Hamburg rules for international carriage

General acceptance by the trading nations of the world of the hamburg rules
for international carriage by sea would consitute a huge breakthrough in the
reform of the law of international carriage.
Introduction
In a world comprising cargo owning nations, and ship owning nations, and where
most nations are both, there is a continual balancing of risk allocation concerning the
damage or loss of sea-borne cargo. Therefore, on the fields of international maritime
law, the international law community such as United nation has sought uniformity
and harmonization on cargo liability that would equitably address the often-
conflicting interests of shippers and carriers. Historically, there have been several well
known attempts at establishing uniform international law in this field, including: the
Hague Rules (1924); the Hague/Visby Rules (1968); the Hamburg Rules (1978); and so
forth. However, it is not likely to be resolved with all parties satisfied. During the
1970’s pressure mounted from developing countries and major shipper nations for a
full re-examination of cargo liability regimes in Hague-visby Rules.The Hamburg
Rules establishes a relative uniform legal regime governing the rights and obligations
of shippers, carriers and consignees under a contract of carriage of goods by sea. It
was prepared at the request of developing countries, and its adoption by States has
been endorsed by such intergovernmental organizations as the United Nations
Conference on Trade and Development (UNCTAD), the Organization of American
States (OAS) and the Asian-African Legal Consultative Committee (AALCO). A draft of
the Convention was prepared by UNCITRAL and finalized and adopted by a
diplomatic conference on 31 March 1978. There are many countries incorporating
the Hamburg Rules into their national law in search for better protection for the
goods owner.However,did it achieve the best balance between the carrier and goods
owner? “The most each interested party could hope for is a ‘best possible alternative:
a ‘win, win’ situation.’ Is this likely to be achieved under the possible introduction of
the Hamburg Rules which came into force internationally on the 1st,November,
1992?”

Afterthe Hamburg Rules entered into force which brought about a system of liability
which is significantly different from that of the Hague and Hague-visby.

Therefore, this paper will fisrt discusses the progress of Hamburg Rules as compared
with the existing convention relating to carriage by sea in several aspects specially on
carrier’s liability, then it will give a glance at the development of the new UN
convention-Rotterdam Rules.
Comparing Hague/Visby Rules with Hamburg Conventions
The history of the development
The Hague Rules are the result of the International Convention for the Unification of
Certain Rules of Law Relating to Bills of Lading. It was signed at Brussels on August
25, 1924. The Convention marked the culmination of negotiations that had been in
progress for some years under the auspices of the International Law Association. The
rules were designed to bring certainty and legal uniformity to what was then, as it is
today, the most important conduit of international trade in corporeal moveable
property.

The Hague rules became known as the Hague/Visby rules on the adoption of The
Protocol to Amend the International Convention for the Unification of Certain Rules
of Law Relating to Bills of Lading. This protocol was adopted to amend the original
treaty in Brussels in 1968. It came into force on June 23 1977. These amendments
were conducted under the auspices of the Comité Maritime International, and were
largely negotiated in a conference in Stockholm in 1963. They do not stand alone as
an independent set of rules, but act only to modify the pre-existing Hague structure.
The rules are therefore known as the Hague/Visby rules and will be so referred in this
paper.

The Hague/Visby rules were further amended by the Protocol Amending the
International Convention for the Unification of Certain Rules of Law Relating to Bills
of Lading (August 25, 1924, as Amended by the Protocol of February 23, 1968). The
main development of this amendment was to adopt a new basic accounting unit,
which had been poincaré gold francs, but would now be Special Drawing Rights of
the International Monetary Fund.

The Hamburg Rules are the result of the United Nations Convention on the Carriage
of Goods by Sea, which was adopted in Hamburg on March 31, 1978 and came into
force on November 1, 1992. They were drafted largely as an answer to the concerns
of developing nations that the Hague rules were unfair in some respects. These
concerns stemmed mainly from the fact that 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. The United Nations
responded to this concern by drafting the Hamburg Rules. The Hamburg rules are far
more than a simple amending of the Hague/Visby regime and came up with a
completely different approach to liability. 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.

