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Hamburg rules for international carriage
General acceptance by the trading nations of the world of the hamburg rules for international carriage by sea would consitute a huge breakthrough in the reform of the law of international carriage.
In a world comprising cargo owning nations, and ship owning nations, and where most nations are both, there is a continual balancing of risk allocation concerning the damage or loss of sea-borne cargo. Therefore, on the fields of international maritime law, the international law community such as United nation has sought uniformity and harmonization on cargo liability that would equitably address the often-conflicting interests of shippers and carriers. Historically, there have been several well known attempts at establishing uniform international law in this field, including: the Hague Rules (1924); the Hague/Visby Rules (1968); the Hamburg Rules (1978); and so forth. However, it is not likely to be resolved with all parties satisfied. During the 1970's pressure mounted from developing countries and major shipper nations for a full re-examination of cargo liability regimes in Hague-visby Rules.The Hamburg Rules establishes a relative uniform legal regime governing the rights and obligations of shippers, carriers and consignees under a contract of carriage of goods by sea. It was prepared at the request of developing countries, and its adoption by States has been endorsed by such intergovernmental organizations as the United Nations Conference on Trade and Development (UNCTAD), the Organization of American States (OAS) and the Asian-African Legal Consultative Committee (AALCO). A draft of the Convention was prepared by UNCITRAL and finalized and adopted by a diplomatic conference on 31 March 1978. There are many countries incorporating the Hamburg Rules into their national law in search for better protection for the goods owner.However,did it achieve the best balance between the carrier and goods owner? “The most each interested party could hope for is a 'best possible alternative: a 'win, win' situation.' Is this likely to be achieved under the possible introduction of the Hamburg Rules which came into force internationally on the 1st,November, 1992?”
Afterthe Hamburg Rules entered into force which brought about a system of liability which is significantly different from that of the Hague and Hague-visby.
Therefore, this paper will fisrt discusses the progress of Hamburg Rules as compared with the existing convention relating to carriage by sea in several aspects specially on carrier's liability, then it will give a glance at the development of the new UN convention-Rotterdam Rules.
Comparing Hague/Visby Rules with Hamburg Conventions
The history of the development
The Hague Rules are the result of the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading. It was signed at Brussels on August 25, 1924. The Convention marked the culmination of negotiations that had been in progress for some years under the auspices of the International Law Association. The rules were designed to bring certainty and legal uniformity to what was then, as it is today, the most important conduit of international trade in corporeal moveable property.
The Hague rules became known as the Hague/Visby rules on the adoption of The Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading. This protocol was adopted to amend the original treaty in Brussels in 1968. It came into force on June 23 1977. These amendments were conducted under the auspices of the Comité Maritime International, and were largely negotiated in a conference in Stockholm in 1963. They do not stand alone as an independent set of rules, but act only to modify the pre-existing Hague structure. The rules are therefore known as the Hague/Visby rules and will be so referred in this paper.
The Hague/Visby rules were further amended by the Protocol Amending the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (August 25, 1924, as Amended by the Protocol of February 23, 1968). The main development of this amendment was to adopt a new basic accounting unit, which had been poincaré gold francs, but would now be Special Drawing Rights of the International Monetary Fund.
The Hamburg Rules are the result of the United Nations Convention on the Carriage of Goods by Sea, which was adopted in Hamburg on March 31, 1978 and came into force on November 1, 1992. They were drafted largely as an answer to the concerns of developing nations that the Hague rules were unfair in some respects. These concerns stemmed mainly from the fact that they were seen to be drawn up by the mainly ‘colonial maritime nations' and had the purpose of safeguarding and propagating their interests at the expense of other nations. The United Nations responded to this concern by drafting the Hamburg Rules. The Hamburg rules are far more than a simple amending of the Hague/Visby regime and came up with a completely different approach to liability. Under the Hamburg Rules, it is the carrier that is responsible for the loss or damage of all goods unless they can prove that they took all reasonable steps to avoid the loss.
The rules are also updated to take note of new technology, new cargos and new issues that can lead to losses being incurred. The Hamburg Rules have not been an overwhelming success and although the Convention has been in force since 1992, non of the major trading or shipping nations have signed up. According to the OECD , the Hamburg Rules are held to govern less than five per cent of global shipping. This may be due to the concerns held by many in the industry that the Hamburg Rules are unnecessarily hard on ship owners and have over-compensated in their attempt to create a fairer balance between the parties to such contracts.
Therefore it can be seen that there are two main regimes in international law that govern the carriage of goods by sea. They have evolved and grown steadily since 1924 when the first set of rules were signed, and have consistently extended the scope of their application as the needs of the shipping industry demanded. From the original concept of Bills of Lading, it is now possible for myriad contracts of carriage, each with its own characteristics, advantages and disadvantages to be used. While the rules have evolved and grown up in response to the same issues, there are important differences between them.
