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Dear clients and cooperation partners,
In this Latvian Transport & Maritime Newsflash, we review the potential impact of the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules), with a focus on carriers' business. The Rotterdam Rules, if and when in force, will bring significant changes to the businesses of those involved in the shipping industry, in particular to the core of global shipping – carriers. The vast scope of the upcoming changes could affect carriers' business at all levels – from long-term business planning to crew training.
- LEGAL AND COMMERCIAL CERTAINTY
- DISPUTE RESOLUTION
- INSURANCE COSTS
- COMPETITION
- CREW TRAINING AND CHOICE OF SUBCONTRACTORS
- CARGO CARE
- HEADHUNTING
LEGAL AND COMMERCIAL CERTAINTY
In maritime disputes, a large amount of money is usually at stake. It would therefore be fair to say that the carrier's ability to foresee the legal consequences of events that may occur in day-to-day operations plays a key role in successful planning and development of the carrier's business. Aimed at creating a uniform legal regime in the shipping trade, the Rotterdam Rules may significantly contribute to legal certainty in the field. However, despite this apparent benefit of the Rules, the legal certainty of the carrier is diminished by the fact that the Rules grant the shipper numerous options as to where to raise a claim against the carrier. In addition, stringent requirements applicable to jurisdiction clauses call the exclusivity of the chosen jurisdiction into question.
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DISPUTE RESOLUTION
For the carrier to be liable for loss of or damage to goods, the claimant must prove that the loss or damage occurred during the period of the carrier's responsibility, ie, from the moment when the carrier receives goods for carriage and until those goods are delivered. The carrier can fully or partly avoid liability by demonstrating that the cause of loss or damage is attributable to one of the carrier's defences or is otherwise not attributable to the carrier, its subcontractors or employees. In addition to this cargo-friendly burden of proof, the carrier's duty to provide a seaworthy ship during the whole voyage is also likely to affect the carrier's chances of resisting a cargo claim, not least as to the complexity and costs of investigating such incidents.
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INSURANCE COSTS
Taking into account that the global shipping and marine insurance industries are inseparable, virtually all additional risks that the carrier becomes exposed to under the Rotterdam Rules will result in growth of insurance premiums and P&I club membership fees. These risks include an increased limit of carrier's liability, an extended period of carrier's responsibility for goods plus amplified carrier's duty to provide a seaworthy ship, amongst others.
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COMPETITION
Competition among carriers may be affected by the Rotterdam Rules in at least two ways. Firstly, the need to cover such extra expenses as higher insurance premiums and P&I club membership fees may force carriers to raise freight charges. Secondly, recognition of the electronic bill of lading as a transport document may influence competition. While establishing the IT systems and processes required by the Rules in order to use electronic transport documents correctly and effectively will be costly, prompt adoption of those systems and processes may put certain carriers at an advantage over their competitors.
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CREW TRAINING AND CHOICE OF SUBCONTRACTORS
Under the Rotterdam Rules, the same degree of care is required with respect to deck cargo as to cargo carried inside the ship. The carrier may therefore have to obtain additional expertise in carrying out such operations as proper stowing and handling of deck cargo. This training may cause the carrier additional expenses and even the need to look for more reliable partners and subcontractors, eg, for loading and unloading goods. The need to reassess business relationships with these entities may also be stimulated by the fact that loading and unloading of goods falls within the period of carrier's responsibility for goods.
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CARGO CARE
The Rotterdam Rules impose stringent duties on the shipper as to the condition of goods at the time of their delivery for carriage and provision of relevant information, instructions and documents to the carrier. This information will enhance the carrier's ability to handle cargo properly and diminish the risk of potential cargo claims.
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HEADHUNTING
The Rotterdam Rules abolish the "navigational error" defence and limit the "fire defence" to cases where a fire was not caused by eg the master, crew and carrier's employees. Taking into account that the majority of accidents at sea are caused by fire on board, the limited "fire defence" may have a significant impact on a carrier's financial standing. This will force the carrier (shipowner or bareboat charterer) to attribute even greater importance to the professional qualifications of masters and crew on its ships. A more sophisticated search for highly qualified crew, including, via contracting a new crewing agency, is likely to cause carriers additional expense.
Without doubt, it is not possible to evaluate the true overall effect of the Rotterdam Rules on carriers' business before they come into force and become widely applicable. Nevertheless, it is clear that thorough preparation and a change of carriers' habits will be required.
Agris Repšs, Partner
Please find a detailed profile here
Agris Repšs is a SORAINEN partner and head of the Dispute Resolution Team in Latvia, which includes the Dispute Resolution, Public Procurement and Transport & Maritime Practices as well as Commercial Contracts, which includes the Distribution & Trade, Information Technology, Intellectual Property, Pharmaceuticals & Life Sciences and Telecommunications Practices. He has also specialised in Employment Law. He has been practising law since 1995.
Agris has extensive experience in litigation and arbitration. He has represented clients in most of our Latvian office's high profile litigation matters in civil, administrative and arbitration courts dealing with issues of international trade and transport, commercial and company law, maritime, intellectual property and employment. He has acted in several multimillion arbitration cases in Latvia and has advised on investment arbitration matters. He has also frequently acted as an arbitrator at the Latvian Chamber of Commerce and Industry arbitration court. He is an arbitration panelist with the ".eu" alternative dispute resolution (ADR) centre of the Czech Arbitration Court, which hears all disputes related to ".eu" domain names. His track record is also impressive in advising on IT and Pharmaceutical industry-specific issues as well as regulatory and public procurement matters.
Agris has authored a range of publications on legal topics including dispute resolution, employment law and administrative procedure. He has co-authored several books and is an acknowledged seminar and conference speaker. He is a board member at the Riga Graduate School of Law, where he has lectured on international commercial arbitration, e-commerce and business law. He has also lectured on business law at the Stockholm School of Economics in Riga.
Jekaterina Badejeva, Associate
Please find a detailed profile here
As of July 2010, Jekaterina Badejeva has joined the SORAINEN Latvian office as an associate. Jekaterina holds a LLB degree from the University of Latvia and a LLM degree in Maritime Law from the University of Lund in cooperation with the World Maritime University. Jekaterina's professional experience in the maritime field includes training in both the public and private sectors of maritime law as well as seafaring. Jekaterina completed training at the Maritime Administration of Latvia as a maritime lawyer trainee as well as an internship at a leading Spanish maritime law firm. During the internship Jekaterina was closely involved in performing a wide range of tasks, such as drafting legal opinions on maritime law matters, drafting and reviewing international sales and liner agency agreements, legal research plus handling maritime disputes such as cargo claims and general average.
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