© Springer-Verlag Berlin Heidelberg 2015Jürgen Basedow, Ulrich Magnus and Rüdiger Wolfrum (eds.)The Hamburg Lectures on Maritime Affairs 2011-2013Hamburg Studies on Maritime AffairsInternational Max Planck Research School for Maritime Affairs at the University of Hamburg2810.1007/978-3-642-55104-8_3
Reflections on Spain’s Decision to Ratify the Rotterdam Rules
University Autónoma of Madrid (Spain), Of Counsel “CMS/Albiñana & Suárez de Lezo”, Madrid, Spain
Andrés Recalde Castells
1. Mandatory or Voluntary Application of the Rotterdam Rules: The Case of Multimodal Transport and Volume Contracts
Of counsel “CMS/Albiñana & Suárez de Lezo”. The present study is included in a research project supported by the Spanish Ministry of Economy and Competitiveness (DER2012-37543-C03-01).
I. Spain and the Uniform Regulation of Contracts for the Carriage of Goods by Sea
Sea carriage is a key sector in international trade, with particular value for a country like Spain, with a great maritime tradition, thousands of miles of coastline and important commercial ports. This goes a long-standing adherence to the process of establishing international uniformity of maritime law. The Kingdom of Spain signed and ratified the Convention for the Unification of Certain Rules of Law relating to Bills of Lading, Brussels, 25 August 1924 (the so-called “Hague Rules”, hereinafter HR) on 2 June 1930, publishing it in the State Official Bulletin (Boletín Oficial del Estado) on the same day. Years later, Spain would also use the second channel planned for including the Convention under the internal regulation, upon the approval of the Act of 22 December 1949, on maritime carriage of goods covered by bill of lading.1 The two Protocols of 1968 (the so-called “Visby Rules”, hereinafter, VR) and 1979, which amended the HR, were also signed and ratified by Spain, thus integrating them into its internal regulatory framework.2 As such, from the outset Spain has belonged to the core of countries adhering to international regulations that govern maritime carriage of goods.
For many years the HR-VR system has been widely criticized. The objections refer to the lack of uniformity resulting from a number of significant countries not ratifying the 1924 Convention (e.g. China, US, Brazil) or their subsequent protocols (e.g. Argentina). Failings were also identified in the low levels of liability and, in general, in a distribution of costs and risks that were biased towards the shipping sector’s interests.
In 1978, efforts developed by UNCTAD and UNCITRAL led to the approval of The United Nations Convention on the Carriage of Goods by Sea, 31 March 1978, known as “the Hamburg Rules” (hereinafter HambR). Despite the praise that they received in recognition of their excellent legal-technical expertise and the achievement of a quite equitable distribution of involved interests, the Convention did not reach the consensus necessary to be ratified by the most important countries in the maritime traffic panorama.
Spain did not ratify the HambR, but their merits were highlighted by academics,3 and their influence was strong in the regulation of contracts for the carriage of goods by sea contained in the Draft Bill of the General Shipping Act, which in 2004 was drawn up by a sub-committee appointed from within the “General Coding Commission”.4 However in view of the strong complaints from the shipowners’ sector, which attributed to this text a distancing from the uniform conventions, the definitive text of the Draft Bill finally submitted by the government before Parliament was much more conservative. In terms of the liability system, it followed the HR-VR model. This Draft Bill was subject to intense debate in the Spanish Parliament during the last two legislative periods (2004–2008 and 2008–2011). However, due to political – rather than technical – reasons, it was not definitively enacted as law. As a consequence, Spanish maritime legislation continues to be the precarious quagmire that has characterised it for decades. Its obsolescence elements can be seen in the simple fact that the nucleus of Spanish private maritime law continues to be found in Book III of the 1885 Commercial Code.5
Although the disparity in international maritime legislation is the consequence of the many Conventions in force, this feeling of regulatory disorder should not be exaggerated. Either directly from the formal signature and ratification of HR (eventually with the VR amendment) by the most important countries in maritime traffic, or indirectly (from the autonomously produced regulation contained in formulas and general uniform contracts, which usually extend the HR-VR to non-applicable cases), there is no question that the HR-VR model has provided a high degree of uniformity in international maritime traffic.6
However, certain solutions of the HR-VR were no longer suited to maritime traffic needs, as they were approved prior to the appearance of container shipping and electronic documentation. On the other hand some of their provisions received strong criticism, as they represented unjustified privileges in terms of liability, such as the carrier’s exoneration for fault in navigation by the carrier’s dependants.
