ADVOCATING FOR THE IMPLEMENTATION OF THE ROTTERDAM RULES

ABSTRACT

The United Nations Commission on International Trade Law (UNCITRAL) in December 11 2008 adopted the Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea: known as the Rotterdam Rules. The Rotterdam Rules were signed by a number of countries in September 23 2009 in Rotterdam (Netherlands) and would come into force when ratified by at least 20 countries. The Rules represent the sentiments of various interest groups: carriers, shippers, freight forwarders, insurance companies and Governments who have interest in international trade and its carriage across various transport modes. The Rules are the latest attempt to establish a modern, comprehensive, uniform legal regime governing carriage of goods by sea because the other carriage of goods by sea conventions in existence which are the Hague Rules, the Hague-Visby Rules, and the Hamburg Convention no longer represent the present state of affairs in the international trade in many respect. Nigeria is a signatory to the Rotterdam Rules, but the Hague Rules and the Hamburg Convention remain the applicable conventions in Nigeria by virtue of its ratification. In practice, experience shows that some member states and signatories to the Rotterdam Rules are reluctant in ratifying the Rules since the Hague Rules cover most aspects of the international carriage and need to remain unchanged, while others argue that the Hague Rules are outdated and do not cover the system of containerization and computer record keeping which have been developing in the shipping industry since 1970s and therefore should be changed. Reflecting this bias, scholars and international traders have been advocating for uniformity and harmonization in the laws governing international carriage of goods by sea (i.e. the Hague Rules, the Hague-Visby Rules and the Hamburg Convention). This dissertation advocates for the implementation of the Rotterdam Rules in the Nigerian law. In doing this, analytical and comparative methods are adopted. The analytical framework is rooted in the understanding of the background of the previous conventions on carriage of goods by sea. On the other hand, since this dissertation deals mainly with three different sets of Conventions, it is natural to have a comparative approach as well. As such, reliance is placed on primary and secondary source materials; case laws, books, articles, journals, as well as seminar/conference materials dealing with the topic of this dissertation. This dissertation found out that the previous conventions fail to keep up with the international transport industry and as such do not represent the present state of affairs in international trade on carriage of goods. Therefore, there is need to embrace and ultimately implement the Rotterdam Rules in the Nigerian Law.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background to the Study

The industrialization of large parts of the world during the 19th century led to increased manufacturing, trade and transport together with technological and infrastructural development. This in turn led to a huge increase in maritime transport. For example between 1850 and 1869, the total net tonnage of steamers increased to over 400 per cent. A part of this development was that liner conferences were created during that 19th century to control price levels and act for uniform tariffs on shipping routes. The organization of carriers in liner conferences led to increased negotiating power that gave carriers a great advantage against shippers when negotiating transport terms.
The early bills of lading contain any mainly four exception which are act of God, public enemies, shipper’s fault, or inherent vice of the goods. Therefore the carrier was strictly liable for cargo damage unless it could prove that its negligence had not contributed to the loss and that the damage had been caused by one of the above four excepted causes.

However, as a result of 18th century judicial decisions, shipowners began generally to amend their bills not only to stipulate the old common law exceptions but also to exempt themselves from liability in respect of all perils of the sea and of navigation “of whatever nature and kind.” That is to say, the law regulating the carriage of goods by sea had in the early 19th century been made up by general maritime principles that were applied in both common and civil law countries. These traditional maritime principles held that a carrier was strictly liable for cargo damage unless it could prove that its negligence had not contributed to the loss and that the damage had been caused by one of four excepted causes namely: act of God, act of public enemies, shipper’s fault, or inherent vice of the goods
Through such comprehensive clauses provisions inserted in their bills (known as “exemption clauses” or “negligence clauses”), carriers began to limit contractually the strict liability imposed upon them by marine law. The use of freedom of contract principles expressed in both common law and civil law created a situation whereby the carrier was enjoined on the one hand to strict liability by marine law, but could, on the other contract out of the bill of lading.
Carriers were permitted by law to extend these principles of freedom of contract and did so to such effect that they came to exempt themselves from practically every liability of ocean carriage. As such, bills of lading came to include stipulations to the effect that the carrier was not to be liable for the results of his own negligence or that of his employees.

In view of the growing dissatisfaction of the shippers, bankers, and underwriters, the shipowners were forced to negotiate and to meet some of the shippers’ complaints about the situation. In England, some shipowners agreed to adopt model bills of lading, which expressly stipulated that they would be relieved from liability only in cases of errors in navigation and management of the ship and not in the case of due diligence as to seaworthiness and care of cargo. That is to say, under model bills, the shipowner was held liable for faults committed by the master or crew unless these related to navigation and to the management of the ship.

