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Diplomacy in Action

87. Speech re negotiations on carriage of goods by sea convention (March 22, 2006)


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U.S. PARTICIPATION IN THE INTERNATIONAL UNIFICATION OF PRIVATE LAW: THE MAKING OF THE UNCITRAL DRAFT CARRIAGE OF GOODS BY SEA CONVENTION

Mary Helen Carlson*

INTRODUCTION

In my capacity as an Attorney-Advisor in the Office of the Legal Adviser for Private International Law in the U.S. Department of State, it is my privilege to serve as the head of the U.S. delegation to the negotiation of a new international carriage of goods convention under the auspices of the United Nations Commission on International Trade Law (UNCITRAL).[1] It is an honor and a pleasure to be with you this evening.

I have been asked to talk to you about the United States approach to international private law unification and harmonization, both in the U.S. domestic process and in the international conference room, with particular reference to UNCITRAL’s preparation of a modern carriage of goods by sea convention.[2] My intention tonight is to first discuss private international law in general, and the rather unusual approach of the United States to this subject. I will also suggest to you which issues I see emerging as important in this field in the next few years. With that as background, the remainder of my remarks will be devoted to an analysis of the draft UNCITRAL carriage of goods by sea convention.

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[RYAN – The text after the asterisk should be in a footnote, and should precede fn 1.]* Senior Attorney, Office of the Assistant Legal Adviser for Private International Law (L/PIL), U.S. Department of State. This address was given on March 22, 2006 as the William Tetley Maritime Law Lecture at Tulane Maritime Law Center. I thank Ignacio Sandoval (J.D. expected from American University in May 2007), who served as an extern in L/PIL from January-August 2006, for helpful research assistance. The views expressed are those of the author and not necessarily the views of the U.S. Government. No copyright is asserted with regard to this Article by the author, the Department of State or Tulane University. [end of fn that goes with the asterisk]

The United States has submitted a comprehensive position paper on the key issues in the new UNCITRAL convention, and copies of that document are available to you.[3]

PART I – GENERAL INTRODUCTION TO INTERNATIONAL UNIFICATION OF PRIVATE LAW

A. Private International Law

In its broadest sense, “private international law” refers to the international process of unifying or harmonizing the rules that govern international transactions between private parties[4], in contrast with public international law, which is concerned with relations between governments.[5] Lawyers from the State Department’s Office of the Assistant Legal Adviser for Private International Law (L/PIL), of which I am a part, frequently coordinate and lead U.S. participation in international efforts to unify, harmonize or create private law. In many respects, the intergovernmental process of private law unification parallels the domestic process of private law unification in the United States done by the National Conference of Commissioners on Uniform State Laws (NCCUSL).[6] The Uniform Commercial Code is probably the NCCUSL instrument most familiar to you.

The international process of private law unification has been underway for over a century in Europe and Latin America. But in the United States, there was for a long time little interest in this topic. The subject matter of private law is for the most part a matter of individual state law in the United States. It was thought that federalism concerns would make acceptance of private international law conventions politically if not constitutionally difficult for the United States. Law established by treaty would become the law of the land, preempting inconsistent state law.[7]

One important exception to the traditional disinterest in the United States to private international law treaties is the area of most interest to us tonight: the international carriage of goods by sea. It has long been recognized that this trade demands a unified legal regime. In the United States, our Constitution provides that the federal courts and federal law, not individual state courts and laws, govern admiralty and maritime cases.[8] The United States is, of course, party to the 1924 Hague Rules,[9] which is the first modern unification of certain rules relating to maritime bills of lading in international cases.

But the maritime area was an exception. It was not until the mid-1960s that the U.S. government began to participate in any significant way in private international law efforts.[10] The legal profession in the United States began to become aware that much was going on abroad in this area, and that large parts of the world were agreeing to uniform laws that did not reflect at all the U.S. approach.[11] There was increasing concern that international unification of law without U.S. involvement could eventually damage U.S. businesses.[12]

The main international fora for work on private international law are the Hague Conference on Private International Law,[13] the United Nations Commission on International Trade Law (UNCITRAL),[14] the International Institute for the Unification of Private International Law (UNIDROIT)[15] and the Organization of American States.[16] Work in this field generally avoids projects where there are high-level governmental policy concerns, and focuses instead on projects where development of uniform law will solve real problems that have made particular international transactions difficult and uncertain.

L/PIL, staffed by three lawyers, coordinates and leads U.S. participation in the work of these four organizations.

The codification of private international law can result in several different kinds of work products, dealing with several different subject matters, and using several different approaches.

The work product can range from a convention (i.e., treaty), which is the most formal and binding example of international law, and which truly unifies the law, to a model law, a model contract, general rules or guidelines – all of which are non-binding efforts to harmonize the law.[17] These non-binding efforts may be precursors to eventual conventions. The UN Convention on Contracts for the International Sale of Goods[18], the UNCITRAL Model Law on Electronic Commerce[19], the OAS Truck Bill of Lading[20], the UNCITRAL Arbitration Rules[21], and the UNCITRAL Legal Guide on International Countertrade Transactions[22] provide an example of each type of work product.

The three main subjects of private law work are commercial law, family law (such as conventions on international adoption, parental child abduction and trust and estates) and judicial assistance (such as conventions on service of process abroad, taking of evidence abroad, and legalization).

So what do these work products on these various subject matters do? Depending on the approach, they either unify substantive law, they unify procedure, they determine the applicable law, or they combine some or all of these approaches.[23]

The Hague[24], Hague-Visby[25] and Hamburg Rules[26] concerning carriage of goods by sea are all examples of substantive conventions, as is the draft UNCITRAL carriage of goods convention.[27] These all set forth the basic substantive provisions that apply to covered transactions.

The Hague Convention on Service Abroad of Judicial Documents in Civil or Commercial Matters[28]is a widely used procedural convention. It sets out agreed procedures for service of process upon a defendant located in another party country.

