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THE HAMBURG RULES, FAILURE OR SUCCESS? A REVIEW BY S.V.

PRAVIN RATHINAM
THE HAMBURG RULES, FAILURE OR SUCCESS? A REVIEW BY S.V. PRAVIN RATHINAM

ABSTRACT

For over twenty years there has been mixed views about the Hamburg Rules, at present some are keen in its adoption, while the others criticize that The Rules are a political compromise as compared to the evolution of The Hague Rules which has been described as culminating in a compromise between competing economic interests, namely, carrier interests and cargo interests. While the rest feel that there is no need for any change. This essay tries to analyse the indispensable question whether the Hamburg Rules are a better choice than its predecessors. The author concludes with an evaluation and outlook for alternatives.

INTRODUCTION

Four decades earlier there were numerous concerns among various developing nations that The Hague/ Hague-Visby Rules[1] were unfair, they were seen to be drawn up by the mainly colonial maritime nations and had the purpose of safeguarding and propagating their interests at the expense of other nations. They believed that the

Operation of the traditional maritime law along with certain aspects of international trade impaired [their] balance of payments and ensured [their] continued poverty and perpetual underdevelopment in an industrial age.[2]

They also criticised that the stated objective of protecting the cargo-owner from the consequences of unequal bargaining power had not been achieved.[3] The United Nations decided to solve the concern and thus stemmed for the evolution of the Hamburg Rules in 1978. From the outset, the question was asked: "The Hamburg Rules Failure or Success?" The United Nations Convention on the Carriage of Goods by Sea 1978 was based on the groundwork done by UNCTAD[4] and UNCITRAL[5].

The Hamburg Rules was drafted in such a way that it was not only an amendment to the Hague/Hague Visby regime but also contains far more stringent rules for carriers liability and appears to be tipped in favour of the cargo owner. Under the Hamburg Rules, it is the carrier that is responsible for the loss or damage of all goods unless they can prove that they took all reasonable steps to avoid the loss.

ROAD TO EVOLUTION

From ancient times, men and women engaged in trade and commerce among nation states have recognised the value, in terms of economic efficiency, of having a uniform legal frame of reference to allocate responsibility and risk in their contractual dealings and thus promote the predictability, certainty and stability which are the foundations of international trade and maritime commerce.[6] In the carriage of goods by sea in international trade, the customs of merchants and mariners alike have found codification or other attempts at uniform expression down through the ages: in classical times, in the Rhodian Law and the Roman Law; in the Middle Ages, in the Rolls of Oleron, the Sea Laws of Visby, and the Law Merchant; and in modern times, in the Hague Rules, the Visby Amendments[7] and the Hamburg Rules.

In recent years there have been many efforts at obtaining uniformity of laws in various jurisdictions: the various restatements of law, international conventions, and, where all else fails, bilateral treaties on specific aspects of law such as recognition of judgments. The chapters which to such efforts have already existed in the ancient times, they have developed in the course of time along with the development of maritime commerce. Although it declined during the rise of nationalism, it was revived back in the nineteenth century at the instigation of lawyers and commercial men such as those who founded the Comite Maritime International. It continues to grow under the guidance of Intergovernmental Maritime Organization and other United Nations affiliated Organizations along with the co-operation of individuals from the private sector.

It is now recognized that the International Unification is a natural requirement of the maritime law since [maritime commerce] gives rise quite often to complex business between citizens of different countries with consequent conflicts between the respective domestic laws which could not be solved by adopting common principles of private international laws. The development of a uniform system lay from the brick stones of different countries using various

different maritime and commercial law, maritime customs, usages and practices and then, realizing the fact, that that system was to the disadvantage to oneself, even if the domestic rules were for the sole benefit of the home country.

The first codification of law concerning the carriage of goods by sea is the Harter Act 1893 of U.S.A., which was followed by the Australian Sea Carriage of Goods Act of 1904 and Canadian Carriage of Goods by Water Act of 1910. These Acts influenced the formulation of the Hague Rules of 1924. At the International Conference on Maritime Law held atBrussels in October 1922, the delegates at the conference, agreed unanimously to recommend their respective government to adopt as the basis of a convention a draft convention for the unification of certain rules.[8] These rules were not a comprehensive regulation of carriage of goods by sea, but rather state certain basic responsibilities of the carrier and shipper, set fort exemptions from carrier liability, and provide for limitation of carrier liability. Eventually, it was thought advisable to modify the Hague Rules for various reasons, including the need to increase the limits of liability which under The Hague Rules had become commercially unrealistic.

Henceforth the Visby Amendments were promulgated in 1968 and, in conjunction with the Hague Rules, are now applicable in some states as the Hague-Visby Rules. The Hague/Visby Rules were the result of over a half-century of endeavours on the part of the CMI to unify the substantive law of carriage by sea. For several decades, however, doubts as to the desirability of the CMI playing this role, as well as dissatisfaction with its work product, have been growing within the developing world because of a perceived bias on the part of the CMI in favour of carriers. The fact that the Visby Rules amounted to a mere face-lifting triggered off a comprehensive revision of the law of carriage under the auspices of the United Nations.[9]

The representatives of developing countries and of some developed countries observed that their nationals were mainly shippers, and did not enjoy an equal bargaining position with shipowners on the terms of shipment. It was noted that most of these countries had not participated in the creation of existing international shipping legislation and that this legislation did not strike a fair balance between the interests of shippers and ship-owners.[10]

Work was commenced in the highly political atmosphere of the United Nations Conference on Trade and Development (UNCTAD)[11] in 1971, but was soon transferred to the more

professionally

oriented

United

Nations

Commission

on International

Trade

Law

(UNCITRAL).[12] The bill of lading was selected as a priority subject within this field because goods were normally carried under bills of lading, which accordingly affected many interests[13] and because it was felt that some provisions of the Brussels Convention were outdated[14] while others could be clarified and made more consistent with those of other international transport conventions.[15]

UNCITRAL was of the view that it could not omit to deal with international shipping legislation, which was an integral part of international trade law for whose unification and harmonization UNCITRAL had been established[16] and that it had the necessary legal expertise.

