Document

The European Shippers’ Council represents the freight transport interests of some 100,000 companies, whether manufacturers or retailers, throughout Europe whose goods move across EU and international borders (imports and exports) by any mode of transport. As such, ESC has taken a strong interest in the UNCITRAL process to ensure that any new international convention on maritime liability would provide shippers with basic protection when involved in international trade. The European Shipper’s Council has been participating in the UNCITRAL process both in the recent sessions of UNCITRAL and in formal written submissions to the UNCITRAL Secretariat. Unfortunately the ESC takes issue with many of the features of the proposed new regime and fears that it could put some shippers in a worse position than that of the pre-1924 liability environment before introduction of the original Hague Rules.

Drafting issues

The draft instrument departs substantially from the drafting style and content of the entire family of international carriage Conventions such as CMR, CIM, Warsaw and Montreal Conventions and the 2001 Budapest Convention on Carriage of Goods by Inland Waterway. The style is at the same time opaque and verbose and this is a great weakness. To put the drafting complexity in context, the combined total of articles contained in the Hague Visby Rules, CMR Convention and Hamburg Rules is 101. The previous draft required 105 articles though the latest draft manages to reduce this to 100. The nature of the legal drafting perhaps causes the most apprehension of any issue concerning the draft. It affects the fundamental structure of the instrument which ESC considers already too set in its form to be capable of substantial amendment. It seems likely greatly to increase legal uncertainty in both maritime and multimodal transport if adopted. In particular:

The definitions are frequently unwieldy and have to be puzzled over to establish their meaning
The excessive cross-referencing makes the document unintelligible to a lay reader and even causes problems for professional readers
Where it does borrow from existing conventions, their wordings are often subtly altered so that the effect is not the same. This will cause confusion and increase friction costs.
The draft will give rise to substantial litigation to establish the meaning of controversial and opaquely worded provisions which often occur
There is likely to be disharmony of interpretation across different national legal systems
In particular the status of the derogation provisions may be given varying treatment in national courts with differences emerging between Common Law and Civil Law states.

Freedom of Contract

The UNCITRAL draft is being supported by some transatlantic interests as though it introduces freedom of contract for the first time through “volume contracts”. The proposals for opt-outs under volume contracts are not required by major European shippers who in fact already have adequate freedom of contract to improve their bargain with carriers under present maritime convention provisions. Under both Hague Visby and Hamburg Rules liability limits may be increased by contract and other duties and liabilities may also be varied within a context which nonetheless gives mandatory protection to the small and medium sized shipper who is unable to negotiate on equal terms with the carrier. This mandatory protection of shippers has been the cornerstone of all previous international transport conventions and its proposed removal in the UNCITRAL draft causes serious concern. Under volume contracts, carriers may derogate from nearly all their obligations whereas shippers may not. It would be easy for unscrupulous carriers to market volume contracts by establishing a spurious rate system whereby they would offer an apparently reduced rate in return for a definitely reduced level of protection for the shipper under a volume contract. A “volume contract” could apply to as little as two shipments over a long period thus potentially applying to 95% of existing shipments. ESC considers that:

Existing Conventions allow adequate freedom of contract for large shippers
There are no grounds for reducing the protection afforded to all shippers under existing Conventions
If there is to be a replacement Convention it should cover the great majority of transport operations, which will not be the case with the present draft

Period, scope and nature of responsibility

A Convention said to cater for multimodal door to door transport should create a situation where the multimodal transport operator, even if primarily a sea carrier, is responsible for the goods from door to door. However the draft may well not have this effect in practice. Thus the carrier may act as agent only in respect of some of its most basic traditional obligations such as loading and unloading of goods although still claiming to offer door to door service and may act as a pure agent in a number of other circumstances. This indicates confusion as to the purpose of the UNCITRAL instrument. Is it truly a multimodal transport convention or is it merely a potential fourth maritime transport regime? Adoption of the instrument could encourage a return by less scrupulous operators to the unsatisfactory practices prevalent prior to the widespread adoption of the voluntary UNCTAD/ICC Rules in multimodal transport. Other aspects which cause concern are that the draft

Is likely to increase frictions costs and could act as a deterrent to the development of the concept of “motorways of the sea”
Gives discretion to the carrier in relation to dangerous goods wider than under Hamburg or Hague Visby Rules and carrier’s liability is apparently further reduced
Imposes no mandatory duty of seaworthiness in relation to the vessel’s holds or any carrier provided containers