Some loophole in the Hague/visby system
The Hague/Visby rules, being the older and therefore more traditional regime under which shipping has been carried out, are in force over most of the world. Thus far, the Hamburg Rules have only have only been given effect by twenty-six shipping nations. Many nations will apply different rules in different circumstances depending on the rules applicable at the port of origin. Many European nations, while preferring the terms of the Hague/Visby rules, and applying these rules to outbound shipments, will allow the Hague rules to govern the shipment if the shipment originated in a country that applies the Hague but not Hague/Visby rules. It is accepted in such policies that the benefits of clear governing rules and uniformity outweigh the benefits that the Visby amendments confer. Many nations also apply their own local laws, which can be considerably modified from the international rules, to internal shipments that begin and end within their own jurisdiction.
Such complications in application are aggravated by the fact that different countries adopt the rules in different ways. There are countries such as France, that upon ratification of international conventions, need take no further action to incorporate that convention into national law. Then there are countries such as Canada and Australia that have not signed or ratified the Hague Convention and therefore are not considered contracting states. Yet they have enacted respectively the Marine Liability Act and the Carriage of Goods by Sea Act which are national statutes, which attach the Hague/Visby Rules as a schedule and in that way operate their shipping law. Here, they may comply very closely with the relevant international instrument without making themselves subject to it. Add to this the countries that have never signed or ratified the Hague, Hague/Visby or Hamburg conventions at all, have adopted no equivalent national legislation but nevertheless, are for all practical purposes bound by international provisions through the practice of incorporating the various international instruments, or the law of a contracting state party by reference in the bill of lading.
The Hague rules, before being amended by the Visby protocol were applicable under the principal of ex proprio vigore or by their own force, to contracts of carriage made by way of a bill of lading or similar document. This restriction on application is made clear by Article 1(b) which states:
‘ ‘Contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charterparty from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.'
The Hague rules also had another potential restriction on their application. This stemmed from the use of paramount clauses. While Article 10 of the Hague Rules states,
‘The provisions of this Convention shall apply to all bills of lading issued in any of the contracting States', this was often overruled by national implementing laws, where they were used, that required the bill of lading to contain a paramount clause expressly stipulating that the Hague Rules were to govern the contract. This was initially upheld by the Privy Council in the case of Vita Food Products Inc. v. Unus Shipping Co. Ltd. (The Hurry On) . However, it was soon distinguished and the Hague rules are now generally held to apply even if they do not contain a paramount clause.
The Visby rules made certain that such a possibility could no longer arise and changed the wording of Article 10 to the stronger phrase, ‘Each Contracting State shall apply the provisions…' Likewise, national implementing legislation uses clearer words to give the Hague/Visby Rules ‘the force of law'. Also, it is now clear that paramount clauses are no longer required under the Hague/Visby rules and national legislation that previously referred to such clauses now no longer do so.
Article 10 of the Hague/Visby Rules lays out the conditions for the rules to be affective. It states that the rules apply if the goods are transported between two different States and:
“(a) a bill of lading is issued in a contracting state(b) the carriage begins in the port of a contracting state (c) the contract of carriage specifically incorporates the rules by reference.”
National law can extend the application of Hague/Visby to circumstances not otherwise covered by Article 10, for example, the UK extends Hague/Visby to non-negotiable receipts if they specifically refer to the rules themselves. National law can also apply the Hague/Visby rules to carriage that remains solely within that nation. This is currently operated by the Denmark, Finland, Norway and Sweden under the Nordic Maritime Code, and Canada also does this.
the progress in Hamburg Rules
The Hamburg Rules represent a clear attempt to avoid the problems of application that have arisen under the Hague/Visby rules. The first major change is found Article 2(1) which states:
“(1) that the rules apply to ‘all contracts of carriage by sea' and not only to contracts entered by way of bills of lading when:
(a) the port of loading is in a contracting state
(b) the port of discharge is in a contracting state
(c) when any one of an optional group of ports of discharge is in a contracting state
(d) when the bill of lading or other contractual document is issued in a contracting state
(e) when the Hamburg Rules are incorporated by reference in the contract”
The most obvious difference between these rules and the Hague/Visby rules is the extension of application from only bills of lading to all contracts of carriage by sea. This not only extends the application of the rules, but also avoids the potential for disputes regarding what exactly a bill of lading is, and whether the contract in question comes within such a definition. Any rules which avoid potential ambiguity and dispute represent an improvement in the trading environment and thus this innovation in Article 2 of the Hamburg Convention should be welcomed.
There has been significant uncertainty under the Hague/Visby rules as to which contracts are covered by the rules. Articles 1(b) and 2 of Hague/Visby apply the rules to bills of lading and other similar documents of title. However, article 6 states that the use of non-negotiable receipts will only avoid the provisions of the rules under certain limited conditions. There are some other exceptions also mentioned and the fact is that there is some ambiguity regarding the exact range of operation of the Hague/Visby rules in this important area. It seems that while the rules genuinely intended to exclude non-negotiable receipts, they also did not want to allow the evasion of the rules by use of non-negotiable receipts in artificial or illegitimate situations.
