No Longer Lost At Sea

No Longer Lost At SeaGraham Kershaw looks at the implications for traders and carriers of the UN Convention on Contracts for the International Carriage of Goods wholly and partly by Sea.

If all goes to plan, the snappily titled Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea will be presented to the UN General Assembly this autumn. This will conclude a drafting process which has taken over 10 years and has been conducted under the auspices of the Comité Maritime International (CMI) and the UN Commission on International Trade Law (UNCITRAL). Even then, the convention will have to be ratified by at least 20 states before it comes into force. Many treaties have fallen at this stage, but the inclusive approach to the drafting process gives some hope that both the established trading countries of The West and the newer giants of The East will take the convention up.

The convention has significant consequences for goods traders as well as carriers. It is intended to replace the Hague, Hague-Visby, and Hamburg Rules and covers all contracts for the carriage of goods by sea, whether they are covered by a Bill of Lading or a Waybill, and allows for the current paper documents to be replaced by electronic versions in the future.

While the existing regimes stop at the ship’s tackle, the convention now covers the non-sea component of any voyage, such as an inland truck journey to the final destination.

Gaps in the chain of responsibility, where a container languishes in the container yard after the carrier has disclaimed all responsibility, can therefore be avoided. It will however be for the parties to agree whether the contract is to start before commencement of loading or finish after the completion of discharge and both trader and carrier will have to be careful to ensure that the transport documents record their agreement. The parties can also agree that loading and discharging is to be carried out by the cargo interests, although the convention expressly provides that these take place during the contract of carriage.

Anyone who expected the new convention to radically improve the trader’s lot in comparison to the Hague-based regimes will be disappointed, but there are important concessions. Previously, the carrier was to ensure that the vessel was sea and cargoworthy only “before and at the beginning” of the voyage. Now he must keep it in that condition throughout the voyage. The defence of “error of navigation” has been removed, as has the catch-all of “any other cause without his fault”.

Traders’ remedies are also improved. They have an extra four days to give notice of damage. As with the Hamburg Rules, they have a claim for delay of 2.5 times the freight and they have two years to bring proceedings (one under Hague). This time‑limit also applies to claims against them, for the first time. The amount they can claim is also increased, to 875 SDRs per package or 3 SDRs per tonne. Surprisingly, given the light, high-value electronic goods shipped these days, the per-package increase is less than that calculated by weight.

Reflecting modern container practice, the convention extends the carrier’s obligations to on-deck carriage. It makes it plain, however, that where he fails to comply with explicit instructions requiring under-deck carriage, he loses all his rights under the convention including the right to limit his liability.

On discharge, the consignee must take delivery promptly, or see the carrier ask the “controlling party” of the cargo for new delivery instructions. The controlling party will usually start out as the shipper, who will then pass control as he deals with the cargo. These arrangements may be of some use to cargo interests, for example where the original Bill of Lading has been lost and a letter of indemnity cannot be provided.

Cargo owners and controlling parties are also given new liabilities, which by‑and‑large they cannot vary by agreement. Traders will need to ensure that their purchase contracts and insurance – which will be typically be property‑based – cover these new liabilities.

Not only must the shipper ensure the cargo can withstand the carriage, he must provide carriage instructions even if the carrier does not ask for them. Disputes could arise where the shipper assumes these instructions are obvious.

The shipper’s obligations are imposed on the true shipper as well as the “documentary shipper”, defined as anyone named as the shipper in the transport documents. Commonly, this might be the person arranging the shipment (eg a freight forwarder), or a trader who has bought the cargo from a local supplier for on-sale. All parties will be advised to reconsider this practice in light of the obligations imposed on the documentary shipper and check their insurance and recourse. In particular, freight forwarders acting as agents (who will not have a contract of carriage with their customer) will need to ensure that their customer is contractually obliged to comply with the same duties.

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