Henry Hai Li, received his bachelor degree in ocean navigation and master degree in maritime law in 1983 and 1988 from Dalian Maritime University, and his PhD diploma in international private law from Wuhan University in 2000. He is a professor and PhD candidate adviser of DMU, and a partner of Henry & Co. Law Firm. He also is a vice-chairman of China Maritime Law Association, and an Executive Councilor of the CMI. He attended the UNCITRAL working sessions for the third reading of the draft Rotterdam Rules as a member of the Chinese Delegation.

The Rotterdam Rules: A Cherishable Opportunity for the Unification of the Law

1.  Introduction

The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, which is also known as the “Rotterdam Rules”, was adopted by the UN General Assembly on 11 December 2008, and the Signing Ceremony has taken place successfully at Rotterdam on 23 September 2009, at which I witnessed some 15 countries signed the “Rotterdam Rules” , and now there are 19 signatories in total . It is a pity that China is not among the 15 or 19 signatories, given the fact that China Maritime Law Association (the “China MLA”) had been actively involved in the CMI’s preparation work and that the Chinese government had sent a rather luxury delegation to the UNCITRAL Working Group III on Transport Law having attended all the working sessions and made a great contribution to the discussion and finalization of the Rotterdam Rules. For the purpose of this paper, the preparation work by the CMI and the UNCITRAL will be looked back in a nutshell, and the key contents of the Rotterdam Rules will be briefly highlighted. Then the compromises will be discussed, which will be followed by a conclusion.  

2.  A ten years crystallization of wisdom and knowledge

As known, the initial preparation work of the Rotterdam Rules was started in 1996 by the CMI together with some international organizations at the request of UNCITRAL to gather information about the current practices and laws in the area of international carriage of goods by sea, with a view to establishing the need for uniform rules in the areas where no such rules existed.

The CMI set up in May 1998 an International Working Group on Issues of Transport Law (the “IWG”) chaired by Stuart Beare. In accordance with CMI’s well-established practice the IWG prepared and circulated a questionnaire on the related issues to its member associations, to which sixteen national maritime law associations responded, and China MLA is one of the 16 respondents. After analysis of the responses, the IWG identified some principal issues for the discussion at the first meeting of the International Sub Committee (the “ISC”), which was set up by the Executive Council of the CMI in November 1999. Among the attendants to the first meeting on 27-28 January 2000 in London, there were two Chinese maritime law experts designated by China MLA to join the ISC, namely Prof. Si Yuzhou and Mr. Song Dihuang .

In the year of 2000, the second, third and fourth meeting of the ISC were held in London or New York, while the UNCITRAL/CMI Colloquium was held in July 2000 in New York, at which Prof. Si Yuzhou presented a paper on the issues in respect of actual carrier. At the CMI Conference in Singapore in February 2001, the Transport Law Issues is the key topic of the Conference and China MLA sent a big delegation attending this conference and participating actively in the discussion of the transport law issues. On 31 May 2001, following the fifth meeting of the ISC in New York, the Chairman of ISC circulated a Draft Outline Instrument and a Consultation Paper, with which comments were requested on a number of issues, comments were received from 17 national associations. Again, China MLA is one of the 17 associations.  The sixth meeting of the ISC was held in November 2001, at which the final revision of the draft instrument was completed. Latter, on 11 December 2001, the CMI submitted to the Secretariat of UNCITRAL the CMI Draft Instrument on Transport Law, which represents a completion of the three and a half years hard work by the CMI on its project on Issues of Transport Law.

Upon receipt of the CMI Draft Instrument, the project was put on the agenda of UNCITRAL Working Group III (Transport Law). The Working Group generally reviewed the themes of the CMI Draft Instrument at its ninth session in April 2002 in New York. It then began its first reading of the individual articles. The first reading continued through the tenth session in September 2002 in Vienna and the eleventh session in March/April 2003 in New York. The second reading of the Draft Instrument based on the text in WP 32 began at the twelfth session in October 2003 in Vienna, and completed at the eighteenth session in November 2006 also in Vienna. The third reading started at the nineteenth session in April 2007 in New York and completed at the twentieth session in October 2007 in Vienna, following which the Secretariat prepared a further text to give effect to the decisions made on the third reading which is contained in A/CN.9/WG.III/WP.101 (WP 101). The Working Group’s work then went on with the final review which was completed at the twenty-first session in January 2008 in Vienna. Later, on 3 July 2008 the Draft Convention was formally approved by the Commission.

From the receipt of the CMI Draft Instrument to the approval by the Commission, it took some seven years for the Working Group to complete the 3 readings and the final review. It is worth mentioning that during this period the Chinese government designated a luxury delegation having attended all the meetings from the ninth session in April 2002 in New York to the twenty-first session in January 2008 in Vienna. The Chinese delegation was headed by Prof. Si Yuzhou with a number of maritime law experts from Dalian or Shanghai Maritime University, the Supreme Court of the PRC, the Ministry of Commerce of the PRC, the Ministry of Transport of the PRC, China Ocean Shipping (Group) Company, China Classification Society, the People’s Insurance Company of China, etc.