Art. 2(1)(a) of the Hamburg Convention is a parallel to art. 10(b) of the Hague/Visby rules. There is however, no corresponding provision in Hague/Visby to art. 2(1)(b) which applies the Hamburg rules to all contracts where the port of origin is in a contracting state. While such a provision is found in the US Carriage of Goods by Sea Act it has not previously been seen in the international conventions and is therefore a novelty in this respect. Art. 2(1)(c) is simply a prudent clause to stop parties taking advantage of a choice of destination ports to avoid the provisions of the rules. The fairness may be called into question in cases where this provision were the only one to apply, it would mean that the Hamburg Rules had not been incorporated by reference, and the ship was travelling from a non-party state to another non-party state but had the option of delivering at a port in a state that is party to the Convention. On what grounds can the Hamburg Rules really claim to be the rightful governing rules of the contract? The answer is probably that certainty and uniformity of application is what is being sought. It is not a matter of which rules take over as the dominant global trading platform, but that the rules always apply in situations where they can be expected to apply. Like art. 10(a) of Hague/Visby, the Hamburg rules provide that where the contract is issued in a contracting state, the rules will apply. Similarly, when the rules are incorporated by reference in the contractual document itself, this will suffice to make the rules applicable. This rules is contained in art. 2(1)(e) and is similar to art 10(c) of the Hague/Visby Rules.
purpose of legislation
To look at the substantive differences between the Hague/Visby rules and the Hamburg Convention, I think it is important to look at the context and placement of the two sets of rules. It is only with respect to the conflicting interests of the parties involved can the rules, and especially the changes in them, be properly understood and appreciated.
The first thing to note is that in the long years since the adoption of the Hague rules, the basic issues of concern in this area are fundamentally the same. The age of the rules has not made them irrelevant to the degree that this would have led for claims for a new legal regime. The issues of who should bare what risk and when can in fact be traced back to the US Harter Act of 1983 and as such, have remained the foremost considerations in this field for over a century. This act became the model for other nations and colonial dominions and eventually formed the basis of the international regime negotiated in The Hague. The issue then, as it is now, was that the colonies and dominions, who were primarily users and not providers of shipping services, were concerned that they could not guarantee for themselves fair contractual terms due to the stronger bargaining position of ship owners.
These various statutes, and the Hague Rules that came about as a result were fiercely criticised by the carriers. The arguments put forward were that shippers, at the end of the day, had to pay for the costs of freight. If more liabilities, and more of the risks of shipping were passed from shipper or goods owner to carrier, then there would be a corresponding increase in price. This was held to threaten the competitiveness of such trade and would endanger the increasingly global markets and supply chains that had evolved since colonialism.
Shippers however maintained political pressure and offered counter arguments that the increase in freight charges, if they materialised at all, would not be so high as to make the trade routes prohibitively expensive. The resulting Hague rules have become one of the most widely used and important international conventions of all time. The success of the Hague rules, which can be taken for granted today, was in fact very hardly fought for. The ship-owner's lobby was extremely powerful at the time, and was only defeated by continued political pressure from the shippers and their representatives. The Hague rules brought with them, none of the feared economic repercussions and chaos that they were predicted to bring. The Hague rules however, did not go so far as to enact all of the shippers demands, and various significant exclusions of liability did remain in favour of the shippers. This is most obviously seen in Article IV whereby:
(1) ‘Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy'.
(2) ‘Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(a) 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.'
Howcver, the greatest criticism of the Hague and Hague/Visby rules was that the carriers superior bargaining position, which remained unaffected by the rules, was still capable of being used to insert, indiscriminately, wide exclusion of liability clauses against which the shipper would remain without a remedy. This was especially true against shippers from developing countries who have reported over the years, innumerable loopholes and lacunas in the rules that allow carriers to limit their liability. Also, a lack of expertise and weakness of bargaining position can make these shippers particularly lose out to the fact that there is no model bill of lading that can be used by the various parties.
Therefore, following the first UN regional Economic Commission, the United Nations Conference on Trade and Development (UNCTAD) began re-examining the legal regime that was established and propagated by the Hague Rules. It can be seen therefore, that some fifty years after the ex-colonies and dominions succeeded in getting The Hague Rules negotiated despite fierce resistance from carriers and ship-owners, shippers, this time from the developing nations, were again forcing a renegotiation of the rules. What's more, it was the very same concerns that were behind the complaints. The excessive exemptive privileges of ship owners, exclusion from liability in key carrier operations such as navigation and restrictive jurisdiction clauses in bills of lading were the complaints levelled at carriers' and ship-owners' practices.
The frustration at such abuses as the insertion of clauses in bills of lading that are simply invalid according to the Hague/Visby rules yet succeed in halting legal action due to the uncertainty of the shipper of his rights was growing in many shipping circles. The jurisdiction clause was also being abused to the benefit of carriers, the wide exceptions to the rules and low limits of monetary liability were other factors that fed into this feeling of discontent. Such emotions however, were matched by an equally powerful laissez-faire in favour of the status quo by governments in the west that is still seen today in the small support the Hamburg Convention has received from major shipping nations.
