General Principles of Transport Law and the Rotterdam Rules

• May 3, 2022
• Maichael Bessada

1          Background

The long-awaited and much-anticipated “United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea”,  which will be known as the “Rotterdam Rules”,  was formally adopted by the U.N. General Assembly on 11th December 2008.  It has been open for signature since 23rd September 2009 (when the first sixteen nations signed the Convention at the formal signing ceremony in Rotterdam).

This new convention represents the culmination of 8 years of intensive work by the U.N. Commission on International Trade Law (UNCITRAL) and its Working Group III on Transport Law,  which followed almost 4 years of preparatory work by the Comite´ Maritime International (CMI).  It will enter into force after twenty countries have ratified it.  Several countries are already well advanced in the ratification process, including the United States. As this paper goes to press, however, it appears that Spain is the closest to ratifying the new convention. The Spanish government transmitted the convention to parliament on 6th May 2010.

The Rotterdam Rules were created to govern the legal relationship between carrier interests and cargo interests in the context of international shipments that travel at least in part by sea. If they succeed, the new Rules will supersede not only the prior multilateral conventions – the Hague Rules,  the Hague-Visby Rules,  and the Hamburg Rules  – but also national and regional alternatives that supplement or partially replace those international regimes in some parts of the world.

The Rotterdam Rules contain no formal “Statement of Principles”,  but it is still possible to discern several important principles motivating the Convention. Many of these principles have been evident throughout international transport law regimes dating back to the Hague Rules. Others are more recent innovations or have been applied less regularly over the years. To help understand the Rotterdam Rules, in this paper I will note a few of these principles, and discuss their impact on the creation of the new Convention.

2          Uniformity

Like its predecessors, the Rotterdam Rules were motivated in large part by the desire to achieve broad uniformity in the law governing the international carriage of goods. The need for uniformity was implicit or explicit throughout the negotiations, and this importance is reflected both in the opening clauses of the resolution that formally adopted the Convention and in article 2 of the text. The first opening clause recalls the General Assembly’s resolution establishing UNCITRAL “with a mandate to further the progressive harmonization and unification of the law of international trade”; the next clause expresses concern over the current lack of uniformity, and the fourth and fifth clauses explain why the General Assembly is convinced that greater uniformity would be beneficial.

Article 2 of the text explicitly directs a court or arbitration panel interpreting the Convention to have “regard . . . to its international character and to the need to promote uniformity in its application . . ..” Many factors have contributed to the breakdown in uniformity under prior conventions (such as the Hague and Hague-Visby Rules). One contributing factor has undoubtedly been the tendency of national courts to construe those conventions with less concern for achieving international uniformity in the application of the regime and more concern for preserving consistency with other aspects of national law. Article 2, following the example of a very similar provision in the Hamburg Rules, is intended to counter that trend.

2.1       The Importance of Uniformity

The goal of achieving greater international uniformity is so well-known, not only for maritime law but for any international private law convention, that it does not require extended discussion here. As the US Supreme Court recognized in its last case construing The Hague Rules, “conflicts in the interpretation of the Hague Rules not only destroy aesthetic symmetry in the international legal order but impose real costs on the commercial system the Rules govern.”

Some portion of the cargo transported in international trade will inevitably be lost or damaged en route. The role of the legal system in this context is to allocate financial responsibility for those losses. In the process, it influences the actions of shippers, carriers, and other participants in a transaction. A carrier’s decision concerning its appropriate level of care during carriage will be based at least in part on its potential liability. Shippers will be similarly influenced in deciding how carefully goods should be prepared for shipment and the extent to which they will insure goods. Insurers must decide the terms on which coverage will be offered, potential buyers of the cargo must determine the protection that they require, and bankers financing a transaction must know the extent to which they can depend on a security interest in the goods. And all these decisions will be based in part on the liability regime that allocates the risk of loss.

If the law is uniform, all participants will know that their liability (or recovery) will be the same wherever a dispute is resolved. Results will be more predictable, litigation will thus be less necessary, and the parties will be able to make their underlying business decisions in confidence, knowing what law will be applied if loss or damage occurs. The chairman of the International Chamber of Commerce (ICC) Bill of Lading Committee clearly expressed the commercial interest in uniformity when he was advocating for the adoption of the Hague Rules in the 1920s. In testimony favoring the United States’ ratification of the Hague Rules, he explained:

[I]n the view of the [ICC,] uniformity is the one important thing. It does not matter so much precisely where you draw the line dividing the responsibilities of the shipper and his underwriter from the responsibility of the carrier and his underwriter. The all-important question is that you draw the line somewhere and that that line is drawn in the same place for all countries and all importers.

The practical factors motivating the ICC’s desire for uniformity over 80 years ago are just as strong today. With uniformity and predictability, the law more efficiently allocates the risks of cargo loss or damage. At the very least, greater uniformity tends to keep the law from interfering with the flow of trade.

2.2       The Current Status of Uniformity

The current situation is widely regarded as unsatisfactory. The Hague-Visby Rules provide the dominant international legal regime today, but some major commercial nations are not parties to that regime. The United States (the nation with the single largest share of world trade) may be the most prominent example, but it is hardly alone. China (with about a quarter of the world’s population and a growing proportion of its trade) operates under a Maritime Code that combines selected elements from the Hague-Visby and Hamburg Rules with unique Chinese provisions. Recognizing the problems, individual nations have already begun to develop their own, non-uniform, solutions.

The Hamburg Rules entered into force (for the countries that had ratified them) in 1992. Although over thirty countries are now parties to the Hamburg Rules, they represent in the aggregate only a very small proportion of world trade. None of the major commercial or maritime powers has ratified them. Indeed, a third of the parties to the Hamburg Rules are land-locked. More significantly, it does not appear that any major commercial or maritime power is likely to become a party to the Hamburg Rules at this late date. Despite the vocal advocates who continue to press for the Hamburg Rules, they simply do not offer any realistic prospect of becoming the uniform regime that the world needs.

If the Rotterdam Rules are not widely adopted, it is likely to be at least a generation before the international community would be prepared to again undertake the effort to reform the law governing sea carriage. In the meantime, national and regional alternatives would be likely to supply the pressing need to update and modernize the law. It is self-evident that these non-uniform responses could not provide the needed uniformity. Moreover, they could well make the effort to achieve uniformity more difficult the next time the international community did attempt the task.

[1] -The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, An Appraisal of the “Rotterdam Rules” – Chapter 2:-General Principles of Transport Law and the Rotterdam Rules, p 63