COMMERCIAL TRANSCATIONS

CA-2

NAME– ANSHUL CHAUHAN

Roll No.-1538
Section- A

RATIFICATION OF ROTTERDAM CONVENTION BY INDIA

Brief introduction regarding Rotterdam Rules

The "Rotterdam Rules" also known as “United Nations Convention on Contracts for the
International Carriage of Goods Wholly or Partly” by Sea is a crucial treaty stating new
international rules to revise the legal framework for carriage of goods by sea and maritime
affreightment. It imposes liability on the carrier if it is established that the delay, damage or
loss occurred due to conduct or fault of carrier or lies within the ambit of carrier’s
responsibility.
These rules does not include carrier liability in case of peril at sea or fire if the cause is not
related to carrier’s fault. According to the rules of Hague Visby, it is a duty of carrier to
ensure that the vessel is seaworthy before and at the beginning of the voyage. Rotterdam rules
also require vessel to be seaworthy throughout the voyage by sea.

History
The Hague Rules of 1924 were modified in 1968 to become the Hague-Visby Rules, The
modified convention only covered "tackle to tackle" carriage contracts. No provision was
made for multimodal transport. The industry-changing phenomenon of containerization was
barely acknowledged. The 1978 Hamburg Rules were introduced to provide both more
modern, and less biased legal framework in favour of ship operators. These Rules were
readily adopted by developing countries, the new convention was not adopted by richer
countries who stuck with Hague and Hague-Visby. It had been expected that a
Hague/Hamburg compromise might arise, but instead the vast (96 articles) Rotterdam Rules
was taken into consideration.
The United Nations Commission assembled the final draft of the Rotterdam Rules on
International Trade Law and was adopted by the United Nations on 11th of December 2008,
and a signing ceremony was held in Rotterdam on 23rd of September 2009. Signatories
included the France, United Nation, Greece, Denmark, Netherlands and the Switzerland; in
all, signatures were obtained from countries said to make up 25 percent of world trade by
volume. Signatures were allowed after the ceremony at the U.N. Headquarters in New York
City, United States.

Aim of the Rotterdam convention

The convention’s aim is to extend and modernise existing international rules and achieve
uniformity of International trade law in the field of maritime carriage, updating or replacing
many provisions in the Hamburg Rules, Hague-Visby Rules and Hague Rules. The
convention creates a uniform legal regime that governs the rights and obligations of shippers,
carriers and consignees under a contract for door-to-door shipments involving international
sea transport.
General obligation
Article 13(1) creates general obligation that carrier must perform every part of his contract
“carefully and properly”. The term “properly and carefully” is used in Hague’s article 3.2 and
Hague-Visby rules, The obligation of carrier depends on what type of good, risks to which
they are exposed, reasonable resources and host of other factors which will be ascertained on
a case to case basis. Hague and other convention are based on tackle-to-tackle period that is
carriers liability begins at loading the goods (literally when the tackle of the ship is attached
to the goods for loading) and ends with the unloading the goods.

Specific obligation
Article 14 of Rules deals with the responsibility of carrier related to seaworthiness. It consist
of things followed, proper crewing, the actual sea worthiness of ship, supplying and
equipping capabilities of the ship. However, it must be noted that the required due diligence
will differ significantly at the beginning of the journey and during the journey due to the
change in conditions. The due diligence is more expected from the carrier when the ship is at
port as compared to when the ship is in the middle of the ocean facing adverse conditions.

Exception
Article 13 (2), 15, 16 create exceptions under which the Carrier can claim exceptions to his
obligations. Firstly, FIO (Free In and Out stowed) terms can be incorporated in the contract
thereby shifting the responsibility of loading and unloading to shipper, shipper’s agent or the
consignee due to the nature of the goods. However, this arrangement will have no effect on
carrier’s period of responsibility.

Should India ratify Rotterdam convention?