Prior to the drafting and negotiation of the Hamburg Convention, the following problems in the existing rules were identified and specifically flagged up by UNCTAD.
“(a) Vague and ambiguous wording in the Hague and Hague/Visby rules which complicate the allocation of liability for loss or damage to cargo. This is a complaint both of carriers and cargo owners who would both benefit from clearer wording of the rules.
(b) The continued use in bills of lading of exemptions and restrictions of liability on the part of the carrier that are invalid, or of doubtful validity according to the Hague and Hague/Visby rules.
(c) Exemptions in the Hague/Visby rules relating to ocean carriage such as the exclusion of liability for losses which are within the carrier's control and should therefore be borne by the carrier. These include the exemption from liability for the negligence of servants and agents in the navigation and management of the vessel, exemption from losses due to the perils of the sea, etc.
(d) The use of undefined and uncertain terms in the Hague/Visby rules such as ‘reasonable deviation', ‘due diligence', ‘properly and carefully', ‘in any event', ‘loaded on' and ‘discharge'.
(e) The uncertainty of the requirements of sea seaworthiness of the vessel.
(f) The low limit of monetary liability for loss of the Hague rules, which has admittedly been addressed and improved in the current set of Hague/Visby rules.
(h) The unfairness of the jurisdiction and arbitration clauses in how they operate between carriers and shippers in week bargaining positions.
(i) The lack of clarity and protection for cargoes that require special towage, adequate ventilation, or deck shipment etc.
(j) Clauses that purport to allow carriers to divert cargos and tranship or land them at alternative ports at the risk and expense of the shipper.”.
As a result of these concerns, the developing states were able to persuade the other members of UCTAD to review and improve the adequacy of the current Hague/Visby rules and it was this review and examination that led to the drafting of the Hamburg text. The main concerns that the Hamburg Convention was assembled to address were:
(a) That a fair balance of allocation of risk be struck between carriers and shippers in the formulation of rules on liability.
(b) The loopholes, uncertainties and other ambiguities exposed in the Hague/Visby rules be rectified.
(c) That the burden of proof be provided for with certainty.
(d) That the following areas be revised and expanded:
“1) Liability for loss or damage to cargo for the entire period that it is in the control of the carrier.
2) The ‘Scheme of responsibilities, liabilities, rights and immunities' in the Hague/Visby rules and their exclusion be completely reviewed.
3) Jurisdiction and its choice.
4) Responsibilities for deck cargoes, live animals and transhipments.
5) Extensions of the period of limitation.
7) Elimination of invalid clauses in bills of lading
8) Deviation, Seaworthiness and unit limitation of liability.”
UNCITRAL and UNCTAD therefore were highly concerned with the above issues when the Hamburg Convention was first being prepared. What came out of this process was a new set of rules that sought to clarify their own scope and application, something that was a big problem with the Hague/Visby rules up to that point. They also wished to distribute the risks and liabilities for the shipment fairly between the parties, both in terms of who bares most absolute liability, and that the party in whose control certain losses are, should bare the risk for those losses unless exceptional circumstances dictate otherwise. They also wanted shippers to be allowed to pursue their legal claims at the destination port, as this is the place where the vast majority of disputes arise and where evidence and costs can be kept practical. That transhipment and through shipment no longer act to exclude carrier's liability and to raise the unit liability rates to more realistic levels.
Let's now look Analyze some specific diffrence between the Hamburg Convention and the Hague/Visby Rules
Period of Responsibility
Situation in Hague/Visby system
The Hague/Visby rules rightfully placed great importance on the question of liability and it was decided as a fundamental rule, that the liability of the carrier would begin with loading of the ship, and end with discharge from the ship. After discharge, the local law at that place would govern liability. Article I(e) therefore provides,
‘Carriage of goods covers the period from the time when the goods are loaded on to the time when they are discharged from the ship.'
Complete freedom of contract is maintained for the regulation of liability before loading and after discharge. This is logical as the risks at sea are far greater than on land and it is this aspect of carriage that the rules are attempting to regulate. Also, the rules and procedures for loading and discharging are different in different countries for various reasons and it would be unwise to ignore these. It can be argued that the carrier has very little control over the goods while they are not aboard his ship and therefore it is fairer to allow the parties to provide for this themselves.
Unsurprisingly in rules of this age, they have been subject to litigation. In Pyrene v. Scindia Navigation Co. there was a dispute as to the purpose of the words with the court ruling that they were intended only to ‘identify the first operation in the series which constituted the carriage of goods by sea'. In Goodwin, Ferreira v Lamport and Holt it was held that discharge occurred when all the goods had been discharged so that goods discharged in fact, were not discharged in law until the entire cargo joined them on solid ground.
Article IV of the Hamburg Rules
Article IV of the Hamburg abandons this ‘tackle to tackle' rule and states
“(1) The responsibility of the carrier for the goods under this Convention covers the period during which the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge.