Liability of the carrier for loss, damage or delay

Compared to Hague Visby or Hamburg Rules, the drafting concerning carrier’s liability is unduly complex. It:

Departs from the systems used by the broad family of international conventions offering elements of the “all-embracing” Hamburg approach to carrier liability and elements of the Hague Visby “exceptions from liability” approach as alternatives for the carrier to use at its option
Consequently appears unsuitable for the multimodal logistics of the 21st Century
Will multiply the number of distinct heads of claim or defence which maritime lawyers will be expected to cover thus tending to increase the costs of insurance claims and premiums.
Will create new legal controversy in relation to claims having a land transport element because of its specialised maritime language and its overlap with land transport conventions
The limits of liability may be varied downwards when a volume contract is agreed, placing small shippers in a vulnerable position

Obligations of the shipper

Carriers, unlike small shippers, are quite capable of safeguarding their interests by taking advantage of existing general laws which deal with shipper obligations. It would therefore seem legitimate to question why shipper obligation provisions should appear at all, except to the extent that they would set maximum obligations and limited liability to protect smaller shippers from unreasonable claims. Far from moving in this direction, the UNCITRAL draft appears to introduce new shipper obligations. Thus it:

Appears to introduce a strict obligation to hand over goods in such a state that they will withstand the “intended carriage”
Could require the shipper to disprove fault in a reversal of the normal burden of proof, though this is thankfully only one variant possible under the latest draft
Contains provisions on “dangerous” goods which will catch many products not considered hazardous under the UN Orange Book system and whose owners may not understand the need to declare them specially

Transport Documents

Transport documents are often an important source of evidence in a claim and anything which reduces their evidential value, as is thought to be the overall effect of the draft provisions, needs strong justification. Overall the shipper position seems to be weakened in areas of major importance For example:-

It may become easier for carriers to avoid the issue of negotiable documents
No written evidence may be available as to carriage on deck
Neither date for delivery nor place of receipt and delivery have to be shown, making it difficult to establish if delay has occurred
Qualification of information by the carrier becomes easier and has potentially adverse consequences for shippers particularly in relation to claims and to documentary letters of credit

Other conventions

Shippers have substantial concerns that the UNCITRAL draft will conflict with CMR and CIM, a concern shared by the International Road Transport Union (IRU). For example any carriage by sea may be sufficient to bring a carrier, irrespective of mode, within the definition of “carrier” and so subject to the draft convention. Such elements of conflict will be left to national law to resolve. These issues are of particular concern in Europe where both CMR and CIM contain multimodal provisions. European shippers wish to ensure that contracts covered by CMR and CIM remain wholly unaffected by the draft but so far only air transport has been removed from the potential UNCITRAL scope of application. That this deletion has already been accepted as necessary tends to indicate the unsuitability of the draft as a convention on multimodal transport.

Deviation

Carrier deviations from agreed routes, destinations or agreed instructions remain frequent sources of complaint by shippers. Under Hague Visby Rules, deviation in saving or attempting to save life or property at sea or any reasonable deviation is permissible without liability on the part of the carrier but carriers may lose some or all of the defences to liability where there has been an “unreasonable” deviation. The UNCITRAL draft effectively nullifies the special protection of shippers in the case of a deviation by the carrier unless the carrier is guilty of wilful misconduct. Shippers are concerned that, freed from worries about losing defences and limitation in the event of deviation, unscrupulous carriers could take less care to fulfil the contract of carriage as agreed with the shipper

Deck Cargo

Rather than treat deck carriage as an exceptional circumstance, the draft now generally treats it as a normal circumstance. This could be acceptable if the provisions concerning the treatment of goods on deck were themselves clear and fair but they are unfortunately unduly complex. Overall there seems to be a step backwards from the Hamburg Rules provisions whereby the carrier retains normal liability for goods carried on deck. Shippers are particularly concerned that the carrier would appear not to be liable for special risks of deck carriage of motor vehicles and trailers, which are not “containers.” They are also concerned about the possible effects of the proposed provisions on letter of credit requirements. These are not academic concerns as there is still far too high an incidence of loss of containers during deck carriage due to inadequate stowage equipment and procedures.

Jurisdiction

The UNCITRAL draft contains novel jurisdiction provisions. Shippers welcome the concept of choice as to jurisdiction but are concerned that an exclusive jurisdiction clause in a bill of lading would remain lawful under proposed volume contracts, which could seriously prejudice small shippers. Also the proposed option for states to be able to override the UNCITRAL choice provisions in their national law will destroy any certainty for the shipper in being able to use the jurisdiction provisions even where there is no volume contract.

