transport insurance plus rotterdam rules – your liability might sky-rocket thursday, 13 may 2010...

transport insurance plus

Rotterdam Rules – Your liability might sky-rocket

Thursday, 13 May 2010

Specialist insurance products and services packaged for the international transport and logistics industry




Your liability might sky-rocket

This is how it could happen…




Example 1

A forwarder assumes liability for the international carriage of 1,000 i-Pads,

which are packed in 50 large boxes each containing 20 iPads. In each box of 20, each iPad is in an individual carton box. The forwarder subcontracts the road portion in Canada to a trucker who is involved in a road accident in which the entire consignment is destroyed. The forwarder’s house bill of lading lists in the column “Number of packages” the entry “1,000”. An iPad weighs 1.0 kilogram and has a value of CAD 500. The forwarder’s trading conditions limit his liability to CAD 4.1 per kilogram.

What is the forwarder’s liability under the Rotterdam Rules (1 SDR equals around CAD 1.5)?




Forwarder’s trading conditions

- Weight limitation:

1000 kg * CAD 4.1 per kg = CAD 4,100

Rotterdam Rules:

- Weight limitation:

1,000 kg * 3 SDR per kilogram = 3,000 SDR = CAD 4,500

- Package limitation:

1,000 packages * 875 SDR per package = 875,000 SDR = CAD 1,312,500, i.e. the terminal is exposed to full value liability for the 1,000 iPads of CAD 500,000




Entry Into Force

• Requirement for entry into force

• Signing Ceremony on 23 September 2009 in Rotterdam

List of states is updated on www.uncitral.org




Application and Scope

• Contract of carriage

• Sea carriage or multimodal carriage with a sea portion

• International character of the carriage contract

• The contractual agreement, not the mode(s) of carriage in fact used

• Excluded contracts and application to certain parties

• Agent or principal in relation to the carriage contract




Example 2:

Q: Road carriage from Moncton NB to Halifax NS, then sea carriage from Halifax to Antwerp and finally land carriage from Antwerp to Paris.

(assumption: the Rotterdam Rules are in force in Belgium, but not in Canada or France).




Moncton NB Antwerp ParisHalifax NS

Example 2:




Mandatory Character

• Principle of mandatory force of law

• Exceptions from the principle of mandatory force




Volume Contracts

Greater or lesser rights, obligations or liabilities

Definition

Requirements for the validity of a “Volume contract” agreement




Carriage Documentation

• Contract particulars

• Identity of the carrier

• Goods presumed to be in “apparent good order and condition”

• Qualifying information




Liability of the Shipper

• Shipper’s liability fault-based, but unlimited

• Documentary shipper




Dangerous Goods

Definition

Strict liability by the shipper and the “documentary shipper”

Carrier’s measures on goods that are or become a danger




Electronic Transport Records

• Electronic documents in the current transport/ shipping industry

• Electronic transport record under the Rotterdam Rules




Delivery

• Consignee’s obligation to accept delivery, goods remaining undelivered (uncollected cargo)

• Delivery under the transport documents provided in the Rotterdam Rules

• Negotiable transport document




Transport Documents

Surrender of transport documentation

required for delivery

Surrender of transport documentation not

required for delivery

Negotiable

transport documentation

Art 47 (1) RR

(“Order” bill of lading)

Art 47 (2) RR

(New type “Order” bill of lading)

Non-negotiable

transport documentation

Art 46 RR

(“straight” bill of lading)

Art 45 RR

(Sea waybill)




Rights of the Controlling Party

• Rights conferred on the controlling party

• Identifying the controlling party




Example 3:

A forwarder assumes liability for the carriage of goods from Canada to the UK. The forwarder concludes the carriage contract with the UK buyer. In the forwarder’s “straight” bill of lading, the Canadian seller is named as the “shipper” and the UK buyer as the “consignee”.

Just before the goods are scheduled to arrive in the UK, the Canadian seller informs the forwarder that he has sold the goods to a party in France (because there was a problem with payment by the UK buyer) and instructs the forwarder not to deliver the goods to the original UK buyer.

When the UK buyer is made aware of the seller’s latest instructions, it clarifies that it would sue the forwarder if the latter did not deliver the goods to it on arrival.

What should the forwarder do (assumption: the Rotterdam Rules are in force in all the countries mentioned)?