(2) For the purpose of paragraph 1 of this article, the carrier is deemed to be in charge of the goods
from the time he has taken over the goods…”
.It is clear from this article that the carrier's liability has been extended to all time under which he has taken over the goods from the sender until such times as they are regarded by the destination port as out of port and in storage, warehouse or onward transit etc. ”
Read in conjunction with Article 23 which states that, “Any stipulation… is null and void to the extent that it derogates, directly or indirectly, from the provisions of this Convention.” It is clear that the carrier's ability to contract out of this clause has been removed completely.
Basis of Liability
unneccesary exceptionn and absence of stipulation on loss caused by delay in Hague/Visby Rules
There are three main ways of breaching a contract for the carriage of goods by sea, these are by losing or damaging the goods, delivering the goods short of their destination, or there has been a delay in carriage. Under Article 4(5) of the Hague/Visby rules, the carrier is liable for ‘any loss or damage' to the goods. It is unclear if this includes loss caused by a reduction in the value of the goods due to delay. The House of Lords, in The Heron II, Koufas v. C. Csarnikow Ltd. stated that damages would be assessed at the difference between the market value at the time of contracted delivery and the time of actual delivery. Article 3(1)(a) provides that the carrier must exercise due diligence in ensuring that the ship is seaworthy and according to Article 3(2) must also exercise due care of the cargo. However, it is Article 4(2) and its list of seventeen exceptions that has been at the route of calls for an amended set of rules. In fact it is probably because of Article 4(2) that we have a Hamburg Convention at all. Under these seventeen circumstances, the carrier can contract out of his liability which you can be assured is overwhelmingly the norm. In the case of The Marine Sulphur Queen they were termed the ‘uncontrollable causes' and as such, the carrier will not be liable for them.
Article 4(2)(a) is commonly termed the negligence clause and excludes liability from the carrier for ‘act, neglect, or default of the master, mariner, pilot or servants of the carrier in the navigation or in the management of the ship'. While the practical use, to the shipping industry as a whole, of this clearly unfair clause is open to question, marine insurers maintain that it is vital. The fear of course is that it is not necessary to the majority of conscientious carriers and is therefore merely relied on by a minority of negligent carriers to the expense both of the shipper in the particular case, and to their more careful competitors.
Article 5 of the Hamburg Convention makes serious modifications to this provision stating
Under Article 5(1), The carrier is liable for the loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence which caused the loss, damage or delay took place while the goods were in his charge as defined in Article 4, unless the carrier proves that he, his servants and agents took all measures that could reasonably be required to avoid the occurrence and its consequences.
This puts the liability for all loss, damage or delay clearly on the carrier unless he can show that he took all reasonable actions to avoid the loss. At first sight this seems a far more logical distribution of risk than what occurs under the Hague/Visby rules. Whatever the danger and unpredictability of life at sea, the carrier is in far more control over such situations than the shipper is. While the shipper can pass on the costs of insurance to shippers, the possibility now exists for careful carriers to reduce insurance costs by making less claims than their competitors. Likewise, negligent carriers will soon be unable to secure insurance and will rightfully be excluded from operating. Surely this is a more rational and economically efficient way of operating the market.
Article 5(2) as occurring when,
‘the goods have not been delivered at the port of discharge provided for in the contract of carriage by sea within the time expressly agreed upon or, in the absence of such agreement, within the time which it would be reasonable to require of a diligent carrier, having regard to the circumstances of the case.'
Article 5(3) gives the consignee a right after 60 days of non-delivery to recover for the loss of the goods without having to wait for conclusive evidence of the loss.
Article 5 does allow the carrier to exclude liability in certain situations and these are,
1. where he proves that he, his servants or agents took all reasonable measures to avoid the occurrence and its consequences,
2. the damage or loss is caused by fire and the claimant proves that the fire arose from the fault or neglect on the part of the carrier, his servants or agents,
3. the damage or loss to live animals results from the inherent risks in their carriage, or
4. the damage or loss results from measures to save life or from reasonable measures to save property at sea.
The carrier therefore, in order to remove liability, must take all reasonable measures to avoid the loss. This could include many of the exclusions in Article 4(2) of the Hague/Visby rules but there will be a test to pass. The standard is objective, being that of the ‘prudent owner' in English or of the ‘bon pere de famille' in French. As science and circumstances advance, what will be reasonable will evolve. Reasonableness will also be able to take into account the weather, sailing conditions, any dangers to life and all other circumstances of the loss in order to rule with the maximum of fairness and justice. The carrier will also be liable for fire loss subject to ‘a survey in accordance with shipping practices'. The ability to exclude liability arising from the special risks inherent in the carriage of live animals is fair and the carrier can satisfy the onus of proof in such situations by showing that he complied with the instructions of the shipper regarding care for the cargo.