II. Origins, Aims and Achievements of the Rotterdam Rules
Uniformity and updated regulation were in the background of the tasks undertaken first by the “Comité Maritime International” (CMI) and, later, by the United Nations Commission for International Trade Law (UNCITRAL), being conducive to the approval of a new international Convention. The plan was not merely adapting the HR-VR or HambR, but to include new topics and to regulate the entire contract for carriage of goods by sea. The efforts undertaken by the “Working Group III (Transport Law)” resulted in a draft instrument that the General Assembly of the UNO adopted on 11 December 2008: the “United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea – the ‘Rotterdam Rules’” (RR).7
The Convention was signed, in the Conference held in Rotterdam in September 2009, by 24 nations. But the RR must be ratified by at least 20 countries before they come into force (Article 96 RR).8 At the present time, Spain, Togo and Congo are the only three countries having ratified the Convention. Spain’s ratification is somewhat surprising given that there has been no material debate of this matter. And it is further remarkable considering that the ratification has received harsh criticism from the majority of academics9 and from significant economic sectors. These have pointed out the negative implications of the new regulation for the commercial interests of a country like Spain that, in an international context, is much more an “importer/exporter” country than a carrier one.10 In this regard, the misgiving expressed from the shipper’s and the cargo-owner’s industry11 probably should have been considered more carefully before the ratification.
The first purpose of the RR was to achieve a higher degree of uniformity in the regulation of international carriage of goods by sea. Its drafters declared themselves not to be worried by what they qualified as any superfluous “elegance” in respect of the legal technique. Their interest lied only in the achievement of pragmatic solutions required by trade and maritime traffic.12 Secondly, in contrast to other maritime carriage Conventions that were clearly skewed in favour of one private group or other, the RR developers highlighted its neutrality and the approach to practical problems. This would be favoured by the participation in the delegation of certain countries (particularly in that of the USA) of representatives of associations linked to the most important sectors involved in maritime traffic.
However, as we will attempt to show, achievement of those aims (uniformity, proximity to practical issues and neutrality) may have been frustrated. Even if the RR did eventually enter into force, without an acceptance and diffusion as generalised as that achieved by the HR-VR, the new Convention could cause a greater dispersion in the regulatory framework.13 In fact, as to a significant portion of the RR, the uniformity achieved might be minimal since in some cases their application (e.g. regulations on jurisdiction and arbitration in chapters 14 and 15) depends on an express declaration (opt in); in other cases the RR expressly exclude any mandatory character (volume contracts); finally, the intention to regulate multimodal (door-to-door) transports that include an international sea leg has limited effects, as the application of mandatory regulations provided for in the Conventions regulating other means of transport is not excluded.
On the other hand, the RR path to numerous issues, which were not considered in prior Conventions, reflects the intention to regulate the entire contract of carriage. However, this can create difficulties, if taking into consideration that the RR often deviates from regulations provided for non-sea transport legs.
III. Complexity and Length as Characteristics of the Rotterdam Rules
Some of the RR’s drafters have defined the regulations as “much broader, more detailed and technically ambitious”.14 The extraordinary size of the new text cannot be disputed. Compared to the 16 Articles of the 1924 HR (expanded in VR 1968 by a further Article), or the 34 Articles of the 1978 HambR, the RR span some 96 Articles (arranged into 18 chapters). Furthermore many provisions of the RR are characterized by their huge length.