CAN

B/L

Seller

Example 3:

Buyer A

Buyer B

UK

Shipper

Rotterdam Rules

Consignee

B/LRotterdam Rules

Shipper Documentary Shipper

France




Carrier’s period of responsibility

Art 12(1)

The period of responsibility of the carrier begins when the carrier receives the goods for carriage and ends when the goods are delivered

Art 11

The carrier shall carry the goods and deliver them




Seaworthiness

Exercise due diligence to…

Rotterdam

…make and keep the vessel seaworthy

Hague-Visby

…make the vessel seaworthy




Basis of Liability & Burden of Proof

- Cargo damaged in carrier’s

possession – 17(1)

- Not the carrier’s fault – 17(2)

- Defences apply – 17(3)

- Carrier’s Fault – 17(4)

- Unseaworthiness – 17(5)


A Practical Guide to the Rotterdam Rules

Thursday 5 November, 2009

List of Defences

ROTTERDAM

Hague-Visbyxxxxxx

Error in navigationAct of God

Act of GodPerils of the sea

Perils of the seaWar, piracy, terrorism, riots, civil commot’n

Act of warxxxxxx

Act of public enemiesxxxxxx

Restraint of princes; public processQuarantine; Interference by governments

QuarantineStrikes

StrikesFire on the ship

Fire unless caused by actual fault or

privity of carrierLatent defects

Latent defectsActs of shipper etc

Acts of shipper etcFIOS agreement

xxxxxxWastage in bulk

Wastage in bulkDefective packing/marking

Defective packing/markingSOLAS

SOLASSaving property at sea

Saving property at seaEnvironmental damage

xxxxxxDangerous goods; Sacrifice for common

xxxxxxadventure




Limits of Liability

Rotterdam Rules (whichever is the highest of)

• 3 SDR per kg• 875 SDR per package

Hague-Visby (whichever is the highest of)

• 2 SDR per kg• 667 SDR per package




Delay

Compensation

2½ the freight – capped at SDR 875/SDR 3

Two Requirements

• Agreement• Economic Loss

What do they mean?




Breaking Limitation

“(…) a personal act or omission of the person claiming a right to limit done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result.”




Time Bar

• Two years

• Applies to claims by either party

• Indemnity claim similar to Art III(6bis) of the Hague-Visby Rules




Misdelivery

• Probably within the scope of the Rotterdam Rules

• Is the carrier entitled to limit its liability?




Multimodal Transport

• Basic principle: Rotterdam Rules apply to a contract for sea carriage or to a contract for multimodal carriage with a sea leg

• First exception: international conventions which are already in force when the Rotterdam Rules enter into force (Art 82 RR)

• Second exception: occurrence solely before or solely after the sea portion (Art 26 RR)




Art 26. Carriage preceding or subsequent to sea carriage

When loss of or damage to goods, or an event or circumstance causing a delay in their delivery, occurs during the carrier’s period of responsibility but solely before their loading onto the ship or solely after their discharge from the ship, the provisions of this Convention do not prevail over those provisions of another international instrument that, at the time of such loss, damage or event or circumstance causing delay:

(a) Pursuant to the provisions of such international instrument would have applied to all or any of the carrier’s activities if the shipper had made a separate and direct contract with the carrier in respect of the particular stage of carriage where the loss of, or damage to the goods, or any event or circumstance causing delay in their delivery occurred:

(b) Specifically provide for the carrier’s liability, limitation of liability or time for suit; and

(c) Cannot be departed from by contract either at all or to the detriment of the

shipper under that instrument.




Example 4:

A forwarder assumes liability for “door to door” carriage from China and subcontracts the performance of the ocean voyage and the final land portion. Will the Rotterdam Rules increase the forwarder’s liability if the goods are damaged during the final land portion:

(4.1) Vancouver – Edmonton

(4.2) Long Beach – Oklahoma City

(4.3) Antwerp - Paris




Example 5

Q. A carrier undertakes carriage of a chemical liquid in a tank container first by road from the Netherlands to Belgium, then by sea onwards to Canada.

On arrival in Canada, the chemical liquid was declared a total loss as it got gradually polluted by the residues of the cargo that was previously in the tank container.

Under which rules is the carrier liable (assumption: the Rotterdam Rules are in force in all the countries mentioned)?