Choice of law conventions are the original – and for a long time the only – type of private international law convention. They were for decades and still are very popular in civil law regions such as Europe and Latin America. They determine which country’s law will apply to a legal transaction or relationship involving more than one country. One example is the Hague Convention on the Law Applicable to Trusts and on Their Recognition.[29] This Convention provides that when certain conditions are met, the law of the country establishing the trust will apply.[30] This is important because the common-law trust is not used in civil law countries, and without the convention the courts of non–trust countries that are faced with disputes involving a trustee or assets located in a non-trust jurisdiction, would often be unable analytically to approach these disputes. While the Trusts Convention addresses a unique situation and clearly benefits common-law jurisdictions, applicable law conventions have a serious drawback which has affected their acceptability, particularly in common-law countries. They often provide for the applicability of law other than the law of the forum. Neither lawyers nor judges are happy about having to prove, argue or base decisions on unfamiliar law. Having to prove foreign law often increases the cost of litigation substantially; and frankly, there is a very high risk of error – of judges saying, “The law requires me to apply the law of XYZLand. I hereby find that the law of XYZLand is the same as the law of ABCLand.” ABCLand, of course, is the forum.

More and more what we are seeing are private international law conventions that combine substantive law, agreed procedures, and choice of law or choice of forum provisions. The Hague adoption[31] and child abduction[32] conventions are examples. They impose substantive obligations on the parties to establish certain standards for adoptions, in the first case, and to return a child who has been wrongfully removed or retained, in the latter case. But much of the conventions are devoted to developing procedural mechanisms for cooperation and requirements for the recognition and enforcement of decisions that meet the conventions’ standards.

The great benefits of private international law are predictability and efficiency. Often it’s less important what the rules are, so long as you know what they are and everybody plays by them.

B. What is the United States Approach to Private

International Law Projects?

It’s a uniquely American approach, perhaps described by two words: participatory and pragmatic.

First, participatory:

The Secretary of State’s Advisory Committee on Private International Law is the forum by which the State Department, which is the action office for private international law within the U.S. Government, obtains the requisite expertise and guidance on both the general direction the U.S. should take in its efforts, and specific positions the U.S. should pursue in specific pending projects.[33] The Advisory Committee’s membership includes representatives from all national legal organizations that have an interest in private international law, including the ABA’s sections of International Law, Business Law, and Family Law, the National Conference of Commissioners on Uniform State Laws, the National Association of Attorneys General, the Judicial Conference of the U.S., the Maritime Law Association and many others. For specific pending projects, we turn to groups of experts who make up informal study groups, subgroups of the Advisory Committee. We hold regular meetings of these Study Groups, which are open to the public and are announced in advance in the Federal Register. We also frequently send out documents and updates by email to a mailing list that includes anyone who wants to be on it. This helps to ensure that the views expressed by United States delegations in international negotiations represent a balanced position resulting from the suggestions received from, and concerns expressed by, many, and sometimes competing, elements of the private sector and responsible government agencies. The members of the U.S. delegation to a particular negotiation are generally chosen from the Study Group. Our delegations are led by an L/PIL attorney, and usually include officials from the relevant federal or other government agencies, academics, lawyers representing the various industry sectors, and non-lawyer industry representatives.

The goal of this very inclusive process is to include every interest group in the process of developing the U.S. position on the various legal and policy issues that arise in each international project. It is of paramount importance to us that none is left out, that every interested party has an opportunity to be heard. Our process is highly participatory. While each of the L/PIL attorneys hopes to be a knowledgeable generalist on a broad range of private international law issues, we are seldom as expert on any specific subject as are the practitioners who deal with these issues every day, the academics who build a career on studying them, and the business officials who have hand-on practical experience in what works and what doesn’t work in the industry.

In private international law, unless there are public or foreign policy interests that are inconsistent with the interests of the affected private sector groups, the U.S. government generally seeks to carry out the goals of those groups. This is at the heart of the difference between U.S. participation in private international law negotiations and that of many other countries. Other countries may prefer to send only government officials to these negotiations; and sometimes these officials express positions that the U.S. private sector advisors know is not the position of the industry representatives in those countries. There often seems to us to be a serious disconnection between a country’s delegation in intergovernmental meetings and the elements of their private sector that are supposed to benefit from the convention or model law.

Some countries and experts, have very strong doubts about industry participation in the actual negotiation of private international law conventions.[34] They prefer to consult with industry before a negotiating session begins, but not to include industry in their delegations. They believe that allowing the active participation of industry can lead to unprincipled compromises, bad drafting, and a complicated and inconsistent text.[35] My short response to that is: It is probably true that a small group of expert legislative drafters could develop a simple, clear and coherent text more easily without the constant interference and competing demands of industry representatives. But, at least from the U.S. perspective, such a text is much less likely to solve the real-world problems it is supposed to address, and is much less likely to be ratified.

This very active participation of industry is such an important aspect of the U.S. approach to private international law, and apparently is so unusual, that it is worth considering why the United States approach is so different. Perhaps the main reason why some states do not permit active participation of the affected private sector interests is because there is no political need for them to do so. Perhaps this results from greater political power in the national governments vis á vis the public, possibly attributable to greater confidence in the national government in smaller countries and to tolerance of more centralized government and law than in the United States. Perhaps there exists in other countries an acceptance of the national Government and its officials as the guardians of fairness and the law, and as the institution that is to weigh and balance various and competing interests without needing to hear or heed them.

The most basic reason for the difference may simply be that many countries have a parliamentary form of government without the separation of the legislative and executive branches of government that exists in the United States.[36]

In those countries there may be little likelihood that a convention, once submitted to parliament by the Government, will not receive the requisite approval. Thus, there is not a compelling political need to ensure that industry approves the convention. That is most decidedly not the case in the United States. In the United States, multilateral private law conventions are vulnerable and prone to derailment during the Congressional approval process unless they have the active support of all major stakeholders. Unless the convention meets their often competing needs, the U.S. will not be able to become a party, no matter how strong the Executive Branch’s support of the convention may be. This may result in the compromises and complicated drafting that Professor Tetley and others dislike. But the alternative is an elegantly drafted, smooth-flowing, completely coherent convention that sits on the shelf because it is not widely accepted.

