Colloquium on the united nations convention on contract for the international carriage of goods wholly or partly by sea [rotterdam rules]

Organised by the federal ministry of transport, the nigerian shippers council and the nigerian maritime law association

on the

8^th – 10^th December 2009

at

ocean view restaurant, victoria island, lagos

The genesis of the rotterdam rules – history and politics

By

Oritsematosan EDODO – EMORE LLM, [Lond] BL

1. Introduction

What is the Rotterdam Rules?

The Rotterdam Rules is the name given to the United Nations Convention on contracts for the International Carriage of Goods Wholly or Partly by Sea.

2. The History of the Rotterdam

(a) The Root of the Rotterdam Rules

The Rotterdam Rules is a document with deep tap roots. Its roots go down to these older documents:

(i) International Convention for the Unification of certain Rules of Law relating to Bills of Lading (Brussels 25 August 1924) “The Hague Rules”.

(ii) Protocols to the Hague Rules “The Hague Visby Rules”

(iii) The United Nations Convention on the Carriage of Goods by Sea Hamburg, 31 March 1978 “the Hamburg Rules”.

(b) Raison D’ être Of the Rotterdam Rules

Advancement in technology had created scenerios which the earlier maritime cargo liability regimes did not have answers to e.g. electronic data transfer. Containerization had changed the face of shipping. Goods need no longer to be unloaded at the ships tackle, since they were packed in containers.

Containers were off loaded from ships directly unto waiting trucks which delivered them at the doorstep of the consignee. The emergence of the internet created electronic commerce and electronic transport documents.

These modern developments created gaps in the law. The courts in different jurisdictions did their best to interprete the law and even create new rules as the circumstances dictated. This led to fragmentation and patch work in the law of maritime cargo liability. Some countries (such as the USA) tried to amend their national maritime legislations [carriage of goods by Sea Act 1936 COGSA] to meet new challenges created by the new realities on ground.

However shipping is international business. Therefore it was necessary to develop new uniform international rules taking cognisance of modern technology, its effects on maritime transport and current commercial practice, hence the Rotterdam Rules.

The Rotterdam Rules thus provides a legal frame work which takes cognisance of the technological advancement which has affected shipping – the door to door movement of goods under single intermodal contracts, containerization and electronic documents generated by electronic commerce.

(c) Preparation of the Rotterdam Rules and Preliminary Negotiations

From conceptualization to signing, the Rotterdam Rules took seven years to prepare - 2002 – 2009. The preparation involved intergovernmental negotiations under the auspices of the United Nations Commission for International Trade Law (UNCITRAL) – Uncitral, charged the Comité Maritime International (CMI) with the responsibility of preparing a draft of the convention. this culminated into the preparation of the UNCITRAL draft convention on tansport law worked upon at various meetings in Vienna, New York etc. maritime stakeholders from all over the world made their imputs in different subjects.

In West Africa under the auspices of Maritime Organisation of West and Central Africa (MOWCA), we formulated an African standpoint at meetings in Abuja and Cotonou in 2007. Our views were heard in Vienna and New York.

Finally on the 11^th december the UN general assembly in New York adopted the Rotterdam Rules. It had taken seven years of negotiations:

3. Its recent history

On the 23^rd September 2009, the Rules were signed by sixteen countries spread around three continents.

The intial signatories to the convention are:

7 – West African Countries

8 – European Countries (Scandinavia, Mainland and Mediteranean Europe)

1 – North American Country

(b) The 20^th Signatory and Coming into Force of the Convention

The convention would come into force one year after the 20^th Country has ratified it. Since the 23^rd September 2009, the following countries have also signed it:

As at the 23^rd October 2009, Niger became the 20^th Country to sign the convention. Consequently the convention would come into effect sometime in 2010.

(c) Significance of the Enforcing Signatories

The twenty signatories which give impetus to the convention create an interesting scenerio:

(i) There are nine West African Countries – all members of MOWCA and one African Island Nation (in the Southern most part of the Continent in the Indian Ocean).

(ii) The African Countries are all cargo owning nations and exporters of primary produce.

(iii) All the African Countries are developing nations – some are infact very poor.

(iv) The European Countries are old maritime nations – they range from Scandanvia to Mainland Europe and the Mediteranean – Denmark, the netherlands spain and Greece.

