UNCTAD and its role in regulation of liability for carriage of goods by sea and multimodal transport

UNCTAD and its role in regulation of liability for carriage of goods by sea and multimodal transport

Mahin Faghfouri
President, International Multimodal Transport
Association/Former Head, Legal Section, United
Nations Conference on Trade and Development

In 2004 UNCTAD celebrated the 40th anniversary of its establishment. Since its inception in 1964, UNCTAD has pursued its basic mission of promoting international trade and economic development, particularly of developing countries. Four decades of study, analysis, discussion and negotiation in UNCTAD have led to the emergence of new ideas, new approaches and solutions. The negotiating process in UNCTAD has resulted in the adoption of international instruments and agreements which contributed to the making of international law. However, the work of UNCTAD had to evolve during this period following the political and economic conditions of the world.

This chapter attempts to provide a brief account of the establishment of UNCTAD with particular reference to shipping and shipping legislation describing the gradual evolution of its work. It further provides an overview of the developments concerning the work of UNCTAD on the carriage of goods by sea and multimodal transport including the negotiating history leading to the adoption of the Hamburg Rules1 and Multimodal Convention.2

Historical background

The first session of UNCTAD I in 1964 laid down the basis for the establishment of an organization which was expected to bring radical changes towards a new dynamic international trade system and to lay the foundation of a better world economic order. In the opinion of the UN Secretary General, U Thant, the Conference

1 United Nations Convention on the Carriage of Goods by Sea, 1978.

2 United Nations Convention on International Multimodal Transport of Goods, 1980.

‘ushered in a new chapter in the history of United Nations endeavours to accelerate the economic development of developing countries’.3

The adoption by the UN General Assembly of Resolution 1995 (XIX)4 establishing UNCTAD as an organ of the Assembly, marked the culmination of deliberations and efforts within the UN in:

the growing conviction that the economic aims of the Charter would best be furthered by a bold new programme of international economic co-operation; and it was in this conviction that the United Nations Conference on Trade and Development had its origin.5

Indeed with the emergence of a large number of developing countries following the decolonization process after the Second World War, there was a growing demand for the creation of an organ within the UN system that would be more responsive to the needs of developing countries. The process leading to the establishment of UNCTAD began by the UN General Assembly, in December 1961, designating the 1960s as ‘the United Nations Development Decade’. This was followed by the Cairo Conference on the Problems of Economic Development in July 1962, attended by 36 African, Asian and Latin American countries, which adopted a declaration strongly recommending the convening of an international conference on trade and development within the framework of the UN. The General Assembly later in December 1962 adopted Resolution 1785 (XVII)6 calling for holding the Conference in early 1964.7

UNCTAD I – convened in Geneva from 23 March to 16 June 1964 – provided a unique opportunity to make a comprehensive review of the problems of trade and economic development, particularly those problems affecting developing countries. The Conference identified the general targets for the international community to focus on dealing with the problems of development through trade and international cooperation. The recommendations of the first Conference covered a wide range of problems of trade and development calling for solution by means of new guidelines for trade and international cooperation, with particular regard to problems affecting developing countries.

While ‘aspects of shipping’ was identified as a major issue in relation to trade of developing countries, in view of opposition from major maritime countries, the Conference only adopted a ‘Common Measure of Understanding on Shipping Questions’ which mainly focused on the liner conference system.8 The Conference also recommended that appropriate intergovernmental procedures be established

3 See Foreword, Proceedings of the United Nations Conference on Trade and Development, 23 March–16 June 1964, vol. 1: Final Act and Report (New York: UN, 1964).

4 UN General Assembly Resolution 1995 (XIX) of 30 December 1964.

5 See fn 3, Final Act of the Conference, Section II, Constitution and Proceedings, para.10.

6 UN General Assembly Resolution 1785 (XVII) of 8 December 1962.

7 See fn 3, Final Act of the Conference, paras 10–15

8 Ibid., Annex A.IV.22.

to promote understanding and cooperation in the field of shipping, and to study and report on economic aspects of shipping that might be referred to it.9

Concerning institutional arrangements, the Conference recommended to the UN General Assembly that UNCTAD should be established as an organ of the General Assembly with the principal functions to include: (a) the promotion of international trade, especially with a view to accelerating economic development; (b) the formulation of principles and polices on international trade and related problems of economic development; (c) initiating action, where appropriate, for the negotiation and adoption of multilateral legal instruments in the field of trade; and (d) being a centre for harmonizing the trade and related development policies of governments and regional economic groupings.10 It further recommended that a permanent organ of the Conference, to be known as the Trade and Development Board (TDB) be established as part of the UN machinery in the economic field. These recommendations were endorsed by the UN General Assembly in resolution 1995 (XIX) of 30 December 1964.