Conclusions

The proposed UNCITRAL convention is worse in many respects than the existing Hague/Hague Visby regimes and could put some shippers in a worse position than that of the pre-1924 liability environment

The draft instrument is essentially designed for maritime transport without proper regard for the needs of land transport or of modern trade logistics and will not establish an adequate system for door to door transport, though it purports to be a multimodal transport Convention

It will increase friction costs and may act as a deterrent to development of the “Motorways of the Sea” concept

It does not cater for the many multimodal transport operations which do not involve a sea leg, thus potentially requiring the drafting of a further convention to cater for this traffic. This does not serve the interests of future uniformity

The draft instrument offers less freedom of contract than presently exists under existing conventions (either Hague or Hamburg Rules). Under Hamburg and Hague Visby, the convention limits may not only be exceeded by contract but other duties and liabilities may also be varied within a context which nonetheless protects the small and medium sized shipper

The UNCITRAL drafting is so complex that many of its terms will be unintelligible to lay managers of carriers and shippers alike and even to many lawyers and insurers. It is likely to give rise to prolonged litigation to establish clear meanings

The draft may still conflict with well established and respected modal Conventions such as CMR and CIM as it overlaps with their provisions

Provisions nullifying carrier derogations are much weaker than under existing conventions because the carrier has the possibility to avoid loading and unloading obligations and door to door liability, or to enter into a volume contract which reduces its liability

It has complex provisions for deck carriage with a different liability regime for some goods and the carrier may contract out of seaworthiness obligations in relation to the hold and to carrier-provided containers

It could give rise to disharmony of interpretation between common law and civil law jurisdictions that will be harmful to international trade

Wider rights for carriers to qualify information in bills of lading and changes to the transfer rights of document holders could adversely affect the system of documentary letters of credit

A threshold of 30 or 40 states seems advisable before such a controversial instrument enters into force so that it would from the outset represent a consensus of the world’s trading community

Is there an alternative to UNCITRAL?

The history of multimodal transport is littered with failed attempts at legislation. In the early 1970s, the proposed TCM Convention/Tokyo Rules failed to reach an outcome. In 1980 the UN made another attempt with the UN Convention on Multimodal Transport but nearly 30 years later it is no nearer entry into force than at the outset. The UNCITRAL draft could follow the same path to oblivion and maybe it should, as its basic structure as a legal instrument seems irremediably flawed even if the process of improving individual clauses continues.

The response of industry to the earlier failures was to seek a commercial solution in the form of the ICC Rules for a Combined Transport Document (now the UNCTAD/ICC Rules, incorporated into the FIATA Bill of Lading. Research by ESC member associations has shown that both Hague Visby and Hamburg Rules would allow updated contractual multimodal solutions working alongside these Conventions to be devised. Furthermore as a modern maritime regime, the Hamburg Rules, which seemed radical to some maritime nations during the 1970s now appear far less problematical than the proposed UNCITRAL draft. They have been adopted by some 32 countries including Austria, the Czech Republic, Hungary and Romania while others, such as the Scandinavian countries, have included some Hamburg provisions in their national law.

On the basis of the arguments set out above, Shippers do not believe that the draft deserves the support of the European Commission or of the Member States. The draft is not the only option for the future. While the European Shippers Council will continue to participate in the UNCITRAL working group in order to mitigate the worst features of the draft, it
does believe that other options should now be actively pursued. These would include:

attempts to refine a commercial contractual solution to the problems of multimodal transport as has been successfully done in the past

allowing the UN (ECE) to pursue its mandate to examine the possibility of establishing a broad based truly multimodal liability Convention. ECE is particularly well equipped to carry out such a task being the successful originator and guardian of instruments such as the CMR

if other options turn out to be too complex or lacking in consensus, moving towards a regional solution, as has already been tentatively investigated by the Commission

More information
Most recent submissions of the ESC can be found on the UNCITRAL Website, under the Link for Working Group Three, which can be accessed from the Welcome to UNCITRAL page. http://www.uncitral.org/uncitral/en/commission/working_groups/3Transport.html or on the ESC website: www.europeanshippers.com

PowerPoint presentation of ESC views on the UNCITRAL’s draft transport convention

For further information contact: Nicolette van der Jagt, Secretary General of the ESC - Brussels 00 322 230 2113