III. Report on Hague Rules Relating to Bills of Lading BE IT RESOLVED, That the American Bar Association supports rat- ification by the United States of the 1968 Protocol ("Visby Amend- ments"), adopted by diplomatic conference in Brussels, Belgium, to the 1924 International Convention for the Unification of Certain Rules Re- lating to Bills of Lading ("Hague Rules"), ratified by the United States in 1937, and the 1979 Protocol(SDR Amendments) to the 1924 Convention as amended by the 1968 Protocol. BE IT FURTHER RESOLVED, That the American Bar Association requests that the United States Government consider further changes in the Hague/Visby Rules such as: (a) Adopting the limits of liability set forth in the proposed 1980 U.N. Convention on International Multimodal Transport of Goods of ap- proximately $1160 per package or approximately $3.50 per kilo; (b) Eliminating the "nautical fault" defense by which a carrier can avoid liability by blaming his servants or agents for negligence in the navigation or management of the vessel; (c) Providing for imposition of liability in multimodal movements when the carrier on which the loss or damage occurred cannot be readily identified, and (d) Clarifying that stevedores are entitled to the same liability limits as carriers. Report Re International Conventions on Ocean Shipping I. Introduction and Summary This Report, prepared by the Section of International Law and Practice, pertains to the maritime law governing shipowner liability in the event of SECTION RECOMMENDATIONS AND REPORTS 247 loss or damage to cargo. For the past fifty years, this liability has been governed by the 1924 Hague Rules, which were ratified by the United States in 1937 and implemented into U.S. statutory law by way of the Carriage of Goods by Sea Act (46 U.S.C. 1300 et seq.). In an attempt to modernize the Hague Rules, a Protocol was adopted by diplomatic con- ference in 1968. Known colloquially as the "Visby Amendments," this Protocol has been ratified by approximately twenty-four nations (but not by the United States) and is presently in force. In 1978 and 1980, two additional Conventions were adopted the U.N. Convention on the Car- riage of Goods by Sea, colloquially known as the "Hamburg Rules," and the U.N. Convention on International Multimodal Transport of Goods, colloquially known as the "Multimodal Convention." The Hamburg Rules were designed to replace both the Hague Rules and the Visby Amend- ments, while the Multimodal Convention was designed to resolve liability problems arising out of the increasing use of containers in door-to-door international shipments using several transports modes. Neither the Ham- burg Rules nor the Multimodal Convention (so far ratified respectively by only eleven and four countries-none from Western Europe or North America) is presently in force. This Report analyzes the various Con- ventions and recommends a course of action which, it is believed, is both attainable and in the overall interests of all concerned parties. SUMMARY OF CONCLUSIONS: (1) that the Visby Amendments should be ratified promptly; (2) that the United States Government should, in addition, consider four further changes in the Hague/Visby regime. II. Historical Background The general maritime law relating to carriage of goods is of ancient origin. Even as applied today in our Federal Courts, there are concepts such as general average' which date back to the Island of Thodes in classical times. Traditionally, through Roman law, the Middle Ages with its "law merchant," the laws of Visby, of Oleron and the Hansa Cities, the merchant and the shipowner each shared in the dangers, the voyage being considered a common adventure. Merchants accompanied their goods on board. The shipowner was bound to furnish a seaworthy vessel and a competent crew, but if the vessel was lost due to perils and dangers of the sea, shipowner and merchant suffered together. 1. General Average is pro rata sharing of losses between a ship and her cargo where there has been a sacrifice of property (of cargo or ship) to save the ship and cargo from a common peril. (GILMORE & BLACK, THE LAW OF ADMIRALTY, 2d ed. 1975, p. 244.) SPRING 1988 248 THE INTERNATIONAL LAWYER By the 18th Century, the bill of lading had been introduced into com- merce. It served a threefold purpose: a receipt for the goods, a document of title, and a contract of carriage. In this latter capacity, shipowners began to put exemptions from liability into their bills of lading. 2 The Courts generally held two types to be against public policy, one a reduction of the warranty of seaworthiness, the other an exemption from the carrier's own negligence. THE HARTER ACT In 1893 Congress enacted the first of the statutes regulating what was to be put into bills of lading. 