UNCTAD was established at a time when the existing international bodies dealing with international trade such as the GATT were considered inadequate to meet the needs of developing countries. Consequently UNCTAD became the ‘voice of the south’ with the aim of transforming the rules of the international trade system so that every country, both developed and developing, could benefit from economic and technological developments.11 The signatories to the Final Act of UNCTAD I had expressed their determination to ‘seek a better and more affective system of international economic cooperation, whereby the division of the world into areas of poverty and plenty may be banished and prosperity achieved by all’. They considered that ‘in an age when scientific progress has put unprecedented abundance within man’s reach, it is essential that the flows of world trade should help to eliminate the wide economic disparities between nations’.12

Shipping and shipping legislation in UNCTAD

When the Trade and Development Board met, at its first session in April 1965, it established, by resolution 11(I) the Committee on Shipping.13 The establishment

9 See fn 3, Final Act of the Conference, Annex A. IV.21, p. 54.

10 Ibid., Consolidation of the Recommendations of the Conference, Section V. Institutional Arrangements, para. 78.

11 See M. Finger and B. Magarinos-Ruchat, ‘Transformation of international public organizations. The case of UNCTAD’, Working Paper, Lausanne: Institute de Hautes Études en Administration Publique, 2000, pp. 145–6

12 See fn 3, Final Act and Report, p. 3.

13 The UN General Assembly Resolution 1995 (XIX) specifically had provided that: ‘The Board shall give special consideration to the appropriate institutional means for dealing with problems of shipping, and shall take into account the recommendations contained in annexes A.IV.21 and AS.IV.22 of the Final Act of the Conference.’

of the Committee on Shipping provided a forum for all parties involved in maritime transport, including governments, of both developed and developing countries, and industry to meet, to discuss and elaborate international solutions and agreements on matters of common interest.

The deliberations of the Committee on Shipping in its early years focused on the issues related to the liner sector and the liner conference system. The decisions of the Committee on Shipping were primarily reflected in resolutions addressed to governments. Their effectiveness, therefore, entirely depended on the willingness of national authorities and their industry. It soon became evident that voluntary compliance system was insufficient. Efforts of developing countries were then directed towards creating a subsidiary body of the Committee on Shipping that would prepare international instruments/conventions and model rules to bring about the recommended changes in law and practice.14

At UNCTAD II – held in New Delhi in 1968 – the representatives of developing countries argued that the existing international maritime law had been largely created by developed states at a time when developing countries’ interests had not been taken into account.15 It was particularly argued that the existing law and practices relating to bills of lading, charterparties and marine insurance were unsatisfactory as they had been largely created by the developed states and favoured the interests of their carriers. It was therefore proposed that UNCTAD give consideration to amending those parts of existing international shipping legislation which adversely affected the trade and development of developing countries.16 However, in view of opposition from some major maritime states,17 the Conference adopted, by a majority vote, Resolution 14 (II) recommending that the Trade and Development Board instruct the Committee on Shipping to create a Working Group on International Shipping Legislation from among the Member States. The Working Group was to review commercial and economic aspects of international legislation on shipping in order to identify areas where modifications were needed and to give recommendations concerning new legislation which had to be drafted. The Conference further proposed that the follow-ing subjects, among others, should be taken with a view to drafting appropriate conventions or for revising existing legislation:

14 See The History of UNCTAD 1964–1984, New York: UN, p. 137.

15 See Proceedings of the United Nations Conference on Trade and Development, 2nd session, vol. 1, Report and Annexes, Annex VII, Chapter IV, p. 315; The History of UNCTAD 1964–198, fn 14, p. 142.

16 See the UNCTAD secretariat report ‘Consideration and Adoption of the Programme and Methods of Work of the Working Group and Priorities within its Work Programme’, TD/B/C.4/ISL/2, 1969, Annex I, p. 2.

17 Representatives of developed market economy countries stated that in their view international legislation on shipping should not be included in the work programme of the Committee on Shipping. They considered that the existing intergovernmental and international organizations dealing with question of maritime law continued to do useful work for the international community. See Proceedings of UNCTAD II, report of the fourth committee, fn 15, chapter IV, p. 318.

The Resolution of the Conference having been endorsed by the Trade and Development Board,19 the Working Group on International Shipping Legislation (WGISL) was created by the Committee on Shipping.20 At its first session in December 1969 the Working Group adopted its work programme including the subjects of: (i) bills of lading; (ii) charterparties; (iii) general average; (iv) marine insurance; and (v) economic and commercial aspects of international legislation in other fields of shipping.21

The work programme of the WGISL was further amended by the Committee on Shipping at its tenth session in 1982 to include the subjects of: (a) maritime liens and mortgages; (b) registration of rights in respect of vessels under construction; and (c) arrest of vessels or other sanctions as appropriate.22

The WGISL had a life span of just over twenty years (1969 to 1991). During this period it examined the subjects of: bills of lading which lead to the adoption, jointly with UNCITRAL, of the Hamburg Rules in 1978;23 liner conference practices, leading to the adoption of the United Nations Convention on a Code of Conduct for Liner Conferences in 1974;24 charterparties;25 marine insurance;26 maritime liens and mortgages;27 and general average.28 The work on marine insurance led to the preparation of the UNCTAD Clauses on Marine Hull and Cargo

18 Ibid., Vol. 1, Annex 1, Resolutions, declarations and other decisions, pp. 50–1

19 See Resolution 46 (VII) adopted at its 173rd plenary meeting, 21 September 1969, Report of the Trade and Development Board on its seventh session, Official Records of the General Assembly, Twenty-Third Session, Supplement no. 14 (A/7214, Annex I, page 85).