[17] UNCITRAL provided much more fertile ground for compromise, and, in 1976, it produced a
draft convention for the unification of bill of lading law. The United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules) was adopted by a diplomatic conference in Germany during the spring of 1978. The Convention entered into force on 1 November 1992 when the pre-requisite number of countries acceded to the Convention. However, none of the worlds major trading nations have acceded to the Hamburg Rules, nor have its provisions been widely incorporated in national legislation, reflecting a general view that the Hamburg Rules have overcompensated in their effort to redress a perceived imbalance in the Hague Rules in favour of ship-owners. The Hamburg Rules probably cover less than 6 per cent of world maritime trade since only thirty-four states have acceded to it

with Kazakhstan acceding to it this year (June 2008).[18] The Rules need a look over, such that the applicability can be made with respect to major trading countries.

THE NEED FOR HAGUE RULES

Conflict of laws and the scope of application The scope of application of the Hague Rules is stated in Article 10 which provides that:

The provisions of this Convention shall apply to all bills of lading issued in any of the contracting States.

Thus, the Hague Rules shall only apply to the outward shipment i.e. shipment from a port of the contracting states to a foreign port. As for the inward shipment i.e. shipment from any port outside the contracting states to any port in the contracting states, presumably, the Hague Rules do not apply but rather the law of the country from where the goods were shipped would

be the applicable law. Another interesting point to note is regarding the clause paramount technique which is common for countries applying the Hague Rules.[19] The problem is that it creates a loophole which allows parties to contract out of the Hague Rules by choosing any law other than the law where the bill of lading was issued as the governing law. If they did so, the Hague Rules would not govern their contract, as the contract was governed by foreign law.

The period when carrier is liable, too limited The carrier's liability only covers the period from the time when the goods are loaded on to the time when they are discharged from the ship[20]. This period is sometimes referred to as extending tackle-to-tackle. Thus, while sitting at dock or in storage at dock, prior to or after shipping, the carrier would not be liable for damage to such cargo. Then the problem is: who would be liable?[21] That deficiency, in turn, gives rise to the requirement of a "Himalaya Clause", which is a contractual mechanism that extends the convention's liability limits to dockside agents of the carrier.[22]

The scope of the subject-matter in respect of which carrier is liable: not complete Deck cargo is excluded from the subject matter for which the carrier may be held liable[23]. This reflects the reality of a time when such on-deck stowage was much more prone to damage or loss at sea than is the case today.

Statements in the bill of lading: only prima facie evidence The bill of lading is only prima facie evidence of the receipt by the carrier of the goods as described therein.[24] As it is not conclusive evidence, it is open for the carrier to deny liability for the loss of or damage to the goods by proving to the contrary.

No liability for delay in delivery of the goods The Hague Rules impose liability only for loss of or damage to the goods. There is no liability on the part of the carrier for delay. In modern international trade, delay in delivery of the goods in many cases is fatal to business opportunity of the shipper or the consignee.

Navigational fault exception of the carrier: not realistic The carrier may escape liability for loss of or damage to cargo arising or resulting from act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship.[25]

Many oppose the continuance of this defense, as it is felt to no longer be a realistic ground for the exoneration of liability. It is argued that advances in communication technology, vessel navigation and safety, and employee education and training provide the carrier with a higher degree of control of the vessel and cargo than was available in the previous century when this defense was adopted. The maximum limit of carriers liability, too low The limitation of liability of the ship owner to the maximum of 100 Pound Sterling per package or unit[26] has become entirely unpractical and inadequate as a realistic means of balancing compensation and liability.

The Hague Rules are not compatible with container transport The use of the term package as a criterion for limitation of liability may create uncertainty because of the increasing use of container transport by the shipping industry.

The Hague rules are not compatible with electronic commerce The Hague Rules fail to allow for modern commercial reality with respect to bills of lading. Widespread use of electronic communication and data transfer systems are not within the scope of the Hague Rules' recognized forms of sea-carriage documentation. Electronic commerce is the most sophisticated advancement of international trade and there is an increasing use of electronic bills of lading in the shipping industry. The Bolero Project is a good example.[27]

As the years passed, technology, commercial practices and worldwide economies all underwent considerable change. The Hague Rules came to be much criticized especially after the emergence of innumerable newly-independent States after the Second World War. The Rules were viewed as being too much weighted in favour of ship owner interests. For instance, the right of carriers to limit their liability to 100 Pound Sterlin per package or unit became ridiculous with inflation. The low rate of compensation also arguably affected the cost of insurance and the balance of payments position of developing countries. It also became evident

that the Hague Rules were beginning to get out of line with technological advances in sea transport and with the container revolution[28]

THE NEED FOR HAGUE-VISBY RULES

The Comit`e Maritime International (C.M.I.) initiated a reconsideration of the Hague Rules. The C.M.I.s proposals were considered at a diplomatic conference at Brussels, culminating in the adoption of a Protocol to amend the Hague Rules on 23 February 1968.[29] The 1968 Brussels Protocol brought the Hague Rules a little more in line with the needs of the changed world.

[30] The amended Hague Rules have become known as the Hague-Visby Rules. They
retained the underlying structure of the old Hague Rules in order to avoid disruption to the established laws and procedures that had grown up internationally. The following are some of the important modifications by the Visby Amendments to its predecessor.