3 It forbade the two types of exemptions already held to be against public policy, and added a compromise third section excusing the carrier from errors in navigation or in management of the ship provided it exercised due diligence before the voyage to make the vessel in all respects seaworthy. This was followed by about thirty years of instability, during which the law relating to shipments to or from the United States differed from that in most other parts of the world. A movement for "uniformity" developed, and an anti-international asso- ciation of maritime lawyers, the Committee Maritime International, in culmination of this movement, drafted a set of rules based upon the Harter Act theory at a conference at the Hague in 1921. III. The Relevant Conventions A. THE HAGUE RULES Ratified by the United States in 1937, the Hague Rules is one of the most widely ratified treaties in private international law. Together with its U.S. implementing legislation, the Carriage of Goods by Sea Act (46 U.S.C. § 1300 et seq.), it sets out the bases for shipowner liability to cargo; precludes contractual exemptions of liability on the part of shi- powners; provides shipowners with various (i.e., seventeen) specified defenses to liability; and establishes a limit on the shipowner's liability of $500 per package or customary freight unit. B. THE VISBY AMENDMENTS In 1968, largely in response to the emergence of containerization in ocean transportation, a diplomatic conference, convened in Brussels, Bel- 2. These exemptions could be very extensive indeed, including things like thieves, heat, leakage, breakage, frost, decay, rust-regardless of fault. 3. The Harter Act, 46, U.S. Code 190-196. VOL. 22, NO. I SECTION RECOMMENDATIONS AND REPORTS 249 gium, adopted a Protocol to amend certain provisions of the Hague Rules. Known as the "Visby Amendments," this Protocol has two principal features. First, it increases the per package limit from $500 to an amount that is now approximately $840 and, in addition, adopts an alternative weight limit of approximately $2.50/kilo. 4 A shipper is entitled to invoke either the per package or the per pound limit, whichever produces a higher recovery. Second, it adopts a so-called "container clause" to make certain that each individual package packed in a container-and not the container and all its contents collectively-is considered a package for purposes of the $840 per package limitation. To take advantage of the benefits of this container clause, all a shipper need do is enumerate on his bill of lading the number of packages or units packed in the container. In other respects, the Visby Amendments do not change the Hague Rules, preserving the general scheme of liability and the carrier's sev- enteen specified defenses. The Visby Amendments entered into force on June 23, 1977, but not for trade to or from the United States. C. THE HAMBURG RULES In 1978, in response to calls that the Hague Rules and Visby Amend- ments should be substantially modernized, a diplomatic conference, con- vened in Hamburg, Germany, adopted the "Hamburg Rules." Comprised of thirty-four detailed articles, these Rules are designed to replace entirely the system established under the Hague Rules and Visby Amendments by inter alia: (1) creating a presumption of carrier negligence in the event of damage to goods; and (2) eliminating specific reference to most of the seventeen defenses, including the defense that exonerates a shipowner from liability when damage to the cargo is caused by the negligence of the carrier's servants or agents "in the navigation or in the management of the ship." This so-called "nautical fault" defense, adopted in trans- portation law conventions during the early part of the century, has been a continuing source of sharp criticism by shippers throughout the world. In addition, the Hamburg Rules increase the limits of liability to ap- proximately $1,050 per package or, alternatively (at the shipper's option), $3.15 per kilo. Only eleven countries (none from Western Europe or North America) are so far parties to the Hamburg Rules. As adherence by twenty countries is required to bring the Hamburg Rules into effect, it may be several years, if then, before that occurs. 4. As the exact limit is expressed in the IMF's SDR unit of account, and fluctuates depending on the value of the five currencies in the IMF's basket. The amounts set out above represent the approximate values as of May 1, 1987. SPRING 1988 250 THE INTERNATIONAL LAWYER D. THE MULTIMODAL CONVENTION The "Multimodal Convention," adopted in 1980, is intended principally to deal with the advent of multimodal door-to-door container shipping practices and to provide for adequate compensation in cases where dam- age occurs but the transport mode on which it occurred cannot be de- termined. So far as concerns terms of liability, the Multimodal Convention basically adopts the same approach as the Hamburg Rules.