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5. Marine Liability Act, Part 5: Liability for the Carriage of Goods by Water

Marine Liability Act, Part 5: Liability for the Carriage of Goods by Water

Report to Parliament

Marine Liability Act, Part 5

Liability for the Carriage of Goods by Water

(TP 14947E)

Transport Canada

International Marine Policy

I Purpose

This Report to Parliament, made pursuant to Part 5 of the Marine Liability Act (MLA) sets out the future approach to Canadian law on cargo liability in the marine mode. The Minister of Transport is required by Section 44 of the Act to submit this Report prior to January 1, 2010.

II Introduction

The MLA incorporates all of Canada's marine liability regimes into one Act, including the former Carriage of Goods by Water Act, 1993 (COGWA), which governs the liability of a shipowner for loss of or damage to cargo. Canada's laws on cargo liability are based on an international convention known as the 1968 Hague/Visby Rules.¹ Though Canada never formally ratified the Hague/Visby Rules, or their predecessor, the 1924 Hague Rules, which formed the basis of COGWA until 1993. These rules establish a limit of liability per package or the gross weight of the goods.

In 1978, the United Nations adopted a new international convention on the carriage of goods by sea, commonly known as the Hamburg Rules.² These Rules introduced substantial changes to the basis of liability, burden of proof and procedures for claims.

III Background to the Hamburg Rules

The preparatory work for the Hamburg Rules was done by the United Nations Commission on International Trade Law (UNCITRAL), leading to a diplomatic conference held in 1978 in Hamburg, Germany, which adopted the new Rules under their official title "The United Nations Convention on the Carriage of Goods by Sea".

The Hamburg Rules were viewed as an improvement over the Hague/Visby Rules since they extended the scope of a carrier's liability for loss of or damage to cargo to the entire period that the goods are in his charge rather than just for the time that the goods are physically aboard the vessel. The Hamburg Rules also established liability of the carrier when economic loss occurs due to delay in delivery and place the onus on the carrier to prove that all reasonable measures were taken to avoid damage or loss rather than requiring the claimant to prove the carrier's negligence. They also increased the carrier's limit of liability.

Having been adopted by the United Nations with the participation of traditional maritime nations and developing countries, the Hamburg Rules were considered to have a broader political base than the Hague/Visby regime.

In the early 1980's, Transport Canada initiated a study of the impact of the Hamburg Rules from the perspective of Canadian interests. The Dalhousie Ocean Studies Program (DOSP) released a detailed report, "The Future of Canadian Carriage of Goods by Water Law". This study concluded that the Hamburg Rules were an improvement upon all of the existing international regimes on carriage of goods by sea and, as such, Canada should adopt them. The Dalhousie Report prompted a much-needed review of the Canada's Carriage of Goods by Water Act, 1936. Stakeholders agreed that this Act, based on the original 1924 Hague Rules, should be replaced with a law that was consistent with that of our trading partners, but there was no consensus on how to achieve this goal.

In 1984, Transport Canada published a discussion paper recommending Canada adopt the Hamburg Rules. Shippers favored this recommendation, viewing the Hamburg Rules as more responsive to their interests than the Hague/Visby Rules. However, shipowners, their insurers, cargo insurers and legal experts preferred the adoption of the Hague/Visby Rules. They suggested that the Hamburg Rules would increase shipping and litigation costs since established case law would no longer be valid.

Extensive consultations with various industry groups failed to reach a consensus on the appropriate regime for Canada. However, agreement on a two-pronged approach to cargo liability eventually emerged. It was agreed that Canada should immediately implement the Hague/Visby Rules with a provision to bring into force the Hamburg Rules when a sufficient number of Canada's trading partners have ratified them. This approach is embodied in section 44 of the MLA, which requires the Minister of Transport to conduct a periodic review of the Act to determine if the Hamburg Rules should replace the Hague/Visby Rules and to report to Parliament on the outcome of that review. This provision reflected Canada's intention to accept the Hamburg Rules, if and when they become a viable liability regime for international trade. Until then, Canada is committed to promoting wider international acceptance of the Hamburg Rules and exploring other practical options to promote uniformity in international law.

In 2005, the government completed its second review of the Hamburg Rules³ and the Report to Parliament submitted by the Minister concluded that:

1. The Hague/Visby Rules should be retained until the next review period, ending January 1, 2010; and
2. Transport Canada should continue to make efforts, in consultation with industry and in cooperation with like-minded countries, with a view to developing practical options for a new international regime of liability for the carriage of goods by sea which would achieve a greater uniformity than the Hague/Visby Rules.

