International Trading Conventions

The Need for Regulations
The 2000 BIFA Conditions
The Hague-Visby Rules
CMR Conventions
Warsaw Convention

The Need for Regulations and background to International Conventions.

The movement of goods domestically within the UK demonstrated the problems which can arise when the contractual relationship between the parties to the contact of carriage is unregulated. Either no party gives any thought to conditions of carriage until there has been mishaps, so that underlying common law will apply, or more commonly one party, the carrier, does give thought to the question and trades under printed conditions which may substantially reduce his common-law liability, in some cases to nil. This uncertainty, together with the potential for the party to contract of carriage having the greatest commercial bargaining power to impose unfair terms on the other, is even more likely to arise in international transport where there will be disputed in addition as to which country’s legal regime is to govern the contract.

It is fortunate, therefore, that international carriage of goods by all the different modes of transport is to a great extent regulated by international Conventions, whose terms cannot generally be departed from, to the detriment of the cargo owner, by any agreement purported to be made between the carrier and such owner. The Conventions affecting trade from this country are:

• Hague-Visby Rules: sea transport (contained in the Carriage of Goods by Sea Act 1971);
• CMR Conventions: road transport (contained in the Carriage of Goods by Road Act 1965);
• COT IF Convention: rail transport (incorporated by the International Transport Conventions Act 1983);
• Warsaw Convention: air transport (contained as amended in the Carriage by Air Act 1961).

These international Conventions are private international law formulated after many years of debate at International Diplomatic Conferences and which are generally mandatory and applicable to contracts of carriage by the particular mode of transport. In some cases they are expressed to apply to claims in tort as well as the claims arising out of contacts, to prevent claimants from getting around provisions which limit the amount of compensation payable. Their provisions have been incorporated into English law by enabling legislation, thought for many years the Rail Convention was applied by contract only.

Typically they deal with:

1. period of responsibility of the carrier;
2. basis of the carriers’ liability;
3. limits of financial liability;
4. carriers’ responsibility for subcontractors;
5. documentary requirements;
6. consignors’ liabilities;
7. special provisions concerning dangerous goods;
8. time-limits for claims and limitation periods.

Although they go into considerable detail, by no means all matters are covered and the questions of liens, the contractual responsibility for loading and unloading and demurrage if the carrier is unreasonably delayed by consignor or consignee, are usually left to be determined in accordance with national law. It is, therefore, still necessary to check the small print of a carrier’s conditions even if one knows that an international Convention is mandatorily applicable to the movement, because the carrier may claim additional rights provided these are compatible with the provisions of the Convention concerned. Also, the liabilities imposed under the Convention do not have to be backed by compulsory liability insurance and, particularly in the case of road transport which is dominated by small firms which are prone to insolvency, it is essential to check that the carrier has adequate and current insurance to cover his legal liabilities.

Lack of uniformity between the different Conventions.

One of the problems with the international carriage Conventions is their lack of uniformity, reflecting the different commercial, political and legal climates obtaining at the date of their creation. To take but two major examples:

1. There is no uniformity in their scope of application. Thus under the CMR Road Convention, the regulations apply to every contract for the carriage of goods by road in vehicles for reward when the place of taking over the goods and the place designated for delivery are situated in two different countries of which at least one is a contracting party. As the UK is a contracting party, all road carriage, whether originating or terminating here, is subject to the Conventions and both import and exports, therefore, benefit.

In the case of the Sea Convention (Hague-Visby Rules), the provisions apply only if a bill of lading is issued or the consignor is entitled to request one, and then only if:

1. the bill of lading is issued in a Contracting State; or
2. the carriage is from a port in a Contracting State; or
3. the contract contained in or evidenced by the bill of lading expressly provides that the rules shall govern the contract.

As the majority of states, including major trading partners such as the USA, are not parties to the Hauge-Visby Rules, many goods imported into the UK will not be subject to those rules, and will probably be subject to the more restrictive provisions of the unamended Hague Rules.

2. There is no uniformity in the basis of the carrier’s liability and his defences to liability so that, to take an extreme contrast, negligence in handling a road vehicles will never provide a defence under CMR whereas negligence in the navigation of a vessel is enshrined as a principal defence under the Hague-Visby Rules. Furthermore, having established liability, the limits of liability vary widely also, from approximately £1.90 per kilo in the case of the most restrictive of the Conventions (Hague-Visby) to approximately £16 under the most generous (Warsaw).

RELATIONSHIP OF INTERNATIONAL TRANSPORT CONVENTIONS AND MUTIMODAL TRANSPORT OR COMBINED TRANSPORT AND THE NETWORK SYSTEM OF LIABILITY.