The need to curb the excesses of carriers was seriously felt. Countries reacted by passing national laws to set out the responsibilities and rights of parties in the event of loss or damage to cargo, for example; The Harter Act was enacted in the United States, followed by the Australian Carriage of Goods by Sea Act, (COGSA), the New Zealand Shipping and Seaman Act , and the Canadian Water Carriage Act as well as the Carriage of Goods by Sea Act UK. In Japan, the position was so strict that the shipowner could not even by express agreement exempt himself from liability for the damage to the goods caused by his own fault, by bad faith, by the gross fault of his employees, or by unseaworthiness of the vessel. But these pieces of legislations did not satisfy the yearnings of parties since they did not take care of the international nature of the business of carriage of goods by sea.

The need for further reforms was generally felt, but ship-owning countries feared that the re-imposition of liabilities upon carriers would increase their freight charges and place them at a disadvantage by comparison with others. They did not relish the idea of abridging the principle of freedom of contract which formed a fundamental feature of their legal systems. It also came to be realized that a solution would have to be based on international agreement in order to be of any practical value in international trade. Concerned parties, shippers, insurers, bankers, initiated discussions which culminated in the meeting of the Maritime Law Committee of the International Law Association held at the Hague in Netherland in 1921. The above meeting produced the International Convention for Unification of Certain Rules Relating to Bills of Lading and came to be known as the Hague Rules at Brussels in 1924.
Therefore the Hague Rules represent the first effective internationally agreed control of bills of lading terms. It defines basic rights and obligations of the parties in a bills of lading contract. The Rules do not constitute a codification of all principles relating to bills of lading. This means that the parties retain the liberty to provide for matters not covered by the Rules. In Nigeria, The Hague Rules and the Carriage of Goods by Sea Act adopted the compromise between the conflicting interests of the carrier and the cargo owner which was effectuated in the Harter Act The Hague Rules were given the force of law by the Carriage of Goods by Sea Act.

The rapid changes in technology and politics during the course of the 20th century soon called for changes in the regulation of international carriage of goods by sea. Some of the factors that had made the Hague rules outdated were that monetary changes had made the liability limits in the Hague rules too low and that the technological changes in the shipping industry caused by the increasing use of containers (the so called container revolution) called for updates in the convention’s definition of “package or unit”.

The Vis by Protocol, concluded in 1968, proposed a few necessary amendments to the Hague rules. The scope of application was widened, although not in a very significant way since it still only covered outward voyages. The most important changes was that a container clause was inserted into the rules, the limitation limits was increased, a weight-based calculation alternative was inserted and the currency on which the calculation of liability amounts was based was changed into poincaré francs, only to be replaced with Special Drawing Right (SDR) a few years later. A Poincaré franc is based on the value of gold. A Special Drawing Right is a unit of account created by IMF which is based on the average value of some major currencies. The SDR protocol was adopted in 1979 and changed the H/V limitations to 666.67 SDRs per package or 2 SDRs per kg whichever amount is the most favorable for the carrier as long as it does not exceed the maximum limitation limit.

The Visby Protocol solved some of the most acute problems such as the definition of a container (if a container were to be considered a package or not) but many issues remained unsolved and more were to come since the modernization of the shipping industry continued. Unfortunately, Nigeria did not ratify the Hague-Vis by Rules.

The Hamburg Convention, originated from the report written by the Secretariat of the United Nations Conference on Trade and Development (UNCTAD) which was adopted in 1978 in Hamburg in Germany which drew attention to certain defects in the Hague Rules and Hague-Visby Protocol.These were said to be disadvantageous to cargo owning countries and to developing countries in particular, in that they operated to place more business in developed countries, protecting shipowners and also creating double insurance situations where cargo owners were carrying insurance liability which were really that of the shipowners.

Also in West Africa under the auspices of Maritime Organization of West and Central Africa (MOWCA), at a meeting in Abuja and Cotonou in 2007 supported the ratification of the Rotterdam Rules which was sent to UNCITRAL. Contrary to the processes of creating the Hague Rules and the Visby protocol, which were to a large extent the products of Comité Maritime International (CMI), while the Rotterdam Rules which is a product of cooperation between UNCITRAL and the CMI , the commercial interests and the CMI were not very involved in the creation of the Hamburg Convention.

The Hamburg Convention is a more shipper-friendly regime than the Hague Rules because it balanced the shipper and carrier interests. Also many of the exceptions in the Hague Rules in Article 4 were removed under the Hamburg Convention. The levels of limitation of carrier liability, lack of jurisdictional regulations that make for the shipper unfavourable forum clauses possible in bills of lading, the period of responsibility and the lack of regulations concerning carriage of cargo on deck and live animals were modified under the Hamburg Convention.

The Hamburg Convention has however not turned out to be a successful attempt to modernize and unify the law concerning carriage for goods by sea. Even though, the Hamburg Convention has been ratified by 38 countries , up until now there is not a single large economy or important maritime nation among them. The criticisms from the carrier interests are concentrated on the level of liability that is placed on the carrier and the changes in the burden of proof which they see as unreasonable and in their opinion will lead to increased freight rates. Additionally, some criticism has also been directed against the removal of the exception of nautical fault (which they argue will increase freight rates also) and the changes to fire exception that will make it harder to use. Other shortcomings of the Hamburg Convention include the point that it did not consider the system of containerization and door to door transport that has been developing in the industrialized world, computer record keeping which has been developing in the shipping industry since the 1970 and the advent of widely used electronic communication, including e-mail.