IV International Developments

The Hamburg Rules entered into force in November 1993, 15 years after their adoption by the United Nations. To date, 34 States⁴ have ratified the Hamburg Rules, but Canada and other major trading nations have not acceded to them, nor implemented them fully in national legislation. The 15-year delay between adoption and entering into force testifies to the reluctance of governments to adopt these rules.

Currently, the Hamburg Rules apply to a very small portion of international maritime trade in comparison to the trade covered by their predecessors, the Hague Rules and the Hague/Visby Rules. As the chart below indicates, over 60 percent of Canada's trade is with countries that subscribe to one of those two, closely aligned, liability regimes (see Annex 1 for details).

Initial expectations were that the Hamburg Rules would prove to be the key to the development of an international regime and contribute to uniformity in the area of cargo liability. Unfortunately, the overall lack of support they received from the international community has resulted in their no longer being considered a viable replacement for the Hague/Visby Rules.

Canada's Waterborne Trade* by Liability Regime of Trading Partners

*Based on dollar value of trade carried by the marine mode of transport in 2008.
**Year of Entry into Force internationally.

United Nations Commission on International Trade Law (UNCITRAL)

In the late 1990's, interest in attempting to develop another cargo liability treaty was generated by several States, including Canada, and international non-governmental organizations. This group felt that it was time to find a solution to the lack of uniformity and create a modern, technologically up-to-date Convention. The task of drafting a new instrument fell to the Comité Maritime Internationale (CMI). In 2001, a Working Group on Transport Law was formed under the auspices of UNCITRAL whose task was to review the CMI draft with the aim of formulating a new international convention on the carriage of goods by sea.

In early 2008, after six years of negotiations, UNCITRAL completed its work on The Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (also known as the Rotterdam Rules). Adopted by United Nations General Assembly in December 2008, the new Convention has a very broad scope, which applies to all door-to-door cargo movements provided there is an international sea leg. It also addresses issues such as the seaworthiness of the vessel, treatment of electronic transport documents, transfer of rights and many other aspects of the relationship between carriers and cargo owners, set out in nearly 100 articles included in the new Convention. At the same time, it introduces contractual freedom, allowing carriers and cargo owners to agree to contract out of several provisions of the new Convention.

On September 23, 2009, the Rotterdam Rules were opened for signature at a special ceremony held in Rotterdam, the Netherlands under the auspices of the United Nations. From among the States that attended this signing ceremony, 16 States signed the Convention⁵, subject to ratification and since then, three additional States⁶ have done so. Should these States follow through with ratification, it would bring the total number of ratifications very close to the threshold of 20 States required to bring the Rotterdam Rules into force at the international level. When a State signs a convention, it expresses, in principle, its intention to become a Party to that convention. However, the signature does not, in any way, oblige a State to ratify or implement the convention. The situation with the Hamburg Rules is a case in point: if all States that had signed the Hamburg Rules subsequently ratified them, these States would account for approximately 36 percent of Canadian current waterborne trade and the Hamburg Rules would most likely be in force in Canada today. Instead, a different group of States implemented the Hamburg Rules, accounting for approximately 3 percent of Canadian trade, as can be seen in Annex 1.

Only the future will show if all signatories to the Rotterdam Rules will actually ratify or if other States will later accede to them. If the 19 signatory States to the Rotterdam Rules proceed with ratification, it would account for approximately 30 percent of Canada's current waterborne trade, as indicated in the chart below.

Canada's Waterborne Trade by Liability Regime of Trading Partners
IF All Current Signatories Ratify the Rotterdam Rules

 

*Based on dollar value of trade carried by the marine mode of transport in 2008.

Canada's international marine transportation stakeholders were extensively consulted throughout the negotiating process that resulted in the Rotterdam Rules. However, stakeholders were divided in their opinions as to whether Canada should sign the Convention, subject to ratification, in Rotterdam.

Taking into account the diverse views among stakeholders on the new Convention and the need to undertake further consultations on some of its provisions, particularly those related to domestic carriage of goods by water, Transport Canada advised industry on September 15, 2009 that Canada would not be in a position to sign the new Convention in Rotterdam. The Notice further informed stakeholders that the Department would continue to monitor closely the future developments and international acceptance of the Rotterdam Rules, with the view of ensuring that our legislation on cargo liability is consistent with the laws of our major trading partners, as is the case today.