The rules are also updated to take note of new technology, new cargos and new
issues that can lead to losses being incurred. The Hamburg Rules have not been an
overwhelming success and although the Convention has been in force since 1992,
non of the major trading or shipping nations have signed up. According to the OECD
, the Hamburg Rules are held to govern less than five per cent of global shipping.
This may be due to the concerns held by many in the industry that the Hamburg
Rules are unnecessarily hard on ship owners and have over-compensated in their
attempt to create a fairer balance between the parties to such contracts.

Therefore it can be seen that there are two main regimes in international law that
govern the carriage of goods by sea. They have evolved and grown steadily since
1924 when the first set of rules were signed, and have consistently extended the
scope of their application as the needs of the shipping industry demanded. From the
original concept of Bills of Lading, it is now possible for myriad contracts of carriage,
each with its own characteristics, advantages and disadvantages to be used. While
the rules have evolved and grown up in response to the same issues, there are
important differences between them.

Application
Some loophole in the Hague/visby system
The Hague/Visby rules, being the older and therefore more traditional regime under
which shipping has been carried out, are in force over most of the world. Thus far,
the Hamburg Rules have only have only been given effect by twenty-six shipping
nations. Many nations will apply different rules in different circumstances depending
on the rules applicable at the port of origin. Many European nations, while preferring
the terms of the Hague/Visby rules, and applying these rules to outbound shipments,
will allow the Hague rules to govern the shipment if the shipment originated in a
country that applies the Hague but not Hague/Visby rules. It is accepted in such
policies that the benefits of clear governing rules and uniformity outweigh the
benefits that the Visby amendments confer. Many nations also apply their own local
laws, which can be considerably modified from the international rules, to internal
shipments that begin and end within their own jurisdiction.

Such complications in application are aggravated by the fact that different countries
adopt the rules in different ways. There are countries such as France, that upon
ratification of international conventions, need take no further action to incorporate
that convention into national law. Then there are countries such as Canada and
Australia that have not signed or ratified the Hague Convention and therefore are
not considered contracting states. Yet they have enacted respectively the Marine
Liability Act and the Carriage of Goods by Sea Act which are national statutes, which
attach the Hague/Visby Rules as a schedule and in that way operate their shipping
law. Here, they may comply very closely with the relevant international instrument
without making themselves subject to it. Add to this the countries that have never
signed or ratified the Hague, Hague/Visby or Hamburg conventions at all, have
adopted no equivalent national legislation but nevertheless, are for all practical
purposes bound by international provisions through the practice of incorporating the
various international instruments, or the law of a contracting state party by reference
in the bill of lading.

The Hague rules, before being amended by the Visby protocol were applicable under
the principal of ex proprio vigore or by their own force, to contracts of carriage made
by way of a bill of lading or similar document. This restriction on application is made
clear by Article 1(b) which states:

‘ ‘Contract of carriage’ applies only to contracts of carriage covered by a bill of lading

or any similar document of title, in so far as such document relates to the carriage of
goods by sea, including any bill of lading or any similar document as aforesaid issued
under or pursuant to a charterparty from the moment at which such bill of lading or
similar document of title regulates the relations between a carrier and a holder of the
same.’

The Hague rules also had another potential restriction on their application. This
stemmed from the use of paramount clauses. While Article 10 of the Hague Rules
states,

‘The provisions of this Convention shall apply to all bills of lading issued in any of the
contracting States’, this was often overruled by national implementing laws, where
they were used, that required the bill of lading to contain a paramount clause
expressly stipulating that the Hague Rules were to govern the contract. This was
initially upheld by the Privy Council in the case of Vita Food Products Inc. v. Unus
Shipping Co. Ltd. (The Hurry On) . However, it was soon distinguished and the Hague
rules are now generally held to apply even if they do not contain a paramount clause.

The Visby rules made certain that such a possibility could no longer arise and
changed the wording of Article 10 to the stronger phrase, ‘Each Contracting State
shall apply the provisions…’ Likewise, national implementing legislation uses clearer
words to give the Hague/Visby Rules ‘the force of law’. Also, it is now clear that
paramount clauses are no longer required under the Hague/Visby rules and national
legislation that previously referred to such clauses now no longer do so.