Limits of Liability
Article 4(5) of the Hague/Visby rules have attracted much criticism as to the manner in which they allow the carrier to limit the value of loss according the package or unit. First of all the provisions are terribly ambiguous, with what exactly will constitute a package or unit being about as clear as the using as a unit of length, a piece of string. It is not even stated if it is a unit of freight or a unit of goods, and in any case these would not always be defined. Also, the monetary limits for such loss were also very low.
Article 6(1)(a) of the Hamburg Convention states,
‘The liability of the carrier of loss resulting from loss of or damage to goods according to the provisions of Article 5 is limited to an amount equivalent to 835 units of account per package or other shipping unit or 2.5 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.'
Article 6(2) provides that,
‘For the purpose of calculating which amount is the higher in accordance with paragraph 1 (a) of this article, the following rules apply:
(a) Where a container, pallet or similar article of transport is used to consolidate goods, the package or other shipping units enumerated in the bill of lading, if issued, or otherwise in any other document evidencing the contract of carriage by sea, as packed in such article of transport are deemed packages or shipping units. Except as aforesaid the goods in such article of transport are deemed one shipping unit,
(b) In cases where the article of transport itself has been lost or damaged, the article of transport, if not owned or otherwise supplied by the carrier, is considered one separate shipping unit.'
Therefore, enumeration on the bill of lading should be able to provide conclusive evidence of the quantity shipped. This should provide for a far fairer method of compensation to the shipper and also to the carrier in that it provides for more certainty and foreseeability.
1.4.4 Article 7 of Hamburg rules,Non-Contractual Claims
The normal defendant in a claim for loss or damage to cargo will be the carrier. This is the most obvious situation and is probably too the most frequent. However, it is not uncommon at all for the carrier to have a good defence that avoids his liability for the loss. The most common defence the carrier will have available is that the bill of lading excluded liability for this particular loss. In this situation, the shipper, while unable to hold the carrier liabile, may have a valid claim against one or more of the shippers servants or agents.
There have been many successful attempts in the case records of shippers who have successfully sued the agents and servants of the carrier in situations where the carrier had excluded liability. The goal of this litigation, which found much judicial favour, was to defeat the carrier's exclusion of liability clause. The response of carriers to this attack was to insert into the contract a clause extending the benefits of exclusions of liability to their servants and agents. To reinforce this measure, carriers succeeded in the 1968 Protocol to the Hague rules, to have a special provision on the rights and immunities of the carrier's servants and agents inserted into the rules.
Under English contract law, the position from first principles would appear to be that if the servant of a carrier, through his own negligence, causes a loss to the shipper, the shipper will be able to raise an action either against to carrier or against the servant. If he chooses to sue the servant, it should be the case according to the rule of privity of contract, that the servant cannot rely on either the Hague Rules, which apply by means of the bill of lading, or on the terms of the bill of lading itself. This is a natural application of the rule that ‘a contract cannot confer rights or impose obligations arising under it on any person except the parties to it.' The situation is not absolutely clear however as the case of Elder Dempster & Co. v. Paterson Zochonis & Co demonstrates. In this case the plaintiff contracted with a charterer to transport a cargo from West Africa to England. The Cherterer subsequently hired a shipowner to carry out the task. When the goods turned up damaged through negligence, the plaintiff sued both the charterer and the shipowner. The charterer was immune due to an exclusion of liability clause in the contract. The House of Lords however, extended this immunity to the shipowner either on the ground that there was an implied contract between the shipowner and the plaintiff with terms identical to those between the plaintiff and the charterer, or alternatively, there is a doctrine of vicarious immunity whereby the agents of a contract party are entitled to the immunities that the principle has secured under contract. Under either explanation, the principle of privity of contract is breached.
However, in the Court of Appeal case of Alder v. Dickson and Another the decision went the opposite way. In this case, the plaintiff, a passenger, couldn't sue the carrier for negligence regarding the gangway as they had excluded liability under the contract, however, she could successfully sue the master and boatswain who should have taken care of the gangway as they were not privy to the exclusion of liability clause in the contract. This rule was affirmed in the later case of Midland Silicones v. Scruttons .
The contract term consequently found in most bills of lading regulated by the Hague Rules, often called an Alder v Dickson clause, will typically state that in concluding the contract, the carrier is ‘acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading'.
In the case of Eurymedon the Privy Council found that such terms could protect agents or servants of the carrier provided that the bill of lading contained a clear intention to protect agents, that the carrier contracts for the protection of his servants and agents, that the carrier had authority of ratification to enter such contract on behalf of his agents and servants, and that there is some consideration from the servant or agent in exchange for the protection so extended.
The Hamburg Convention attempts to avoid the uncertainty of this situation, which is even more uncertain in some jurisdictions than it is in England and thus, Article 7 states,
“The defences and limits of liability provided for in this Convention apply in any action against the carrier in respect of loss or damage to the goods covered by the contract of carriage by sea, as well as of delay in delivery, whether the action is founded in contract, in tort or otherwise.
If such an action is brought against a servant or agent of the carrier, such servant or agent, if he proves that he acted within the scope of his employment, is entitled to avail himself of the defences and limits of liability which the carrier is entitled to invoke under this Convention.
