Legal Briefing SEPTEMBER 2009 ROTTERDAM RULES

What impact will the Rotterdam Rules have on your liability? About us Rotterdam Rules This briefing is one of a continuing In December 2008, the convention on contracts for the international series which aims to share the legal THE AUTHORS carriage of goods wholly or partly by sea was adopted by the UN expertise within the Club with our Maya Linkinoska General Assembly. What impact will this have on your liability? Claims executive Members Maya joined Thomas Miller in The Convention on Contracts for the carriage of goods by sea law in a uniform 2008 and is now a full-time International Carriage of Goods Wholly or Partly approach across the world. The alternatives of A significant proportion of the expertise in the by Sea (Rotterdam Rules) was adopted in regional updating will certainly involve the same Managers’ offices around the world consists of claims handler for the Club’s Members in Japan. Her previous December 2008 by the UN General Assembly. The (or worse) problems of increased liabilities and lawyers who can advise Members on general P&I Convention will be opened for signature at a legal uncertainties, but multiplied by the related legal, contractual and documentary issues. experience is predominantly from New Zealand and Australia where she ceremony to be held in Rotterdam from 21 to 23 difficulties of conflicting, overlapping regimes. In September 2009 and will be known as “The common with fellow clubs in the International These lawyers participate in a virtual team, writing was responsible for the claims department of a major shipping company. Maya has a Master’s Rotterdam Rules”. The Convention will enter Group, the UK Club therefore supports the on topical and relevant legal issues under the into force 12 months after ratification by at least introduction of the Rotterdam Rules, leadership of our Legal Director Chao Wu. degree (LLM) in maritime law from a London university. 20 States. notwithstanding the additional liability burden.

As part of Thomas Miller that virtual team can also Direct line: +44 20 7204 2212 The Convention is designed to legislate both for For the benefit of Members interested to compare call on executives who support the UK Defence Email: [email protected] international maritime carriage of goods, and for the Rotterdam Rules with the current regime, the Club and the experience and expertise that serves international multimodal carriage of goods where tables below provide a useful summary comparison the largest defence mutual in the world, with over there is a maritime leg in the contract of carriage. of the defences and limitations. it should be noted, 3,500 owned and time chartered ships entered. Marc Duck It is often therefore described as a “maritime plus” nonetheless, that the standard terms of contracts Claims executive instrument. This broad scope of application is for carriage, for purposes of Club cover and for If you have any enquiries regarding the issues Marc joined Thomas Miller in reflected in the new terminology used in the eligibility for Pooling, currently remain the covered in this briefing please contact the team via Convention, such as, for example, a change from Hague-Visby Rules. This will be reviewed in light Chao Wu and we will be pleased to respond to April 2005 from another P&I club where he handled P&I “bills of lading” and “sea waybills” to the general of the support for the new Convention which is your query. The team also welcomes suggestions term “transport document”. forthcoming when it opens for ratification. from Members for P&I related legal topics and claims for both European and American Members. Having problems which would benefit from explanation If brought widely into force, the Convention will by one of these briefings. graduated in Law, Marc is currently studying for an LLM in International Transport and significantly increase the liability of shipowners You and your cover Maritime Law. and maritime carriers in respect of the carriage of cargo. The long established exception of negligent Voluntarily incorporating these provisions into Direct line: +44 20 7204 2110 Chao Wu error in the navigation, management or pilotage of your contracts could increase liability and risk Email: [email protected] Legal Director a vessel will be lost. The obligation to exercise due incurring liabilities that would not arise under Chao has a doctorate in law and diligence in relation to seaworthiness of a vessel conventional arrangements. Such increases in is based in London as Legal will be extended to the duration of the voyage, liabilities may require additional insurance cover. Director, where she is responsible rather than merely before and at the for giving general legal advice, commencement of the voyage as under the The effects of voluntary increases in potential including guidance on the legal Hague-Visby Rules. Limits of liability per package liability are described in the Club’s Rule 2, aspects of P&I Club documentation, and on or unit of weight will be increased beyond Section 17, Proviso (a). the legal aspects of cover for Members’ Hague-Visby and Hamburg Rule limits. contractual arrangements. She represents the Shipowners and other maritime carriers will If you have any queries regarding the cover Club on various subcommittees and working become liable for the negligence of so-called arrangements for potentially extended liabilities groups of the International Group of P&I “maritime performing parties” such as sub- in respect of cargo you should call your usual Clubs. Chao speaks Mandarin, French and contracted sea carriers, stevedores and terminals. underwriting contact in advance of any Shanghainese. The use of unfamiliar concepts and terminology contractual arrangements being concluded. will inevitably lead to legal uncertainty - which Direct line: +44 207 204 2157 will no doubt keep lawyers busy. Email: [email protected] There is a positive side. Although the new Convention will increase shipowners’ liabilities, in doing so it offers the best prospects for updating Key provisions relating to carriage of goods conventions

