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The paradigm shift in regulatory mechanism for carriage of goods at sea

—Capt. Ashwani Jhingan

 

In the earlier days prior to 1924, it was the English "Common Law" which provided protection to the "cargo owners" and imposed more liabilities upon the "ocean carriers". The premise of the earlier English "Common Law", from which the "Hague" and "Hague-Visby" Rules are drawn, was that a "carrier" typically has far greater bargaining power than the "shipper", and that to protect the interests of the shipper/cargo owner, the law should impose some minimum affreightment obligations upon the "carrier".

 

There has been a long-standing aim of the trading and maritime communities to have a uniform set of rules to govern carriage of goods. Presently, there are five different sets: Hague, Hague-Visby, Hague-Visby/SDR, Hamburg and Rotterdam.

 

Hague Rules 1924 (Brussels): (Drafted: August 25, 1924; Effective: June 2, 1931; Ratifiers: 86):

 

The official title of the Hague Rules 1924 is "The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of August 1924".

 

The Hague Rules form the basis of national legislation in almost all of the world’s major trading nations and cover nearly all the present international shipping. The objective of the Hague Rules was to establish a minimum mandatory liability of carriers. The Hague Rules represented the first attempt by the international community to find a workable and uniform way to address the problem of shippers.

 

Criticism

 

Shipowners were regularly excluding themselves from almost all the liabilities for loss or damage to cargo. The Hague Rules favoured "carriers" and reduced their obligations to "shippers". The shipper bears the cost of lost/damaged goods if they cannot prove that the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo. That means the carrier can avoid liability for risks resulting from human errors, provided they exercise due diligence and their vessel is properly manned and seaworthy.

 

These provisions have frequently been the subject of conflict between shipowners and cargo interests on whether they provide an appropriate balance in liability.

 

Hague-Visby Rules 1968: (First Protocol 1968 of Hague Rules 1924; Drafted: February 23, 1968; Effective: June 23, 1977, Ratifiers: 24):

 

Hague Rules, as amended by "The Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading" in 1968, became known colloquially as the Hague-Visby Rules. They are a slightly updated version of the original Hague Rules which were drafted in Brussels in 1924.

Criticism

 

The Hague and Hague-Visby Rules were hardly a charter of new protections for cargo owners, because there were modest amendments. Hague-Visby Rules still covered carriage "wholly by sea" only (thereby ignoring multimodal transport), and barely acknowledged the container revolution of the 1950s and multimodal transport. The convention covered only "tackle to tackle" carriage contracts.

 

SDR Protocol: (Second Protocol 1979 of Hague Rules 1924; Drafted: December 21, 1979; Effective: February 24, 1982; Ratifiers: 19):

 

This is the second and final amendment in terms of "Protocol" amending "International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of August 1924 (The Hague Rules), as amended by the Protocol of February 1968 (Visby Rules)-December 1979".

 

Many countries declined to adopt the Hague-Visby Rules and stayed with the 1924 Hague Rules. Some other countries which upgraded to Hague-Visby subsequently failed to adopt the 1979 SDR protocol.

Thus, the Hague Rules have been updated by two protocols, but neither addressed the basic liability provisions, which remained unchanged.

 

Hamburg Rules: The Hamburg Rules are a set of rules governing the international shipment of goods, resulting from the "U.N. International Convention on the Carriage of Goods by Sea 1978" adopted in Hamburg on March 31, 1978". Hamburg Rules came into force on November 1, 1992. There were 34 ratifiers.

 

The objective of protecting the cargo owner from the consequences of unequal bargaining power had not been achieved through Hague and Hague-Visby Rules. The United Nations decided to solve the concern and thus stemmed the evolution of the Hamburg Rules in 1978. The U.N. Convention on the Carriage of Goods by Sea 1978 was based on the groundwork done by U.N. Conference on Trade and Development (UNCTAD) and U.N. Commission on International Trade Law (UNCITRAL). The Convention was an attempt to form a uniform legal base for the transportation of goods on oceangoing ships. A driving force behind the convention was the attempt of developing countries to level the playing field. Hamburg Rules 1978 were embraced by many developing countries, but largely ignored by the ship-operating nations.

Article 31 of the Hamburg Convention covers its entry into force, coupled to denunciation of other Rules. Within five years after entry into force of the Hamburg Rules, ratifying states must denounce the earlier conventions, specifically the Hague and Hague-Visby Rules.

 

Criticism

 

The Hamburg Rules contain far more stringent rules for carrier’s liability and appear to be tipped in favour of the cargo owner. Under the Hamburg Rules, it is the carrier that is responsible for the loss or damage of all goods, unless they can prove they took all reasonable steps to avoid the loss. Although the Hamburg Rules were readily adopted by developing countries, they were shunned by richer countries who stuck with Hague and Hague-Visby because of liability issue.

Rotterdam Rules: United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea was called as "Rotterdam" Rules. Drafted: December 11, 2008; Signed: September 23, 2009, Not yet in force. Ratification required by 20 states.

 

The aim of the convention is to extend and modernise the existing international rules and achieve uniformity of international trade law in the field of maritime carriage. The convention establishes a comprehensive, uniform legal regime governing the rights and obligations of shippers, carriers and consignees under a contract for door-to-door shipments that involve international sea transport.

 

The Rules apply only if the carriage includes a sea leg; other multimodal carriage contracts which have no sea leg are outside of the scope of the Rules. It eliminates the "nautical fault defence" which had protected carriers and crew from liability for negligent ship management and navigation. It obliges carriers to keep ships seaworthy and properly crewed throughout the voyage. The standard of care is not "strict", but "due diligence" (as with the Hague Rules).

 

Upon entry into force of the convention for a country, it should denounce the conventions governing the Hague-Visby Rules as well as the Hamburg Rules as the convention does not come into effect without such denouncements.

 

(Article compiled and contributed by Capt. Jhingan, Chairman and Managing Director of Malaxar. He is also an Advocate of Bombay High Court. Capt. Jhingan can be contacted at legal@malaxar.com. Views expressed here are his own.)

 

Source : Our Correspondent

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