Yet the vastly greater size of the new regulations is not the most surprising fact. More concerning is their dense drafting and complex structure,15 brimming with references to other precepts in the same text (more than 200), as well as exceptions, and exceptions to exceptions (the case of Article 13 is significant). These characteristics complicate the understanding of the Convention, which may lead to an increase in litigation costs and damage legal certainty due to the unpredictability of court decisions.16
However the most questionable aspect of the over-regulation contained in the RR is that they now deal with new areas that justly had been irrelevant in the previous Conventions that sought only to unify the carrier liability rules17: carrier duties, delivery of goods and other questions concerning documentation, right of delivery, transfer of incorporated rights, arbitration, etc. Moreover, this enlargement of regulated areas has been executed with pioneering language unknown in traditional maritime Conventions. Perhaps this could be justified by the long and complex process of negotiation among representatives of countries and states with different legal traditions participating in the drafting of international regulations. But it clearly seems that there has not always been enough reflection on the topics that should be considered.
Besides, the interpretation of certain rules will be difficult as they can be understood only with a US maritime legal background. The activism from the US delegation in the negotiation and debating process was to determine the leaning of many solutions included in the Convention towards predominant concepts in that country. This is the case for the deviation system (Article 24).18 In US law deviation is a situation preventing the carrier from invoking exoneration from liability, while in other countries, or in the HambR themselves, this conception would lack all logic.19 This clear bias towards one of the known national models of law brings risks with regard to the uniformity target, particularly because of the opposition from the Latin American countries.
IV. Main Features of the Rotterdam Rules
1. Mandatory or Voluntary Application of the Rotterdam Rules: The Case of Multimodal Transport and Volume Contracts
The approval of the 1924 Convention (HR) responded to the aim of protecting shippers and consignees from some contractual practices introduced by shipowners at the beginning of the 20th century in the contracting of carriage of goods by sea. Via the widespread extension in maritime carriage of goods contracts of exemption and limitation of liability clauses, shippers, consignees, cargo insurers, financing banks and international maritime trade suffered an unfair distribution of maritime risks. This explains the option for the preferentially mandatory nature of the regulations. However the mandatory nature of the uniform rules for maritime transport of goods has been somehow diluted in the RR.
The RR apply to multimodal transport that is not carried out exclusively in one sea leg. The possibility of extending the uniform regulation to transport that has one international sea leg, whilst other legs are made by other means of transport (air, road, railway), is included in a large number of provisions (Articles 6, 12, 19, 33, 41, 45, 46 and 47).20 However, the spreading of the RR’s scope of application to the non-sea phase of international multimodal transport is limited, since this only operates when other international Conventions that mandatorily regulate the carrier’s liability are not applicable (Articles 26 and 82). But those unimodal Conventions other than the RR shall be applicable only when damages, losses or delays are incurred in one, specific non-sea leg of the overall route. In any event, there are so many variables that must be taken into consideration in order to determine if the circumstance is subject to the RR or if regulations of another Convention are applied, that the application of the Convention shall no doubt create a great number of doubts.21
On the other hand, the RR lose their mandatory nature when it govern a new contractual device that has been gaining importance in maritime traffic: that of the volume contract.22 In this contract the shipper undertakes with the carrier to ship a quantity of goods in one or various consecutive trips. The contract’s origin is identified in loose transport traffic, to then extend to container transport where exporters negotiate with the shipping company a forfait the conclusion of contracts corresponding to multiple trips, accepting special liability regulations. The freedom of contracts (Article 80) is explained because in this type of transport there is not the typical imbalance in the negotiation powers which historically justified the compulsory international regulation. On the contrary, parties were thought to be experienced and with the same bargaining power.23 But the broad concept of volume contracts used by the RR may be a means to elude application of mandatory provisions in ordinary carriage of goods contracts where, in broad terms, it was always considered they should not lose this character.
Nevertheless, in order to exclude the application of the Convention, a series of conditions must all be met, which should limit the risk of fraud. The parties may exclude the regulations of the Convention (Article 80.2): a) if the volume contract was not completed with a pre-existing, standard printed form; b) if visible mention is made therein to the clauses in which the RR regulations are separated; c) if the shipper is offered the right to agree transportation subject to the RR; and d) if it was the result of an individually agreed negotiation between the parties. As the test of this individual negotiation is not easy to prove, it has been understood that it could be presumed if all the other requirements concur, without specific proof of the negotiation being necessary.24 However, the mere formal fulfillment of these conditions is not enough to stop them from eluding the mandatory regulation as regards liner transport.