Hague Rules Hague-Visby Rules US COGSA Hamburg Rules Rotterdam Rules 1924 1968 1936 1978 2009 Additional provisions in the Rotterdam Rules Scope of Bills of Lading issued • B/L issued in a Shipments to and from • B/L issued in a contracting state Contracts of carriage where any of the following places are application in a contracting state. contracting state the United States in • Carriage to or from a contracting state located in a contracting state: • Carriage is from a foreign trade. • If B/L provides for Rules to apply • Place of receipt Freedom of There is some freedom of contract under the Port in a contracting • Port of loading state • Place of delivery contract Rotterdam Rules with respect to “volume • Contracts of carriage • Port of discharge contracts”. These are defined as: which incorporate the Rules “A contract of carriage that provides for the carriage of a specified quantity of goods in a Geographical Covers the period from the time when the goods are loaded on the ship until Carrier responsible while “in charge” of the In addition to sea carriage: series of shipments during an agreed period application they are discharged from the ship. goods at port of loading, during the carriage, • Stevedoring / terminal storage services and at port of discharge i.e. normally from • Freight-forwarding services of time”. time goods are taken over from the shipper • Domestic inland road and rail carriage if no competing to time delivered to the consignee. • Inland water carriage Carriers and shippers can agree terms for convention applies • International inland road and rail } volume contracts which may increase or decrease the parties’ obligations or Which Contracts of carriage covered by a B/L or any similar document of title, or “Any contract of carriage whereby the carrier Contracts of carriage of goods by sea against a payment of freight, limitations of liability (subject to a criteria contracts are when such is issued under or pursuant to a Charterparty from the moment undertakes against payment of freight to which may include carriage by other modes of transport in addition to defined in the rules). However, the carrier covered? at which such document of title regulates the relations between a carrier carry goods by sea from one port to another”. carraige by sea. and a holder of the same. Need not be a B/L or document of title. can not exclude his basic obligations to Includes “transport documents” and “electronic transport records”. exercise due diligence to make the ship Excludes charterparties (unless rules are incorporated). Excludes charterparties (unless rules are incorporated). seaworthy and to properly crew, supply and equip the ship. Who is the Owner or charterer “who enters into contract of carriage with a shipper”. “Any person by whom or in whose name a A person who enters into a contract of carriage with a shipper. carrier? contract of carriage has been concluded Inclusion of a “Performing party” and a “Maritime performing party”. Rights of the The new rules include provisions for exercise with a shipper”. Covers “actual” and controlling and extent of the right of control. The shipper “contractual” carrier. party & is the controlling party unless he designates Transfer of another party or when title is transferred. Deck cargo Excluded from Rules if stated to be carried on Excluded from US Rules do not expressly exclude deck cargo. Goods may be carried on deck if: deck on face of B/L. COGSA – unless the Carrier can undertake deck carriage if • Such carriage is required by law rights There are distinctions drawn on the right to B/L states the cargo agreed with shipper or in accordance with • Carried in containers or vehicles fit for deck carriage and the decks transfer depending whether the document is Undeclared deck carriage may affect carrier’s is carried on deck the usage of a particular trade in which case are specially fitted to carry such containers or vehicles negotiable, non-negotiable or an electronic ability to rely on defences, although the carrier and is so carried. B/L should so state that goods are carried • Carriage on deck is in accordance with the contract of carriage, may still rely on package limitation. on deck. customs/usages and practices of the trade in question document. Also requires all original documents to be surrendered to effect a Carrier liable for unauthorised deck carriage Note: If goods carried on deck in cases not permitted by above and if carried on-deck contrary to express damage/loss is caused exclusively by such deck carriage, carrier not transfer of rights. agreement, and can be deprived from its entitled to its defences. defences and limitations of liability. If carrier agreed to carry the goods under-deck and carries them on Delivery of In the Rotterdam Rules the carrier’s deck which causes loss/damage, carrier not entitled to its limitations the goods obligations continue until delivery, at of liability. minimum, “delivery” takes place upon receipt of the goods for loading or unloading. Apart Delivery of Rules are silent – No express obligation to deliver goods beyond the port Carrier responsible until Carrier’s obligation continues until delivery. from obligations on the carrier “to deliver” the the goods of discharge, however, the carrier can contract to do so. goods are delivered to the consignee. goods, there is also an obligation on the consignee to accept delivery and to Law and No express provisions. Claimant may choose where to commence Claimant may choose where to commence proceedings: acknowledge receipt. There is a distinction Jurisdiction/ proceedings: • Domicile of the carrier between delivery under non-negotiable Arbitration • Place where defendant has principal place • Place of receipts of business • Place of delivery documents (which may or may not require • Place where contract was made • Port of initial load or final discharge surrender) and negotiable documents. There • Port of loading • At any court named in an agreed non-exclusive jurisdiction clause are also provisions for undelivered goods. • Port of discharge • Place specified in arbitration clause. Parties can also agree arbitration after a dispute has arisen. Arbitration agreement permitted. If “Maritime There is a new concept of a “maritime incorporating charterparty arbitration Performing performing party” which will be subject to the clause, must be incorporated in the B/L. Parties” same rights and obligations as a carrier defined in the Rules. This includes parties Limitation 12 months12 months 12 months 2 years unless judicial or arbitral Litigation or arbitration to be commenced within 2 years from date of of action/ proceedings have been instituted. delivery or when goods should have been delivered. (claims by cargo such as stevedores, ports, terminals, freight Indemnity actions may interests or carrier). forwarders, agents, NVOCC’s, etc… “The Time-bar be brought after the one year, see Art III, 6bis. Indemnity proceedings may be commenced after this period (at least performing party” would be caught under the 90 days from date of commencement of action against carrier). rules if it undertakes activity in a contracting state under an intermodal contract of carriage as defined by the Rotterdam Rules. Hague Rules Hague-Visby Rules US COGSA Hamburg Rules Rotterdam Rules Further reading/references 1924 1968 1936 1978 2009