To solve the conflict of laws problems of the Hague Rules, the Hague-Visby Amendments provide that the Rules apply in three types of voyages where: (a) the bill of lading is issued in a Contracting State; or (b) the carriage is from a port in a Contracting State; or (c) the contract of carriage expressly provides that the Rules shall apply.[31]

The Hagues-Visby Rules increase the maximum amount for limitation of liability of a carrier and introduce a new weight-based criterion: 10,000 francs[32] per package or unit or 30 francs per kilo of gross weight of the goods lost or damaged.[33] By virtue of theSDR Protocol, 1979, the limitation of liability is again amended to 666.67 SDRs per package or unit, or 2 SDRs per kilo[34].They also provide unlimited liability for the carrier, where the carrier's actions involved intentional damage or recklessness. [35] They include a container clause, in recognition of the new cargo packaging techniques adopted throughout the shipping industry.[36]

However, for many who are critical of the Hague Rules, the Hague-Visby Rules do not deal adequately with some of the major defects in the Hague Rules. For instance, the position concerning a carriers right to exclude liability for negligent navigation and management of the ship was not changed. It has also been said that the limits of a carriers liability remain low under the Hague-Visby Rules.

THE NEED FOR HAMBURG RULES

A distinction between carrier and actual carrier: One of the main features of the Hamburg Rules is to draw a distinction between a carrier and an actual carrier. The carrier is the person who enters into a contract of carriage with the shipper.[37] The actual carrier is the person to whom the actual carriage of the goods has been entrusted.[38] In many instances the carrier will himself perform the carriage as, for example, where a liner operator accepts cargo direct from a shipper. In such a case the liner operator will be the carrier, there being no delegation of carriage by him to an actual carrier. Conversely, whether the carrier sub-contracts all or part of carriage to another person, that person becomes an actual carrier within the meaning of the Hamburg Rules. By virtue of Article 10, the carrier remains primarily responsible for the entire carriage, notwithstanding any delegation, while the actual carrier is jointly and severally liable for that part of the carriage which he undertakes.

Wider definition of contract of carriage The Hamburg Rules are not restricted to contracts of carriage covered by a bill of lading or other similar document of title as stated in the Hague Rules.[39] The definition of a contract of carriage by sea is wide enough to include any contract of affreightment (except a charter party)[40]. Where the contract is for the carriage of goods partly by sea, for example carriage under a combined transport bill of lading or through bill of lading, the rights and liabilities prescribed by the Convention will apply to the sea leg of the carriage only. The Hamburg Rules are not restricted to negotiable bills of lading and may be applicable to non-negotiable bills of lading, sea way bills and electronic documents.

Period of carriers responsibility is extended The responsibility of the carrier for the goods covers the period during which he is in charge of the goods at the port of loading, during the carriage, and at the port of discharge, i.e., normally from the time he has taken over the goods from the shipper until the time he has delivered to the consignee, subject to local port regulations.[41]

Basis of carriers liability: presumed fault

The Hamburg Rules adopt an entirely different approach from the Hague-Visby Rules with regard to the basis of a carriers liability. The liability of the carrier under the Hamburg Rules is based on the principle of presumed fault, which means that, as a rule, theburden of proof rests on the carrier. It envisages three important points. First, the carrier is, without more, liable for loss of or damage to goods as well as for delayed delivery if such loss, damage or delayed delivery of goods occurred while the goods are under his charge. Secondly, the carrier is absolved from liability if he, his agents or servants have taken all measures which could reasonably be required of them to avoid the loss, damage or delayed delivery in question. Thirdly, in contrast to the position under the Hague-Visby Rules, it is for the carrier to prove that he has not been at fault.

Abolition of exceptions to the carriers liability An important feature of the Hamburg Rules is the absence of familiar exceptions to a carriers liability contained in Art. IV rule 2 of the Hague and Hague-Visby Rules.[42] In so far as the majority of the exceptions are concerned, the effect of the abolition would be minimal. However, one major shift of responsibility is envisaged by the abolition of the exception covering the negligence in the navigation and management of the ship.[43]Cargo interests have long contended that it is unreasonable that a carrier, in complete control of vessel and cargo, should exclude such liability which is basic to the contract of carriage. Moreover it is a form of protection which is not extended to the carrier in any other mode of transport. Carrier interests are naturally reluctant to forgo such traditional protection and argue strongly, inter alia, that such a change would result in a substantial increase in freight rates.

Liability for delayed delivery of goods The Hamburg Rules, unlike the Hague-Visby Rules, impose liability on the carrier for delayed delivery of goods unless he has taken all measures which could reasonably have been taken to avoid the delay and its consequences.[44] This brings the Hamburg Rules in line with three international conventions concerning other modes of transport of goods, namely: the Warsaw Convention 1928 (air); the CMR Convention 1956 (road); and the CIM Convention 1962 (rail).

Higher limitation of liability In respect of the carriers right to limit his liability, the Hamburg Rules impose higher limits than those imposed under the Hague and the Hague-Visby Rules. The liability of the carrier for loss

of or damage to goods is limited to 835 SDRs per package or other shipping unit or 2. 5 SDRs per kilo of gross weight of the goods.[45] The liability for the carrier for delay in delivery is limited to an amount equivalent to 2. 5 times the freight payable for the goods delayed (but not exceeding the total freight payable under the contract of carriage).[46] The carrier is not entitled to limit his liability if it is proved that the loss, damage or delay in delivery resulted from an act or omission of the carrier done with intent to cause such loss, damage or delay or recklessly and with knowledge that such loss, damage or delay would probably result.[47]

Jurisdiction; wider choice of courts Under the Hamburg Rules, the plaintiff is given a wide choice of courts in which to initiate judicial or arbitral proceedings[48]. Provided that the court selected is competent in terms of its own domestic law, the plaintiff has an option of instituting proceedings in any court situated in one of the following places:

(a) the principal place of business or, in the absence thereof, the habitual residence of the defendant; or (b) the place where the contract was made provided that the defendant has there a place of business, branch or agency through which the contract was made; or (c) the port of loading or the port of discharge; or (d) any additional place designated for that purpose in the contract of carriage by sea.[49]