Bigger problems remain in the application of this non-mandatory regulation to third party consignees that did not participate in the contract negotiations. In this instance, sufficient information should have been provided and the express consent of the third party is necessary, which should not be recorded only in the “carrier’s public schedule of prices and services, transport document or electronic transport record” (Article 80.5). The express consent by the purchaser to the seller in the sale contract bill may be considered suitable for these purposes.25 But the acceptance in traffic practices and court decisions of printed jurisdiction clauses may be used to extend the non-mandatory regulation to third parties.
This partially non-mandatory nature of the RR could also have negative effects from the point of view of uniformity. It was always believed that the “other” target of the mandatory character of international regulation was the fostering of a uniform regulation, from which countries could not diverge.26 This will be difficult to achieve when the RR provisions may be excluded in the foreseen terms.
2. New Rules on Carrier’s Liability
The core of uniform regulation in the carriage of goods by sea contracts was the carrier’s liability regulation. This was one of the issues most commonly criticized in the HR-VR, but the RR incorporates few changes.27 These changes, apparently innocuous, may lead, however, to consequences that seem inconsistent with the declared goals of the rules.
a) Period of Liability
Considering the period during which the carrier is liable for damages caused to the goods, the new provisions establish the general rule that the liability applies from the moment of the receipt of the goods and that it ends with their delivery at the destination (Article 12.1). As such, the reference of the HR to the tackle-to-tackle standard disappears, which, in any event, was only relevant for the purposes of excluding the mandatory nature of the regulations between the aforementioned moments.28
The duty to carry out loading and unloading operations lies with the carrier. Yet, this regulation is not binding. Contractual clauses that establish the moment and the place of receipt of the delivery are admitted. This would entail that, by means of a FIOS clause (Article 13.2), costs of the loading/unloading and stowing operations are allocated to the shipper or the consignee.29 These agreements would be prohibited if it was established that the receipt of the carrier had been made following the beginning of the loading operation, or when it was foreseen that delivery precedes the end of the final unloading operation.
However, the RR seem to open up the possibility of the carrier being exonerated from liability for damages occasioned during the land legs of port to port transport, i.e. in port operations prior to loading or following unloading. This would be the consequence of a combined interpretation, which has been classified as “almost investigative”, of Article 12 (located in chapter 4 concerning shipper obligations), in relation to Article 1.6.b (definition of the “performing party”, which does not include those persons contracted by the shipper or consignee instead of by the carrier), Article 13.2 (possibility of attributing to the shipper or the consignee the performance of the loading, handling, stowing or unloading), and of Articles 18.d and 17.3.i (exoneration of liability for damages occasioned in loading, unloading, handling and stowing, if these were carried out by the shipper or consignee). All these provisions considered together would lead to the conclusion that FIOS clauses would not only attribute to the shipper or consignee the performance and economic costs of loading/unloading and stowing/docking operations, but also would allow those carriers that do not carry out these operations to be exonerated from liability during this stage, even if they had received the goods.
This contradicts a long-time interpretation that had been reached by the legal doctrine and European Courts concluding that the captain and crew of a vessel must monitor and supervise the loading/unloading operations, even if they are not carrying them out themselves.30
b) Basis of Liability
The core of the international regulatory Conventions on maritime (and non-maritime) transport has always been located in the basis of liability. The cause for the HR was the wide extension at the beginning of the 20th century of exemption and liability limitation clauses in contracts of carriage by sea, and the strong differences between internal laws as regards a carrier’s liability. The achieved uniformity of this item was the main reason for the success of the HR. Yet the case-based system of excepted perils was hardly criticized.