Carrier’s Carrier must exercise due diligence before and at beginning of voyage to: Carrier, his servants and agents must take Same as Hague-Visby Rules however the carrier’s obligation to Further information on the Rotterdam Rules and general duty • make ship seaworthy all measures that could reasonably be exercise due diligence to make the ship seaworthy is extended to other conventions affecting the liability for of care • properly man, equip and supply the ship required to avoid the event causing loss and cover the entire voyage. It is now “to make and keep the ship • make holds etc. fit and safe for reception, carriage and preservation of cargo its consequences. seaworthy”. carriage of cargoes can be found in the Carrier must properly and carefully load, handle, stow, carry, keep, care for It also includes an obligation “to deliver” the goods. Encyclopaedia in the Members’ Areas of the and discharge goods. Club website – www.ukpandi.com

Carrier’s • Act, neglect, or default of the master, mariner, pilot or the servants of the No specific list of defences. Additional defences to those listed in the Hague-Visby Rules include: Useful information can also be found in the defences carrier in the navigation or in the management of the ship • War hostilities, armed conflict, piracy, terrorism • Fire, unless caused by the actual fault or privity of the carrier Carrier must prove he, his servants or agents, • Loading, handling, stowing, or unloading of the goods, unless the following publications: • Perils, dangers and accidents of the sea or other navigable waters took all measures that could reasonably be carrier or a performing party performs such activity on behalf of the • Act of God required to avoid the occurrence and its shipper or the consignee Hill Dickinson’s Shipping At a Glance Guide • Act of war consequences. • Reasonable measures to save or attempt to save property at sea No.1 “Cargo Conventions: Comparing Hague, • Act of enemies • Reasonable measures to avoid or attempt to avoid damage to the • Arrest or restraint of princes, rulers or people, or seizure under legal process environment Hague-Visby, Hamburg and Rotterdam Rules” • Quarantine restrictions • Acts of the carrier in pursuance of the powers conferred by articles at www.hilldickinson.com (see Marine, Trade & • Act or omission of the shipper or owner of the goods, his agent or 15 and 16 (in relation to goods that may become dangerous and representative need to be sacrificed for the common safety) Energy) • Strikes or lockouts, or stoppage or restraint of labour from whatever cause • Riots and civil commotions “Error of navigation” defence and “any other cause” defence have And then there were the Rotterdam Rules • Saving life or attempting to save life been removed. D. Rhidian Thomas • Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods Editorial of the Journal of International Maritime • Insufficient packaging • Insufficiency or inadequacy of marks Law (JIML) (2008) 14 JIML • Latent defects not discoverable by due diligence • Any other cause arising without the actual fault or privity of the carrier The Rotterdam Rules Professor Michael Sturley; Professor Tomotaka Fujita; Professor G. J. van Notification of Notice of loss or damage must be given in writing to the carrier or his agent In writing to the carrier: Notice of loss to be given at the time of delivery, or if the loss/damage der Ziel; Sweet & Maxwell – ISBN: damage before or at the time of delivery, or within 3 days where damage is not • by the working day following delivery to is not apparent then within 7 working days. Such notice is not required 9781847037343 apparent. consignee when loss/damage is ascertained by way of a joint inspection/survey. • within 15 days of delivery where damage is latent Failure to provide notice shall not affect the right to claim Notice of delay must be given within 60 days compensation nor the allocation of burden of proof. No compensation of delivery. for delay if notice given after 21 days of delivery.

