The
Speakers Panel
CIFFA AGM 13 May 2010
Gavin Magrath

• How we got here and what’s next
• What’s new for Shippers?
• Concerns + Criticisms
• Comments + Questions
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• The Convention on Contracts for the
International Carriage of Goods Wholly or
Partly by Sea
• Negotiated through the United Nations
Commission on International Trade Law
(UNCITRAL) in co-operation with the
WTO
A Proposed Global Legal Regime for Multimodal Transport
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• Need for Harmonized System Recognized
• 1924: Hague Rules adopted
(~58 ratify)
– 1936: largely adopted into US law
• 1968: Visby amendments added
– ~52 ratify, but never adopted into US law
• 1968: Negotiation begins at UNCITRAL
• 1978: Hamburg Rules established
– Only ~30 ratify, including 10 landlocked nations
– ~20 signed but did not ratify
• 1996: Proposal for a new convention adopted
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• Application restricted to carrier BLs only
• Liability from loading to discharge only
• ‘error in navigation’ defence
• Low carrier limitations
• No liability for delay
• Very short notice period and short time bar
• Increasing international fragmentation
Canada supported both Hamburg and the new Rules
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• 1980s: Hamburg Rules fail to achieve widespread adoption
• 1996: Proposal for new convention adopted
• 2001: UNCITRAL Working Group formed
• July 2008: Draft convention adopted by UNCITRAL
• December 2008: Convention adopted by General
Assembly
• September 2009: Signing ceremony at Rotterdam
• October 2009: 22 nd and most recent signature
• 2011+??: Coming-into-force
…but is there a light at the end of the tunnel?
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22 Signatures
• May be made at
September/09 or later
• Indicate intent to be bound
•
Not binding in domestic law
•
Not sufficient for cominginto-force
Zero Ratifications
• Must be done by domestic authority
• Federal States clause
• No Reservations
• Optional Chapters 15 and 16
Are all ratifications really equal?
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Canada has not indicated an intention to sign…
• Convention has some benefits for shippers and removes some defences for carriers;
• Convention has substantial untested provisions;
• CIFFA views some provisions as concerns; and
• ‘Volume contracts’ may eviscerate rules…
…but if USA signs, does the desire for uniformity trump these concerns?
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• How we got here and what’s next
• What’s new for Shippers?
• Concerns + Criticisms
• Comments + Questions
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H/V*
COGSA
Hamburg
Rotterdam
(Art. 59+60)
SDR/kg Package
2 666.67 SDR
-
2.5
USD$500
Delay
-
-
835 SDR 2.5x Freight
3 875 SDR 2.5x Freight
Art 61: Rotterdam Limit cannot be broken unless damage is intentional or reckless!
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• For carriage under a ‘transport document’ (not only a Bill of Lading);
• For carriage including an international sea leg (as opposed to that portion of it);
– But “Door” provisions do not displace existing international land conventions;
• Applies to carrier’s ‘maritime performing parties’ at ports;
• Where receipt, loading, discharge, or delivery are in a contracting State (Art. 5)
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• Art 12: from the time at which the carrier or performing party receives goods for carriage and ending when goods are delivered.
– …or when received from/delivered to a 3 rd party authorized by law
– But onus is now on the shipper to establish this period of responsibility! (Art.17(1))
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Notice (Art 23)
The obligation to provide written notice so that the carrier may preserve evidence:
• At delivery or within 7 days if hidden;
– Up from delivery/3 days;
• Failure not fatal;
• 21 days notice for delay;
• Notice is
Joint + Several .
Time Bar (Arts 62-64)
The time before which a claimant must file suit in a competent court:
• Within 2 years (up from 1;
• May be extended in writing;
• Permitting 90 days in which to file suit seeking indemnity for 3P claim.
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Ch 14: Jurisdiction
• Plaintiff may sue:
– In Carrier’s domicile
– At place of receipt
– At place of delivery
– At Port of loading/discharge
– In a competent Court agreed under a Volume
Contract
• Maritime Performing
Parties sued only in their
Port or Domicile
Ch 15: Arbitration
• Any place agreed under a volume contract that is
– Individually negotiated; or
– Contains a prominent statement and specifies sections containing the arbitration agreement.
States may opt-out of these Chapters!
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• “A contract that provides for the carriage of a specified quantity [range] of goods in a series of shipments during an agreed period of time...”
• Ch. 16 Art 80 permits derogation from carrier responsibilities where:
– The derogation is stated prominently