(v) The European nations are ship owners – experienced owners and builders of specialized vessels.

(vi) The European nations are major trading Countries. They are industralized and manufacturers of finished products.

(vii) The only North American Country is an industrial power and the current reigning super power of the world.

(d) The Enforcing Signatories and Effect on World Trade

According to the United Nations 2008 International Merchandize Trade statistics year book, the twenty Countries giving impetus to the convention represent 25% of current volume of world trade.

What is clear from the scenerio above is that the cargo owning nations and producers of primary goods as well as the industralized ship owning and trading nations are keen to move international carriage of goods by sea on to the next level.

4. What does “the rotterdam rules” actually do?

The Rotterdam Rules actually achieve the following effects which were absent in earlier transport regimes.

(1) It governs the carriage of goods by sea. It also regulates the land or rail transportation of the goods before and after the sea transport until the goods are delivered at the doorstep of the owner or consignee. It recognises different modes of transportation in getting the goods to the door step of the owner.

Under previous regimes, the different aspects of the journey was covered by separate contracts.

(a) Land or rail transport of the goods to the ship

(b) Sea transportation of the goods to the Port nearest to the location of the owner or consignee of the goods.

(c) Land or rail transportation of the goods from the port to the place of delivery

A consignment of tanned leather from Kano to Néant – Sur – Yvel (France) would

travel thus:

Three separate contracts are indentified in this transaction. Under the old regime, the Hague Rules would only apply to the sea leg of the journey i.e. from Lagos to Le Havre. The journey from the leather factory in Kano to the Port of Lagos would be covered by a road haulage or railway contract. The journey from the Port of Lagos to the Port of Le Havre would be covered by a bill of lading. The journey from the Port of Le Havre to the consignee at Néant – Sur – Yvel would be covered by either a road or rail contract.>

Under Rotterdam Rules:

Transport document

Kano Lagos Le Havre Néant – Sur – Yvel

Under the Rotterdam Rules, the whole journey is covered by one transport document,

even though the modes of transportation at different times may be road, rail and sea.

(2) The rights and obligations of all players in the whole journey [while the goods are is transit up to the point of delivery] is clearly spelt out in the convention Stevedore for example are now jointly liable with carriers – as maritime performing parties.

(3) The Rotterdam Rules lays down the “infrastructure for the development of e – commerce in maritime transport”. There are rules for document free transport transactions. This is more important as world trade moves towards paperless transactions.

(4) The Rotterdam Rules provides a simpler process for a shipper or insurer who wishes to recover damages for loss of cargo.

the politics of the rotterdam rules

The development of the Rotterdam Rules was laced with an interplay of regional sectorial and international politics. Groups have supported or disagreed with the rules based on their own interests. Leading the cheer leaders in support are powerful American Shippers interests. National Industrial Transportation League [NITL] standing in opposition is the European Shippers Council supported by the European Commission, and sitting on the fence is china. Africa has not really expressed any strong views, for or against the rules!

(a) Supporters of the Rules

The following groups among others support the Rotterdam Rules:

(1) Bimco

(2) World Shipping Council (carriers sailing to and from USA)

(3) International Chamber of Commerce

(4) International Chamber of Shipping

Chief among the supporters of the Rotterdam Rules are the US based shippers group - National Industrial Transportation League [NITL] and the European Community Ship Owners Association ECSA.

The NITL is an association comprising over 700 companies spanning various industries such as paper, electronics, chemicals, automotive, computers, petroleum etc. its members range from large corporations involved in international trade, to local small and medium scale enterprises involved in interstate transportations. The members are shippers who own the cargo they supply for transportation and are interested in how such cargo are delivered to their destinations. NITL members would qualify as stakeholders in the maritime industry.

It is interesting to note that NITL had been involved domestically trying to get an amendment to the US COGSA that would take cognisance of modern development in the maritime industry. Thus when the opportunity came in 2001 to participate at the CMI meetings in London and Madrid to discuss and advance a global cargo liability regime, NITL became interested. It actively participated in subsequent meetings of CMI in the development of what became the Rotterdam Rules. NITL strongly supports the Rotterdam Rules and has called on the USA and other countries to ratify and domesticate same.