Article 10 of the Hague/Visby Rules lays out the conditions for the rules to be
affective. It states that the rules apply if the goods are transported between two
different States and:

“(a) a bill of lading is issued in a contracting state(b) the carriage begins in the port of
a contracting state (c) the contract of carriage specifically incorporates the rules by
reference.”

National law can extend the application of Hague/Visby to circumstances not

otherwise covered by Article 10, for example, the UK extends Hague/Visby to non-
negotiable receipts if they specifically refer to the rules themselves. National law can
also apply the Hague/Visby rules to carriage that remains solely within that nation.
This is currently operated by the Denmark, Finland, Norway and Sweden under the
Nordic Maritime Code, and Canada also does this.

the progress in Hamburg Rules

The Hamburg Rules represent a clear attempt to avoid the problems of application
that have arisen under the Hague/Visby rules. The first major change is found Article
2(1) which states:

“(1) that the rules apply to ‘all contracts of carriage by sea’ and not only to contracts
entered by way of bills of lading when:

(a) the port of loading is in a contracting state

(b) the port of discharge is in a contracting state

(c) when any one of an optional group of ports of discharge is in a contracting state

(d) when the bill of lading or other contractual document is issued in a contracting
state

(e) when the Hamburg Rules are incorporated by reference in the contract”

The most obvious difference between these rules and the Hague/Visby rules is the
extension of application from only bills of lading to all contracts of carriage by sea.
This not only extends the application of the rules, but also avoids the potential for
disputes regarding what exactly a bill of lading is, and whether the contract in
question comes within such a definition. Any rules which avoid potential ambiguity
and dispute represent an improvement in the trading environment and thus this
innovation in Article 2 of the Hamburg Convention should be welcomed.

There has been significant uncertainty under the Hague/Visby rules as to which
contracts are covered by the rules. Articles 1(b) and 2 of Hague/Visby apply the rules
to bills of lading and other similar documents of title. However, article 6 states that
the use of non-negotiable receipts will only avoid the provisions of the rules under
certain limited conditions. There are some other exceptions also mentioned and the
fact is that there is some ambiguity regarding the exact range of operation of the
Hague/Visby rules in this important area. It seems that while the rules genuinely
intended to exclude non-negotiable receipts, they also did not want to allow the
evasion of the rules by use of non-negotiable receipts in artificial or illegitimate
situations.
Art. 2(1)(a) of the Hamburg Convention is a parallel to art. 10(b) of the Hague/Visby
rules. There is however, no corresponding provision in Hague/Visby to art. 2(1)(b)
which applies the Hamburg rules to all contracts where the port of origin is in a
contracting state. While such a provision is found in the US Carriage of Goods by Sea
Act it has not previously been seen in the international conventions and is therefore
a novelty in this respect. Art. 2(1)(c) is simply a prudent clause to stop parties taking
advantage of a choice of destination ports to avoid the provisions of the rules. The
fairness may be called into question in cases where this provision were the only one
to apply, it would mean that the Hamburg Rules had not been incorporated by
reference, and the ship was travelling from a non-party state to another non-party
state but had the option of delivering at a port in a state that is party to the
Convention. On what grounds can the Hamburg Rules really claim to be the rightful
governing rules of the contract? The answer is probably that certainty and uniformity
of application is what is being sought. It is not a matter of which rules take over as
the dominant global trading platform, but that the rules always apply in situations
where they can be expected to apply. Like art. 10(a) of Hague/Visby, the Hamburg
rules provide that where the contract is issued in a contracting state, the rules will
apply. Similarly, when the rules are incorporated by reference in the contractual
document itself, this will suffice to make the rules applicable. This rules is contained
in art. 2(1)(e) and is similar to art 10(c) of the Hague/Visby Rules.

purpose of legislation
To look at the substantive differences between the Hague/Visby rules and the
Hamburg Convention, I think it is important to look at the context and placement of
the two sets of rules. It is only with respect to the conflicting interests of the parties
involved can the rules, and especially the changes in them, be properly understood
and appreciated.

