Carsten Grau,Carsten is partner in DLA Piper’s Hamburg office, member of the global shipping, transport and logistics practice group in DLA Piper and in charge of this industry sector in Germany. He and his team specialise in advising and representing clients in contentious and non-contentious shipping and transport matters, in particular in relation to ship financing transactions including restructuring, shipbuilding, charter party issues, litigation, arbitration and marine insurance matters (P & I, Hull and Machinery, FD&D).He is member of the Hamburg Bar and also qualified as Solicitor (England & Wales). Further memberships: German Maritime Arbitration Association (GMAA), IBA – Maritime & Transport Law Committee, Chinese European Arbitration Centre (CEAC) and European Maritime Lawyers' Organization (EMLO), elected member of the central committee (“Zentralausschuß”) of German Maritime Law Association (Deutscher Verein für Internationales Seerecht e. V. – DVIS). Carsten has been appointed to the list of arbitrators of Deutsches Schiedsgericht Logistik e. V. – the German logistics arbitration association  -and to the list of arbitrators of Logistik Schiedsgericht of Handelskammer Hamburg (Hamburg Chamber of Commerce).

The Rotterdam Rules 2009 -the German perspective and legislative tendencies

I.Introduction
After long negotiations at both the Comité Maritime International (CMI) and the United Na¬tions Commission for International Trade Law the “International Con¬vention on Contracts for the International Carriage of Goods, Wholly or Partly by Sea” , better known as the “Rotterdam Rules” (RR) were adopted by the General Assembly of the United Nations on December 11th 2008  and opened for signature at an official signing cere¬mony held in Rotterdam on the 23rd of September this year. 

This Convention is supposed to replace both the Hamburg Rules and especially the Hague-Visby Rules (HVR), which is so far still the most important convention in international transport by sea. Keeping in mind that the HVR are to a great extent based on its prede¬ces¬sor, the 1924 Hague Rules (HR), it becomes obvious that a modernization and adaptation of these transport regulations to modern practices and requirements – e.g. con¬tainerization, door-to-door transport or the use of electronic transport documents – is ab¬solutely necessary.  More than 70 % of all transports of goods today are carried out at least partly by sea, to and from Germany even more than 90 %.  The transport of goods is an international business and thus requires interna¬tionally unified regulations.  Nowadays, after its arrival at the port of destina¬tion, a huge part of the goods is transported further in land to their place of destination, be it by train or truck. This is not regulated at all in well-established international treaties on trans¬port by sea, such as the HR and HVR or the US Carriage of Goods by Sea Act (US COGSA).

Therefore, it is the aim of the new convention to further promote the international unifi¬cation of transport regulations and to find a solution that serves all parties involved in such a trans¬port.

This paper will deal with two major issues:

A.Short introduction into the changes brought forward by the Rotterdam Rules in compari¬son to the HVR, which as of now both the People’s Republic of China and Germany have ratified;
B.the latest developments and discussion regarding a revision of German maritime law with regard to the Rotterdam Rules.
Part A: Introduction into the most important changes brought forward by the Rotterdam Rules

I.Scope of Application
According to Art. 5 RR the Rotterdam Rules are applicable to a contract of carriage which provides for at least one international transport by sea, i.e. if port of loading and port of dis¬charge are located within different states. However, the Rotterdam Rules were drafted to cover the entire period in which the goods are in the custody of the carrier.  Thus, the place of receipt and the place of delivery also trigger the application as much as the ports men¬tioned above, given that only one of those places is located within a state party to the Con¬vention.  Yet, as an international transport by sea is needed, the convention is better de¬scribed as a “maritime plus” than as a true multimodal convention.
As the Rotterdam Rules also cover the dry part of the transportation, it might come to over¬laps with other existing international conventions for land transports, such as the CMR and the COTIF. If these more specialized conventions are applicable to the case in question, they override the Rotterdam Rules for the land legs. If, however, it is uncertain where the damage occurred, the – supposedly lower  – liability regulations of the Rotterdam Rules would be appli¬cable. This is not ideal and still far from a true multimodal convention, yet it is impor¬tant to close that gap at all.

II.New Obligations both for Shippers and Carriers
•The carrier has to exercise due diligence not only to provide a seaworthy vessel at the beginning but throughout the whole journey.
•FIOS Shipment: Despite the general obligation of the carrier to load, handle, stow and unload the goods in Art. 13(1) RR, Art. 13(2) RR takes up the common practice of FIOS agreements, so that the cargo interest remains responsible for these actions. This regula¬tion has been a major point of criticism, yet it simply reflects a common practice espe¬cially in bulk carriage.
•The shipper has to deliver the goods ready for transportation, to inform the carrier about im¬portant facts regarding the nature of the cargo and the shipper/consignee has to accept receipt  of the goods at the destination.  If the cargo cannot be delivered, although the car¬rier followed the procedure set out in Art. 45-47 RR, it may store or even sell the goods to the costs of the shipper.

