22
Dec
13

Evolution of Trade Laws

by Muhamad Rizal Avif Khan, Liverpool John Moores University

Freight shipping is acknowledged as one of the most global business, since maritime trade is at the peak of world economic activity (Stopford, 1997 p.2). When cargo owners devise to transport their cargo from one port to another, they need a shipowner or shipping agent to provide cargo vessels. Concomitantly, when shipowner promise to provide their vessels for the purpose of carrying freight by sea, an affreightment contract, a contract between shipowners and other parties to carry goods using their vessel (Wikipedia, 2013a), is a requirement to synchronize comprehension of the cooperation and to be a reference of decision if such problem occurs. This type of contract is under the umbrella of law of carriage by sea.

English law does not specifically contain the law of carriage by sea. Dockray (2004, p.1) stated that the English law does not cover some specific rules or cases which have no straight relationship in other areas of national law, since law of carriage by sea is formed based on a separate international maritime code which is agreed by several countries. However, the English law is still connected to law of carriage by sea in term of general common law circumstances, such as the law of bailment, contract, agency, tort, property and equity. Dockray (2004, p.1) considered the law of carriage by sea as a distinctive law. The law has its own international nature which leads to a willingness to make an international uniformity in maritime law. This desire has been complied in several rules of the law, although not always by the identical perception.

Traditionally, contracts between shipowner and other parties are classified into two types, charterparty and bill of lading. Wilson (2010, p.3) defined charterparty as a contract signed by shipowner which is in circumstance that he undertakes to specially allocate all of his vessel’s carrying capacity for either a particular expedition or a specified time period. On the other hand, if the shipowner does not employ his vessel in a certain voyage but a specific liner trade company, allowing any cargo to be carried the cargo, then the contract which is used will be in the form of bill of lading. These two evidences of contract are not absolutely distinctive. The variety of contracts made in seaborne trade lead to an expansion of the form. Wilson (2010, p.6-7) extended it into charterer’s bills of lading and the demise charterparty. Charterer’s bill of lading is used in situation where both bills of lading and charterparties are used in parallel. The demise charterparty, distinctively, does not act as a contract of carriage but a lease of the vessel, in a sense that the charter is responsible of vessel crew, equipment, navigation and management.

Wilson (2010, p.115-116) described the historical introduction of Hague/Visby Rules. Historically, carrier had a strict liability to deliver freights from original port to destination port. There was no exemption unless act of God, public enemies, and inherent vice. Any negligence and mistakes made by carrier was intolerable. In nineteenth century, concept of freedom of contract which excluded carrier’s common law liability was developed, creating advantages of superior bargaining power owned by carrier. This unfair condition led to the creation of some national laws in several countries, such as Harter Act 1893 in USA, the Australian Carriage of Goods by Sea Act 1904, the New Zealand Shipping and Seamen Act 1908, and the Canadian Water Carriage Act 1910. These legislations were made to ban the unfair exclusion of carrier liability, but they were still considerably insufficient. Therefore, a meeting held in the Hague in 1921 confronting shippers, shipowners, and other parties related to carriage by sea. The meeting resulted in a draft called Hague Rules which finally signed on 25 August 1924. However, these rules did not provide an extensive code to regulate all parties of carriage of goods by sea. These rules were intended only to identify basic liability of carrier to transport freight in proper level of safety. Because contents of Hague Rules did not fully satisfy shippers, a series of amendments was resulted then compiled in Brussels in February 1968. The revised rules are known as the Hague/Visby Rules. The rules are adopted in United Kingdom as the Carriage of Goods by Sea Act 1971.

Hague/Visby Rules, described by Wilson (2010, p.174-175), are focused on files covering the carriage contract rather than on the contract of carriage itself. It means the rules will not be applied unless the parties issue or envisage issuing bill of ladings or other document which is considered as a negotiable contract. The cargoes excluded in this rules are deck cargo and animals which are stated in contract to be carried at deck (Wilson, 2010, p.178). The coverage period of the rules is tackle-to-tackle (Wilson, 2010, p.181). It means the period starts when ship tackle is hooked onto the first cargo at the port of loading and ends when the tackle is released from the last cargo at the port of discharging. Therefore, according to the rules, the carrier liability is not only to carry the cargo safely but also load and discharge it in intact condition. Furthermore, the rules imply the duties of the carrier, such as to provide a seaworthy ship before and at the beginning of the voyage, to reasonably care about cargo as well as to issue a bill of lading. Besides carrier’s liability, the rules contain also rights, immunities and exemptions of the carrier (Wilson, 2010, p.194). One of the exemptions is perils of the sea. In the case of Canada Rice Mills v Union Marine [1941], the carrier was free from liability of the damage of rice they brought. The damage was caused by water that came in through a hole which was made by rat.