This leads to the second and related characteristic of the U.S. approach to private international law negotiations: pragmatism. The result of our highly participatory process is that we tend to take extremely pragmatic positions. We start by focusing on real problems and looking for practical solutions. The active participation of our stakeholders provides a much-needed reality check to what otherwise is often the largely theoretical work of the organizations responsible for drafting private international law conventions. We do not think that government knows best how to define and solve industry’s problems. We are not particularly concerned if these solutions go against the traditional legal theories that have been applied to a particular issue in the past. We understand the need to make compromises in order to have a balanced convention that meets the competing demands of various industry sectors. When our industry representatives tell us that a complicated solution is necessary because the issues are, in fact, complex, we often defer to them.

C. Some Thoughts for the Future

I will leave the general topic of private international law by just noting two emerging important issues. First, in the future I believe that we will be seeing an increasing use of private international law instruments to create law, rather than simply harmonize or unify existing law. This will be the case for new technologies such as electronic commerce; and it is likely also to be the case with model laws that are drafted with developing countries in mind. And the second tantalizing development that we are already seeing is the emerging power of regional organizations, such as the European Union. The European Commission, the administrative arm of the EU, already has the exclusive authority to negotiate on behalf of its member states on certain specified topics, and the list of topics is getting longer every year. It will be fascinating to see the effect of this 25-nation bloc on the negotiating process.

PART II – THE DRAFT UNCITRAL CONVENTION ON THE CARRIAGE OF GOODS BY SEA

A. Introduction

I am going to first give you a brief summary of the background and rationale for this project -- how did we arrive at this point both within the United States and internationally. I will also describe the negotiation process. And then I will give you an overview of a few of the major issues in the draft convention.

B. Background

Everyone agrees that none of the existing carriage of goods regimes meet today’s commercial needs. These include the 1924 Hague Rules[37](in use by the United States and a few other countries), the 1968 Hague-Visby Rules[38] (in use by most of our major trading partners) and the 1992 Hamburg Rules (rejected by most major maritime and commercial powers).[39] Most significantly, the Hague Rules[40] and the Carriage of Goods by Sea Act (COGSA)[41] (the U.S. enactment of the Hague Rules), with their tackle-to-tackle scope limitation[42], and $500 per package liability limitation,[43] fail to address the astonishing changes brought about by containerization, multimodal transport and e-commerce. The U.S. Maritime Law Association proposed detailed amendments to COGSA in the late 1990’s.[44] These amendments were supported by some but not all of the affected U.S. industry groups.[45] Congress was unwilling to legislate in this complex and technical area in the absence of a consensus among all the major affected interest groups.

Although the MLA proposal was not enacted, it nonetheless was an important step in cargo liability reform for at least two reasons. First, one of the lessons learned was that while no party has the power to get its favorite proposals enacted, any major party has the power to block enactment of any other proposal. Thus, everyone realized that cargo liability reform in the United States would not be possible without compromise and cooperation among the major U.S. players. Recognizing this, in 2001 the World Shipping Council (WSC), representing owners of liner vessels, primarily foreign, that serve the United States, and the National Industrial Transportation League (NIT League), representing U .S. shippers, reached a compromise agreement on cargo liability reform.[46] And second, the MLA proposal to amend COGSA got the attention of the international maritime community.[47] The unwelcome suggestion that the United States might unilaterally reform its cargo liability laws helped convince our trading partners that the time was right for the negotiation of a new multilateral convention.

When UNCITRAL decided to consider the need for a new carriage of goods convention, it invited the Comité Maritime International (CMI) to do so.[48] After a massive amount of work, the CMI delivered its draft text to UNCITRAL in December 2001.[49] The USMLA, as the U.S. member of the CMI, was an active participant in the CMI drafting exercise, and much of the MLA COGSA proposal found its way into the CMI draft.

C. The Negotiation Process

The U.S. Government agencies involved in this negotiation are the Legal Adviser’s Office and the Bureau of Economic and Business Affairs in the State Department and the Department of Transportation’s Maritime Administration. But we are not the subject matter experts in this negotiation.

We have held numerous meetings and conference calls seeking input as to what the U.S. position should be on various subjects. Every sector of industry concerned with the carriage of goods in the United States has participated in this process. This includes the MLA, the World Shipping Council, the National Industrial Transportation League, the Transportation Intermediaries Association, FedEx, UPS, the American Institute of Marine Underwriters, the Association of American Railroads, the American Trucking Associations, as well as representatives of the stevedores and terminal operators. The U.S. delegation to this negotiation includes, in addition to the government representatives, representatives from many of these organizations. It also includes University of Texas Law Professor Michael Sturley, who is perhaps the leading U.S. expert on COGSA and the Hague Rules.

Since this negotiation began in the Spring of 2002,[50] the UNCITRAL Working Group on Transport Law has met for a total of 15 weeks, in either New York or Vienna. The next two-week session will take place in New York in April.[51] Early on the Working Group recognized that, with a convention covering as many topics as this one, there was a need to continue preparatory work between the formal Working Group sessions in order for the project to be completed in a reasonable amount of time. Therefore, the Working Group agreed to a number of informal steps. First, a coordinator was selected for each of the convention’s 11 main topics. The coordinator developed a questionnaire on his topic and delegations provided responses. Based on the responses, the coordinator prepared a report, which was distributed as an official UNCITRAL document summarizing the main issues and the positions of the various delegations, and proposing various options. This enabled delegates to come to the Working Group sessions well-prepared, and thus enabled the Working Group to make much faster progress. Second, one delegate offered to create and maintain a website, where the coordinators’ questionnaires and reports, and delegations informal submissions on any topic, could be posted and made available to all. Finally, on several occasions, a delegation has hosted an inter-sessional meeting in London, open to all delegates, for an informal exchange of views on particularly complex topics. No decisions are ever made during any of these informal exchanges. All decision-making is done at the formal Working Group sessions. However, given the complexity and size of this project, the informal exchange of information has enabled people to be better prepared for the Working Group sessions.