Apart from the aforesaid, an action may be instituted in the courts of any port or place in a contracting State at which the carrying vessel or any other vessel of the same ownership may have been arrested in accordance with the normal legal procedures. In such a case, however, the defendant can demand the removal of the trial to one of the jurisdictions referred to in the above paragraph, provided that he is prepared to furnish security sufficient to cover any possible judgment against him.[50]

From a pure legalistic point of view, the Hamburg Rules appear to be much more comprehensive and much better in terms of giving solutions to the defects or shortcomings of the other two regimes. At the same time, it is to be admitted that when compared to either the Hague Rules or the Hague-Visby Rules, the Hamburg Rules are clearly in favor of the shipper. It is, therefore, not surprising that the Rules have not been warmly received by ship-owners

COMPARISON OF HAGUE/HAGUE-VISBY AND HAMBURG RULES

HOW DOES HAMBURG RANK AGAINST HAGUE?

One of the principal purposes of the original effort that culminated in the Hague Rules was uniformity. One of the unsettling effects of the entire Hamburg project is that it may unwittingly generate, at least in the short term, an even greater lack of uniformity than presently exists. Efforts sparked by notions of integration (the Nordic approach) or

compromise (the U.S. approach) may simply add two more competing regimes to the three major regimes presently in effect. An integrated carriage law is neither Hague-Visby nor Hamburg. Likewise, a compromise carriage law is neither Hague-Visby nor Hamburg. On the other hand, some believe that efforts such as those in the United States may, in the long run, improve the chance for achieving uniformity.[51]

Another question which only seldom has been alluded to in the literature is the difference in scope between the original Hague Rules as modified by Visby and the Hamburg Rules. The antecedent to The Hague Rules was the Harter Act enacted into law in the United States in 1893. The Harter Act had limited objectives. The primary objective was to prohibit clauses in which carriers tried to exculpate themselves from liability for loss or damage caused by their negligence. The statute dealt with other matters such as carrier defences, the duty of due diligence and requirements relating to bills of lading. But the Harter Act made no attempt to comprehensively regulate the relations between carrier and shipper.

Even the Hague Rules, which are more expansive and detailed, basically deal with problem areas. The Hamburg Rules, by contrast, are much more comprehensive in scope and even more detailed. They are more like a mini-code defining the relations between carrier and shipper. Now coming to the textual differences as well as the construction of the various rules as they may be applied it can be seen that different results might not be yielded even in case of differential texts.

Carrier is defined as any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper. By not referring specifically to the owner or charterer, as in the Hague Rules, it is clear that the term may include a person such as a freight forwarder or a non-vessel operating common carrier. Furthermore, by defining the term Actual Carrier as one who in fact performs all or part of the carriage of goods, the Rules

specifically recognize that the person who enters into a contract of carriage with a shipper may be different from one who in fact transports the goods.

Contract of carriage by sea means any contract whereby the carrier undertakes against payment of freight to carry goods by sea from one port to another... It should be observed that the Hamburg Rules are not restricted to contracts of carriage covered by a bill of lading or any similar document of title as stated in the Hague Rules. Thus, the Hamburg Rules are not restricted to negotiable bills of lading and may be applicable to straight (non-negotiable) bills of lading and electronic documents. The term bill of lading is defined in the Hamburg Rules as follows: a document which evidences a contract of carriage by sea and the taking over or loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document. A provision in the document that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. In contrast to the Hague Rules, goods are defined as including live animals. The term also applies to containers, pallets, or similar articles of transport supplied by the shipper to consolidate goods. As will be discussed later, the Hamburg Rules do not exclude deck cargo from its application and contain explicit provisions regarding deck cargo. Instead, The Hague Rules exclude from coverage deck cargo which is stated as being carried as such and is so carried.

The scope of application of the Hamburg Rules may be somewhat broader than the application of The Hague Rules in some countries in that the Hamburg Rules are applicable where either the port of loading or the port of discharge is in a contracting state. Also, the Hamburg Rules apply regardless of the nationality of the ship, the carrier, the actual carrier, the shipper, the consignee or other interested party.

A major difference between Hague and Hamburg is that the Hamburg Rules extend the responsibility of the carrier to the period during which the carrier is in charge of the goods at the port of loading, during the carriage, and at the port of discharge. In practice, it is not unusual for a bill of lading to provide that the Hague Rules apply from receipt to delivery, such as in a warehouse to warehouse bill of lading or during the period of time the carrier has actual custody or contractual responsibility for the goods. Such a provision extends to the carrier The Hague defences and limitation of liability during the entire period during which the carrier is by law or contract responsible for the goods.

The Hague Rules in Article 3 impose certain duties on the carrier including: (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cool chambers, and other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

(2) Subject to the provisions of Article 4 [Immunities of Carrier] the carrier shall properly and carefully load, stow, carry, keep, care for, and discharge the goods carried.

The Hamburg Rules have no provision that specifically deals with cargo damage caused by an un-seaworthy condition. Such cases would be resolved by resort to the general rule of presumed fault, that is, the carrier would be presumed to have been at fault with respect to such damage unless it could prove that the un-seaworthy condition caused the loss through no fault of its own. With respect to un-seaworthy conditions that exist at the time the voyage is commenced, the Hamburg Rules seem to introduce no change of substance because even under the Hague Rules, whenever damage has resulted from un-seaworthiness, the burden of proving the exercise of due diligence [ i.e., freedom from fault] shall be on the carrier.

