Tuesday, February 16, 2016

Rotterdam Rules

By Yasser Latif Hamdani


The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (hereinafter the “Rotterdam Rules” or the “Convention” as and where the context permits) was prepared by the United Nations Commission on International Trade Law (hereinafter “UNCITRAL”) and was designed to provide an alternative Hague Rules, Hague-Visby Rules and the Hamburg Rules on international carriage of goods by sea.[1]  The Rotterdam Rules were adopted by the UN General Assembly on 11 December 2008 and were signed at ceremony in Rotterdam, Netherlands, on 23 September 2009 by 16 countries.[2] Till 2015 only a total of 25 countries have signed the Rotterdam Rules and only three countries have ratified Rotterdam Rules. As a consequence, the Rotterdam Rules are still not in force.  The controversies surrounding the ratification and adoption of the Rotterdam Rules, however, are not the topic of this paper as the question pertains to the scope of Rotterdam Rules, in terms of their application pursuant to the language of the Convention.


Scope of Application:

The Rotterdam Rules apply to “Contracts of Carriage” which are defined in Article 1(1) of the Convention. These are contracts of carriage where the carrier, against payment of freight, is tasked to take goods from one place to another. It is therefore envisages door to door multimodal transportation (as opposed to tackle to tackle regime under The Hague-Visby Rules which traditionally from the ship’s tackle is hooked on the port of loading to the moment it is unhooked at the port of discharge). It has to mandatorily have one leg at least by sea and can have more than one kind of transports. The Rotterdam Rules therefore apply to not only sea leg but land transportation as well and as such is seen as a replacement for not just the pre-existing The Hague, The Hague-Visby Rules and Hamburg Rules but also the Multimodal Convention of 1980.

Article 5 of the Rotterdam Rules makes it clear that it applies to a situation where place of receipt and place of delivery are in two different states and where – this is most important- port of loading and port of discharge are also in two different states. Additionally one of the following has to be in a contracting state: (i) place of receipt, (ii) port of loading, (iii) place of delivery; or (iv) port of discharge.  Article 5 is subject to exceptions or exclusions contained in Article 6 of the Rotterdam Rules. Article 6 supra excludes “Charter parties”, contracts for usage of ships for other reasons and non-liner transportation. Non-liner transportation may also be covered in the event that there is no Charter party or if there exists no contract for other use of the ship and where a transport document or an electronic transport record has been issued.  Article 7 further applies the convention not just to shipper and the carrier party to the contract but to holder or the controlling party as well.

Here it must be stated Article 82 of the Rotterdam Rules gives precedence to conventions applicable to other modes transportation including air transport, rail transport and inland waterways where there is no transshipment.  This means that when read with Article 26 of the Rotterdam Rules, the application of Rotterdam Rules will be limited to the sea leg and not to transportation before and after where another international instrument applies mandatorily.

Article 79 of the Rotterdam Rules declares any contractual term in a contract of carriage that clashes with the Convention is automatically void. However an exception is created for volume contracts under Article 80.  Volume contracts are defined in Article 1(2) of the Rotterdam Rules. A volume contract provides for a series of shipments of specified number of goods over an agreed period of time.


Carrier’s liability:

A carrier is defined as someone who enters into a contract with the shipper in Article 1(5) of the Rotterdam Rules. The carrier’s responsibility or liability encompasses the acts or omissions by performing parties, master and crew of the ship and employees of the carrier or the performing parties and any other person who assumes and performs the duties or responsibilities of a carrier. A performing party is most likely to be a subcontractor of the carrier when we consider the definition in Article 1(6).

The carrier’s duties are as follows:

(i)                 Transport document: Article 35 of the Rotterdam Rules place the duty to issue a transport document on the carrier, unless of course the parties have agreed not to use a transport document or where it is not the usual course of business or trade.  Under Article 1(8) these include “Electronic Transport Documents” thereby paving the way for ecommerce and the use of electronic means for contract of carriage.


(ii)               Duty to protect against loss, delay or damage (carrier’s fault): Article 17(1) of Rotterdam Rules makes the carrier liable for any loss, delay or damage arising out of the period of responsibility which is defined as from receipt to delivery under Article 13. However Article 17(2) limits the liability to fault of the carrier or any other person as defined under Article 18. Article 17(3) is a kind of a force majeure clause which limits the carrier’s liability. Articles 17(4) and 17(5) further crystallize the carrier’s liability if the event that carrier relies on can be shown to either be attributable to the carrier or a performing party or if the carrier can’t disprove his fault in any other circumstance or were caused by unseaworthiness or improper crewing or because the ship’s hold or deck were not fit for carriage. For matters pertaining to delay the claimant has to give a notice within 21 days or he loses his right to compensation under Article 23(4) of the Rotterdam Rules.


