3rd Global Sipping Summit 7-9 November 2008, Dalian, China International Multimodal Transport: A New Approach to Liability Regulation Dr. Mahin Faghfouri International Multimodal Transport Association International Multimodal Transport: A new approach to liability regulation I. Introduction and background II. Regulation of liability: Current liability framework III. The new Transport Convention: Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea - Impact on multimodal transport - Central features I. Introduction and background What is multimodal transport? • • • • No single authoritative definition Carriage by two or more modes of transport Door-to-door transport Often under one contract with one party assuming responsibility throughout • One document • Terms also used: intermodal transport, combined transport Recent developments • Increase in containerization & multimodal transport • Concentration of the Liner Shipping Market • Emergence of “Service Contracts” in some trade • E-commerce & transport: inadequate legal infrastructure • Increasing proliferation of national/regional laws • Increased regulatory burden to address security requirements Recent developments • Global credit crunch • impending economic slowdown • decline in trade volumes • decline in freight rates, and • decline in demand for transport services International Containerized Growth 1990-2008 Million TEUs 180 160 140 120 100 80 60 40 20 Source: Drewry Shipping Consultants, 2006 and 2007. 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 0 International Containerized Trade Growth Forecast (2009 - 2020) Million TEUs 400 350 300 250 200 150 100 50 Source: Drewry Consultants, 2007. 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 0 Value of Manufactured Goods Exported (Trillion US$) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 1995 1996 1997 Source: UNCTAD Handbook of Statistics, 2008 1998 1999 2000 2001 2002 2003 2004 2005 2006 Manufactured Goods (SITC 5 to 8 less 667 and 68) II. Regulation of liability Current liability framework: • No international uniform regime in force to govern liability for loss, damage or delay • Localized loss: International unimodal Conventions on carriage by sea, road, rail and air (if applicable) • Some regional, subregional and national laws (if applicable) • Standard term contracts: e.g. FIATA FBL 92, BIMCO MULTIDOC 95 Problems • Liability varies depending on: - Applicable regime - Stage of transport where loss or damage occur - Causes of loss or damage • Current liability framework is fragmented and liability cannot be assessed in advance • It is too complex and may not be cost-effective Loss or damage in the course of transportation from point to point Simplified scheme of liability limits under unimodal Conventions A Road CMR 8.33 SDR/kg Sea Rail Road HVR COTIF/CIM CMR 2 SDR/kg or 17 SDR/kg 8.33 SDR/kg 666.67 SDR/pkg [N.B. Same limit for air transport Hamburg R under Warsaw 2.5 SDR/kg or Convention] 835 SDR/pkg B Previous attempts at achieving a uniform regime at international level 1. 1980 UN Convention on International Multimodal Transport of Goods - Not in force 2. 1992 UNCTAD/ICC Rules for Multimodal Transport Documents - Need to be incorporated into contracts - Application subject to mandatory law III. New Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea • By the end of 2008 a new Convention on Contracts for International Carriage of Goods Wholly or Partly by Sea will be adopted by the United Nations General Assembly • Application to sea transport & MT including an international sea leg • Based on maritime concepts and existing maritime liability regime, but with significant changes in structure and content • Does not address specific issues arising from modern MT • Extremely lengthy and complex: 96 articles But: only 2 relate to multimodal transport Impact on MT: Will the new Convention improve the status quo? 1. Will same rules apply throughout? If loss is localized: • only certain provisions of: (liability, limitation of liability, time for suit) • any applicable unimodal convention apply • plus remainder of the new Convention And: If loss, damage or delay cannot be localized or if no international convention is applicable: • Maritime liability rules of the new Convention apply • Irrespective of how short the sea leg and how long the land leg may be 2. Will there be one party responsible throughout? Period of responsibility: receipt to delivery But carrier may - Contractually limit period of responsibility e.g. to “tackle-to-tackle” - Not be responsible for certain functions e.g. loading, stowing, discharging So: • Carrier may not be responsible door-to-door The new Convention: Central features A. Carrier’s obligations and liability • Liability: fault based • Long list of exceptions • Extensive scope for contracting out B. Shipper’s obligations and liability • Detailed obligations: mandatory • Fault based liability, but • Strict liability for the provision of inaccurate information and dangerous goods • No monetary limitation on shipper’s liability • Arguments: Modern shippers more sophisticated (?) But special rules for sophisticated parties: “volume contracts” C. Freedom of contract: “volume contracts” The Convention primarily establishes mandatory liability both for carriers and shippers But: “volume contracts” (= service contracts) are exempts from mandatory application of the Convention So: most of its provisions could be modified or contracted out Apparent rationale: “volume contracts” = “service contracts” are contracts between parties of equal bargaining power! What is “ volume contract”? • • • • • a contract of carriage for the carriage of specified quantity of goods in a series of shipments during an agreed period of time specification of quantity may be a minimum, a maximum or a certain rang No minimum quantity of cargo required. And: • Convention applies to: • “volume contracts” in liner trade • But: application is by default and not mandatorily Definition wide enough to cover almost any contract of carriage in liner trade Special rules for volume contracts allowing derogation “volume contracts” may provide for greater or lesser rights, obligations and liabilities if it • ….is individually negotiated, OR • ….prominently specifies sections containing derogations Potential consequences Volume contracts between parties of equal bargaining power: • No general concern except for protection of 3rd parties • Volume contracts between parties of unequal bargaining power: Small shippers and large container carrier in liner trade: • Freely negotiated? Or contract of adhesion? • Potential for abuse! • Marginal application of the Convention Conclusions! Thank you [email protected] For further information see: UNCITRAL documents: • Text of the Draft Convention (document A/63/17) and all working documents: www.uncitral.org UNCTAD documents: • UNCTAD Commentary on Draft Instrument on Transport Law (UNCTAD/SDTE/TLB/4) • Freedom of contract and carrier liability (UNCTAD/SDTE/TLB/2004/2) • Multimodal transport: The Feasibility of an International Legal Instrument (UNCTAD/SDTE/TLB/2003/1) IMMTA submission to UNCITRAL: A/CN.9/WGIII/WP.97 • See also Mahin Faghfouri, International Regulation of Liability for Multimodal Transport-In search of Uniformity, WMU Journal of Maritime Affairs, April 2006.