20 Resolution 7(III). There was a large measure of agreement among the states attending the Committee on Shipping concerning the purposes and activities of the Working Group. In particular a general agreement had been reached concerning the division of functions between the Working Group and UNCITRAL, enabling the Committee on Shipping to adopt the terms of reference of the Working Group unanimously in resolution 7 (III).

21 See Report of the Working Group on International Shipping Legislation on its first session, TD/B/ C.4/64, 19 December 1969, p. 6. Representative of developing countries proposed that bills of lading should receive top priority in the Work Programme. It was considered inter alia, that changes which the Working Group might bring about in bills of lading would have the greatest and most immediate impact on the trade of the developing countries.

22 Resolution 49 (X) on International Maritime Legislation.

23 2nd session, Feb. 1971 and 5th session, Part I and II in January and July 1976 respectively.

24 3rd session, January 1972.

25 4th session, January 1975 and 12th session, October 1990.

26 6th, 7th, 8th, 9th and 10th sessions in 1979, 1980, 1981, 1983 and 1984 respectively.

27 11th session, October 1985, as the subject was also on the Work Programme of the IMO the WGISL adopted the Resolution 6 (XI) recommending the establishment of the Joint UNCTAD/ IMO Intergovernmental Group of Experts on Maritime Liens and Mortgages and Related Subjects. The Joint Group then carried out the review of the existing international conventions on maritime liens and mortgages and arrest of ships.

28 13th session, October 1991.

Insurance which acted as catalyst for reform by the London insurance market of its Lloyds’ S.G. Policy form and insurance clauses and conditions.29 The work on general average led to further investigation of the subject by the IUMI and the CMI and the revision of the York–Antwerp Rules and the adoption of the 1994 and 2004 versions of these Rules by the CMI.30

As of 1992 UNCTAD went through a major transformation process as a result of the economic and political changes in the world, including the end of the cold war. These events affected the balance of negotiating power of the developing countries within UNCTAD. The transformation which began with UNCTAD VIII in Cartagena in 1992 reached its climax in 1996 when UNCTAD IX was held in Midrand, South Africa. UNCTAD moved from a negotiation and law making forum to a consensus building and technical assistance forum. This also affected the intergovernmental machinery, mandate, method of work and internal structure of the UNCTAD secretariat. The Committee on Shipping and the WGISL were discontinued. Consequently the mandate of UNCTAD on shipping matters was reduced significantly. However, an area of shipping work which still continued was the subjects of maritime liens and mortgages and arrest of ships which were being considered jointly with IMO. This was due to the fact that recommendations and resolutions concerning these subjects had originated from the UN General Assembly and the UN/IMO Diplomatic Conference.31 Consequently, following UNCTAD VIII in 1992, two international conventions were adopted in Geneva under the auspices of UNCTAD by the UN/IMO Diplomatic Conferences: namely the International Convention on Maritime Liens and Mortgages 1993 and the International Convention on Arrest of Ships 1999.32

In other areas of shipping the work focused mainly on technical assistance programmes and at most review and follow-up of international developments and their impact on developing countries. UNCTAD’s new role was to assist developing countries to integrate into the global economy. As a commentator put it: ‘Midrand aimed at turning UNCTAD from a critique of the global economy into an instrument of the global economy’.33 In other words UNCTAD no longer aims at establishing a ‘new economic order’, as had been originally intended, but at providing policy guidelines and capacity building to help developing countries to participate in the global economy.

29 See N. G. Hudson and J. C. Allen, The Institute Clauses Handbook (London: Lloyd’s of London Press Ltd, 1986), pp. 1–2.

30 See the UNCTAD Secretariat reports, ‘General Average – Reform of the System’, UNCTAD/ SDD/LEG/3, 1995, ‘The Place of General Average in Marine Insurance Today’, UNCTAD/SDD/ LEG/1, 1994, and ‘General Average – A Preliminary Review’, TD/B/C.4/ISL/58, 1991. These documents are available at UNCTAD’s website: www.unctad.org/ttl/legal.

31 See UN General Assembly Resolutions A/Res/46/213 of 20 December 1991 and Resolution A/Res/52/182 of 18 December 1997.

32 For the text of the Conventions, see documents A/CONF.188/6 and A/CONF.162/7 respectively, available at UNCTAD’s website.

33 See op. cit., Finger and Magarinos-Ruchat, fn 11, p. 150.

Carriage of goods by sea

Bills of lading

The WGISL began consideration of its first priority subject, i.e. bills of lading, at its 2nd session in February 1971. Its mandate was to ‘review the economic and commercial aspects of international legislation and practices in the field of bills and lading from the standpoint of their conformity with the needs of economic development in particular of the developing countries’.34 The UNCTAD secretariat had produced a report on the subject35

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