The carrier criticism of the Hamburg Convention shows that there is no acceptable internationally agreed maritime convention. This lack of uniformity or harmonization for sea conventions was no longer adequately conducive to the safe, efficient and reliable movement of goods, particularly because of uncertainties relating to liability for loss and delay (including limitations of liability), where the goods had passed from the carrier to another during transit.

In December 11 2008, the United Nations Commission on International Trade Law (UNCITRAL), adopted the Convention on Contract for the International Carriage of Goods Wholly or Partly by Sea, popularly known as the Rotterdam Rules in September 23 2009. As stated earlier, the Rules will come into force one year after the 20th ratification is deposited with the United Nations.

Therefore, one can consider the Rotterdam Rules as a late response to three trends:
a. The system of containerization and door to door transport that has been developing in the industrialized world,
b. Computer record keeping which has been developing in the shipping industry since the 1970 and the advent of widely used electronic communication, including e-mail; and
c. The increasingly high value of shipped cargo.

1.2 Statement of the Problems

The need for modernization and harmonization of the regime governing carriage of goods by sea had been the reason for the creation of the Vis by Protocol, (to amend the Hague Rules) which solved some issues, but problems remained. According to the developing nations without national shipping capacities, the Vis by Protocol was not enough. They wanted a new regime, one that favors their interests and not those of the traditional maritime nations. This led to further reform under the Hamburg Convention and now the Rotterdam Rules.

At the United Nations Commission on International Trade Law (UNCITRAL) signing ceremony in Rotterdam, the Rotterdam Rules received 25 signatures including that of Nigeria. The signing ceremony is only a step along the path for the Rotterdam Rules to take off, as the Convention expressly states that it will only come into force one year after the 20th ratification is deposited with the United Nations. As at October 2015 only three countries had ratified the Rotterdam Rules.

The Carriage of Goods by Sea Act and the Hamburg Convention domesticated the Hague Rules and the Hamburg Rules respectively in Nigeria and have remained the only applicable Carriage of Goods by Sea Conventions in Nigeria. Both the Carriage of Goods by Sea Act and the Hamburg Convention fails to keep up with the international transport industry and as such does not represent the present state of affairs in international trade on carriage of goods by sea. For example, the Act apply only to carriage of goods by sea under a bill of lading: this provision alone prevents the Act from accommodating different forms of negotiable and non-negotiable instruments, including electronic forms, and from responding to the advent of multimodal transport, in which the ocean transport cannot be easily be disentangled.

This dissertation discusses the Rotterdam Rules and previous conventions on carriage of goods by sea while making a case for the need to embrace and implement the Rotterdam Rules under the Nigerian law. In doing this, the controversies which the Rules have generated are considered, in that some countries have argued, in particular maritime lawyers from common law jurisdictions, (and notably carriers) that the Hague Rules have been tried and tested and need to remain unchanged. While some developing countries, mostly consumers of shipping services argue that the Hague Rules which have held sway for many years are unfair and work against the interest of the users of shipping services.

1.3 Research Questions

The issue set out in this dissertation work is to discuss the Rotterdam Rules and previous conventions on carriage of goods by sea while advocating for the need to embrace and implement the Rotterdam Rules under the Nigerian law. Positive attempt will be made to proffer answers to the following questions:

1. What are the difficulties perceived in the previous Conventions that led to the development of the Rotterdam Rules?

2. What are the differences between the Rotterdam Rules and the previous Conventions on Carriage for Goods by Sea Conventions?

3. What are the innovations/changes made by the Rotterdam Rules on the previous Conventions on Carriage of Goods by Sea Conventions?

4. Is there a need to embrace and implement the Rotterdam Rules under the Nigerian law?

1.4 Aims and Objectives of the Study

The aim of this dissertation is to discuss the Rotterdam Rules and previous conventions on carriage of goods by sea while advocating for the implementation of the Rotterdam Rules in the Nigerian law. As such, the new element introduced by the Rotterdam Rules will also be discussed.

1.5 Significance of the Study

This study identified the shortcomings in the previous conventions on carriage of goods by sea which caused some dissatisfaction over the years to maritime traders. It is this dissatisfaction that the Rotterdam Rules seek to address. Therefore, this work is very significant because it advocates the need to embrace and implement the Rotterdam Rules in the Nigerian law.

1.6 Methodology

The methodology adopted in this dissertation is analytical and comparative. The analytical framework presented in this dissertation is rooted in the understanding of the background of different previous Conventions on carriage of goods by sea. In the same vein, since this dissertation deals mainly with three different sets of Conventions, it is natural to have a comparative approach as well. Reliance is placed on primary and secondary source materials; statutes, international conventions, treaties, case law, textbooks, journals, seminar/conference papers and internet materials.

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