D. Significant Provisions of the Draft Convention

One of the most important features of the draft convention is the range of issues it covers. COGSA, the Hague, Hague-Visby and Hamburg Rules all are limited mainly to liability issues. This convention covers a much broader range of issues. In addition to the ones we will discuss today (scope, liability of the carrier and shipper, liability limits, jurisdiction and freedom of contract) the convention also covers electronic transactions[52], transport documents[53], transfer of rights[54] and right of control[55], and delivery to the consignee.[56] Many of these issues have never before been codified in an international convention.

As I highlight some of the main issues in the convention, I would remind you of one caveat: No part of the draft text will be final until it is all final. Thus, when I say that the Working Group has tentatively agreed to particular language, it is still possible for the debate on that language to be reopened.

1. Scope Of Coverage

-- What is the geographic scope of the convention (port-to-port, tackle-to-tackle, or door-to-door)?

The approach that has been tentatively agreed to is a modified door-to-door approach that has come to be called a “maritime plus” or “limited network” regime.[57] This means that when there is a through bill of lading covering an international multimodal shipment, and one of the legs of the journey is by sea, then, as between the parties to the contract, the convention’s terms, including its liability terms, apply, regardless of whether the damage occurred on the ocean leg or during the inland carriage.[58] This is a huge improvement over the current situation where the liability rules depend on where the damage occurred. This uncertainty is the cause of much litigation.

There is one significant exception to this regime. Many European countries initially opposed a door-to-door scope because of fear that it would conflict with existing European unimodal regimes[59], such as the CMR and CIM-COTIF (the European road and rail conventions). The draft convention deals with this by providing that, when it can be proved that the damage occurred during land transport that would, absent this convention, have been subject to a mandatorily applicable international convention, then that land convention will apply.[60]

-- Who is covered by the convention? (Treatment of Performing Parties)

The Hague Rules and COGSA were developed at a time when multimodal shipping contracts were much less common, and therefore it was appropriate that those rules regulate the relationship between the contracting shipper and the contracting carrier. The early regimes did not address the responsibilities of parties, other than contracting parties, who actually performed the contract. This caused some problems from the start, because shipowners have always contracted with independent stevedores and terminal operators to load and unload vessels, and to store cargo. Different countries, and different courts within a single country, have handled these issues inconsistently. The uncertainty is the source of much litigation. Under modern commercial shipping practices, and with the increasing number of door-to-door contracts, more and more of the contracting carrier’s responsibilities are performed by others.

It was not possible, either within the United States, or internationally, to achieve support to apply the convention’s rules to suits against inland performing parties (i.e., trucks and railroads). But there was widespread support for applying the convention to (in addition to the parties to the contract) maritime performing parties (e.g., terminal operators and stevedores).[61] This is an improvement over current law. Cargo claimants will be free to sue inland performing parties (trucks and railroads) as they do today under national law.

-- What (which transactions) is covered by the convention?

From the beginning of this project, there has been no disagreement in substance as to what types of transactions should be within the scope of the convention. Everyone has agreed that, generally speaking, the instrument is intended to cover contracts in the liner trade because they are less likely to be negotiated individually and because a certain inequality of bargaining power between the shipper and the carrier has been assumed. Likewise, everyone has agreed that the instrument should generally speaking not cover the tramp trade, where individually negotiated charter parties and an equality of bargaining power are normal. It was also agreed that there were some exceptions to this general rule. There was considerable disagreement as to how to reduce this substantive consensus into treaty language.

Three different approaches were identified for defining the scope of application. These came to be called the “documentary” approach, under which the application of the Convention would turn on the issuance of a particular type of document, the “contractual” approach, under which application would depend on the parties’ concluding a particular type of contract, without regard to whether a particular document was issued, and the “trade” approach, in which application of the convention would turn on the of trade in which the carrier was engaged. All of these approaches have strengths and weaknesses. Any of them would work for the vast majority of transactions that everyone agrees should clearly fall within or without of the convention. But, with each approach, there is a danger that some transactions at the margins would accidentally be included or excluded from the scope of the convention.

The Working Group has tentatively agreed on a modern, hybrid proposal that takes advantage of the strengths of each of the three approaches, while minimizing the weaknesses. This proposal starts with a contractual approach, by stating the convention applies to all contracts of carriage by sea that meet certain geographic conditions.[62] Because this approach, standing alone, is too broad and would sweep in contracts that all agree should not be subject to the convention, the proposal then uses a trade approach to exclude charter party contracts and other non-liner contracts.[63] Unfortunately, excluding all non-liner contracts goes too far and would also exclude some transactions that the Working Group agreed should be included. Such contracts technically do not meet the definition of contracts in the liner service; however, they essentially operate as if they were in the liner service and issue traditional liner service bills of lading. Therefore, the policy justification for subjecting them to the convention’s mandatory rules applies to them just as strongly as in the strict liner context. This problem is addressed by adding a provision based on the documentary approach that would bring back into the convention’s coverage contracts of carriage in the non-liner service where a traditional liner-service-type bill of lading has been issued.[64] This innovative approach is a practical solution to a frustrating problem that has plagued previous carriage of goods conventions.

2. Liability Of The Carrier/Burden Of Proof

The United States has three main objectives for the carrier’s liability/burden of proof part of the new convention. Those objectives are: retention of most of the enumerated exceptions to carrier’s liability[65]; elimination of the error of navigation or management defense[66; and improvement of the burden of proof rule.[67] The current draft of the instrument meets those objectives.