Except as provided in Article 8, the aggregate of the amounts recoverable from the carrier and any persons referred to in paragraph 2 of this article, shall not exceed the limits of liability provided for in this Convention.”
This is an example of one place where the Hamburg Convention seeks not only to protect the interests of Shippers but to clarify and improve the law also. This provision is clearly to the benefit of the carrier and specifically his servants and agents. However, in so clarifying the rules, and in a fair manner, it should reduce the need for lengthy and complex provisions in bills of lading. It is such complex legal arrangements that generally act to the detriment of developing nation shippers as the lack the advice and expertise to interpret and negotiate the documents and in this case often lose out. Cleraer, simpler rules, that lead to more straightforward contracts will always benefit the weaker party in a any negotiation and therefore, such provisions should be supported by both carriers and shippers as reducing transaction costs and complexity, reducing the scope for potential disputes and for making the trading situation more fair.
1.4.5 Article 8 of Hamburg Rules, Loss of Right to Limit Liability
We have already seen that the carrier's right to limit liability has been drastically reduced in Article 6 of the Convention. However, the Hamburg Convention sought to go farther than this and exclude the ability to rely on these limitations completely in situations of serious fault or intentional misconduct. The negotiation of such a provision did lead to some dispute between various delegations but the result was the insertion of a clause similar to that found in Article 25 of the Warsaw Convention.
The Article 8 states,
(1) The carrier is not entitled to the benefit of the limitation of liability provided for in Article 6 if it is proved that the loss, damage or delay in delivery resulted from an act or omission done with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result.
(2) Notwithstanding the provisions of paragraph 2 of Article 7, a servant or agent of the carrier shall not be entitled to a benefit of the limitation of liability provided for in Article 6 if it is proved that the loss, damage or delay in delivery resulted from an act or omission of such servant or agent, done with the intent to cause such loss, damage or delay or recklessly and with knowledge that such loss, damage or delay would probably result.
This means that carriers can no loner contract out of intentional or reckless conduct leading to loss, damage or delay. This is another reasonable clause that should not prejudice reputable carriers but only those that compete with them and act recklessly or wilfully resulting in loss to shippers. All reasonable parties and observers should be in favour of such a clause and it is difficult to justify any arguments against it.
Article 8 covers a wide array of potential conduct. This will range from extreme situations such as theft or malicious vandalism, to less blameworthy conduct that nevertheless, the shipper has a right to avoid. According to Foscolo, Mango & Co. v. Stag Line the House of Lords can consider deviations from a normal or agreed route, which have not been allowed in the contract, as unjustified conduct that will deprive the carrier of exclusion of liability clauses. Carrying cargo on deck or in another manner contrary to the instructions of the shipper or overloading the ship weould also be covered. Such a rule, it is argued here, would have the effect of improving shipping practices and making cargoes and crews safer. It would cause otherwise careless captains or shipowners to think twice before engaging in potentially dangerous conduct and give them a sound financial incentive to error on the side of safety.
Carrying goods on deck is inherently more dangerous than if they are stowed in the hold below deck. The Hague/Visby rules therefore allow the carrier to exclude liability for this risk in Article 1(c). Under the Hague/Visby rules, the shipper and the carrier must have agreed in advance to carry the goods on deck, and furthermore, the goods must in fact be carried on deck. If the contract gives the carrier a liberty to carry the goods on deck, this will only be a valid ground for exclusion of liability if the carrier is compelled to do so. This might occur under the Article 2(2) duty of the carrier in the Hague/Visby rules to properly and carefully carry, keep and care for the goods. If there was some reason to carry the goods on deck for their own safety this would be justified. If the carrier decides to carry the goods on deck simply for his own benefit, then a term authorising such conduct in the contract would be effective, but the carrier would also be precluded from relying on the exclusion of liability clause that he would generally have for deck cargo.
Certain goods by their nature will be carried on deck as a matter of course, such as goods too large for the hold or goods that require ventilation. In such cases, it is still wise under the Hague/Visby rules to stipulate deck carriage in order to benefit from the terms of Article 1(c).
The aims of the Hamburg Convention with regards to deck cargo are to entitle the carrier to carry the goods on deck only if it has been agreed by the shipper, if it is required by law, or it is in accordance with usage or trade. Also, if it has been agreed with the shipper, this agreement must be entered into the bill of lading or other contract of carriage. If it is not in the bill of lading or contract, there shall be a presumption that the shipper did not agree to it. According to Article 9 of the Hamburg Convention, any other reason for carrying the goods on deck will place the carrier in breach of contract.