The first thing to note is that in the long years since the adoption of the Hague rules,
the basic issues of concern in this area are fundamentally the same. The age of the
rules has not made them irrelevant to the degree that this would have led for claims
for a new legal regime. The issues of who should bare what risk and when can in fact
be traced back to the US Harter Act of 1983 and as such, have remained the
foremost considerations in this field for over a century. This act became the model
for other nations and colonial dominions and eventually formed the basis of the
international regime negotiated in The Hague. The issue then, as it is now, was that
the colonies and dominions, who were primarily users and not providers of shipping
services, were concerned that they could not guarantee for themselves fair
contractual terms due to the stronger bargaining position of ship owners.

These various statutes, and the Hague Rules that came about as a result were fiercely
criticised by the carriers. The arguments put forward were that shippers, at the end of
the day, had to pay for the costs of freight. If more liabilities, and more of the risks of
shipping were passed from shipper or goods owner to carrier, then there would be a
corresponding increase in price. This was held to threaten the competitiveness of
such trade and would endanger the increasingly global markets and supply chains
that had evolved since colonialism.

Shippers however maintained political pressure and offered counter arguments that
the increase in freight charges, if they materialised at all, would not be so high as to
make the trade routes prohibitively expensive. The resulting Hague rules have
become one of the most widely used and important international conventions of all
time. The success of the Hague rules, which can be taken for granted today, was in
fact very hardly fought for. The ship-owner’s lobby was extremely powerful at the
time, and was only defeated by continued political pressure from the shippers and
their representatives. The Hague rules brought with them, none of the feared
economic repercussions and chaos that they were predicted to bring. The Hague
rules however, did not go so far as to enact all of the shippers demands, and various
significant exclusions of liability did remain in favour of the shippers. This is most
obviously seen in Article IV whereby:

(1) ‘Neither the carrier nor the ship shall be liable for loss or damage arising or
resulting from unseaworthiness unless caused by want of due diligence on the part
of the carrier to make the ship seaworthy’.

(2) ‘Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from:

(a) 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.’

Carrier’s Liability
Howcver, the greatest criticism of the Hague and Hague/Visby rules was that the
carriers superior bargaining position, which remained unaffected by the rules, was
still capable of being used to insert, indiscriminately, wide exclusion of liability
clauses against which the shipper would remain without a remedy. This was
especially true against shippers from developing countries who have reported over
the years, innumerable loopholes and lacunas in the rules that allow carriers to limit
their liability. Also, a lack of expertise and weakness of bargaining position can make
these shippers particularly lose out to the fact that there is no model bill of lading
that can be used by the various parties.

Therefore, following the first UN regional Economic Commission, the United Nations
Conference on Trade and Development (UNCTAD) began re-examining the legal
regime that was established and propagated by the Hague Rules. It can be seen
therefore, that some fifty years after the ex-colonies and dominions succeeded in
getting The Hague Rules negotiated despite fierce resistance from carriers and ship-
owners, shippers, this time from the developing nations, were again forcing a
renegotiation of the rules. What’s more, it was the very same concerns that were
behind the complaints. The excessive exemptive privileges of ship owners, exclusion
from liability in key carrier operations such as navigation and restrictive jurisdiction
clauses in bills of lading were the complaints levelled at carriers’ and ship-owners’
practices.

The frustration at such abuses as the insertion of clauses in bills of lading that are
simply invalid according to the Hague/Visby rules yet succeed in halting legal action
due to the uncertainty of the shipper of his rights was growing in many shipping
circles. The jurisdiction clause was also being abused to the benefit of carriers, the
wide exceptions to the rules and low limits of monetary liability were other factors
that fed into this feeling of discontent. Such emotions however, were matched by an
equally powerful laissez-faire in favour of the status quo by governments in the west
that is still seen today in the small support the Hamburg Convention has received
from major shipping nations.

Prior to the drafting and negotiation of the Hamburg Convention, the following
problems in the existing rules were identified and specifically flagged up by UNCTAD.

“(a) Vague and ambiguous wording in the Hague and Hague/Visby rules which
complicate the allocation of liability for loss or damage to cargo. This is a complaint
both of carriers and cargo owners who would both benefit from clearer wording of
the rules.

(b) The continued use in bills of lading of exemptions and restrictions of liability on
the part of the carrier that are invalid, or of doubtful validity according to the Hague
and Hague/Visby rules.