However, improvement is not the necessary consequence of undertaking reforms. Article 17 RR is a fine example of the numerous technical failings that many attributed to the RR. To quote a reliable source, the specific regulation stands as a “long, complicated, intricate, baroque and polysemous” provision, in spite of there being excellent previous experiences of national statutes und international conventions with a general description of the basis of liability (HambR or the Scandinavian Maritime Code).31 Its intricate game of evidence and counter-evidence (that at times appears to lack criteria of general fault, at other times assumes it and, in any event, once again includes the case-based system of excepted perils) is captured by what some of the RR’s editors (apparently with a certain sense of humour) qualified as a tennis match. The most important provision of the Convention is so long and complex that in the future huge disruptions might arise in its application. And the most serious danger is that, in addition to the costs caused by a greater level of litigation, Article 17 RR may augment the carrier’s defences in response to claims,32 which is particularly worrying for cargo owners, be they importers or exporters.
Some authors reject the statement that the RR are biased towards the shipping sector. They stress the disappearance of the exclusion of liability of the carrier due to fault in navigation of the carrier’s dependants, which constituted the most traditional mark of a system privileged towards the interests of the shipping sector. Yet if this is all the achieved progress, it should be acknowledged that it has been a small step, since courts in numerous countries had toned down the most damaging consequences of this provision of the HR.
Likewise, the progress of the RR should lie in that delay is finally included as an instance of liability, as done by most Conventions on goods transport made by other means than by sea. However, the definition of the relevant delay is very narrow: carriers are liable for delay only if the goods were delivered outside the agreed deadline (Article 21); as such, if no delivery deadline was agreed (which is usually the case), the carrier would not respond at all. It has been argued that this deadline does not need to be expressly recorded in a document, but can be established verbally or even result from an implicit agreement. However, one must be aware of the difficulties of proving the foregoing. The agreement of a deadline is beginning to spread in some liner traffic, even if at much higher freights. The extension of this practice could result in the restriction of implicit agreement on a deadline for the delivery.
On the other hand, the maximum amount of compensation in the instance of delay is very limited: two and a half times the value of the freight paid (Article 60).33
c) Limits of Liability
The sum of the maximum amount that a carrier would be obliged to pay is regulated in a number of places (Articles 22 and 59 to 62; in volume contracts, once again, the regulation would not be of a mandatory nature). These figures have risen in comparison with those set forth under the HR and the HambR. This was logical, since they would be, in today’s context, very small. However, the increase is of limited significance and does not appear to be that important so as to encourage a change of attitude in countries that have been reticent as regards the fact that the responsible party does not fully indemnify the damages incurred by cargo owners.
As regards the limitation of liability when transport is carried out in containers or other closed pallets, changes compared to the HR/VR are scarce. The “package” or “unit” relevant to calculate the limitation is that described in the document as included in the container or pallet. If the goods were not enumerated in the document, all goods contained in the container are deemed one shipping unit. Mention must be made of the extension of these references to cases of goods loaded onto a vehicle (Article 59), in consideration of the possibility of applying the Convention to non-sea areas.34
There is neither significant change with respect to conduct that leads to the non-application of the compensation limit: the carrier is only deprived of the benefit of limited liability if the loss, breakdown or delay was due to its own deliberate or reckless behaviour, but not that of its employees or assistants. Once again, among the various alternatives, the RR opts for the one most favourable to shipowner interests.
3. Transport Documents
a) General Patterns
Even though the official name of the HR is the “International Convention for the Unification of Certain Rules of Law relating to Bills of Lading”, only exceptionally do they regulate sea transport documents. Their contents, as well as the VR and HambR, deal almost exclusively with the obligations and liability of sea carriers. When they regulate certain matters of the documentation, those are ancillary and directly relating to the carrier’s liability. This is the case with the evidentiary value of the bill of lading, which states the object to which the carrier’s duties of custody and delivery extend.
In contrast, the title of the RR omits any reference to the bill of lading or any other document. Its objective is to regulate the entire contract of carriage, although one of the most important issues (the freight) is not considered at all. It thus appears to imply that in the new regulation, documentation is neither a fundamental question. But, regulation in this subject has broadened its scope far beyond traditional matters and now transport documentation constitutes one of the cores of the Convention. One third of the RR directly or indirectly refers to documentation and problems relating thereto. The RR extends to new matters in its provisions, which are extremely extensive and complex, and has led to numerous problems and confusions.35