III.Liability
The key liability provision is Art. 17 RR. This provision has often been criticized as being too long and complicated. It can, however, be compared to a match of table tennis with the li¬ability as the ball. The carrier is liable for loss, damage and delay in delivery that occurred while the goods were in his custody.  Yet, he is not liable, if he proves that the cause is ei¬ther not attributable to him  or that certain events caused or contributed to the damage , thus playing the ball over to the shipper. The shipper then may play the ball back to the carrier in proving either that the even that excuses the carrier from liability was caused or contributed to by the carrier  or that the damage was caused by the un-seaworthiness of the vessel.  The limit of liability has been raised significantly to 875 Special Drawing Rights  (SDR) per unit or three SDR per kilogramme, whichever is higher.  Yet, this increase was necessary and reasonable keeping in mind that the amounts of the HVR were fixed 40 years ago.
Other important changes were the deletion of the error in navigation, which is simply out¬dated due to immense technical enhancements since the drafting of the HR, and the introduction of a liability for delay , similar to the one to be found in the Hamburg Rules.  If there is an agreement between the parties as to when exactly the goods are to be delivered, the failure will trigger this liability.  It is, however, not strict but subject to the same rules as set forth in Art. 17 RR.  Liability for delay is limited to two-and-a-half times the value of the freight.  The denial of limitation is designed in accordance to all modern mari¬time conventions with the formula for reckless and intentional behaviour on part of the carrier it¬self.

Much uproar was caused by the inclusion of the “maritime performing party” which includes by definition  all parties performing obligations of the carrier during the period of the arrival of the goods at the port of loading and their departure from the port of discharge. These par¬ties, with whom the claimant usually has no contractual relationship , are also liable under this Convention.  The concept was copied from passenger air trans¬portation, where it is called “actual carrier”.  As in the maritime context the complex types of charters, subchar¬ters and other contractual relationships make it hard to differentiate, the Convention now ex¬tends liability to all parties performing carrier’s duties. However, if a party performs this duty only on land and not exclusively in port areas, it shall not be liable under the Rotterdam Rules. For the first time, such a definition also covers terminal operators and ste¬vedoring companies  as well as freight forwarders . Maritime performing parties are liable jointly and sever¬ally with the carrier, which means that the claimant may sue any of them , which again is welcomed very much by marine insurers , however of course not by those who may be held liable in future. 

IV.Time for Suit
The time for suit for damages was extended to two years – instead of one year (Art. III (6) HVR) – after delivery or the date when the goods should have been delivered.
V.Transport documents and electronic transport record
A simplification for all parties concerned are electronic documents, either negotia¬ble or non-negotiable. Electronic documents are treated equally as paper documents, both in requirements and effects (Art. 8 RR)  The regulations are not exactly innovative, but the aim is rather to clarify and unify the already existing practice.
The types of paper documents covered by this convention are Negotiable Transport Docu¬ments (traditional Bill of Lading – B/L), Door-to-Door B/L, Straight B/L and Non-Negotiable Transport Documents/Sea Waybills.

Different from the HVR, the shipper will be entitled to a transport document without the need of a formal request. 

Whether or not the document may be negotiable, shall be subject to the agreement with the carrier. If the document is negotiable and more than one original has been issued, the number of originals shall be stated within the document, in order to alert possible third-party bona fide purchasers or beneficiaries under a letter of credit.  Of course, negotiable documents, espe¬cially documents of title or blankly endorsed documents, always carry with them the risk of falling into the wrong hands as the holder does not in all cases need to properly identify him¬self (Art. 47 (a) (i) RR). This was also a point of major criticism as encouraging fraudulent sales of goods to a second buyer.  However, this is not a problem unique to maritime trans¬port documents; it can be found in all civil law jurisdictions in connection with other negotia¬ble papers.

There have also been other consistent clarifications. Art. 37 RR states that, if the identity of the car¬rier is not obvious from the transport document, then the shipper may sue the regis¬tered owner, a regulation extremely helpful for the cargo interest  and helpful also with re¬gard to ship arrest.