Hague/Visby Rules were regarded by many countries which have cargo-owning roles as outdated rules because of the emergence of need of comprehensive code covering all aspect (Wilson, 2010, p.215). This issue led to the arrangement of International Convention which sponsored by United Nations in Hamburg in March 1978, resulted in a Hamburg Rules. These rules are always applied regardless whether a bill of lading or a non-negotiable receipt is issued or not, as long as the carriage is between ports in two different states that accept the rules. The coverage period of the rules is during which the carrier is in charge of the goods at the port of loading until at the port of discharge, excluding carrier liability in loading and discharge process. Table 1 shows comparison of Hague/Visby and Hamburg Rules which is referenced from Wanigaskera (2013) and Berlingieri (2013).

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While rules above are focused on carriage of goods and involved by shipper, ship owner or charterer, there is also regulation which is focused on trades and mainly participated by buyer and seller. Sale of Goods Act 1979 regulates trades, transfers of ownership of goods for a monetary consideration, in United Kingdom as a consolidation of the earlier Sale of Goods Act 1893 and subsequent legislation. Sale of Goods Act 1979 has been further amended and varied by some legislation. This legislation put goods description in a compulsion. In case of Ashington Piggeries v Christopher Hill [1971] which is described by Wikipedia (2012), many Ashington Piggeries’ animal which consumed food from Christopher Hill died. The food contained toxic substance which was potentially harmed animals. Christopher Hill did no breach since the toxic substance was written on the product description. Time is also one of critical factor in this legislation. In case of Bunge Corp. v Tradax SA [1981] described by Wikipedia (2013b), the buyer, Bunge Corp., bought thousands of soya beans meal from Tradax SA. Because of some reasons, Tradax SA failed to deliver it on time so that the market price of soya beans meal fell down. Then, Bunge Corp terminated the contract and it approved by the court.

For standardizing understanding of buyer and seller obligation, there is an international term which is used in trade. International Commercial Terms (INCOTERMS) are internationally well-known uniform trade terms used in sales contracts. GOV.UK (2013) implied that these terms are used as a standard to identify who is responsible for the transport cost, where the goods should be picked up and deliver to, and who is responsible for the goods at every phase of transportation.

Although those rules above are suitable enough and have been adopted by many countries, Malcolm (2013, p.131) said that the most updated rules, Hamburg Rules, have been unsuccessful to reach the key purpose of any international conference in the term of commercial law, which to produce legitimate standardization of law at the international level. As a solution, Rotterdam Rules are introduced in 2009 capturing widespread aspects in deeply-detailed scope. The existence of these rules is expected to establish modern international rules that fulfil the needs of commercial parties and offer international uniformity. Designed to deal with emerging current issues in logistic, Rotterdam Rules cover several new topic which is not existed in preceding rules, such as Electronic Data Interchange (Article 35, 36, 37, 38, 39, 40, 41, 45, 47, 51, 57, 58) and multimodal transport including road (Article 82.b), rail (Article 82.c), air (Article 82.a), and inland waterways (Article 2.2). However, these young rules have been ratified by only two states until July 2012 (Malcolm, 2013, p.132).

By examining all rules above, the old rules have been rooted in maritime business and still sufficient to be enforcedly used as legitimacy. The emerging of the new ones, Rotterdam Rules, offers a bright prospect of modern international law to bring uniformity although those dreams will not come in an instant.

 

References

Berlingieri, Fransesco (2013) A Comparative Analysis of The Hague-Visby, The Hamburg, and The Rotterdam Rules
Available at: http://www.uncitral.org/pdf/english/workinggroups/wg_3/Berlingieri_paper_comparing_RR_Hamb_HVR.pdf
[Accessed: 21st November 2013]

Clarke, Malcolm (2013) Maritime Law Evolving: Thirty years at Southampton. United Kingdom: Hart Publishing

Dockray, Martin (2004) Cases & Materials on the Carriage of Goods by Sea Third Edition. London: Cavendish Publishing.

GOV.UK (2013) Incoterms (International Commercial Terms) – GOV.UK
Available at: https://www.gov.uk/incoterms-international-commercial-terms/overview
[Accessed: 23rd November 2013]

Stopford, Martin (1997) Maritime Economic 2nd Edition. London: Routledge.

Wikipedia (2012) Christopher Hill v Ashington Piggeries
Available at: http://en.wikipedia.org/wiki/Christopher_Hill_v_Ashington_Piggeries
[Accessed: 25th November 2013]

Wikipedia (2013a) Affreightment – Wikipedia
Available at: http://en.wikipedia.org/wiki/Affreightment
[Accessed: 18th November 2013]

Wikipedia (2013b) Bunge Corporation v Tradax SA
Available at: http://en.wikipedia.org/wiki/Bunge_Corporation_v_Tradax_SA
[Accessed: 25th November 2013]

Wilson, John F (2010) Carriage of Goods by Sea Seventh Edition. Harlow: Pearson


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