronic transport documents. The Convention provides shippers and carriers with a binding and balanced universal regime to support the operation of maritime contracts of carriage that may involve other modes of transport.
Operation of the Rotterdam Rules
As expressed in the title of the Convention, it aims to regulate contracts for the carriage of goods "wholly or partly by sea", thereby capturing the more traditional port-to-port transport and multimodal transport with a sea leg. By extending the reach of the Convention beyond that of the earlier carriage conventions, the Convention has become structurally complex - both internally and externally in its relationship with other unimodal transport conventions.
The Convention also contains a number of other significant developments, including the qualified presumption of fault liability regime of carriers and maritime performing parties, the extinction of the nautical fault exclusion, increases in the limits of liability, the reformulation of the duty to provide a seaworthy ship, rules allocating the burden of proof, the emphasis on the duties of shippers and documentary shippers, the extended view taken of transport documents (both traditional and electronic), the transferability of contractual rights, the formulation of detailed rules relating to the delivery of cargo and the special rules for volume contracts, and the extended Himalaya-type protective provisions.
Qualified presumption of fault liability regime of carriers and maritime performing parties
The fault-based liability regime as contained in the Hague-Visby Rules, whereby the shipper must establish fault by the carrier, is maintained in the Convention.6 That is, 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 or circumstance that caused or contributed to it, took place during the period of the carrier’s responsibility.
The carrier will, however, be relieved of all or part of its liability if it can prove that the cause or one of the causes of the loss, damage or delay is not attributable to its fault or the fault of the master or crew of the ship, an employee of the carrier, or a performing party7, or that the loss was caused or contributed to by one of the enumerated events or circumstances detailed in Article 17, including Act of God, fire on the ship, latent defects not discoverable by due diligence and - of particular relevance to today’s mariners - piracy and terrorism.8
If a claimant, however, is able to prove that the fault of the carrier (or any other person referred to in Article 18) caused or contributed to the event or circumstance on which the carrier relies, the carrier is liable for all or part of the loss, damage or delay.9
Extinction of the nautical fault exclusion
As mentioned above, the fault-based liability regime as contained in the Hague-Visby Rules, whereby the shipper must establish fault by the carrier, is maintained in the Convention.10 However, the list of defences available to the carrier in the Rotterdam Rules is significantly reduced with the abolition of the "nautical fault" defence found in the Hague-Visby Rules which relieved the carrier of liability for any “act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship”.11
This defence was originally premised on the view that once a ship sailed, the owner could not maintain instant contact with the ship and therefore should not be held responsible for the negligence of an otherwise competent crew. UNCITRAL’s rationale for the removal of this anachronistic provision is that, unlike the 1920’s and 1930’s, when instantaneous communication was unavailable, this defence cannot be justified today in an environment where modern means of instantaneous communications between ship and shore exist.
The reformulation of the duty to provide a seaworthy ship
Under the Hague-Visby Rules the carrier has an obligation before and at the beginning of the voyage to exercise due diligence to make the ship seaworthy.12 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. It follows that under the Rotterdam Rules the carrier is under a continuing duty to make the ship seaworthy for the full duration of the voyage.
In the opinion of at least one leading P&I Club, the elimination of the nautical fault exception, together with the extension of the carrier’s continuing duty to exercise due diligence to make and keep the ship seaworthy, will substantially alter the allocation of risk between the carrier and cargo interests in favour of cargo and probably result in an increase in the carrier’s potential liability.
Increases in the limits of liability
Under the existing Hague-Visby Rules, the carrier’s liability for any loss or damage to or in connection with the goods is limited to 666.67 units of account per package or unit, or two units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.13
Under the Rotterdam Rules, the carrier’s liability for breaches of its obligations under the Convention has been increased from 666.67 to 875 units of account per package or other shipping unit, or from two to three SDR ’s per kilogram of the gross weight of the goods that are the subject of the dispute, whichever amount is higher.
Previous doubts as to whether the container is the shipping unit are removed in the Convention which deems that the number of packages enumerated in the contract particulars as packed in the container is the number of packages for the calculation of limits of liability. In the absence of such enumeration, the goods in the container are deemed one shipping unit.
Time for suit
The time for commencing proceedings has been extended from the Hague-Visby Rules’ one year prescription period to two years.14
Volume contracts are defined in Article 1 as contracts of carriage that provide for the carriage of a specified quantity of goods in a series of shipments during an agreed period of time. Unlike the prohibition on excluding or limiting the obligations of the carrier or a maritime performing party under the Convention, the parties to a volume contract may provide for greater or lesser rights, obligations and liabilities than those provided elsewhere under the Convention, provided that any derogation contains a prominent statement that it derogates from this Convention; is individually negotiated or prominently specifies the sections of the volume contract containing the derogations; and the shipper is given an opportunity to contract on terms and conditions that comply with the Convention and without derogation.15
Despite the greater freedoms afforded the parties to a volume contract, a carrier is not able to contract out of its obligation to exercise due diligence to make and keep the ship seaworthy and to properly crew, equip and supply the ship throughout the voyage. The carrier is also not able to contract out of its unlimited liability for loss that results from a personal act or omission done recklessly and with knowledge that such loss would probably result.
Similarly, the shipper is not able to contract out of its obligation to provide the carrier with information, instructions and documents which relate to the goods and are not otherwise reasonably available to the carrier.
Neither the carrier nor the shipper is able to contract out of the two year time period for the bringing of suit.
Extended Himalaya-type protective provisions
The Convention contains a “Himalaya” provision extending the defences and limits of liability available to the carrier to maritime performing parties.16
To date, the Convention has received a mixed reception, with criticism being levied by the European Shippers’ Council and the European Freight Forwarders Association. Despite being the subject of criticism, the Convention has received strong support from a number of international bodies, including the National Industrial Transport League, the International Chamber of Commerce, the Comité Maritime International and the World Shipping Council. Notwithstanding the differences between supporters and critics of the Convention, with major cargo-oriented states (such as the United States) alongside traditional shipowning states (such as Greece) being signatories to the Convention, it is recommended that all companies involved in the international transport of goods take notice of the Rotterdam Rules and prepare for their operation and effect.
Philip Roche is a partner and Peter Glover is an associate/master mariner in the Shipping Dispute Resolution department, Norton Rose LLP , London.
- Sixty-third session. Agenda item 74, Resolution 63/122. United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea.
- Article 90.
- Article 89.
- Article 94.
- United Nations Commission on International Trade Law, Status 2008 - United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea - see the "Rotterdam Rules" (2009) 27 November 2009 here.
- Article 17.
- See Article 18.
- Article 17.3.
- Article 17.4.
- Article 17.
- Article IV, Rule 2(a).
- Article III, Rule 1(a).
- Article IV, Rule 5(a).
- Article 62.1.
- Article 80.
- Article 19.1.