The draft instrument eliminates the error of navigation defense. It retains all of the other COGSA defenses, although many of them are modified. For example, the traditional fire defense has been limited to fire on the ship[68], a change required because the new convention will apply (as between the contracting carrier and the shipper) to multimodal door-to-door shipments, and it was thought unnecessary for the fire defense to apply to fires on land. The exception for saving or attempting to save life at sea has been retained[69], but the exception for saving or attempting to save property has been modified to “reasonable measures”[70] to save or attempt to save property. An exception has been added for “reasonable measures to avoid or attempt to avoid damage to the environment.”[71]

The order of the burden of proof is not covered by COGSA or the Hague Rules and has generally been left to national courts to determine. The draft convention does include rules on this topic. With one exception, the draft convention applies basically the same shifting burden of proof as has been imposed by U.S. and most other courts, which have compared the process to a ping-pong game. The one change is for the last volley of the ping-pong game, and it concerns situations where the damage is attributable partially to something for which the carrier is liable, and partially to something for which the carrier is not liable. It is often impossible to determine the extent of damage caused by each. The U.S. courts follow a rather harsh rule which does not allow for equal or proportionate allocation of the loss but instead states that in such cases the carrier must bear the entire loss.(cite cases) The draft instrument includes a proportionate fault rule that states that in such cases the carrier is only liable for the part of the loss that is attributable to the event or occurrence for which it is liable, and that liability must be apportioned on the basis of the rules set forth in the convention.[72] This should result in a more balanced and fair outcome.

3. Obligations Of The Shipper

The principal obligation of the shipper under COGSA and the Hague Rules relates to the shipment of dangerous goods. The draft instrument would impose a wider range of obligations on the shipper, including obligations

concerning delivery of the goods to the carrier[73] and obligations concerning the furnishing of information.[74] The draft also sets forth detailed liability rules for violation of these obligations.[75] This will be the first time that the shipper’s obligations/liabilities have been codified in an international convention. This is an improvement. The carrier’s obligations have been spelled out in detail in previous conventions. It seems appropriate and fair that the shipper’s obligations are as well.

4. Limitation Of Liability/Delay

The liability limitations are likely to be the last thing agreed upon in this negotiation. The United States is in favor of adopting the Hague-Visby limitation amounts[76]. In the very brief discussion of this topic thus far, a number of delegates have expressed support for the Hamburg Rules limitation (which is 25% higher than the Hague-Visby limits)and a few have argued for limitation amounts comparable to the much higher levels found in the European road and rail conventions.

Recovery of consequential damages for delay is not covered by any of the existing conventions on this topic, which limit recovery to physical loss or damage, unless the parties agree to a specific delivery time. The draft convention includes language that would allow for the recovery of consequential damages caused by any “unreasonable” delay on the part of either the shipper or the carrier, even when there is no specific delivery date. The United States opposes the inclusion of consequential damages for delay, unless this has been expressly agreed to by the parties.[77] The inclusion of consequential damages inserts a strong element of unpredictability into what should be a predictable risk calculation by shippers, carriers and insurers. This issue has not yet been finally decided by the Working Group.

5. Jurisdiction

Prior to the Supreme Court’s 1995 Sky Reefer [78] decision, U.S. courts uniformly held that COGSA prohibited foreign forum selection clauses. This was an exception to the general rule established by the Supreme Court in the 1972 Bremen [79] case that forum selection clauses were presumptively valid. In Sky Reefer, the Supreme Court found that COGSA did not prohibit forum selection clauses and that therefore contracts for the carriage of goods by sea were subject to the same rule of presumptive enforceability as other contracts.[80] U.S. cargo interests believe that enforcing foreign forum selection clauses against them is unfair, as these clauses are, they say, part of adhesion contracts and often are hidden in the boiler plate on the back of the bill of lading. The added cost of litigating in a foreign country often forces them to agree to low settlements. As a result, U.S. cargo interests have made reversing Sky Reefer one of their primary objectives in the UNCITRAL negotiation.[81]

As part of an overall “package deal,” U.S. shipper and carrier interests agreed to a two-part proposal that would provide that, as a general rule, the shipper/plaintiff could choose the place of litigation, even if another forum was designated in the contract between the shipper and the carrier; except that, in situations where there was a negotiated contract between sophisticated parties, the forum selection clause was enforceable and the plaintiff could only litigate in the designated forum. For the United States, a forum selection provision that incorporates these two points – one favoring the shipper, and one the carrier –is a “deal-breaker” issue.[82] It is unlikely that we could become a party to the new convention if it does not include these two rules.

In UNCITRAL, it was clear from the beginning that delegations had irreconcilably different views. Many preferred that forum selection clauses be enforced in all cases, even if they appeared in the boilerplate clauses of a liner bill of lading. Others preferred that exclusive choice of forum clauses never be enforced, thus guaranteeing that cargo interests would have access to convenient forums to resolve their claims against carriers.

The 25 members of the European Union were representative of the larger Working Group, in that they had widely differing views on the forum selection issue. However, the European Commission has exclusive competency to negotiate jurisdiction questions on behalf of the member states, and thus the individual delegations from EU states were not allowed speak on this issue in the Working Group. Thus the Commission, like the United States, needed to find a compromise position during its coordination sessions with its members.

The text that the Working Group eventually accepted in principle was the result of a joint proposal of the United States and the European Commission.[83][1] The Commission, which has its own forum selection rules (Brussels I)(cite) that generally enforce choice of forum clauses in EU member states, needed to ensure that the EU rules would continue to apply in EU states. At the same time, the Commission frankly acknowledged that this issue was a critical one for the United States, and that the convention was unlikely to succeed without the United States as a party. The Joint Proposal was a compromise that harmonized the law to the extent possible, but offered optional choices to the extent necessary to reach an agreement.

The Joint Proposal is similar in many ways to the U.S. proposal. It permits a plaintiff suing a carrier to institute an action in any of six places with a reasonable connection to the dispute: the carrier’s domicile, the place of receipt, the place of delivery, the port of loading, the port of discharge, or a place designated in a forum selection clause. It also provides that, notwithstanding this general default rule, exclusive choice of court clauses in certain volume contracts would be enforceable between the parties. This exception for a defined class of volume contracts meets the U.S. insistence that forum selection clauses in mutually negotiated contracts between sophisticated parties should be upheld.