In a study done in 2010-2011 by the Indian Shipping Statistics it was found that the total
overseas cargo handled at Indian Ports was 742.28 million tones. It demonstrates the
importance that rules of carriage of goods by sea are important to emerging India. There is a
ongoing debate on the feasibility and practicality of signing the Convention in India and since
there is little doubt that the rules will come into force, it is important to understand their
effect if India finally decides to ratify the Convention.
 Why it has not been ratified yet?

1. Unfair bargaining power

Due to the unfair bargaining power of the carrier, a shipper generally has little discretion in
negotiating the terms of bill of lading. In order to protect the Shipper various rules have been
formulated at the international level which have been ratified by and incorporated into
domestic laws by the member states. The first of such rules was Hague Rules whose framing
was necessitated due to the complex nature of clauses in bills of ladings exempting the carrier
from various liabilities. The rules provide for the carrier’s duty and liability in respect of
goods shipped from a port in a contracting state, or where the bill of lading is issued in a
contracting state. The rules can be incorporated in the shipping documents to which they
don’t generally apply such as charter parties. The former two rules namely Hague rules,
Hague-Visby rules were based on Harter act and Harter style acts which were heavily tilted
towards carriers and therefore incorporated and subsequently retained primary compromises
regarding carrier’s liability. The Hamberg Rules tried to achieve some radical changes which
were not generally accepted.
Hague Rules:
No strict liability of carrier for unseaworthiness of the vessel but must exercise due
diligence in providing a seaworthy vessel.
Could escape liability for negligence of employees in navigation and management of
vessel but was responsible for negligence of employees in care and custody of vessel
Hague –Visby Rules: Kept both compromises in place Hamberg Rules: Kept the part
relating to due diligence compromise on seaworthiness in part 11 but made the carrier
liable for the negligence of employees for navigation and management.

2. Bifurcation between carrier states and shipper states

The seperation between carrier states and shipper states is a result of economic position of
respective countries. The powerful Countries such as U.S or Britain were able to develop a
majestic merchant fleet due to their rich resources. On the other hand many countries like
India who has been a victim of colonialism, did not have access to its own resources to
develop in the same way but a 21st century India possesses one of the largest fleet in the
world and is in a position to make a great difference to world trade. Therefore, while we must
make sure that our own interests are protected, at the same time we need to be proactive
instead of being dormant. The key concern expressed by participants in a meeting organized
by BCC&I's Shipping, Transport & Logistics Committee on the issue was about the
implications of the rules. Practical questions related to the implications of terms like
‘transport document’ and ‘volume contract used in the Rules on actual shipping concerned
the participants more than whether the rules are pro-shipper or pro carrier.

Carrier liability
1. It focuses on fault or negligence by the carrier
2. Carrier is responsible for shipments of goods “door to door”
 3. Carrier must exercise due care and diligence as to seaworthy vessel both at beginning
and during voyage at sea
4. Carrier are liable for errors in navigation
5. Liability limited to 875 SDRs per package (up from COGSA $500)

Major countries who has ratified the Rotterdam Rules

The first country to ratify the convention was Spain, which signed on 20 July 2011. Till now
24 countries have approved the treaty. The most recent to sign the said treaty was Sweden,
which signed on 20th july 2011. These rules will come into effect after 20 countries have
ratified that treaty. The signing of the treaty would mean that these countries must denounce
the convention governing the Hague Visby and Hamburg Rules.