The Hamburg Rules also depart from the Hague Rules in that, with the exception of specific provisions that deal with damage to cargo while the vessel is attempting to save life or property at sea and damage caused by fire, it eliminates the laundry list of immunities provided in the Hague Rules. The Hamburg Rules do not expressly include an enumeration of the immunities listed in the Hague Rules. Nevertheless, it is fair to conclude that the failure to specifically enumerate those immunities listed and the substitution of liability based on the carriers presumed fault does not preclude the carrier from asserting as a defence under the Hamburg Rules the circumstances that under the Hague Rules would have been offered to establish an immunity defence. Each of the grounds specified is predicated on the fact that the damage to cargo was caused under circumstances in which the carrier was not at fault. In some of the immunities, the loss is occasioned by no ones fault (e.g., act of God). In others, the loss is occasioned by the fault of some wrongdoer such as an enemy or someone who acts during war or in a riot.

In some, the loss is occasioned because of the fault of the shipper or his agent. The same result ought to appertain under the Hamburg Rules which are predicated on the rule of presumed fault. Therefore, under the Hamburg Rules, where a carrier shows that the damage was caused not by it, but rather by an act of war, restraint of princes, insufficiency of packing, inherent vice, or any other circumstance which is an immunity under the Hague Rules, such a showing is simply another way in which the carrier rebuts the presumption of fault and demonstrates that it was not at fault. Note that under the Hague Rules, the carrier has the burden of proving that the cause of the damage to cargo was within an enumerated immunity just as it would under the presumed fault rule of Hamburg.

Although Article 4 of the Hague Rules does not expressly so state, it is implicit that the carrier itself must be blameless to invoke immunity. Where loss is occasioned in part by a cause enumerated as one of the immunities and in part by unexcused fault of the carrier, the rule, at least in the United States, imposes the burden on the carrier to show what part of the loss was occasioned by the cause from which it is immune or else it is liable for all of the loss. Similarly, the Hamburg Rules provides that where carrier fault or neglect combines with another cause, the carriers liability will be limited to the part of the loss attributable to its fault provided it can prove the amount of loss not attributable to it. By implication, if the carrier cannot prove how much of the loss was attributable to its fault and how much was attributable to other causes, it will be liable for the entire loss

The Hague Rules has an additional provision relating to deviation. It states that a deviation to save life or property is not to be regarded as a breach of the convention or of the contract of carriage, and the carrier is not liable for any loss or damage resulting there from. The same protection is provided to the carrier in the case of any reasonable deviation. The Hamburg Rules have no provision that relates specifically to deviation. However, because liability under the Hamburg Rules is based on fault, damage that occurs during a reasonable deviation, such as to save life or property, would seem to be without fault and, thus, provide a defence for the carrier. One of the Hague immunity however has been abrogated by the Hamburg Rules. The immunity for damage caused by act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship set out in Article 4(2)(a) ofthe Hague Rules has no counterpart expressed or implied in the Hamburg Rules. As a matter of fact, the nautical fault immunity runs directly counter to the basic theme of the Hamburg Rules, that is, liability based on fault. There is no question that, in this respect, the Hamburg Rules provides less protection to carriers than the Hague Rules. The

impact of this loss of protection and the ensuing impact on carrier liability are difficult to quantify. The loss of the errors in management defence, ultimately, may prove to have comparatively little impact on carrier liability.

Both the errors in navigation and management defence and the fire defence under the Hague Rules insulate the carrier from liability for certain negligent acts of its employees. Under the Hamburg Rules, where it appears that cargo was damaged because the vessel was negligently navigated or managed, or where cargo was damaged by fire caused by the negligence of the carriers agents and employees including members of the crew, the carrier would not be able to rebut the presumption of fault and would be liable.

The Hague Rules exclude the carriage of live animals from its scope of applicability. This means that a carrier may provide exculpatory clauses to protect itself from liability regarding such carriage to the extent permitted by local law. The Hamburg Rules do not exclude live animals as cargo. Instead, Article 5(5) provides a special rule applicable to the carriage of live animals whereby a carrier is not liable for loss caused by any special risks inherent in that kind of carriage. Although Visby and Hamburg do not expressly extend the carriers defences and limitation to independent contractors, neither explicitly condemns nor prohibits the carrier and shipper from contractually agreeing to such a result. One factor which supports the validity of such clauses under the Hamburg Rules is the extension of the period of the carriers responsibility beyond tackle to tackle.

Cargo which by the contract of carriage is stated as being carried on deck and is so carried is excluded from the definition of goods under the Hague Rules and not subject to the Rules. The Hamburg Rules in Article 9 make explicit provisions for deck cargo. When such carriage is by agreement, the carrier must insert a statement to that effect in the bill of lading or other document evidencing contract of carriage. If such a statement is not included, the carrier has the burden of proving that an agreement for on-deck carriage was made and, furthermore, the carrier may not invoke the agreement against a third party, including a consignee, who has acquired a bill of lading in good faith. The Hamburg Rules also differ from the Hague Rules and the Visby Amendments in specifically providing for the respective

responsibilities of the carrier (a person who enters into a contract of carriage) and the actual carrier (a person to whom the performance of the contract of carriage or part of it has been entrusted by the carrier). Just as the Hamburg Rules differentiate between the carrier and the actual carrier, they also have explicit provisions where a contract of carriage provides for

through carriage, that is, where the contract itself provides that different segments of the transport will be carried out by a named person other than the carrier. Where a contract of carriage provides that part of the carriage is to be performed by an actual carrier other than the carrier and that actual carrier is named in the contract of carriage, the contract may also provide that the carrier is not responsible for damage caused by an occurrence which takes place while the goods are in charge of the actual carrier.

The Hamburg Rules also require substantially more information to be inserted in a bill of lading than the Hague Rules. The Hamburg Rules are more detailed and direct with regards to evidentiary effect of bill of lading. The rule is similar with respect to freight. Failure to set forth the freight or that freight is payable by the consignee is prima facie evidence that no freight is payable by him. The same rule is applicable with respect to demurrage where the bill of lading does not specify that demurrage at the port of loading is payable by the consignee. With respect to both freight and demurrage, proof to the contrary is not admissible when the bill of lading has been transferred to a third party, including a consignee, who in good faith has acted in reliance on the absence in the bill of lading of any such indication. Neither the Hague Rules, nor the Visby Amendments include any provisions dealing with forum selections clauses generally or arbitration agreements specifically. In contrast, the Hamburg Rules in Article 22 have a broad provision authorizing the parties to provide by agreement that their disputes relating to the carriage of goods shall be referred to arbitration.