The international Conventions mentioned above apply to particular modes of transport but, increasingly, goods move by a variety of modes of transport, particularly when they are packed in maritime containers. The Conventions apply only to the period of time when the carrier by the particular mode is deemed to be in charge of the goods. It, therefore, occurs that when goods travel from Birmingham, England to Birmingham, Alabama, a number of legal regimes will apply to different segments of the journey: common law from Birmingham to the ship’s rail, with freedom for the road carrier to contract on his own terms, freedom again for the Port Authority to contract on his own terms, then Hague-Visby Rules mandatorily applicable from ship’s rail to ship’s rail, then terms and conditions of the US road or rail carrier.

There can also be situations where two legal regimes will apply concurrently. Thus, on a transit from Birmingham, England to Milan by one road vehicle, the CMR Convention will apply to the entire transit form door to door but the vehicle might be carried by ferry to the Continent and might be carried onwards by rail from Dunkirk to Milan. In both cases there will be a complex intermeshing between CMR and the terms of the sea carrier and of the COTIF Rail Convention. It is sometimes very difficult indeed to establish where loss of goods in a container occurred and which carrier was responsible and under which regime of liability. It has been argued that multimodal transport, where the contracting carrier (and often these days this is a forwarder) undertakes to have the goods delivered by whatever means, is a form of transport which stand alone and should benefit from its own unique liability regime. To this end the United Nations has developed an International Conventions on Multimodal Transport, which so far has failed to find the necessary ratifications to enter into force.

In the meantime, two ways have been found around the problem. One is by the issue of a through bill of lading. The through transport operator only accepts responsibility for the goods during the period when they are in his actual custody and control. If the movement or handling is subcontracted, this is stated to be arranged by the through transport operator as agent for the owner of the goods who will be expected to deal direct with the actual carrier in the case of any claim. This is much less satisfactory for the owner of the goods that the position where a multimodal transport bill of lading is issued, the multimodal transport operator accepting responsibility for the entire period during which the goods are in transit. However, there may be a reluctance to issue multimodal transport bills in respect of transits to parts of the world where the mutlimodal transport operator may not be sure of the reliability of subcontractors which he has to use.

The best practicable solutions which has been achieved is that contained in the International Chamber of Commerce Rules for Combined Transport Documents (No 298) (still in use by some shipping lines) and the new UNCTAD/ICC rules of 1991. The UNCTAD/ICC rules state that where they are incorporated into the contract of carriage:

1. If the stage of transport at which the loss occurred can be pinpointed, any mandatory international Convention or mandatory national law will be applied to determined the compensation payable by the multimodal transport operator.
2. If the stage is not know, or no mandatory regime applies, then the rules’ provisions on liability and compensation will be applied.

When the rules apply, the multimodal transport operator (MTO) is liable for loss and damage between the times of taking charge of the goods and the time of delivery unless he proves that no fault or neglect of his own, his agents or subcontractors has caused or contributed to the loss. There are tow additional defences in sea and inland waterway transport. Provided the vessel was seaworthy at the commencement of the voyage, the MTO is not responsible for act, neglect or default of the master, pilot or servants of the carrier in the navigation of the vessel, nor for fire unless caused by the actual fault of the carrier.

If liable, the compensation payable by the MTO is aligned on the low limit of two SDRs per kilo or 666.67 SDRs per package or unit applicable to sea transport under the Hague-Visby Rules. However, if the contract does not provide for carriage by sea or inland waterway, the compensation is aligned with the CMR limit of 8.33 SDRs per kilo. It should be stressed that these are the "fall-back" provisions if no other regime is compulsorily applicable or the stage at which the loss occurred is not known.

The 2000 BIFA Conditions, the terms of the FIATA multimodal transport bill of lading and the terms of reputable container lines all contain variants on these rules, providing the shipper of goods first with a readily identifiable party against which the claim in respect of loss or damage and, secondly, a reasonable basis for the settlement of claims. The 2000 BIFA Conditions are separately considered here. It is strongly recommended that only mutlimodal transport documents incorporating these or more favourable terms be accepted. It is, unfortunately, still common to encounter shipping lines, non-vessel operating common carriers and freight forwarders who purport to issue multimodal transport documents but then one reads the small print one finds that any claims must be addressed to the carrier who had actual custody of the goods at the time of the loss (if this can be ascertained). Such unsatisfactory documents may also state that the carrier will only be liable if an international Convention or national law makes him so. The chances of recovery against such operators are very poor.

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