– It is individually negotiated
– The shipper has the opportunity to contract on Rules
– The derogation is not incorporated by reference
Will Volume Contracts become the norm?
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• How we got here and what’s next
• What’s new for Shippers?
•
Concerns + Criticisms
• Comments + Questions
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• Chapters 3 and 8 provide extensive provisions for electronic documents;
• Chapter 9 codifies rights and obligations on delivery;
• Chapter 10 codifies the rights of ‘controlling parties’ and Chapter 11 governs the transfer of those rights.
Uncertainty generally leads to Litigation
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Art 21: “Delay in delivery occurs when the goods are not delivered at the place of destination provided for in the contract of carriage within the time agreed.”
• What delivery time is ‘agreed’?
– Where none specified, will a proxy be applied?
• What is the basis for liability?
– “loss resulting from” has been removed!
– Appears to be strict: must cargo prove loss?
– Due Diligence defence? If not, will carrier be diligent?
• How will delay claims proceed?
– Limited to 2.5x freight (below deductibles)
– Not economically viable to litigate but may ‘set-off’
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• Art 27: suitable packing
• Art 28-29: communications and instructions
• Art 32: Dangerous goods labeling
• Art 33: Obligations extend to documentary shipper
• Art 34: Shipper liable for acts of its servants and agents who are not acting for the carrier
But Only the Carrier’s Liability is limited!
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• Door provisions do not oust existing international conventions;
• Local subcontractor’s liability as per local regulations or terms of subcontract
• Forwarder can be caught between limits
(weight and package)
Effective door-to-door responsibility is seen as critical to Multimodal
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• Most stakeholders perceive undue carrier influence (a major reason for the Hamburg and Rotterdam Rules);
• Volume Contract provisions allow broad opt-outs;
• Carriers can be expected to bring economic pressure to negotiate volume contracts with lower liability;
• Zero-liability volume contracts may therefore become the industry norm.
“Freedom of Contract” was the price for US Support
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The Agreement must be:
• for a quantity or range of goods…
• …during an agreed period of time…
• individually negotiated
• not incorporated by reference
• stated prominently
The Agreement could be:
• for between one and 208 shipments…
• …over the course of no more than two years
• At zero-liability or for double the freight charges
• Willingly accepted as a condition of the relationship
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Standard forms already cause legal problems :
• At the point of customer interaction where the consumer is not sophisticated (ticket cases);
• Where both parties are sophisticated and both mutually apply different terms (battle of forms).
In Transport and under the new Rules :
• Between inconsistent shipper-side contracts
• Between inconsistent
Performing Party contracts
• In the context of agency relationships
• In the context of Himalaya clauses
• With contractual indemnities
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Freight Charges
Policy Cost
Insured Recovery
Insurer Recourse
Limitation
“Rotterdam Terms”
High (“negotiated”)
Comparable to today
Full (within Policy)
As against any liable parties
As per Rules or local law
(breakable where reckless)
“Zero-Liability”
Low (“volume”)
Higher
Full (within Policy)
No recourse against
Carriers (or Performing
Parties)
N/A
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• How we got here and what’s next
• What’s new for Shippers?
• Concerns + Criticisms
•
Comments + Questions
All content © Copyright 2010 Magrath O’Connor LLP

• The time for debating individual provisions has now passed;
• Canada likely has little influence over adoption by other States;
• The goal of uniformity (and economic reality) requires adoption if US + EU adopt;
• “There is a certain weariness towards continuing any discussion of reform of International Carriage by Sea law and it is doubtful that further effort will be made to restart negotiations in the event of failure.” - CMLA
Canada is a mouse sleeping with an elephant
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Gavin Magrath, Partner
Magrath O’Connor LLP
Direct: 416-931-0463 email: Gavin@MagrathOconnor.com

Appendix:
(date marked where other than 23 September 2009)
Armenia (29 Sept/09)
Cameroon (29 Sept/09)
Congo
Denmark
France
Gabon
Ghana
Greece
Guinea
Madagascar (25 Sept/09)
Mali (26 Sept/09)
Netherlands
Niger (22 Oct/09)
Nigeria
Norway
Poland
Senegal
Spain
Switzerland
Togo
United States of America
Source: http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/rotterdam_status.html Last updated: 10 May 2010
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