The Rotterdam Rules Speakers Panel CIFFA AGM 13 May 2010 Gavin Magrath.

The

Rotterdam RulesSpeakers Panel

CIFFA AGM 13 May 2010

Gavin Magrath

Agenda

• How we got here and what’s next

• What’s new for Shippers?

• Concerns + Criticisms

• Comments + Questions

All content © Copyright 2010 Magrath O’Connor LLP

What Are The Rotterdam Rules?

• The Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea

• Negotiated through the United Nations Commission on International Trade Law (UNCITRAL) in co-operation with the WTO

A Proposed Global Legal Regime for Multimodal Transport


100 Years of Cargo Law

• Need for Harmonized System Recognized• 1924: Hague Rules adopted (~58 ratify)

– 1936: largely adopted into US law

• 1968: Visby amendments added– ~52 ratify, but never adopted into US law

• 1968: Negotiation begins at UNCITRAL• 1978: Hamburg Rules established

– Only ~30 ratify, including 10 landlocked nations– ~20 signed but did not ratify

• 1996: Proposal for a new convention adopted


Failure of Hamburg left Many Dissatisfactions with Hague Regime

• Application restricted to carrier BLs only• Liability from loading to discharge only• ‘error in navigation’ defence• Low carrier limitations• No liability for delay• Very short notice period and short time bar• Increasing international fragmentation

Canada supported both Hamburg and the new RulesAll content © Copyright 2010 Magrath O’Connor LLP

The Journey is almost Finished…

• 1980s: Hamburg Rules fail to achieve widespread adoption

• 1996: Proposal for new convention adopted• 2001: UNCITRAL Working Group formed• July 2008: Draft convention adopted by UNCITRAL• December 2008: Convention adopted by General

Assembly• September 2009: Signing ceremony at Rotterdam• October 2009: 22nd and most recent signature• 2011+??: Coming-into-force

…but is there a light at the end of the tunnel?


Rules Come Into Force One Year After 20 Ratifications

22 Signatures

• May be made at September/09 or later

• Indicate intent to be bound

• Not binding in domestic law

• Not sufficient for coming-into-force

Zero Ratifications

• Must be done by domestic authority

• Federal States clause

• No Reservations

• Optional Chapters 15 and 16

Are all ratifications really equal?


What Will Canada Do?

• Convention has some benefits for shippers and removes some defences for carriers;

• Convention has substantial untested provisions;• CIFFA views some provisions as concerns; and • ‘Volume contracts’ may eviscerate rules…

…but if USA signs, does the desire for uniformity trump these concerns?


Canada has not indicated an intention to sign…

Agenda






Evolution of Limitations

SDR/kg Package Delay

H/V* 2 666.67 SDR -

COGSA - USD$500 -

Hamburg 2.5 835 SDR 2.5x Freight

Rotterdam(Art. 59+60)

3 875 SDR 2.5x Freight

Art 61: Rotterdam Limit cannot be broken unless damage is intentional or reckless!


Scope of Application Extends Beyond Bills of Lading

• For carriage under a ‘transport document’ (not only a Bill of Lading);

• For carriage including an international sea leg (as opposed to that portion of it);– But “Door” provisions do not displace existing

international land conventions;

• Applies to carrier’s ‘maritime performing parties’ at ports;

• Where receipt, loading, discharge, or delivery are in a contracting State (Art. 5)


Responsibility Extended from Tackle to Door

• Art 12: from the time at which the carrier or performing party receives goods for carriage and ending when goods are delivered.– …or when received from/delivered to a 3rd

party authorized by law– But onus is now on the shipper to establish this

period of responsibility! (Art.17(1))


Notice and Time Bar Extended

Notice (Art 23)

The obligation to provide written notice so that the carrier may preserve evidence:

• At delivery or within 7 days if hidden;

– Up from delivery/3 days;

• Failure not fatal;

• 21 days notice for delay;

• Notice is Joint + Several.

Time Bar (Arts 62-64)

The time before which a claimant must file suit in a competent court:

• Within 2 years (up from 1;

• May be extended in writing;

• Permitting 90 days in which to file suit seeking indemnity for 3P claim.


Jurisdiction and Arbitration

Ch 14: Jurisdiction• Plaintiff may sue:

– In Carrier’s domicile– At place of receipt– At place of delivery– At Port of loading/discharge– In a competent Court agreed

under a Volume Contract

• Maritime Performing Parties sued only in their Port or Domicile

Ch 15: Arbitration

• Any place agreed under a volume contract that is

– Individually negotiated; or

– Contains a prominent statement and specifies sections containing the arbitration agreement.

