Rotterdam Rules: Will the U.S. lead?
Obama expected to submit regulatory analysis to Senate for advice and consent this summer.
By Chris Dupin
Adetailed analysis of the Rotterdam Rules, a proposed international treaty to achieve cargo liability reform for multimodal maritime cargo, could be transmitted by President Obama to the Senate for its advice and consent later this summer.
“We are fairly far along in the process. We are towards the phase of having various agencies review it,” including the Justice and Transportation departments, and Federal Maritime Commission, said Steve Miller, team leader for maritime and land transport in the State Department’s Office of Transportation Policy.
Once the document is transmitted to Congress, it will become public. However, the State Department has already been discussing the rules with industry groups such as the American Association of Port Authorities (AAPA), World Shipping Council, and National Industrial Transportation League.
Supporters believe that U.S. ratification could help prod other nations into approving the treaty.
The treaty was developed through the United Nations Commission on International Trade Law (UNCITRAL). But since it was adopted in December 2008, only two dozen countries have signed the treaty, and only one—Spain—has actually ratified it. The treaty will enter into effect when 20 countries ratify it.
“It is time to see this thing moving forward,” said Vince DeOrchis, an attorney with Montgomery McCracken who served as a consulting expert to the State Department during the drafting of the Rotterdam Rules. “I’m a little worried that some countries may lose interest in it because they do not see the U.S. carrying the banner and moving forward with it. The whole thing could die on the vine if it does not get reinvigorated.”
Chet Hooper, an attorney with Holland & Knight and another member of the U.S. delegation to UNCITRAL, agrees that “most of the world is waiting for us. We have such a bad reputation of helping to negotiate treaties and then not ratifying them. The rest of the world says last thing we need is another maritime treaty without the United States.”
Hooper is hopeful that the article-by-article analysis that will accompany the transmittal letter will resolve concerns, such as those raised by AAPA, and expects the treaty will be self-executing, meaning implementing legislation will not be required.
Chris Koch, president and chief executive officer of the World Shipping Council, also was hopeful that concerns about the treaty would be resolved through transmittal documents, which the Senate would rely on when considering the bill for ratification and courts would eventually look to when deciding litigation.
He’s hopeful the legislation will be transmitted to the Senate this year and approved, although possibly not this year.
If the United States does approve the law, Koch said “I don’t know if other countries are going to follow in lockstep, but I think what is pretty clear is if the U.S. doesn’t ratify it, it is going to take a lot of the momentum away from it.”
Jean Godwin, AAPA’s general counsel and executive vice president, said the Rotterdam Rules would bring so-called maritime performing parties “directly beneath the treaty, which has not been true in the past. That would include any operating ports and private marine terminal operators.
“I don’t think a lot of the issues of what that would mean were thought about in the process of negotiations, so we are working through a number of questions with them to try and get clarification,” she said. “We haven’t decided yet whether we think our issues can be resolved through the transmittal process or if we need to seek implementing legislation. That is still an open question.”
Implementing legislation “would clarify how the provisions would apply to maritime performing parties,” she added.
One concern for the AAPA is what the Rotterdam Rules would mean to states that enjoy sovereign immunity under the U.S. Constitution, but have state port authorities that operate their own terminals. Another concern is about the right of contribution, where a terminal operator and a carrier may be jointly liable in the event of, say, cargo damage.
The State Department has “to decide what they are willing to do, if we can come up with language that will make everyone happy and if they are willing to sign off on it. I think it is going to take a while,” Godwin said
AAPA’s concerns have “to do with liability standards, how they would be interpreted, how they would be applied to maritime performing parties, and what the relationship would be if there is joint liability between the carriers and marine terminal operators,” she said.
“The treaty provides that marine terminal operators based in the U.S. can be sued here,” she said, while on the other hand “carriers can have a choice of forum provision in their contract that requires them to be sued in their own country.
“We are worried that that may make U.S. operators a target for litigation if we are the ones are most easily found,” Godwin said. “How do we address getting contribution from the carrier if there is joint liability?
“It changes the rules of the game. The treaty sets forth a set of rules, but then says carriers and shippers can negotiate away from those rules by contract. We don’t have that opportunity. We are not party to those contracts,” she said. “The treaty does indicate in some cases what that would mean for maritime performing parties and in other cases it is not clear.”
As an illustration of what AAPA is concerned about, Godwin gave the example of a consignee receiving damaged cargo in the United States, when it’s not clear where the damage occurred.
“Who do they sue if they are a U.S. shipper? If they have come through one of my operating ports can they sue that port here?” she said.
If the shipper has to go to Japan or South Korea to sue a carrier because of a forum selection clause, “we think we are going to be a likely target of litigation if they can easily sue a terminal operating company or a port here. They are not supposed to be able to recover from us unless we actually caused the damage, but we are the easy target,” she said.
“We get the benefit right now if a carrier and the shipper have a forum selection clause in a contract and the carrier can only be sued in another country,” Godwin explained. “They can’t sue us here. We would always be in the same forum as the carrier under current law.”
But under the Rotterdam Rules, she said ports or terminals could be sued here and the carrier could not be sued in the United States if it had a forum selection clause.