(c) Exemptions in the Hague/Visby rules relating to ocean carriage such as the
exclusion of liability for losses which are within the carrier’s control and should
therefore be borne by the carrier. These include the exemption from liability for the
negligence of servants and agents in the navigation and management of the vessel,
exemption from losses due to the perils of the sea, etc.

(d) The use of undefined and uncertain terms in the Hague/Visby rules such as
‘reasonable deviation’, ‘due diligence’, ‘properly and carefully’, ‘in any event’, ‘loaded
on’ and ‘discharge’.

(e) The uncertainty of the requirements of sea seaworthiness of the vessel.

(f) The low limit of monetary liability for loss of the Hague rules, which has admittedly
been addressed and improved in the current set of Hague/Visby rules.
(h) The unfairness of the jurisdiction and arbitration clauses in how they operate
between carriers and shippers in week bargaining positions.

(i) The lack of clarity and protection for cargoes that require special towage,
adequate ventilation, or deck shipment etc.

(j) Clauses that purport to allow carriers to divert cargos and tranship or land them at
alternative ports at the risk and expense of the shipper.”.

As a result of these concerns, the developing states were able to persuade the other
members of UCTAD to review and improve the adequacy of the current Hague/Visby
rules and it was this review and examination that led to the drafting of the Hamburg
text. The main concerns that the Hamburg Convention was assembled to address
were:

(a) That a fair balance of allocation of risk be struck between carriers and shippers in
the formulation of rules on liability.

(b) The loopholes, uncertainties and other ambiguities exposed in the Hague/Visby
rules be rectified.

(c) That the burden of proof be provided for with certainty.

(d) That the following areas be revised and expanded:

“1) Liability for loss or damage to cargo for the entire period that it is in the control
of the carrier.

2) The ‘Scheme of responsibilities, liabilities, rights and immunities’ in the

Hague/Visby rules and their exclusion be completely reviewed.

3) Jurisdiction and its choice.

4) Responsibilities for deck cargoes, live animals and transhipments.

5) Extensions of the period of limitation.

6) Definitions.

7) Elimination of invalid clauses in bills of lading

8) Deviation, Seaworthiness and unit limitation of liability.”

UNCITRAL and UNCTAD therefore were highly concerned with the above issues
when the Hamburg Convention was first being prepared. What came out of this
process was a new set of rules that sought to clarify their own scope and application,
something that was a big problem with the Hague/Visby rules up to that point. They
also wished to distribute the risks and liabilities for the shipment fairly between the
parties, both in terms of who bares most absolute liability, and that the party in
whose control certain losses are, should bare the risk for those losses unless
exceptional circumstances dictate otherwise. They also wanted shippers to be
allowed to pursue their legal claims at the destination port, as this is the place where
the vast majority of disputes arise and where evidence and costs can be kept
practical. That transhipment and through shipment no longer act to exclude carrier’s
liability and to raise the unit liability rates to more realistic levels.

Let’s now look Analyze some specific diffrence between the Hamburg Convention
and the Hague/Visby Rules

Period of Responsibility
Situation in Hague/Visby system
The Hague/Visby rules rightfully placed great importance on the question of liability
and it was decided as a fundamental rule, that the liability of the carrier would begin
with loading of the ship, and end with discharge from the ship. After discharge, the
local law at that place would govern liability. Article I(e) therefore provides,

‘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.’

Complete freedom of contract is maintained for the regulation of liability before

loading and after discharge. This is logical as the risks at sea are far greater than on
land and it is this aspect of carriage that the rules are attempting to regulate. Also,
the rules and procedures for loading and discharging are different in different
countries for various reasons and it would be unwise to ignore these. It can be
argued that the carrier has very little control over the goods while they are not
aboard his ship and therefore it is fairer to allow the parties to provide for this
themselves.

Unsurprisingly in rules of this age, they have been subject to litigation. In Pyrene v.
Scindia Navigation Co. there was a dispute as to the purpose of the words with the
court ruling that they were intended only to ‘identify the first operation in the series
which constituted the carriage of goods by sea’. In Goodwin, Ferreira v Lamport and
Holt it was held that discharge occurred when all the goods had been discharged so
that goods discharged in fact, were not discharged in law until the entire cargo
joined them on solid ground.