States may opt-out of these Chapters!All content © Copyright 2010 Magrath O’Connor LLP

Volume Contracts Permitted

• “A contract that provides for the carriage of a specified quantity [range] of goods in a series of shipments during an agreed period of time...”

• Ch. 16 Art 80 permits derogation from carrier responsibilities where:– The derogation is stated prominently

– It is individually negotiated

– The shipper has the opportunity to contract on Rules

– The derogation is not incorporated by reference

Will Volume Contracts become the norm?All content © Copyright 2010 Magrath O’Connor LLP

Agenda






Some Untested Provisions

• Chapters 3 and 8 provide extensive provisions for electronic documents;

• Chapter 9 codifies rights and obligations on delivery;

• Chapter 10 codifies the rights of ‘controlling parties’ and Chapter 11 governs the transfer of those rights.

Uncertainty generally leads to Litigation


Delay Provisions Lack Clarity

• What delivery time is ‘agreed’?– Where none specified, will a proxy be applied?

• What is the basis for liability?– “loss resulting from” has been removed!– Appears to be strict: must cargo prove loss?– Due Diligence defence? If not, will carrier be diligent?

• How will delay claims proceed?– Limited to 2.5x freight (below deductibles)– Not economically viable to litigate but may ‘set-off’


Art 21: “Delay in delivery occurs when the goods are not delivered at the place of destination provided for in the contract of carriage within the time agreed.”

Ch 7: New Shipper Obligations

• Art 27: suitable packing• Art 28-29: communications and instructions• Art 32: Dangerous goods labeling• Art 33: Obligations extend to documentary shipper• Art 34: Shipper liable for acts of its servants and

agents who are not acting for the carrier

But Only the Carrier’s Liability is limited!


Potential for Patchwork Application of Door-to-Door Responsibility

• Door provisions do not oust existing international conventions;

• Local subcontractor’s liability as per local regulations or terms of subcontract

• Forwarder can be caught between limits (weight and package)

Effective door-to-door responsibility is seen as critical to Multimodal


“Volume Contracts” may Undermine Uniformity

• Most stakeholders perceive undue carrier influence (a major reason for the Hamburg and Rotterdam Rules);

• Volume Contract provisions allow broad opt-outs;• Carriers can be expected to bring economic pressure

to negotiate volume contracts with lower liability;• Zero-liability volume contracts may therefore become

the industry norm.

“Freedom of Contract” was the price for US Support


How Will ‘Standard’ Volume Agreements be Made?

The Agreement must be:• for a quantity or range of

goods…

• …during an agreed period of time…

• individually negotiated

• not incorporated by reference

• stated prominently

The Agreement could be:• for between one and 208

shipments…

• …over the course of no more than two years

• At zero-liability or for double the freight charges

• Willingly accepted as a condition of the relationship


How Will ‘Standard’ Volume Agreements Interact?

Standard forms already cause legal problems:

• At the point of customer interaction where the consumer is not sophisticated (ticket cases);

• Where both parties are sophisticated and both mutually apply different terms (battle of forms).

In Transport and under the new Rules:

• Between inconsistent shipper-side contracts

• Between inconsistent Performing Party contracts

• In the context of agency relationships

• In the context of Himalaya clauses

• With contractual indemnitiesAll content © Copyright 2010 Magrath O’Connor LLP

Insurers to the Rescue?


Agenda






Final Thoughts• The time for debating individual provisions has now

passed;

• Canada likely has little influence over adoption by other States;

• The goal of uniformity (and economic reality) requires adoption if US + EU adopt;

• “There is a certain weariness towards continuing any discussion of reform of International Carriage by Sea law and it is doubtful that further effort will be made to restart negotiations in the event of failure.” - CMLA

Canada is a mouse sleeping with an elephant


Thank you

Gavin Magrath, Partner

Magrath O’Connor LLP

Direct: 416-931-0463

email: [email protected]

Appendix:

Signatories to the Rotterdam Rules(date marked where other than 23 September 2009)

Armenia (29 Sept/09) Cameroon (29 Sept/09) Congo Denmark France Gabon Ghana Greece Guinea Madagascar (25 Sept/09) Mali (26 Sept/09)

Source: http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/rotterdam_status.html Last updated: 10 May 2010


Netherlands Niger (22 Oct/09) Nigeria Norway Poland Senegal Spain Switzerland Togo United States of America

The Rotterdam Rules Speakers Panel CIFFA AGM 13 May 2010 Gavin Magrath.

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