India undecided on adopting Rotterdam Rules convention

India is still undecided on adopting the Rotterdam Rules- United Nations convention
governing liabilities on goods transported via sea or land- as it has not been able to convince
key stakeholders with contrasting views. If India signs the convention then the liabilities for
delay or damages for transporting goods by sea and carriage will apply on shipping lines.
Many shippers does not want to sign the convention as it may expose them to higher
insurance premiums. The Rotterdam rules on the other hand govern liabilities on a door to
door basis as said by Proshanto Mukherjee, vice president (research) and director of doctoral
programmes at world maritime university. He stated that the Rotterdam Rules are
comprehensive and attempts to create a balance between shippers and shipping lines. If other
countries sign the convention then India cannot refuse to sign as it will affect its internation
relationship. A shipping official said she will take a decision soon on ratifying the UN
convention or not on a condition of anonymity.
Shashi Kiran Shetty who is current chairman and managing director of Micargo Global
Logistics Ltd which has both land and sea transport division for cargo said while the
Rotterdam Rules are comprehensive, Indian authorities have to clear the confusion over
multiple laws and lay out the liabilities and responsibility. Meanwhile another senior
representative of a large shipping line has argued that shipping owners are against as the fear
they have to take the blame of errors by the other transporter in the absence of proper
disclosures of fault.

Concerns of Indian stakeholders

India did not play any significant role in the negotiation process at the Rotterdam
Convention held recently. As a result of this it is likely that rules will come into effect in
upcoming years. This has concern many major industry in India as they were not expecting
this decision. The reaction of the industry especially shipper interests are typical of such a
situation i.e. protective of status quo and fearful of change. That is not to say they do not
have valid concerns. Firstly, industry sources maintain that the rules will not have much
impact in India if banks continue to insist on Shipped-on Board bill of lading. Shipping
companies argue that the potential harmonization of the rules can be shared by both shippers
and carriers. The major problem is industry sources, the pitiable state of infrastructure in
India which will not be able to ensure that there are no delays and subsequent losses. Another
major concern was highlighted in a seminar organized on the topic at St. Xavier’s Institute of
Management, Mumbai. It was related to India’s unorganized international trade comprising
of very small enterprises which do not have the expertise to function in the regime created by
the Rules. Another set of concerns relates to the Rules themselves, for instance it has been
argued that the ongoing duty of the Carrier to maintain seaworthiness is based on the premise
that that there will be a series of servicing facilities across the oceans. However, this
argument holds no water as any concept of due diligence is based on reasonableness as we
have observed while discussing Carrier’s liability. Another objection based on the multi-
modal nature of transport is that it will not be possible for the Carrier to guarantee speedy
delivery on other legs of the journey by modes such as railways. This objection overlooks the
fact that any such liability will arise out of contractual obligations only which are stipulated
in the Contract of Carriage and therefore can be “contracted out” by express declaration.
Though serious consideration of the effects of the Rules on Indian industry is required, such
consideration must distinguish between real and imagined threats. The instant clamor needs
to be carefully sifted in order to arrive at genuine concerns which can only be achieved by
commencing a serious dialogue on the issue.

Conclusion

To conclude this assignment I would like to share my opinions with others. To begin with, I
would like to say that our country India is one of the fastest growing country globally. It has
seen tremendous progress in global trade and business. When the entry in 20th century, India
has entered into the new era of trading. It is high time that the merchants should understand the
importance of Rotterdam rules. There is a dichotomy, since the carriers and Indian stakeholders
do not want to ratify the Rotterdam rules. The reason behind this reluctancy is that once they
ratify it, the liability or the accountability of losses or delay in delivery would be casted upon
the carriers and stake holders. On the other hand, there is lots of boon associated with ratifying
it. The first and upmost importance is that this ratification will fortify its stance and relation in
sea carriage. It is also pertinent to not that many nations have understand the importance and
ratify the Rotterdam rules. Almost 25 countries have ratify the treaty. Some of the most
powerful nations like United Sates have also ratify it and is a member to this convention. One
of the implication of their ratifying the convention is that these countries majority of 25 % of
the total world trade which places them at a higher pedestal than other countries. These
countries have a higher dominance in shippers and as well as carriers related business.
The perception and acceptance of the convention by these countries is that these countries have
realised that their ratifying the treaty will have a two folded importance. It will not only benefit
shipper but also the carriers. Hence it is important that the Indian stakeholders and traders
understand the importance of this convention and ratify this.