Various places are specified as being an appropriate situs for such arbitration, including the situs of the port of loading and the port of discharge.

Cases regarding the applicability of the Hamburg Rules[52]

The first decision, the World Apollo, was made by the Marseilles Commercial Court onJanuary 23, 1996. Under a contract of carriage of goods by sea, 525,000 sacks of rice were carried from Koa Sichang (Thailand) to Dakar (Senegal). On arrival, parts of the cargo were found to be defective or missing. The damages were attributed to faulty storage and careless handling of the goods during discharge. As the bill of lading was issued with a Dakar Free Out clause, the

consignee had appointed a stevedoring company to carry out the discharge operation. A claim was made by the insurers of the shipment who subrogated the right of the cargo receivers after indemnifying the claim. The main issue for the courts consideration was to determine the liability of the carrier. As Senegal is a contracting party to the Hamburg Rules, the Rules were therefore the governing law on the issue.

According to Article 2 (1) of the Rules, the provisions of the Convention are applicable to all contracts of carriage of goods between two different states, if: (b) The port of discharge as provided for in the contract of carriage by sea is located in a contracting state.

Article 4 (2) (b) Defines the end of the period of the carriers responsibility at the port of discharge as the moment of delivery of the goods in one of two alternative ways: (I) by placing them at the disposal of the consignee in accordance with the contract or with the law or with the usage of the particular trade, applicable at the port of discharge; (II) By handing over the goods to an authority or other third party to whom, pursuant to law or regulations applicable at the port of discharge, the goods must be handed over.

The court concluded that the responsibility of the carrier ended at the point when the stevedoring company began the discharge operation. Article 4 (2) (b) and the Dakar Free Out clause shift to the consignee not only the cost of the discharge operation but also the responsibilities arising from the task. It should be noted that the carriage of goods in this case was under charter party. If the cargo had been carried on board a ship operating under liner traffic, the carrier would not have been released from responsibility with respect to the discharge operation since in normal practice of liner traffic, the agents of the carrier at the port of discharge would perform the task. In the decision, the court added the provision of Article 5 (1) of the Rules and emphasized that the carrier was liable for loss or damage prior to delivery of the goods unless he proved that he took all measures that could reasonably be required to avoid the occurrence and its consequences. However, it was mentioned that none of the defendants had met such a test.

The second decision Carte V Sudcargos is more straightforward. A bill of lading was issued for the carriage of a container from a French Port to a Tunisian Port. The container was closed

and sealed by the shipper, stating that the container was said to contain 437 crates of household appliances. Upon discharge, 57 cases were found missing.

As in the World Apollo case, a claim was made by the cargo insurers who subrogated the consignees right after paying compensation. The applicable law in this case was the Hamburg Rules since Tunisia is a contracting state. The issue for consideration was whether the bill of lading was of evidentiary value in demonstrating that the container held 437 crates. In its decision, the Tunisian court referred to Article 16 of the Rules, which provides that if a bill of lading contains particulars concerning the general nature, leading marks, number of packages or pieces, weight or quantity of the goods which the carrier or other person issuing the bill of lading on his behalf knows or has reasonable grounds to suspect do not accurately represent the goods actually taken over, or loaded where a shipped bill of lading is issued, or if he had no reasonable means of checking such particulars, the carrier or such other person must insert in the bill of lading a reservation specifying the inaccuracies, grounds for suspicion or the absence of a reasonable means of checking. With the insertion of a reservation in the bill of lading, the bill ceases to be evidence against the carrier as to the number and kind of goods shipped. As the plaintiff failed to demonstrate by other means the actual number of crates shipped, the claim was disallowed.

It was pointed out that the clause in question had been the subject of scrutiny on many occasions but always led to the same conclusion in courts applying the Hague Rules. Article III Rule 3 of the Hague Rules allows the inclusion of reservations in the bill of lading if the carrier, master, or agent of the carrier has reasonable grounds for suspecting that the particulars do not accurately represent the goods actually received or if there is no reasonable means of checking. Although Section 23 of the Thai Carriage of Goods by Sea Act adopted the principle of Article 16 of the Hamburg Rules, it remains to be seen whether the Thai court will share the same view on the evidentiary value of a bill of lading as the Tunisian court. If it is to be the case, shippers may have a reason to be alarmed because when a sealed container is shipped with a said to contain clause stamped on the bill of lading by the carrier, the carrier will not be held liable for what is in the container. However, the said to contain clause must be differentiated from other reservations such as shippers weight, load and count, whereby there are decisions to the effect that the clause put the burden on the shipper to prove the amount of goods shipped but in no way diminished the responsibility of the carrier.

For the cargo interest to tackle the said to contain clause, it is advised that the weight of the container be considered. In normal practice, the carriers agent at the port of loading participates in the weighing operation or performs it himself. The same operation would occur immediately upon the arrival of the goods at the port of discharge. If there were any discrepancy between the two weights, the carrier would be liable.

HAMBURG RULES: A CASUALTY

None of the 34 countries is a major maritime or trading state and, taken together, they represent something less than 4 per cent of world total tonnage and about 6 per cent of world total trade. The strategy of the United Nations Commission on International Trade Law (UNCITRAL) seems to be to fill the remaining places as quickly as possible and hope that the "tail" will be able to wag the dog[53].

