33rdrd Global Sipping Summit Global Sipping Summit7-9 November 2008, Dalian, China7-9 November 2008, Dalian, China

International Multimodal Transport:International Multimodal Transport:A New Approach to Liability RegulationA New Approach to Liability Regulation

Dr. Mahin FaghfouriDr. 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 Growth1990-2008

0

20

40

60

80

100

120

140

160

18019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: Drewry Shipping Consultants, 2006 and 2007.

Million TEUs

International Containerized Trade Growth Forecast(2009 - 2020)

0

50

100

150

200

250

300

350

40020

09

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: Drewry Consultants, 2007.

Million TEUs

Value of Manufactured Goods Exported (Trillion US$)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: UNCTAD Handbook of Statistics, 2008 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

ProblemsProblems

• Liability varies depending onLiability varies depending on::

- - Applicable regimeApplicable regime

- Stage of transport where loss or damage occur- Stage of transport where loss or damage occur

- Causes of loss or damage- Causes of loss or damage

• Current liability framework Current liability framework is fragmented and is fragmented and liability cannot be assessed inliability cannot be assessed in advanceadvance

• It It is too complex and may not be cost is too complex and may not be cost--effectiveeffective

BRoad Rail Road

ASea

CMR HVR COTIF/CIM CMR 8.33 SDR/kg 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

Loss or damage in the course of transportation from point to point Simplified scheme of liability limits under unimodal Conventions

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 articlesBut: 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

President@immta.org

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.