As can be seen from the above, from the time the initial preparation work started by the CMI in 1996 until the time of the adoption by the UN General Assembly in 2008, it took more than 10 years for the Rotterdam Rules to come into being. Therefore, it can be said that the Rotterdam Rules is a ten years crystallization of wisdom and knowledge of hundreds of experts coming from all over the world. In addition, during this period, the world has witnessed the involvement by China MLA in the CMI’s preparation work and the contribution by the Chinese delegation to the discussion and finalization of the Rotterdam Rules at the UNCITRAL Working Group III. It seems that the Chinese involvement and contribution are more than sufficient to make China a signatory of the Rotterdam Rules. Yet, an official declaration or explanation is expected by Chinese maritime law circles from the government as to why China not signed the Rotterdam Rules at the Signing Ceremony.

3.  A set of comprehensive rules of law

The Rotterdam Rules consists of 96 articles，which are grouped into 18 chapters. Apart from the 10 final clauses under Chapter 18, there are 86 clauses dealing with the substantive issues in relation to international carriage of goods wholly or partly by sea. Whereas, as known, the Hague Rules has only 16 articles in total, and just 10 articles dealing with the substantive issues; while the Hamburg Rules has 34 articles in total, and just 26 articles dealing with the substantive issues. As far as the number of the substantive articles is concerned, the Rotterdam Rules is 8.6 times larger than the Hague Rules and 3 times larger than the Hamburg Rules. In addition, as can be observed, covered by the Rotterdam Rules there are a number of new subjects, which have never been dealt with by any existing convention in relation to carriage of goods by sea, such as the electronic transport records, rights of the controlling party, the transfer of rights, the identity of the carrier, the volume contract, the delivery of goods, etc. It is believed that “The Rotterdam Rules bring more clarity regarding who is responsible and liable for what, when, where and to what extent. The application of the new convention will make international trade easier and lead to a reduction in costs.” 

In view of the above, it seems that the Rotterdam Rules is a truly comprehensive convention in terms of the number of the articles contained therein and the subjects covered thereby, to which no previous convention is comparable. Whereas, it is true that the more comprehensive a convention is, the more difficult the convention will enter into force and be widely accepted. On the other hand, it is also true that for a widely accepted convention, the more comprehensive the convention is, the greater uniformity the convention may bring. The Rotterdam Rules being as a truly comprehensive convention, once it enters into force and becomes widely accepted, the uniformity which may bring will be much more and wider than any existing convention in relation to carriage of goods by sea. In other words, once the Rotterdam Rules enters into force and becomes widely accepted, an ever great and unprecedented uniformity on the law in relation to carriage of goods by sea will be achieved.

4.  An outcome of compromises keeping fair balance between the ship and the cargo interests

Due to the well-known reasons, significant difference in the national laws in relation to carriage of goods by sea accompanied with the development of the international trade and shipping. The world’s first attempt to unify the relevant rules of law in relation to carriage of goods by sea may be traced back to some 100 years before. The adoption of the Hague Rules in 1924 was the first time that a fair balance between the ship interests and the cargo interests at an international level was established under the given circumstances of 1924. The number of the states which had joined the Hague Rules by way of either ratification or accession may well amount to a convincing proof of the balanced interests.

With the development of the international trade and shipping, the previously balanced interests would change, which would call for new rules of law to maintain. The Hamburg Rules may be considered as the first trial to maintain or adjust the changed balance of interests between the ship and the cargo. Although not successful, lessons have been given to its successor. When a fair balance between the ship interests and the cargo interests is to be established or maintained, compromises will have to be made by the parties who have an interest in the international trade and shipping. Without compromise, there will be no conventions. In other words, a fair balance of interests can only be established or maintained through compromises.

As known, in the Rotterdam Rules, the notorious nautical fault exoneration is abolished, that makes the fault which bases the carrier’s liability a complete one; the package limitation is increased to SDR 875/per package or SDR 3/per kilo, which is a 5% increase per package and 20% increase per kilo of the limits under the Hamburg Rules; the carrier’s seaworthiness obligation has been made a continuing one throughout the voyage, etc. For these reasons, critical views have been expressed that these changes have broken the fair balance between the cargo and the ship interests which have long been established by the Hague or Hague-Visby Rules.

