Rotterdam rules

OPERATING on an island that is girt by sea, Australia’s mining industry depends greatly on shipping its products. New international laws are being shaped that will clarify the responsibilities for each link of the delivery chain.
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Courtesy QRC.

Wally Graham

Published in the December 2009 Australia’s Mining Monthly

The Rotterdam Rules is a new international convention on the carriage of goods by sea.

Although it will not have a great impact on how mining companies manage their operations, the convention provides peace of mind for producer and customer while deliveries are en route.

The rules describe the rights and obligations of parties involved in carrying goods by sea. They clarify who has responsibility for what, when and where in maritime transport and how far these responsibilities extend.

They are the result of inter-governmental negotiations carried out within the United Nations Commission for International Trade Law between 2002 and 2009.

The Comite Maritime International had prepared a basic draft of the convention.

On September 23, 16 countries – including several big players which are said to comprise more than 25% of world sea trade by volume – signed the agreement.

Since then another five countries have signed on, bringing the total to 21, including the US, France, Greece, Denmark, Switzerland and the Netherlands.

A key aspect of the Rotterdam Rules is the clear definition of who is responsible and what they are accountable for in the case of a stranded ship, a stolen container or damage to a shipment.

All parties involved in the supply chain, including stevedores, which were excluded under previous conventions, may now be jointly liable with the carrier.

In addition, the carrier’s liability for damage to the cargo has been increased.

The obligations for shippers, such as ensuring goods are ready for transport on time, are also more clearly defined.

The rules also cover the prior or subsequent overland legs of each shipment’s journey.

“This extension of responsibility acknowledges that today, carriers are often part of a larger logistics chain and, therefore, it is appropriate for their liability to match their delivery obligations,” Stuart Hetherington, maritime lawyer and partner at Colin Biggers & Paisley, said in a recent article.

“Similarly, the new convention aims to apply modern duty of care concepts more consistently.

“For example, carriers are made responsible for ensuring the ship is seaworthy and properly crewed throughout the voyage and not just at the port of departure.”

Most importantly for the modern age, Rotterdam establishes legal infrastructure for development of e-commerce in maritime transport.

This makes way for the introduction of electronic transport documents to replace paper and provides for transportation that is entirely document free to take place.

The carriage of goods in containers and electronic data transfer were not around when previous conventions were drawn up, which has resulted in gaps in laws that have been exploited.

This convention is designed to once again bring international rules into line.

Rotterdam brings an end to the so-called “nautical fault defence” to prevent a ship’s master and crew escaping liability if they have been negligent in navigating or managing a ship.

With the number of signatory countries increasing, Hetherington said Australia had more to gain from joining the new regime than staying with the old.

“Australia’s regime has been grafted on to the archaic rules which hark back to a time when cargo was shipped in bags or boxes rather than containers and communication technology was still in its infancy,” he said.

“It is generally considered out of date and cumbersome. By contrast, the new convention brings the maritime sector into the 21st century.

“It reflects current shipping practices and recognises the impact of e-commerce and electronic communications on shipping transactions.”

According to Hetherington, if Australia does not sign on to the Rotterdam Rules, it runs the risk of operating within an antiquated regime of maritime law inconsistent with major trading partners.

“Eighty per cent of world trade is now conducted by sea,” he said. “Supporting a uniform framework that clarifies the rights and responsibilities of marine cargo carriers and shippers promotes international trade and, in turn, is good for Australia.”

The Rotterdam Rules will replace the Hague Rules of 1924, the Hague-Visby Rules and the Hamburg Rules of 1978.

“Goods traders and shipping companies will no doubt debate who gets the short straw under the new rules but at a national level, the benefits to Australia of a uniform law are clear,” Hetherington said.

“With the US having signed, and hopefully moving to ratification soon, it is likely that other major nations will feel greater pressure to commit.

“Australian traders and shipping companies will have to grapple with the reality of the new regime as it applies to their contractual arrangements once the rules come into force.”

While it may not have much impact on how mining companies operate, new shipping rules will provide peace of mind for producers and customers while their goods are on the water.