What is the ratification status of the Rotterdam Rules in the US and the effectiveness of choosing to apply them voluntarily?

By
Utsav Mathur, Norton Rose Fulbright,

The Rotterdam Rules, or the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, is the latest international convention intended to harmonize rules governing international contracts for transportation of goods by sea. Adopted by the General Assembly on December 11, 2008 and signed by the United States and many other maritime countries in 2009, just three countries have ratified the treaty to date, a long way short of the 20 countries required for the rules to come into force. A general perception is that if the US ratifies, then a sufficient number of other countries will ratify as well.

Some shipping interests could contemplate adopting the Rotterdam Rules voluntarily with a choice of law clause, or a clause paramount, in their contract of carriage

Despite not being in force yet, some shipping interests might consider adopting the Rotterdam Rules by express reference to the Rules in a choice of law clause in their contracts of carriage. This raises a question whether US courts would enforce a voluntary selection of the Rotterdam Rules and, more broadly, the status of US efforts to ratify the treaty.

Despite not being in force yet, some shipping interests might consider adopting the Rotterdam Rules by express reference to the Rules in a choice of law clause in their contracts of carriage.

Law clauses effect

While awaiting potential ratification, some shipping interests could contemplate adopting the Rotterdam Rules voluntarily with a choice of law clause, or a clause paramount, in their contract of carriage. Research indicates that no reported case in US courts has decided the question as to whether contractual selection of the Rotterdam Rules would be enforceable to displace statutory application of COGSA. In the absence of definitive case law, one can expect US courts to be guided by the following COGSA provisions.

Section 6 of COGSA describes circumstances under which US courts should enforce a Rotterdam Rules choice of law clause. Section 6 allows the carrier and shipper to agree to any terms regarding the carrier’s duties, immunities, liabilities, and seaworthiness of the ship, provided that no bill of lading is issued and the agreed terms are included in a receipt that is marked non-negotiable. In addition, the agreed term regarding seaworthiness cannot be one that is contrary to public policy. This provision, allowing contract terms to differ from COGSA, does not apply to “ordinary commercial shipments made in the ordinary course of trade,” but only to other shipments when the particular cargo or other circumstances justify a special agreement.

If the Section 6 circumstances are met, the parties’ agreement to apply the Rotterdam Rules should be given full legal effect. If a negotiable bill of lading is issued, US courts probably would treat the choice of law clause differently.

In general, COGSA applies as a matter of law to bills of lading that are (1) a document of title to the cargo, and (2) evidence of the contract of carriage for transport of goods to or from US ports in foreign trade. When COGSA applies as a matter of law, Section 3(8) prohibits any contract clauses that would reduce the carrier’s duties or liabilities to a level below the minimum threshold provided in COGSA. Section 5 expressly allows a carrier contractually to increase its responsibilities and liabilities in a bill of lading. Section 5 also says COGSA does not apply to a charter party, but if a bill of lading is issued under a charter party then the bill of lading must comply with COGSA.

As a final observation, one could presume that US courts would not enforce a Rotterdam Rules choice of law clause to impose Article 19 liability on a port or terminal who is not a party to the contract of carriage. On the other hand, the automatic Himalaya Clause provisions in Articles 4 and 19, which extend the carrier’s defenses and liability limits to a “maritime performing party,” raise interesting questions about whether the non-parties could be insulated from the liabilities while still benefitting from these protections.

Utsav Mathur is a Senior Associate at international law firm Norton Rose Fulbright and focuses on global energy and shipping disputes and data privacy and cybersecurity matters. He can be contacted on +1 713 651 5374 or by emailing utsav.mathur@nortonrosefulbright.com.