However, it is now clear that the Hamburg Rules have not been accepted by the international community as a marine cargo liability regime, worthy of implementation by mandatory international convention, to regulate the carriage of goods by sea in private maritime commerce. The function of a marine cargo liability regime is to allocate risk between ship and cargo, in a way that is economically efficient and that promotes the predictability, certainty and stability that come from uniformity of application, and thereby protect the integrity of the bill of lading as the instrument of currency in international trade.[54]

The elimination of the nautical fault defence on political considerations and on irrelevant perceptions of "equity" and "fairness" were a mistake,[55] and a fatal flaw in the Hamburg Rules. It is now increasingly understood that this defence is a vital part of the mechanism for allocating risk under The Hague and Hague-Visby Rules, which the system of risk allocation under those Rules is economically more efficient than that provided by the Hamburg Rules. The conclusion of the CM1 Colloquium on the other important aspect, uniformity of application, was that there would be considerable uncertainty as to the Hamburg Rules' and on the matter of costs, it concluded that the Hamburg Rules will lead to some increase in the costs of sea

transport rather than to any diminution.[56] Chairman of the Hamburg Conference in 1978, has confirmed this:[57]

The expectation of a possible decrease in overall transportation costs for shippers all over the world, however, does not seem to be justified [The Hamburg Rules'] coming into force would certainly not meet expectations as to a decrease ,' in overall costs.

Given the above considerations as to allocation of risk, uniformity of application and costs, it is perhaps not surprising that the Hamburg Rules have found so little support from the major trading and maritime nations. Moreover, when one considers that there are over 100 developing countries in the United Nations Group of 77, the support that the Hamburg Rules have received from developing countries at whose instigation, with some prompting from UNCTAD, they were created[58] - has been quite limited. It is now generally accepted that the Hamburg Rules will not alleviate the "economic burden" of the developing countries.[59]

SHOULD THE HAMBURG RULES BE ABANDONED?

In the interests of uniformity, the Hamburg Rules should now be abandoned. They are seen by the international community as an unwarranted intervention in the affairs of aprivate maritime commerce. The overwhelming view of distinguished Common lawyers is that they will not promote uniformity of application.[60] They fail to allocate risk between ship and cargo in an economically efficient manner. They will not achieve UNCTADs objective of relieving the economic burden on developing countries and other shipper countries; rather, they will increase that burden and they can be expected to result in a net cost increase for shippers.

The international community pays a heavy price for lack of uniformity and the worst case situation is one where, in the present context, the Hague-Visby and the Hamburg Rules, two incompatible regimes, compete with each other. Expressing his disenchantment with the Hamburg Rules and contemplating this worst case situation, Professor Tetley warned in 1979 that:

The ensuing contradictions and disputes will frustrate carriers and shippers, confound Admiralty lawyers, ensnarl the courts of the world and only please the occasional professor of conflicts of law.[61]

The more "equitable" regime is the one that will cost shippers least. An efficient marine cargo liability regime is essential if international trade is to be conducted effectively. The international community will not allow an inefficient and unacceptable regime to be foisted on it. It will not be "shoehorned" into the ill-fitting Hamburg Rules. In a recent BIMCO Bulletin,[62]members of the organisation are given the unequivocal advice that, the current pro Hamburg Rules campaign by shippers and their organisations must be resisted at every opportunity and any moves by government administrations towards ratification of the Hamburg Rules [must] be discouraged. In advancing this case the following potent observation is made, it is clear that the Hamburg Rules would cast aside the results of half a century of expensive litigation and pave the way for another half century of legal debate on a new and different regime uniformity and certainty would be lost and litigation lawyers would be the sole beneficiaries.[63]

FINALE- A QUEST FOR THE SOLUTION The Hamburg Rules has been strongly opposed by ship owning interests as it is feared that they would tend to increase carriers liability and therefore affect the cost of insurance through the P & I clubs. Those critical of the Hamburg Rules fear that the application of the Rules so favour cargo interests to such an extent that increased claims will be encouraged, resulting in increased carrier liability. They also point out the fact that because the Hamburg Rules have higher limits of liability, the amount of damages recovered from carriers will be higher. This increase in liability in turn results in higher insurance costs and inevitably in higher freight rates. This may put a financial squeeze on carriers and their insurers at a time when the shipping industry is depressed and the insurance industry is facing troubled times.[64]

The Hamburg Rules so far had no major impact on world trade it is to be admitted that when compared to either The Hague Rules or the Hague-Visby Rules, the Hamburg Rules are clearly in favour of the shipper. It is, therefore, not surprising that the Rules have not been warmly received by ship-owners and their insurers.

[1] The Visby Rules (the Brussels Protocol of 1968 amending the Brussels Convention of 1924) [2] Yancey (1983) Tulane Law Review 1257 [3] The need for Hamburg Rules, Principles of International Trade Law, Indira Carr, 2ndEdition [4] United Nations Conference on Trade and Development-Established in 1964 [5] United Nations Commission on International Trade Law- Established in 1966 [6] Uniformity of the carriage of goods by sea in the 1990s: The Hamburg rules A casualtyBrian Makins [7] See G Gilmore and CL Black, The Law of Admiralty (2 ed. Foundation Press, New York, 1975) 3. [8] COMPARISON OF HAGUE-VISBY AND HAMBURG RULES by Ms Anomi Wanigasekera, Also available at Http [9] Selvig, the Hamburg Rules, the Hague Rules and Marine Insurance Practice, 12 J. MAR. L. & COM.299, 302 (1981)

[10] See Working Group, Report on First Session (1970), document TD/B/289, at Para. 4, 5, 6;
Report on Second Session, document TD/B/C.4/86, at Para. 4 [11] UNCTAD is divided into groups A-D, which consist of the Afro-Asian nations, the developed free world, the communist bloc, and Latin America respectively. Since all debate takes place on the group level, the tendency is for group positions to devolve into ideological orthodoxy. [12] The purpose of UNCITRAL is to harmonize legal institutions in world trade and to encourage East-West Trade. [13] See Working Group, Report on First Session (1970), document TD/B/289, at Para.18 [14] Working Group, Report on Second Session, document TD/B/C.4/86, Para. 7