V Conclusion

Given the recent international developments concerning cargo liability regimes, culminating in the adoption of the Rotterdam Rules, and the stagnant position of Hamburg Rules internationally no action should be taken under section 44 of the MLA in respect of the Hamburg Rules during the next review period ending January 1, 2015. From the existing international regimes, the Hague/Visby Rules continue to meet Canada's objective of maintaining uniformity with our major trading partners whose laws are also based on the same regime.

Prior to the 2015 review, Transport Canada, in consultation with interested stakeholders, will undertake a thorough analysis of the complete body of law pertaining to carriage of goods by water in Canada and make recommendations to modernize it with a view of maintaining Canada's commitment to uniformity of international law, in particular with the law of our major trading partners as it may develop in the future during the next review period.

ANNEX 1

Dollar Percentage of Canadian Waterborne Trade and Legislation on Carriage of Goods Implemented by Canada's Trading Partners

Countries	percent of CDN Waterborne Trade	Countries	percent of CDN Waterborne Trade	Countries	percent of CDN Waterborne Trade
HAGUE/VISBY RULES		HAGUE RULES		HAMBURG RULES
Australia	1.06 percent	Algeria	3.10 percent	Austria		0.55 percent
Belgium	1.63 percent	Argentina	0.17 percent	Barbados		0.02 percent
Denmark	0.67 percent	Cuba	0.81 percent	Cameroon		0.01 percent
Ecuador	0.11 percent	Iran	0.30 percent	Chile		0.77 percent
Finland	0.67 percent	Israel	0.28 percent	Czech Republic		0.13 percent
Ireland	0.21 percent	Jamaica	0.21 percent	Dominican Republic		0.10 percent
France	2.03 percent	Malaysia	0.67 percent	Egypt		0.31 percent
Germany	4.62 percent	New Zealand	0.21 percent	Guinea		0.04 percent
Greece	0.09 percent	Peru	0.50 percent	Hungary		0.11 percent
Japan	9.51 percent	Portugal	0.23 percent	Kenya		0.03 percent
Italy	2.13 percent	Turkey	0.79 percent	Lebanon		0.04 percent
South Korea	2.19 percent	U.S.A.	17.51 percent	Morocco		0.16 percent
Latvia	0.03 percent			Nigeria		0.45 percent
Luxembourg	0.07 percent			Romania		0.13 percent
Mexico	0.84 percent			Senegal		0.01 percent
Netherlands	2.09 percent			Syria		0.05 percent
Norway	3.71 percent			Tanzania		0.02 percent
Poland	0.30 percent			Tunisia		0.05 percent
Singapore	0.31 percent
Slovakia	0.09 percent
Spain	0.84 percent
Sri Lanka	0.22 percent
Sweden	0.62 percent
Switzerland	0.34 percent			Sub-total		2.98 percent
United Kingdom	3.66 percent
				OTHER*
				Brazil		1.60 percent
				China		15.11 percent
				India		1.24 percent
				Russia		1.21 percent
				Subtotal		19.16 percent
Total	38.04 percent	Total	24.78 percent	Total		22.14 percent

*Other category is states that have developed their own particular maritime code and have not ratified any convention on carriage of goods.

¹ The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, concluded at Brussels on August 25, 1924, as amended by the Protocol concluded at Brussels on February 23, 1968.
² The United Nations Conventions on the Carriage of Goods by Sea, 1978.
³ The first review of the Hamburg Rules was done pursuant to the former Carriage of Goods by Water Act (COGWA), 1993. In 2001, various maritime liability regimes, including COGWA, were consolidated under the MLA.
⁴ According to the Comité Maritime Internationale (CMI), parties to the International Convention on the Carriage of Goods by Sea, 1978 (Hamburg Rules) as of October 13, 2009 are: Albania, Austria, Barbados, Botswana, Burkina Faso, Burundi, Cameroon, Chile, Czech Republic, Dominican Republic, Egypt, Gambia, Georgia, Guinea, Hungary, Jordan, Kazakhstan, Kenya, Lebanon, Liberia, Lesotho, Malawi, Morocco, Nigeria, Paraguay, Romania, Saint Vincent and the Grenadines, Senegal, Syrian Arab Republic, Sierra Leone, Tunisia, Uganda, United Republic of Tanzania, Zambia.
⁵ Congo, Denmark, Gabon, Ghana, Greece, Guinea, The Netherlands, Nigeria, Norway, Poland, Senegal, Spain, Switzerland, Togo and the United States of America.
⁶ Armenia, Cameroon and Madagascar

Date modified:

2010-03-15

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