But the Joint Proposal also meets the European Commission’s need, and that of other countries whose internal laws generally uphold choice of forum clauses. It does this by permitting any Contracting State to give effect to any choice of court agreement if that State gives notice that it will do so when it becomes a party to the convention. EU members and some other states will presumably take advantage of this option. The effect of this for the United States is that, assuming the United States abides by the general default rule and does not give notice that it will enforce choice of court clauses in circumstances other than those specified in the convention, U.S. cargo and carrier interests will be met: the cargo interests will have succeeded in partially overruling the Sky Reefer case, thereby giving the U.S. cargo plaintiff the right to litigate in the United States in many cases; and the carrier interests will have preserved the right to enforce forum selection clauses in certain volume contract cases.

6. Contractual Freedom

All of the existing multilateral carriage of goods conventions are “one-way mandatory,” i.e., the rules state that contracts must not derogate from the convention to the detriment of the shipper, but derogation that increases the carrier’s obligations is allowed. Just as the forum selection issue is a “deal breaker” for the United States, so is the inclusion in the convention of a provision that allows the parties to certain mutually negotiated agreements (volume contracts) that contain certain safeguards to derogate from the terms of the convention, whether the derogation increases or decreases the carrier’s obligations. The rationale for the United States position is that the existing mandatory regimes were developed for a commercial context that no longer exists, and that they do not meet today’s commercial realities. It can no longer be assumed that the carrier always has the more powerful bargaining position with regard to a shipper; nor can it be assumed that transport contracts are always adhesion contracts, which the shipper must take or leave.

When the United States first proposed to the Working Group that the new convention should allow parties to certain types of contracts to opt out of one or more of the convention’s rules, there was strong opposition. There was objection to the whole notion of freedom of contract from countries that take a more regulatory approach to trade issues, as opposed to the free-market approach the United States endorses. But after more than three years of discussion, which included many meetings outside of the formal Working Group, I think we have persuaded the Working Group that if the new convention is to be forward-looking and able to respond to the changing needs of industry, it has to provide, along with a strong framework of generally applicable rules, the flexibility that the commercial parties need to be successful. The Working Group has tentatively agreed to a proposal that would allow “volume contracts,” under certain conditions that would ensure that the shipper was not taken by surprise, to derogate from all but a few of the convention’s rules.

E. Next Steps

This negotiation has already taken longer than most countries, including the United States, would have liked. But, it is a massive undertaking, covering numerous topics that could easily have been the subject of half a dozen separate conventions. And I am encouraged that we are making good progress on all of those topics. I think that it is realistic to expect that the Working Group will finish the text of the convention in 2007.[84] The draft convention then must be approved by the full Commission, and finally by the U.N. General Assembly, at which point it will be open for signature, hopefully in 2007, or, at the latest 2008.

CONCLUSION

In conclusion, I would note that it has frequently been stated by non-U.S. participants in this negotiation that U.S. acceptance of the convention is critical for its success. As more than one delegate has put it, the maritime cargo transportation world does not need another treaty to which the United States is not a party. If indeed, United States ratification of the new convention is as important as many have suggested, then I hope that my remarks concerning the U.S. process of participation in international private law, and the U.S. views on some of the major issues in the draft convention, may be of some interest to you.

As for the convention’s chances of success, there are no guarantees. But the draft convention is shaping up to be an instrument that is consistent with all major U.S. objectives, and therefore I am cautiously optimistic that it will be a convention that U.S. industry will want the United States to join. For this to happen, we need to continue the excellent partnership that we have developed between and among all of the U.S. stakeholders. Internationally, the Working Group also needs to continue the pragmatic, open-minded approach that has resulted thus far in essential compromises. If this cooperative attitude continues, we stand a very good chance of bringing home a modern, comprehensive carriage of goods treaty that will serve the global industry’s needs for decades, and which the United States will be able to join.



[1] See UNICTRAL - About UNCITRAL, http://www.uncitral.org/uncitral/en/about_us.html (June 5, 2006) (listing UNCITRAL’s mandate, origin, methodology, current news and frequently asked questions).

[2] See generally Draft Convention on the Carriage of Goods [Wholly or Partly] [by Sea], U.N. Commission on International Trade, Working Group III, Sixteenth Sess., U.N. Doc. A/CN.9/WG.III/WP.56 (2005) (hereinafter Draft Convention).

[3] See Preparation of a Draft Instrument on the Carriage of Goods [by Sea], Proposal by the United States, United Nations Commission on International Trade Working Group III, Twelfth Sess., U.N. Doc. A/CN.9/WG.III/WP/34 (2003) (hereinafter US Proposal).

[4] See 15A C.J.S. Conflict of Laws § 2 (2005) (“Conflict of laws, or private international law, constitutes that field of law which determines whether foreign law should or should not be given effect or enforced”).

[5] See 48 C.J.S. International Law § 1 (2005)(“International law is that branch of positive law which governs the interrelations of sovereign states”).

[6] See John A. Sponagle, Jr., The Arrival of International Private Law, 25 Geo. Wash. J. Int’l L. & Econ. 477 (1991) (drawing parallels with the private international law unification process and the domestic process undertaken by the NCCUSL); see also Uniform Law Commissioners, Organization at http://www.nccusl.org/Update/DesktopDefault.aspx?%20tabindex=0&tabid=11 (last visited June 7, 2006) (describing the work done by the NCCUSL).

[7] See Peter H. Pfund, Progressive Development of Private International Law, 249 Recueil Des Cours 9, 51 (1994).

[8] U.S. Const. art. 3, § 2 (“The judicial Power shall extend . . . to all Cases of admiralty and maritime Jurisdiction”).

[9] International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading and Protocol for Signature, opened for signature Aug. 25, 1924, 51 Stat. 233, 120 L.N.T.S 155 [hereinafter Hague Rules], reprinted at 6 Benedict on Admiralty, Doc. No. 1-1 (7th rev. ed. 2004); see also Act of Apr. 16 1936, Ch. 229, 49 Stat. 1207, 1207-13 (codified at 46 U.S.C. app. §§ 1300-1315 (2000)) (codifying Hague Rules in the United States as the Carriage of Goods by Sea Act (COGSA)).