(b) Opposition to the Rules

The following bodies or persons among others have expressed opposition to the rules.

(1) International Road Transport Union.

(2) European Shippers Council

(3) European Commission

(4) CLE CAT – the European Freight Forwarders Association

(5) Prof. Williams Tetley

However the most vocal opponent of the Rotterdam Rules is the European Shippers Council (ESC). This is a Brussels based umbrella association comprising national shippers councils of individual countries in Europe. The ESC was not involved in the initial discussions and negotiations of the convention. However it was active at the tail end and is now openly critical and opposed to the rules.

In a recent statement, the ESC referred to the rules as “undoubtedly the most complex, international convention on liability and conditions of carriage there has ever been; academics, laywers member states and industry representatives are struggling to understand it and agree on what it means and will mean if this

international convention were to be ratified”.

(c) Why Oppose? What are they seeing that we are not?

The ESC is opposing the Rotterdam Rules because they are said to be:

(i) too complex and long. its ambigous terms are likely to generate litigation. This view is supported by Prof Williams Tetley of McGill University Montreal Canada, who says the rules are too complex, verbose and written in an unfamiliar style which “not only erases years of practice and custom, but set aside 100 years of established legal jurisprudence”!

(ii) likely conflict with other European unimodal conventions – such as CMR and CIM applicable to Road and Rail transport. This view is supported by the International Road Transport Union.

(iii) Change in Burden of proof.

(iv) Increased shipper liability – will lead to increased insurance premium for shippers. [Carriers may be relieved from liability for stowing, loading and unloading of cargo if the shipper agrees].

(v) Reduction in carrier’s liability for non delivery of goods

(vi) The convention allows carriers and shippers to derogate from its terms with regard to volume contracts. Terms of volume contracts are likely to be onerous to the shippers – Prof William Tetley is also against the exception made for volume contracts.

For these reasons and more, the ESC is actively campaigning against the Rotterdam Rules, and discouraging countries from ratifying same

(d) The European Community and Alternative Cargo Liability Regime

The objections of the ESC is supported by the European community who see the Rotterdam Rules as not “conforming to European multimodal expectations”.

The rules are said to be inconsistent with the European Commissions broader vision of European Unions Transportation “Policy of Simplification and encouragement of co – modal logistics. The rules are said to conflict with “European maritime space without barriers” and “Freight Transport Logistics Action Plan”. These are new initiatives which the European Commission has been pursuing.

The EU is now said to be preparing its own cargo liability convention for European states. This would be an alternative to the Rotterdam Rules for states which do not wish to ratify the Rotterdam Rules.

(e) The Role of the European Community Ship Owners Association (ECSA)

However the European community shipowners Association (ECSA) opposes the stand of the ESC and EU and has expressed the view that if the ESC continues its campaign to discourage countries from ratifying the convention that this would push Washington to create an alternative legislation. Consequently ECSA has thrown its weight behind NITL in support of the rules. This is what the Secretary General of Nicolette Vander Jagt the ESC had to say in response to ECSA’s.

“It just goes to show that a failure to reach consensus and different trade interests and other organizations on the content of the Rotterdam Rules and the complexity of them will most likely result in a number of potential multimodal variants being developed around the world and not just by the European Union”.

(f) Where is Asia?

It is interesting to note that at this stage, in its recent history, Asia seem some what in the background. Although in recent years Asian Ship yards have grown in leaps and bounds, as yet there are no Asian signatories to the convention.

However many Asian Countries including China attended the signing ceremony in Rotterdam. It is hoped that they would sign the convention sometime in the new year.

Although China attended the ceremony in Rotterdam, it is opposed to the Rules on the ground that they do not favour SME’s which most China Shippers

are. For this reason many Asian Countries are opposed to the Rules in principle, until they are able to study them individually and take a position that suit their countries.

(g) Wither West Africa?

It is clear from the initial signatories that West Africa is clearly in support of the Rules – having actively participated in its negotiations. However, we need to be cautions of the views expressed by ESC and NITL and see how they match our own needs. As exporters of primary produce, volume contracts will certainly apply to bulk cargo generated by the West African Economies – but West africa must move with the rest of the world in taking maritime cargo liability legislation into the 21^st century.