Article 10 Liability of the Carrier and Actual Carrier
Under Article 10 of the Hamburg Convention, identity of carrier clauses and demise clauses will not be valid. They may however be allowed under Article 11. If the carrier provides for the use of other carriers in the contract or bill of lading, he will be deemed to be the agent of the actual carrier. The contractual carrier will be the one liable under the contract. Under Article 10(2) however, the shipper will have a right to bring a claim against the actual carrier if the loss, damage or delay occurred while the goods were under his charge. Article 11 allows for contracts of through carriage and as such, the through carrier can limit his liability to only such time as the goods are in his charge. While such contracts would have the effect of avoiding the limitations in Article 10, they would mean that the entire character of the contract would have to change, and so they could not be inserted surreptitiously. It would be impossible for the carrier to represent that he was going to carry the goods the entire way as the contract would have to take on completely, the form of a contract for through carriage. This is in accordance with one of the central themes of the Hamburg Convention which is to invest more clarity and certainty into the contract of carriage.
At present, the transport legislation prevailing in the various countries is not harmonized, and in part even outdated. The existing conventions are not always complete, and the interpretation of rules varies from country to country. That is detrimental to the development of trade and the carriage of goods by sea. International trade benefits from legal certainty and from modern rules that are in line with day-to-day practice.
The Rotterdam Rules will offer that certainty for the international transport law. They apply from ‘door to door', as a result of which the same rules apply for carriage by road, by rail and by sea. That is more economical for the modern way of transport by container. Container transport often involves a combination of transport by sea vessel, river vessel, HGV and/or train. The existing sea carriage conventions do not take this kind of transport into account. The Hamburg Rules (1978), for example, only apply to port-to-port transport. The Hague Visby Rules (1968) – to which the Netherlands is a party – apply as soon as the goods are attached to the hoist to load the goods until the moment that the hoist is detached, when the goods are unloaded.
The Rotterdam Rules will increase the liability of the carrier. The carrier's obligation to provide a sea-worthy vessel will apply for the entire journey rather than just at the start of the journey. Moreover, the amount to which the carrier will be allowed to limit its liability will be increased.
E-mail is used very little, in practice, in the international carriage of goods by sea. The reason for this is the lack of a legal framework defining the extent to which such means of communication can be used. The Rotterdam Rules make it clear that the use of digital transport documentation is permitted, resulting in a quicker transfer of the goods carried, and lower transaction costs.
Another advantage of the Rotterdam Rules is that there are fewer defence options as a result of which the number of lawsuits is expected to decrease. Under the new Rotterdam Rules, the carrier is, for example, also liable for damage caused by a navigation error. Under the Hague Visby Rules the carrier was not held responsible for loss or damage as a result of a navigation error. With the current, modern navigation equipment, that defence is no longer considered justified. The defence that relied on the argument that the loss or damage arose or resulted from an error in the management of the ship, which defence had been included in the Hague Visby Rules, has likewise been eliminated under the Rotterdam Rules.
Moreover, the new UN Convention offers the defence options that the carrier does have to all employees, representatives and freelancers deployed by the carrier insofar as they can be held liable under the Rotterdam Rules. This will bring an end to the everlasting legal disputes on third-party liability with respect to the shipping of goods by sea, and will prevent time and money from having to be spent on lawsuits.
It cannot be denied by anyone looking at this area of law, that the Hague/Visby rules continue to be the governing law of the carriage of goods by sea. They still constitute the rules that govern the vast majority of contracts globally. They have proved to be one of the most successful and important international law regimes ever, and have succeeded in establishing a sufficiently clear, universal and dependably international norm that can be depended on and carried out globally. They have withstood the changes and variances of over 70 years of application and technological change and despite some difficulties in interpretation, have consistently maintained their ‘international currency' and uniformity. In this regard the Hague/Visby rules should be rightfully regarded as an amazing success of international law.
However, the rules are not perfect. There are serious shortcomings in their scope of application. There are inconsistencies in interpretation that can leave huge amounts of uncertainty. This uncertainty is all to often abused by the stronger bargaining partners and many weaker parties cannot afford the speculative litigation that would be required to safeguard their rights.
There is also the serious issue of an imbalance in the interests, rights and liabilities of carriers vis-à-vis shippers. In this era of fair trade and new approached to the issues of global poverty and inequality, perhaps it is time to allow for a fairer, clearer and more level playing field in all areas of international trade. As the vast majority of trade between the developed and developing worlds rely centrally on carriage by sea, this would be a very good place to start in such reform. As an issue of fairness, it is the conclusion of this paper that the Hamburg Rules provide significant improvements in terms of certainty of law, clarity of contracts, and fairness in the allocation of liabilities, and should be adopted as the global standard in international shipping law.
In term of Rotterdam Rules, the lack of practise determined that It has a long way to go to Achieve General acceptance.The existing two conventions are still the Main system to govern the fields of international carriage of goods by sea.
Books and Articles
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Elder Dempster & Co. v. Zochonis & Co. (1924) AC 52
Alder v. Dickson and Another (1954) 2 Lloyd's Rep. 267
Midland Silicones v. Scruttons (1962) 2 WLR 186
Eurymedon (1974) 1 Lloyd's Rep. 534
Foscolo, Mango & Co. v. Stag Line (1931) Ll.L. Rep 271
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