[15] Id. At Para 5 [16] UNCITRAL, Report on Second Session (1969) Para. 118, I Yearbook 94, 109 [17] UNCITRAL, Report on Second Session (1969) Para. 119, I Yearbook 94, 109 [18] Information available at www.uncitral.org [19] Section 4 of the Malaysian Carriage of Goods by Sea Act 1950 adopted the clause
paramount technique whereby it provides that every bills of lading, or similar document of title, issued in Malaysia which contains or is evidence of any contract to which the rules apply shall contain an express statement that it is to have effect subject to the said rules as applied by this Act. [20] Article I (e): Carriage of goods covers the period from the time when the goods are loaded on to the time when they are discharged from the ship. [21] See Leslie W. Taylor, Proposed Changes to the Carriage of Goods by Sea Act: How Will They Affect the United States Maritime Industry at the Global Level, (1999) 8 Currents Int'l Trade L.J. 32, 34. [22] For an analysis of the Himalaya Clause, see Wilson, John F., Carriage of Goods by Sea, 4th.ed. Longman, Pearson education Ltd. Harlow, 2001. [23] Article I (c), the Hague Rules: Goods includes. except live animal and cargo which by the contract of carriage is stated as being carried on deck and is so carried. [24] Article III rule 4 [25] Article IV, rule 2(a) [26] Article IV, rule 5, the Hague Rules [27] See Abdul Ghafur Hamid & Khin Maung Sein, The Legal Implications of Electronic Bills of Lading: a Challenge of the New Millennium, Conference Paper, International Conference on Law and Commerce 2002, the Malaysian Current Law Journal, July 2002, 300, at 305. [28] See Thomas J. Schoenbaum, Admiralty and Maritime Law, 2nd. ed., 1994, 548-49. [29] Protocol to Amend the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, 1924, done at Brussels, 23 February 1968(Hereinafter referred to as the Hague-Visby Rules or the Brussels Protocol, 1968) [30] See Tan Lee Meng, The Law in Singapore on Carriage of Goods by Sea,2nd.ed.,Butterworths Asia, Singapore, 1994, 316. [31] Article X of the Hague Rules was deleted and replaced by the above provision. [32] A franc means a unit consisting of 65.6 milligramme of gold of millesimal fineness 900. Article IV rule 5 (d) [33] Article IV rule 5 (a). See also Mendelsohn, Alan I., The Best Way To Update CargoDamage Limits, J. of Comm., August 3, 1999, at 8. [34] According to the SDR Protocol 1979, the unit of account is the Special Drawing Right (SDR) as defined by the International Monetary Fund (IMF). [35] Article IV rule 5(e) [36] Article IV rule 5 (c) [37] Article 1. 1, the Hamburg Rules [38] Article 1. 2, the Hamburg Rules [39] See Article 1(b), the Hague Rules [40] Article 1. 6, the Hamburg Rules [41] Article 4, the Hamburg Rules [42] Article 5. 1, the Hamburg Rules [43] Article IV rule 2(a) [44] Article 5. 1, the Hamburg Rules

[45] [46] [47] [48]

Article 6. 1(a), the Hamburg Rules Article 6. 1(b), the Hamburg Rules Article 8. 1, the Hamburg Rules Under Article 22, the parties may provide by agreement evidenced in writing that any dispute be referred to arbitration. [49] Article 21. 1, the Hamburg Rules [50] Article 21. 2(a), the Hamburg Rules [51] Michael F. Sturley, Uniformity in the Law Governing the Carriage of Goods by Sea, 26 J. Mar. & Com. L. 553, (1995)

[52] (Based on D. Bovios, The First Decisions Applying the Hamburg Rules , Lloyds
Maritime and Commercial Law Quarterly, 1997,. 351)

[53] UNCITRAL is currently holding discussions with several countries in the hope of filling the
remaining places. (S Katz, personal communication, June 1990) [54] See generally B Makins "Sea Carriage of Goods Liability: Which Route for Australia? The Case for the Hague-Visby Rules and SDR Protocol" Fourteenth International Trade Law Conference Report 93 (Attorney-General's Department, Canberra, 1987 [55] See CM1 Report, above n4, 57-58. See also Makins, above n24, 11. Note that the UNCTADIICC Draft Rules for the Multimodal Transport Documents (Document No 321-34/1) propose to retain the nautical fault defence (Rule 5.4). [56] See CM1 Report, above n4, 59. [57] Herber "United Nations Convention on the Carriage of Goods by Sea (1978) (Hamburg Rules)" Eleventh International Trade Law Seminar Report 125 at 165, 166 (Attorney-General's Department, Canberra, 1984) [58] See S Basnayake "Introduction: Origins of the 1978 Hamburg Rules" (1979) 27 AJCL353. 354.

[59] See Makins, above n24, 20-21. [60] Carruthers J, Judge in Admiralty in the Supreme Court of New South Wales, said: By
reason of their draftsmanship [the Hamburg Rules] raise a multitude of legal problems, including questions which go to the main thrust of the new rules i.e. the division of responsibility between cargo and ship. It will take the courts many years to resolve these problems . . . . The Hamburg Rules create as many problems as they purport to solve. (See Carruthers, "The UNCITRAL Draft Convention: A Lawyer's View" (1977) MLAANZ Annual Conference Papers) See CM1 Report, above n4, 3, 59; Tetley, above 1118-20. [61] Prof. Tetley [62] BIMCO Bulletin 1/88, p. 9024 at p. 9026. [63] At p. 95025

[64] See Johnsen, Neils F., A Comparison of The Hague, Hague-Visby, and HamburgRules:
Much Ado About (?), (1996) 70 Tulane Law Review, 2051