Sea change

New rules governing the transportation of goods by sea have been drawn up by the UN. Graham Kershaw looks at what the new convention could mean for goods traders, carriers and shippers

Sea change 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 that has taken more than 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 it 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 on whether the contract is to start before the 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 with the Hague-based regimes will be disappointed, but there are ­important concessions. Previously, the ­carrier was to ensure that the vessel was sea- and cargo-worthy only “before and at the beginning” of the voyage. Now he must keep it in that ­condition throughout. 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 two and a half times the freight and they have two years to bring proceedings (as against one year under Hague). For the first time, this time limit also applies to claims against them. The amount traders 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 typically be ­property-based – cover these new liabilities.

Not only must the shipper ensure that 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 (for example 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.

Graham Kershaw is an associate in the shipping and transport team at HBJ ­Gateley Wareing

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