Example 5:

Belgium USAThe Netherlands

Pollution




Example 6

A machine is carried first by lorry from France to Antwerp, then by sea from Antwerp to Halifax NS and, due to urgency, finally flown from Halifax to Boston.

During the initial road haulage in Europe, rough driving weakens some bolts, but the machine remains in one piece. While being loaded on board an airplane at Halifax airport for its final leg to Boston, the machine is handled in a rough manner and, already weakened by the vibrations during the road haulage in Europe, falls to pieces.

Under which liability regime is the carrier liable (assumption: the Rotterdam Rules are in force in all the countries mentioned)?




Damage 1

France

Example 6

CanadaBelgium USA

Damage 2




Maritime Performing Parties

Principle of “Same liability as the Carrier”

Definition of “Maritime performing party”




Defintion of “Maritime performing party”

Article 1(7)

“Maritime performing party” means a performing party to the extent that it performs or undertakes to perform any of the carrier’s obligations during the period between the arrival of the goods at the port of loading of a ship and their departure from the port of discharge of a ship. An inland carrier is a maritime performing party only if it performs or undertakes to perform is services exclusively within the a port area.




Carrier

Shipper

RRRR

Liability joint & several

Not RR

Terminal 1




Defenses available to a “Maritime Performing Party”

The Rotterdam Rules give the shipper a sword against the

Maritime performing party, but they also give the Maritime

performing party a shield against the shipper.




Example 6

A forwarder assumes liability for the carriage of a machine “door to door” from the USA to Hong Kong and instructs a Hong Kong terminal to handle the goods on arrival at the Hong Kong port.

A stevedore, who is employed by a subcontractor of the Hong Kong terminal, in an act of negligence, drops the containerised machine, which is deemed a total loss. Cargo insurers sue the forwarder in contract and the Hong Kong terminal, the terminal’s subcontractor and the stevedore in tort.

Which of the four defendants can rely on Rotterdam Rules liability limits (assumption: the Rotterdam Rules are in force in the USA and in Hong Kong)?




Example 6

Claim

NVOCC (Rotterdam Rules: carrier)

Rotterdam Rules Claim

Shipper

Terminal (RR: maritime performing party)

Terminal’s sub-contractor (RR: maritime performing party)

Stevedore

“Himalaya” type protection under

Art 4 RR




Legal actions outside the Rotterdam Rules

The Rotterdam Rules do not apply to Terminals which do

not “perform or undertake to perform any of the Carrier’s

obligations”.




Carrier

Shipper

Terminal 2

Not RR

RRRR


Not RR

Terminal 1





The Rotterdam Rules do not apply to legal actions by the

Terminal against the Shipper




Carrier

Shipper

RRNot RR

Terminal





The Rotterdam Rules do not apply to recourse actions

between Carrier and Terminal




Carrier

Shipper

Terminal 2

Not RR

RRRR


Not RR

Terminal 1




Effects of Volume Contracts on “Maritime Performing Parties”

Terminals as Maritime Performing Parties are not parties

to Volume Contracts, but a volume contract between the

Shipper and the Carrier can affect the Terminal indirectly




Carrier

Shipper

RRRR

Terminal

Volume contract

Act 19(2) RR

Liability




Jurisdiction and Arbitration

• Jurisdiction

• Arbitration




Example 7

A forwarder assumes liability for carriage “door to door” from Canada to the United Kingdom. The forwarder subcontracts the UK land carriage to a haulier who trades under the UK Road Haulage Association (RHA) conditions. After the UK haulier damages the goods, the forwarder is sued by cargo interests.

Might the forwarder fall into the liability gap (assumption: the Rotterdam Rules are in force in Canada and in the UK)?




Moncton NB

Example 7

Halifax London Bristol UK

Rotterdam Rules

RHA

London

CMR

CMR

Damage

Damage

Bristol UKHalifaxMoncton NB




What amendments to transport documents and contracts

will be required when the Rotterdam Rules become law?

•Freight forwarding conditions and framework contracts

•Sea carriage and multimodal transport documents

•Terminal operator conditions and service agreements




So – are the Rotterdam Rules good for

forwarders?




Thank you for your interest!

transport insurance plus rotterdam rules – your liability might sky-rocket thursday, 13 may 2010...

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