[10] See Peter H. Pfund, United States Participation in International Unification of Private International Law, 19 Int’l L. 505, 505-06 (1985) (indicating United States involvement with the Hague Conference and UNIDROIT beginning in 1964).

[11] See Pfund, supra note 7 at 52 (describing concerns of U.S. legal profession).

[12] Id.

[13] See Kurt H. Nadelmann, The United States joins the Hague Conference on Private International Law: A “History” with Comments, 30 Law & Contemp. Probs. 291 (1965) (describing history of United States membership to the Hague Conference on Private International Law); Hague Conference on Private International Law - About, http://www.hcch.net/index_en.php (follow “About HCCH” hyperlink) (last visited June 5, 2006) (describing the work of the Hague Conference on Private International Law).

[14] See UNICTRAL – About UNCITRAL, http://www.uncitral.org/uncitral/en/index.html (follow “About UNCITRAL” hyperlink) (last visited June 5, 2006) (describing the work of UNCITRAL).

[15] See UNIDROIT – About UNIDROIT, http://unidroit.org/english/home.htm (follow “About UNIDROIT” hyperlink) (last visited June 5, 2006) (discussing the work of UNIDROIT).

[16] See Organization of American States – Private International Law, http://oas.org/main/main.asp?sLang=E&sLink=http://www.oas.org/dil/ (last visited June 5, 2006) (describing the work of the OAS when it comes to Private International Law).

[17] See Pfund, supra note 7 at 45-49 (describing the different forms of private international law).

[18] Convention on Contracts for the International Sale of Goods, opened for signature on Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1984), 1489 U.N.T.S. 3 (1980).

[19] UNCITRAL Model Law on Electronic Commerce, G.A. Res. 162, U.N. GAOR, 51st Sess., Annex I, U.N. Doc. A/RES/51/162 (Jan. 30 1997).

[20] Model Inter-American Uniform Through Bill of Lading for the International Carriage of Goods by Road, adopted on Feb. 8 2002 at http://www.oas.org/main/main.asp?sLang=E&sLink=http://www.oas.org/DIL/treaties_and_agreements.htm (last visited June 12, 2006).

[21] UNCITRAL Arbitration Rules, G.A. Res. 31/98, U.N. Doc. A/RES/31/98 (Apr. 28, 1976).

[22] Legal Guide on International Countertrade Transactions, G.A. Res. 34, U.N. GAOR, 47th Sess., 73rd plen. mtg., U.N. Doc. A/RES/47/34 (Feb. 9 1993).

[23] See Pfund, supra note 7 at 40-44 (describing the different types of PIL conventions).

[24] See Hague Rules, supra note 9.

[25] Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, Feb. 23, 1968, 1977 Gr. Brit. T.S. No. 83 (Cmnd. 6944) (entered into force June 23, 1977), reprinted in 6 Benedict on Admiralty, Doc. 1-2; Protocol Amending the International Convention for the Unification of Certain Rules Relating to Bills of Lading, Dec. 21 1979, 1984 Gr. Brit. T.S. No. 28 (Cmnd. 9197) (entered into force Feb. 14., 1984), reprinted in 6 Benedict on Admiralty, Doc. No. 1-2A (7th rev. ed. 2004). These amendments to the Hague Rules are collectively referred to as the Hague-Visby Rules.

[26] Convention on the Carriage of Goods by Sea, Mar. 31, 1978, 17 I.L.M. 608.

[27] Draft Convention, supra note 2.

[28] Hague Conference on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, opened for signature Nov. 15 1965, 20 U.S.T. 361, 658 U.N.T.S. 163 available at http://www.hcch.net/index_en.php?act=conventions.text&cid=17 (last visited June 7, 2006).

[29] 1985 Hague Convention on the Law Applicable to Trusts and on Their Recognition, Hague Conference on Private International Law, Proceedings of the Fifteenth Session, 1985, tome II, “Trusts – Applicable Law and Recognition”, at p. 361; 23 I.L.M.1389, 1389-1392 (1984) available at http://www.hcch.net/index_en.php?act=conventions.text&cid=59 (last visited June 7, 2006).

[30] Id.

[31] 1993 Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoption, Hague Conference on Private International Law, Proceedings of the Seventeenth Session, 1994, tome II. “Adoption – Co-operation”, Final Act, Part A, at pp. 523-535; 32 Int’l Legal Mat. 1134 (1993) available at http://www.hcch.net/index_en.php?act=conventions.text&cid=75 (last visited June 7, 2006).

[32] 1980 Hague Convention on the Civil Aspects of International Child Abduction, Hague Conference on Private International Law, Actes et documents de la quatorzieme session, 1982, tome III, “Child Abduction”, at pp. 413-422; 51 Fed. Reg, 10494, 10498-10502 (26 March 1986); 19 Int’l Legal Mat. 1501, 1501-1505 (1980) available at http://www.hcch.net/index_en.php?act=conventions.text&cid=24 (last visited June 7, 2006).

[33] See generally, Pfund, supra note 7 at 53-57; see also Federal Advisory Committee Act, 5 U.S.C.A. app. 2, §§ 1-16.

[34] See William Tetley, Uniformity of International Private Maritime Law -- The Pros, Cons, and Alternatives to International Conventions -- How to Adopt an International Convention, 24 Tul. Mar. L.J. 775, 814 (2000) (“International legislators, like national ones, must strive to produce the best possible international law, rather than to appease and placate specific lobbies promoting their own agendas”).

[35] Id. (“Practising lawyers who participate in such international legislative endeavors should make a determined effort to “check their clients at the door” before beginning work. They should focus on the process of preparing clear and fair conventions and protocols that will stand the test of time and contribute to order and justice on the oceans of the world”).

[36] See Pfund, supra note 7 at 81 (indicating that parliamentary systems have more flexibility when it comes to ratifying conventions).

[37] See Hague Rules, supra note 9.

[38] See Hague-Visby Rules, supra note 25.

[39] See Hamburg Rules, supra note 26.

[40] See Hague Rules, supra note 9.

[41] 46 U.S.C. app. §§ 1300 -1315 (2000).