However, it should be emphasized that the centurial Hague Rules is too old to govern or adjust the modern shipping business and to meet with the development of the international trade, even for the Hamburg Rules, some 30 years have past since its adoption in 1978. In addition, as a matter of fact, the Working Group has paid special attention to keeping or maintaining a fair balance between the ship and the cargo interests during the discussion and finalization of the Rotterdam Rules. For example, while discussing the seaworthiness obligation of the carrier, “The Working Group also agreed that making this obligation a continuing one affected the balance of risk between the carrier and the cargo interests in the draft instrument, and that care should be taken by the Working Group to bear this in mind in its consideration of the rest of the instrument.”  Not surprisingly, the Rotterdam Rules has maintained a fair balance between the ship and the cargo interests, a convincing proof is that among the present 19 signatories, there are some important seafaring nations such as Greece, Norway, the United States, Denmark, the Netherlands, France and Spain ; on the other hand, there are also a number of nations which care more the cargo interests, such as Congo, Gabon, Ghana, Guinea, Nigeria, Senegal, Togo, Madagascar, Cameroon, etc. From the present signatories, it can be seen that to some extent the Rotterdam Rules is not only acceptable to the important seafaring nations, but also to the nations which care more the cargo interests.

As a Chinese, I am happy to see that quite some provisions contained in the Rotterdam Rules are identical or akin to the relevant provisions contained in the Chinese Maritime Code (the “CMC”). For example, Article 21 of the Rotterdam Rules provides for the delay, which reads “Delay in delivery occurs when the goods are not delivered at the place of the destination provided for in the contract of the carriage within the time agreed.” The wording and the effect of this article 21 is almost the same as that of Article 50 of the CMC, which reads “Delay in delivery occurs when the goods have not been delivered at the designated port of discharge within the time expressly agreed upon.” For further example, Article 17 of the Rotterdam Rules is entitled “Basis of liability” which consists of 6 paragraphs. Provisions akin to Article 17.1, 17.2, 17.3 and 17.6 of the Rotterdam Rules can be found in Article 46, 50, 51 and 54 of the CMC. In other words, the provisions contained in the CMC in respect of the basis of liability including the burden of proof are in many aspects close to the provisions of Article 17 of the Rotterdam Rules, even bearing in mind the abolishment of the so-called nautical error exoneration by the Rotterdam Rules.

On the other hand, I also noticed that some subjects or provisions contained in the Rotterdam Rules would not be welcomed by the Chinese maritime law circles, or at least some of them. For example, the provisions on freedom of contract for volume contract, the provisions on the right and obligation of the documentary shipper; the provisions on delivery of cargo without surrender of transport document; the provisions on the identity of the carrier, etc. In addition, it is also negatively commented that the package limitation is increased too high to be reasonable and more than necessary.

Perhaps, attention should be paid to the fact that China is a great country, but still a developing country. The Chinese controlled fleet of commercial ships in 2008 ranked the top 4 of the world.  In 2008, the cargo throughput at the Chinese ports was 7 billion tons, which made China to rank the top one in the world in 6 consecutive years . Also, in 2008, in terms of merchandize trade, China was the second leading exporter and the third leading importer .These simple facts remind the Chinese maritime law circles that the Rotterdam Rules should be welcomed, if it is proved that by the Rotterdam Rules a fair balance between the ship interests and the cargo interests have been established or maintained taking account the circumstances of today and the nearby future.

It is no doubt that changes will be brought by the Rotterdam Rules to the existing rules of law in relation to international carriage of goods by sea. And, among the changes, some could amount to a significant change to the existing rules of law, e.g. the abolishment of the nautical fault exoneration. But, it should be emphasized that while assessing the impacts or effects of the changes brought by the Rotterdam Rules to a certain legislation, such as the Hague-Visby Rules or the relevant Chinese law, we should always bear in mind that the Rotterdam Rules is a set of systematic rules of law, which should be accessed comprehensively as a whole but not isolatedly in parts. Or, otherwise, a wrong way will never produce a right fruit.

It is believed that the Rotterdam Rules would create a contemporary and uniform law providing for modern door-to-door container transport including an international sea leg. There are many innovative features contained in the Convention, including provisions allowing for electronic transport records, and other features to fill the perceived gaps in existing transport regimes.  “It is expected that harmonization and modernization of the legal regime in this area will lead to an overall reduction in transaction costs, increased predictability when problems are encountered, and greater commercial confidence when doing business internationally.”  It is hoped that the Rotterdam Rules may enter into force early rather than late.

5.  Conclusion 

The Rotterdam Rules being one unprecedentedly comprehensive convention in relation to carriage of goods by sea, consisting of some 86 substantive articles, although has gone through a 10 years preparation process, nobody would claim it being a prefect convention having resolved all problems and addressed all issues that concern the international shipping and trading. But it should be accepted that the Rules is a ten years crystallization of wisdom and knowledge, an outcome of compromises achieved through a democratic and transparent process by the international community, and the best possible solution acceptable to all the related parties under the current circumstances. Satisfactory or not, after more than 10 years pregnancy the baby now is ready to be given birth to. Bearing in mind that it is unlikely that the international community will be able to work out another international instrument on the same subject having the same width and depth as the Rotterdam Rules in the near future, say in the next 30 or 50 years, we have no reason not to cherish the enthusiasm, wisdom and efforts which have been put into it by so many people, including those Chinese maritime law experts taking part in the work of the CMI and the UNCITRAL. China, perhaps, also other countries, should get ready and prepared to welcome the birth of the Rotterdam Rules, the new baby of the international maritime law family.