Article IV of the Hamburg Rules

Article IV of the Hamburg abandons this ‘tackle to tackle’ rule and states
“(1) The responsibility of the carrier for the goods under this Convention covers 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.

(2) For the purpose of paragraph 1 of this article, the carrier is deemed to be in
charge of the goods

1. from the time he has taken over the goods…”

.It is clear from this article that the carrier’s liability has been extended to all time
under which he has taken over the goods from the sender until such times as they
are regarded by the destination port as out of port and in storage, warehouse or
onward transit etc. ”

Read in conjunction with Article 23 which states that, “Any stipulation… is null and
void to the extent that it derogates, directly or indirectly, from the provisions of this
Convention.” It is clear that the carrier’s ability to contract out of this clause has been
removed completely.

Basis of Liability
unneccesary exceptionn and absence of stipulation on loss caused by delay in
Hague/Visby Rules
There are three main ways of breaching a contract for the carriage of goods by sea,
these are by losing or damaging the goods, delivering the goods short of their
destination, or there has been a delay in carriage. Under Article 4(5) of the
Hague/Visby rules, the carrier is liable for ‘any loss or damage’ to the goods. It is
unclear if this includes loss caused by a reduction in the value of the goods due to
delay. The House of Lords, in The Heron II, Koufas v. C. Csarnikow Ltd. stated that
damages would be assessed at the difference between the market value at the time
of contracted delivery and the time of actual delivery. Article 3(1)(a) provides that the
carrier must exercise due diligence in ensuring that the ship is seaworthy and
according to Article 3(2) must also exercise due care of the cargo. However, it is
Article 4(2) and its list of seventeen exceptions that has been at the route of calls for
an amended set of rules. In fact it is probably because of Article 4(2) that we have a
Hamburg Convention at all. Under these seventeen circumstances, the carrier can
contract out of his liability which you can be assured is overwhelmingly the norm. In
the case of The Marine Sulphur Queen they were termed the ‘uncontrollable causes’
and as such, the carrier will not be liable for them.

Article 4(2)(a) is commonly termed the negligence clause and excludes liability from
the carrier for ‘act, neglect, or default of the master, mariner, pilot or servants of the
carrier in the navigation or in the management of the ship’. While the practical use,
to the shipping industry as a whole, of this clearly unfair clause is open to question,
marine insurers maintain that it is vital. The fear of course is that it is not necessary to
the majority of conscientious carriers and is therefore merely relied on by a minority
of negligent carriers to the expense both of the shipper in the particular case, and to
their more careful competitors.

Article 5 of the Hamburg Convention makes serious modifications to this

provision stating
Under Article 5(1), The carrier is liable for the loss resulting from loss of or damage to
the goods, as well as from delay in delivery, if the occurrence which caused the loss,
damage or delay took place while the goods were in his charge as defined in Article
4, unless the carrier proves that he, his servants and agents took all measures that
could reasonably be required to avoid the occurrence and its consequences.

This puts the liability for all loss, damage or delay clearly on the carrier unless he can
show that he took all reasonable actions to avoid the loss. At first sight this seems a
far more logical distribution of risk than what occurs under the Hague/Visby rules.
Whatever the danger and unpredictability of life at sea, the carrier is in far more
control over such situations than the shipper is. While the shipper can pass on the
costs of insurance to shippers, the possibility now exists for careful carriers to reduce
insurance costs by making less claims than their competitors. Likewise, negligent
carriers will soon be unable to secure insurance and will rightfully be excluded from
operating. Surely this is a more rational and economically efficient way of operating
the market.

Article 5(2) as occurring when,

‘the goods have not been delivered at the port of discharge provided for in the
contract of carriage by sea within the time expressly agreed upon or, in the absence
of such agreement, within the time which it would be reasonable to require of a
diligent carrier, having regard to the circumstances of the case.’

Article 5(3) gives the consignee a right after 60 days of non-delivery to recover for
the loss of the goods without having to wait for conclusive evidence of the loss.

Article 5 does allow the carrier to exclude liability in certain situations and these are,

1. where he proves that he, his servants or agents took all reasonable measures to
avoid the occurrence and its