Rotterdam Rules - Ratification status in the US and effectiveness of choosing to apply them voluntarily

Rotterdam Rules - Ratification status in the US and effectiveness of choosing to apply them voluntarily

02 August 2016

On 12 July 2016, Christopher R. Hart and Utsav Mathur of Norton Rose Fulbright published an article about the ratification status in the U.S. 


The Rotterdam Rules, or the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, is the latest international convention intended to harmonize rules governing international contracts for transportation of goods by sea. Adopted by the General Assembly on December 11, 2008 and signed by the United States and many other maritime countries in 2009, just three countries have ratified the treaty to date, a long way short of the 20 countries required for the rules to come into force. A general perception is that if the US ratifies, then a sufficient number of other countries will ratify as well.

Despite not being in force yet, some shipping interests might consider adopting the Rotterdam Rules by express reference to the Rules in a choice of law clause in their contracts of carriage. This raises a question whether US courts would enforce a voluntary selection of the Rotterdam Rules and, more broadly, the status of US efforts to ratify the treaty.

Status of ratification in the US 

Under the US Constitution, for the US to ratify a treaty, the President must obtain advice and consent of the US Senate, which requires two thirds approval in the Senate. To date, the President’s office has not sent the Rotterdam Rules to the Senate for consideration, mainly because some US port authorities and terminal operators oppose ratification.

The ports and terminals are reported to believe that the Rotterdam Rules would impose on them risks of potential cargo damage liability that they do not already have under the current cargo liability statute, the US Carriage of Goods by Sea Act (COGSA). Article 19 of the Rotterdam Rules imposes liability for cargo loss or damage, in certain circumstances, on a “maritime performing party.” The definition of this term, under Article 1, includes ports and terminals when they perform “any of the carrier’s obligations under a contract of carriage with respect to the receipt, loading, handling . . . unloading or delivery of the goods.” COGSA does not contain a similar provision imposing liability on ports and terminals, and US ports and terminals are concerned about how this change would affect them.

Two related obstacles are firstly, that some US port authorities are governmental entities who may be entitled to sovereign immunity in some circumstances, and secondly, uncertainties about what effect the Rotterdam Rules would have on cargo litigation involving ports and terminals, who are not parties to the contract of carriage. It is not clear how the Article 19 liability provision could be reconciled with a port’s sovereign immunity.

A representative of the US Department of State, Mr. Steve Miller, recently indicated that the US government Executive Branch is in favor of ratifying the Rotterdam Rules, and the State Department is exploring avenues for how to move forward to obtain Senate consent. Mr. Miller made these public remarks during a presentation at the CMI/MLA Conference in New York on May 4, 2016. From these comments, it seems that ratification efforts remain underway in the US, but it is not clear how or when the concerns of the ports and terminals will be satisfied.

Effect of Rotterdam Rules choice of law clauses in the US

While awaiting potential ratification, some shipping interests could contemplate adopting the Rotterdam Rules voluntarily with a choice of law clause, or a clause paramount, in their contract of carriage. Research indicates that no reported case in US courts has decided the question as to whether contractual selection of the Rotterdam Rules would be enforceable to displace statutory application of COGSA. In the absence of definitive case law, one can expect US courts to be guided by the following COGSA provisions.

Section 6 of COGSA describes circumstances under which US courts should enforce a Rotterdam Rules choice of law clause. Section 6 allows the carrier and shipper to agree to any terms regarding the carrier’s duties, immunities, liabilities, and seaworthiness of the ship, provided that no bill of lading is issued and the agreed terms are included in a receipt that is marked non-negotiable. In addition, the agreed term regarding seaworthiness cannot be one that is contrary to public policy. This provision, allowing contract terms to differ from COGSA, does not apply to “ordinary commercial shipments made in the ordinary course of trade,” but only to other shipments when the particular cargo or other circumstances justify a special agreement.

If the Section 6 circumstances are met, the parties’ agreement to apply the Rotterdam Rules should be given full legal effect. If a negotiable bill of lading is issued, US courts probably would treat the choice of law clause differently.

In general, COGSA applies as a matter of law to bills of lading that are (1) a document of title to the cargo, and (2) evidence of the contract of carriage for transport of goods to or from US ports in foreign trade. When COGSA applies as a matter of law, Section 3(8) prohibits any contract clauses that would reduce the carrier’s duties or liabilities to a level below the minimum threshold provided in COGSA. Section 5 expressly allows a carrier contractually to increase its responsibilities and liabilities in a bill of lading. Section 5 also says COGSA does not apply to a charter party, but if a bill of lading is issued under a charter party then the bill of lading must comply with COGSA.

As a final observation, one could presume that US courts would not enforce a Rotterdam Rules choice of law clause to impose Article 19 liability on a port or terminal who is not a party to the contract of carriage. On the other hand, the automatic Himalaya Clause provisions in Articles 4 and 19, which extend the carrier’s defenses and liability limits to a “maritime performing party,” raise interesting questions about whether the non-parties could be insulated from the liabilities while still benefitting from these protections.