[42] 46 U.S.C. app. § 1303 (6) (2000).

[43] 46 U.S.C. app. § 1304 (5) (2000).

[44] See generally Michael F. Sturley, The Proposes Amendments to the Carriage of Goods by Sea Act: An Update, 13 U.S.F. Mar. L. J. 1 (2000-01) (updating the status of the MLA proposals) (hereinafter Sturley 2000); Michael F. Sturley, Proposed Amendments to the Carriage of Goods by Sea Act, 18 Hous. J. Int’l L. 609 (1996) (describing the proposed MLA amendments to COGSA) (hereinafter Sturley 1996); see also Michael F. Sturley, Overruling Sky Reefer in the International Arena: A Preliminary Assessment of Forum Selection and Arbitration Clauses in the New UNCITRAL Transport Law Convention, 37 J. Mar. L. & Com. 1, 3-6 (2006) (providing background information on the MLA’s proposed COGSA amendments) (hereinafter Sturley 2006).

[45] See Constantine G. Papvizas & Lawrence I. Kiern, 1999-2000 U.S. Maritime Legislative Developments, 32 J. Mar. L. & Com. 349, 367-368 (2001) (indicating that the proposal was stalled in part because of opposition from some groups); see also Sturley 2000 supra note 62 at 19-21 (discussing the political process around the proposed changes).

[46] Press Release, World Shipping Council and National Industrial Transportation League, Shippers and Carriers Agree on Cargo Liability Reform, (Sept. 27, 2001) available at http://www.worldshipping.org/pressrelease.pdf (last visited June 7, 2006).

[47] See Sturley 2000, supra note 62 at 22-27 (discussing the impact of the U.S. proposal on the international community).

[48] See Commission on International Trade law on the Work of its Thirty First Session, UNGA, A/53/17 (June 1-12, 1998) at ¶ 263 (inviting CMI and other groups to submit opinions on a new COGSA); see also UNCITRAL, Possible Future Work on Transport Law, Report of the Secretary-General, Thirty-fourth Sess., United Nations Commission on International Trade Law, Para. 8 (indicating CMI’s report to the commission that a working group was studying areas where unification or harmonization are needed).

[49] See generally Preliminary Draft Instrument on the Carriage of Goods by Sea, United Nations Commission on International Trade Working Group III, Ninth Sess U.N. Doc. A/CN.9/WG.III/WP.21/Add.1 (2002) (indicating in footnote 1 that the CMI prepared the draft instrument).

[50] See Provisional Agenda, United Nations Commission on International Trade, Working Group III, Ninth Sess., U.N. Doc. A/CN.9/WG.III/WP.20 (Jan. 15, 2002) (outlining the agenda of the opening session).

[51] See Annotated Provisional Agenda, United Nations Commission on International Trade, Seventeenth Sess., Working Groups III, A/CN.9/WG.III.WP.60 (January 13, 2006) (indicating the date of the next working group session).

[52] See Draft Convention, supra note 2 at arts. 5, 6, 7, 37 (referring to the use of electronic record and documents).

[53] Id. at arts. 37-45 (dealing with transport documents and electronic transport records).

[54] Id. at arts. 54-60 (dealing with right of control)

[55]] Id. at arts. 61-63 (dealing with transfer of rights).

[56] Id. at arts. 46-53 (dealing with delivery to the consignee).

[57] Id. at arts. 8-10 (indicating the scope of application).

[58] Id. at arts. 11-12 (dealing with the period of responsibility for the carrier and transport beyond the contract of carriage).

[59] See generally UNCITRAL, Preparation of a Draft Instrument on the Carriage of Goods [by sea], Proposal by the Netherlands on the Application door-to-door of the instrument, Twelfth Sess., Working Groups III, A/CN.9/WG.III.WP.33 (October 6-17 2003).

[60] See Draft Convention, supra note2 at art. 89 (dealing with international instruments governing other modes of transport).

[61] See Draft Convention, supra note 2 at art. 20 (describing the liability of maritime performing parties).

[62] See Draft Convention, supra note 2 at art. 8 ( indicating the general scope of application).

[63] Id. at art. 9 (indicating specific exclusions and inclusions).

[64] Id. at art. 10 (indicating application to certain parties”).

[65] See U.S. Proposal, supra note 3 at ¶¶ 13, 14.

[66] Id. at ¶¶ 13, 14.

[67] Id.at ¶ 15.

[68] See Draft Convention, supra note 2 at art. 17(3)(f).

[69] Id. at art. 17(3)(l).

[70] Id. at art. 17(3)(l) – (m).

[71] Id. at art. 17(3)(n).

[72] Id. at art. 21 (indicating joint and several liability and set-off).

[73] Id. at art. 28 (“Delivery for carriage”).

[740] Id. at art. 29 (“Carrier’s obligation to provide information and documents).

[751] Id. at arts. 31 (“Basis of shipper’s liability”), 32 (“Material misstatement by shipper’s), 33 (“Special rules on dangerous goods), 34 (Assumption of shipper’s rights and obligations”), 35 (“Vicarious liability of the shipper”).

[76] See U.S. Proposal, supra note 3 at ¶ 10.

[77] See US Proposal,supra note 3 at ¶¶39-40.

[78] See Vimar Seguros y Reaseguros, S.A. v. M/V SkyReefer, 515 U.S. 528 (1995) (hereinafter SkyReefer).

[79] M/S Bremen v. Zapata Off-Shore Co.,407 U.S. 1 (1972).

[80] See Skyreefer, 515 U.S. at 530.

[81] See generally Sturley 2006, supra note 62.

[82] See U.S. Proposal, supra note 3 at ¶¶ 30-33.

[83] See Report of Working Group III (Transport Law) on the work of its sixteenth session , UN Doc A/CN./9/591 (December 2005), paragraphs 73-84.

[84] See Report of United Nations Commission on International Trade Law on the work of its thirty-eighth session, U.N. General Assembly, 38th Sess., U.N. Doc. A/60/17 at ¶ 184 (2005).



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