(iii)              Duty of care: There is a duty of care for goods during handling, stowing, transporting from door to door on the carrier under Article 13(1) of the Rotterdam Rules.


(iv)             Duty to keep the ship seaworthy and cargo-worthy:  The carrier is required under Article 14 to keep the ship seaworthy and cargo-worthy both at the start of the voyage and throughout it.


Shipper’s Liability:

A shipper is defined as someone who enters into contract with the carrier in Article 1(8) of the Rotterdam Rules. Article 1(9) further introduces the concept of a “documentary shipper” or a person who accepts to be named as the shipper on the transport document and/or contract or carriage. The liabilities of both a shipper and documentary shipper are identical.  In some cases a shipper is subject to strict liability and in others at fault liability like the carrier.

A shipper’s duties include the following:

(i)                 Duty to provide accurate information: Under Articles 28, 29 and 31 of the Rotterdam Rules a shipper is required to provide accurate and timely information to the carrier. Article 31 is a strict liability rule and as such the shipper indemnifies the carrier in this regard.


(ii)               Duty to inform carrier of dangerous nature of goods: Under Article 32 of the Rotterdam Rules, a shipper has to inform the carrier of the dangerous nature of goods and to clearly the mark the goods as dangerous. This too is a strict liability rule.


(iii)             Duty to perform obligations faithfully:  The shipper must perform obligations dutifully under the contract and is liable for any loss caused by any act of omission by the shipper, documentary shipper or the shipper’s employees etc under Article 30 of the Rotterdam Rules. With the exception of Articles 31 and 32, this is an at-fault liability rule.


Limitation of Liability:

Rotterdam Rules limit the liability of the carrier to 875 units of accounts per package or 3 units of accounts per kilogram under Article 59 of the Convention. This is where either the value of goods has been declared by the shipper or where a higher amount has been agreed between the parties. A unit of account is defined is the Special Drawing Right (“SDR”) as laid down by the IMF in Article 59(3). This then is to be converted to a contracting state’s currency in accordance with IMF procedure. Article 59 as a whole is subject to Article 60 of the Rotterdam Rules which states that liability for delay would be limited to two and a half times of the freight paid. The sum total however has been limited to the amount payable under Article 59(1) i.e. 875 SDR per package or 3 SDR per kilogram. Article 62 further limits the operation of limitation of liability where a loss is attributable to a breach of obligation by the carrier or a performing party and their employees etc. In this case the carrier loses the right to limit liability.


Delivery on Electronic Transport Document, Negotiable Transport Documents, and Negotiable Electronic Transport Document:

A very important and much needed provision in the Rotterdam Rules is the acceptance of Electronic Transport Document and delivery on such a document. Rotterdam Rules also govern those situations where the receiver does not have the transport document. Similarly it governs the use of negotiable transport documents and negotiable electronic transport documents under Article 47 of the Rotterdam Rules. An example of a negotiable transport document is a bill of lading.



Given the multimodal nature of transport envisaged under the Rotterdam Rules, the Convention is a big nod towards containerization.[3]  The use of intermodal containers have revolutionized the field of shipping. Given that the same container can be used across rail truck and sea transport does away with the hassle of there being separate contracts of carriages.[4] The Rotterdam Rules now give an overarching legal cover for the operation of intermodal containers.


Statute of limitations/Time Bar:

Under Article 62 of the Rotterdam Rules, a claim has to be brought within two years of delivery or the time when delivery should have taken place. For delay the shipper has to notify the carrier of a loss within 21 days under Article 23(4) supra.



Under Article 66 of the Rotterdam Rules, judicial proceedings (as well as arbitral proceedings) can be instituted in the following places:

(i)                 Domicile of the carrier; or

(ii)               Place of receipt; or

(iii)             Place of delivery; or

(iv)             Port of loading; or

(v)               Port of discharge; or

(vi)             A place agreed by the parties in contract.

 Article 68 further introduces following places of jurisdiction for actions against a maritime performing party (which would be a sub-carrier or sub-contractor of carrier by sea):

(i)                 Domicile of the maritime performing party; or

(ii)               The port where maritime performing party took charge of the goods; or

(iii)             The port where maritime performing party delivered the goods; or

(iv)             The port where maritime performing party usually performs services related to goods.



The Rotterdam Rules build upon at times and at times significantly depart from The Hague Rules, The Hague-Visby and Hamburg Rules. Indeed they go beyond them by envisaging door to door multimodal transport as opposed to merely sea transport. The Rotterdam Rules apply to multimodal contracts of carriage with at least one international sea leg.  In other modes of transport the Rotterdam Rules usually defer to other conventions if any. It has also facilitated the growth of containerization by adopting a multimodal approach and providing a legal framework for door to door transport. Another important introduction is that of electronic transport documents and records which the Rotterdam Rules explicitly recognize and set out a framework for.


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