The "Rotterdam Rules" and Arbitration: Questions and Warning Signs

By Bekker, Pieter H. F.; Ginzburg, Daniel | Dispute Resolution Journal, February-April 2010 | Go to article overview

The "Rotterdam Rules" and Arbitration: Questions and Warning Signs


Bekker, Pieter H. F., Ginzburg, Daniel, Dispute Resolution Journal


A new convention on contracts for carriage by sea contains arbitration provisions that will require some untangling. This article discusses some of the issues they raise.

The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, informally known as the "Rotterdam Rules"1 (hereinafter, the Rules) introduces a sub-set of binding arbitration provisions for the resolution of disputes relating to certain covered "contracts of carriage" by sea. The Rules have now been signed by over 20 countries.2 Nevertheless, they will not formally enter into force until ratified by 20 countries in a process that normally involves parliamentary approval.3 At press time, none of the signatories had yet ratified the Rules.

The purpose of the Rules is to "establish a uniform and modern global legal regime governing the rights and obligations of stakeholders in the maritime transport industry under a single contract for door-to-door carriage."4 Toward this end, the Rules state that they should be interpreted with regard "to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."5

They also say that its provisions should be applied without regard to the nationality of the vessel, the carrier, the performing parties, the shipper, the consignee, or any other interested parties.6

If ratified, the Rules would apply to a "contract of carriage"7 that places receipt and delivery of cargo, and the ports of loading and discharge, in different countries, and one of these places or ports is in a Contracting State.8 The Rules also would exclude some types of agreements, which are discussed later. However, the Rules also have exceptions to the exclusions. One of these exceptions would make the Rules applicable as between the carrier and the following persons who were not original parties to an excluded agreement: the person entitled to delivery of the cargo (i.e., the consignee), the party with control over the cargo (usually the shipper), or a holder of an original transport document).9

The worldwide shipping industry hauled eight billion tons of cargo in 2007, which amounted to approximately 80% of the volume of world trade.10 The drafters of the Rules recognized that this industry needs orderly dispute resolution procedures for the mishaps that inevitably occur during the transportation of goods by sea.

The current dispute resolution practice in the maritime industry is almost exclusively to use a choice-of-court agreement. The drafters decided to continue that practice. However, they limited the jurisdictions in which court proceedings could be commenced to six potential locations with a relationship to the carrier, the contract, or the cargo: (1) the jurisdiction designated by the parties' agreement; (2) the country where the carrier is domiciled; (3) the contractual location for receipt of the goods; (4) the contractual location for delivery of the goods; (5) the jurisdiction in which the port of initial loading is located; or (6) the State in which the port of discharge from a ship is located. These provisions are found in Chapter 14 of the Rules.11

The drafters recognized also that carriers might attempt to bypass these jurisdictional provisions by replacing their choice-of-court provisions with arbitration agreements. To prevent this and to protect persons with claims against carriers, they added the arbitration provisions in Chapter 15, which contain jurisdictional limitations similar to those in Chapter 14.12 The arbitration provisions in Chapter 15 are discussed below, together with some of the issues that could arise once the Rules are ratified and applied in practice.

Arbitration Is Not Mandatory

Arbitration would not be mandatory under Chapter 15, nor would it b imposed on the parties to contracts covered by the Rules. Rather, Chapter 15 would merely permit these parties to agree to arbitrate any disputes relating to such contracts.

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