Limitation of 100 pounds sterling 2 SDRs per kg or USD500 per 2.5 SDRs per kg or 835 SDRs package or 3 SDRs per kg or 875 SDRs package or shipping unit – whichever Liability per package or unit 666.67 SDRs per package or shipping unit – whichever is the higher. is the higher. package – whichever customary freight unit is higher

Liability Rules are silent. 2.5 times freight payable on goods delayed, Liability for economic loss due to delay is limited to an amount for delay subject to upper limit of total freight on all equivalent to 2.5 times the freight payable on the goods delayed. goods or amount of limitation if goods have The total amount payable not to exceed the limits of liability under been lost or destroyed. the rules.

Loss of right No special provisions. Right to limit lost if Carrier will only lose Right to limit lost if damage caused by The carrier cannot limit if the claimant proves that the loss resulting to limit carrier intends to cause right to limit liability if intention, with knowledge that damage from the breach of the carrier’s obligation was attributable to a liability loss or is reckless he intended to could occur or recklessness. Also when “personal act or omission… done with the intent to cause such loss or knowing loss would cause loss/damage goods are carried on deck contrary to recklessly and with knowledge that such loss would probably result”. probably result. or was reckless express agreement to carry under-deck. knowing such Damage/loss due to delay included. loss/damage would probably result.

Burden of Shipper must show cargo was delivered to the carrier in good order and Carrier must prove that reasonable steps to Detailed wording on how the burden of proof operates. Proof condition but received at destination in damaged condition. A clean B/L is avoid loss were taken unless damage is The carrier is liable for loss, damage or delay if the claimant proves that prima-facie evidence of this. Under English law the claimant must establish caused by fire. such loss, damage, delay or event (which was causative or contributed breach of a seaworthiness obligation or failure to properly and carefully carry by) took place during the carrier’s responsibility for the goods. the goods. Once this is established, the burden of proof shifts to the carrier to show either due diligence or the application of one of the defences. The carrier is liable if the claimant proves that loss, damage or delay was caused or attributed by a) unseaworthiness of the ship, b) improper crewing, equipping or supplying of the ship, c) if the holds or other parts of the ship (including containers) were not fit and safe for carriage, reception and preservation of the goods. The carrier is relieved from liability if it can prove that the cause or one of the causes is not attributable to its fault or the fault of its subcontractors, agents or employees. Alternative to proving absence of fault, the carrier must prove that the damage was caused by one of the exceptions in the list of defences. Thomas Miller P&I Ltd – London Thomas Miller (Americas) Inc – New Jersey Tel: +44 20 7283 4646 Fax: +44 20 7283 5614 Tel: +1 201 557 7300 Fax: +1 201 946 0167

Thomas Miller (Hellas) Ltd – Piraeus H1 Thomas Miller (Hong Kong) Ltd – Hong Kong Tel: +30 210 42 91 200 Fax: +30 210 42 91 207/8 Tel: + 852 2832 9301 Fax: + 852 2574 5025

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