VI.Volume Contracts
One of the most debated topics was the volume contract issue. A volume contract is a contract of carriage which provides for the carriage of a specified quantity of goods in a series of ship¬ments during an agreed period of time , i.e. rather a type of frame or master agreement.  As many issues in this Convention volume contracts are not a new invention, but have been in use since over ten years.  It is the only contract where the standard of liability set forth in this Convention is not mandatory, but left to the freedom of contract. Thus it was feared that carriers would gen¬erally waive their liability and leave the shipper with any damages.  But this does not reflect business real¬ity. In order to deviate from the Convention, the very strict requirements of Art. 80 RR have to be met.  A deviation is certainly not possible by stating it in standard terms and conditions. Furthermore, shippers regularly know the business as well as the carriers do and have the same power  if not more – especially in times of economical crisis and overcapacities  – they cannot be compared to normal consumers.  In many cases, it is especially the shippers that ask for such contracts in order to obtain lower freight rates  and to draft finan¬cial penalties for car¬riers that might go far beyond the scheme of the Rotterdam Rules.

Part B: Developments and tendencies in Germany regarding a revision of its maritime law

Parallel to the development of the Rotterdam Rules, the German Ministry of Justice (BMJ) initiated a study how the German maritime code (V. Book of the Handelsgesetzbuch ) can be updated to modern standards. The results of the study have been published in the final report of the panel of experts appointed by the Ministry.  Although the BMJ has still not fixed its position towards the Rotterdam Rules  and did not send an official delegation to the signing ceremony, several similarities can be found in this report com¬pared to the Rotterdam Rules.

•liability for delay  
•the possibility of deviation from otherwise mandatory rules, if the parties are both mer¬chants and thus not in need of special (consumer) protection
•increase of the amounts of limited liability to 875 SDR (§ 515 I HGB-E)
•deletion of error in navigation as an exclusion for liability
•several changes referring to the Bill of Lading, incl. acknowledgment of the elec¬tronic form (§ 500 II HGB-E) and a general approximation to German law on securi¬ties.
Other particularities of the Rotterdam Rules have already been part of German maritime law, such as an unlimited liability for shippers, especially in connection with the information obli¬gations (§ 563 I HGB), the definition of the shipowner being the carrier if no other carrier is declared (§ 644 HGB).
Generally, it can be concluded that both the Rotterdam Rules and the report have more in common than they are apart. This does not come by chance but more than once in the report it is pointed out that the panel of experts let themselves be guided in parts by the international developments including the Rotterdam Rules.  Details might be different, but this is always subject to ratification within the different states.
Apart from the Ministry of Justice, voices both in the mari¬time industry and from maritime law are clearly in favour of the Rotterdam Rules, as they, despite all possible deficiencies, constitute the last and only chance for years to come to an internationally uniform multimodal convention.

Analysis and conclusion
The Rotterdam Rules succeed in offering a modernized standard of transport regulations. Of course, they are not yet perfect, but one has to keep in mind that such a convention must al¬ways be a compromise between a multitude of political and economical interests. Compared to the HVR, which are the only real alternative to the Rot¬terdam Rules at the moment, they provide for a modern standard in almost any regard. It will certainly not be the end of the de¬velopment in transport regulation, but it is a good start and – like with all new things – the Rotterdam Rules deserve a chance and need to be tried and adjusted in practice. With only few excep¬tions, it is generally agreed upon that to have internationally unified transport regulations is far better than developing regional solutions. Both the US and the EU have al¬ready pointed out they would only opt for such a regional solution, if the Rotterdam Rules would fail to find broad acceptance among the major shipping nations.  Those who argue against the Rotterdam Rules are mostly shippers and those parties now newly put under li¬ability. Of course, for the latter, the Convention means a negative deviation from their status quo, but firstly this devia¬tion is insurable, and secondly it seems to be justified to include them into the system of liability. Ship¬pers are divided on that issue, American shippers are strongly in favour of the Convention and have actively taken part in the drafting , while Euro¬pean and Asian shippers on the other hand are mostly in opposition to it.  Some of their points of criticism, however, like the unlimited liability for shippers, are already covered in the existing and the draft German maritime law. It is therefore doubtful, whether a Euro¬pean solution would be so much more favourable for them.

Furthermore, keeping in mind that the HVR so far have 33 Ratifications, and that among those were Denmark, France, Greece, the Netherlands and Norway, which have now signed the Rotterdam Rules and are therefore likely to denounce the HVR, sticking to the HVR may no longer be a reasonable option. Even the US have signed the Rotterdam Rules, however, one has to wait in this case whether their ratification might actually follow. To whatever con¬clusion one might come having now heard about the pros and cons of the Rotterdam Rules, the big question is whether it makes sense to stick to a convention that major shipping nations and trade partners are likely to denounce soon.
For all these reasons, it seems to be – by matter of fact – the only reasonable option to also sign the Rotter¬dam Rules and for all its positive changes that will certainly not be a bad choice.

Hamburg, 16 October 2009