CIFFA Submission to Transport Canada Re: UNCITRAL Preliminary Draft Instrument (40KB)

By Tony Young, Chairman Seafreight Committee
Toronto, February 14, 2002

I. Introduction

CIFFA has been actively interested in the issues of multimodal transport law since 1999 and has attended a number of international conferences including the OECD Workshop on Cargo Liability in January 2001, the CMI Singapore Conference in February 2001 and the CMI International Sub Committee meeting in July 2001 as a constituent member of the Executive Committee of the Canadian Maritime Law Association and has written a number of papers on this topic. These papers, starting with our position paper on the US Cogsa bill of 1999 up to the CMI Revised Draft Instrument of May 31, 2001 form the background to our commentary on the latest instalment, the UNCITRAL “Preliminary Draft Instrument on the Carriage of Goods by Sea”, dated January 8, 2002. 

II. Background

The UNCITRAL Secretary General’s report states in its Introduction that the purpose of the project undertaken by the Commission was to establish the need for uniform rules pertaining to the carriage of goods by sea, where such rules did not exist, and to achieve a greater uniformity of laws where they do exist. In particular, views and suggestions pertaining to obstacles to the free flow of goods in light of new technology, i.e. electronic commerce, were to be sought from industry groups. The report acknowledges that there was a danger that the process could result in even more disharmony of laws and therefore any investigation of the liability regime was to be avoided, in order not to undermine the Hamburg Rules; rather, the project was to concentrate on “modern solutions to the issues not adequately dealt with or were not dealt with at all in treaties”.

CMI, at the invitation of UNCITRAL, undertook a study on a broad range of issues dealing with the interfaces between the different types of contracts involved in international trade and transport of goods with the aim of identifying areas where unification or harmonization was needed. The study would include a “re-evaluation of the principles of liability to determine their compatibility with broader areas of rules on the carriage of goods”. In the course of its work, CMI would come to the determination that the “broad-based project should be extended to include an updated liability regime that would complement the terms of the proposed harmonizing instrument”, which should not only deal with the carriage of goods by sea but also from warehouse-to-warehouse. At the CMI-UNCITRAL colloquium, “there was general consensus that, with the changes wrought by the development of multimodalism and the use of electronic commerce, the transport law regime was in need of reform to regulate all transport contracts, whether applying to one or more modes of transport and whether the contract was made electronically or in writing.”

Accordingly, an UNCITRAL “Working Group on Transport Law” was established to consider initially port-to-port issues, including that of liability, and then to study the desirability and feasibility of dealing also with door-to-door transport operations, while taking into account “solutions embraced in the United Nations Convention on the Liability of Transport Terminals in International Trade (Vienna, 1991) and issues of electronic commerce. Following is our commentary: 

III. Commentary on the UNCITRAL Draft Instrument

1. Electronic Commerce Issues

In our view, the Draft Instrument offers an excellent opportunity to set the legal framework in which electronic commerce can operate in international carriage of goods by sea and multimodal transport. Unfortunately, however, we feel definitions are lacking, rules are unclear and too much is left to commercial solutions. We realize that methods of electronic commerce are constantly evolving with advancements in communication technology and data management techniques and it is difficult to pin down exactly how electronic commerce is operating or should be operating. Yet, this is the very reason why there must be clear rules. We believe these rules should be technology and platform neutral and be based on existing rules and customs governing traditional [paper-based] commercial practices.

First, one must try to understand what a negotiable transport document is before one can attempt to put it into the context of electronic commerce. A negotiable transport document, such as an “original bill of lading”, is an item that has value in and of itself. It is an item that can be bought and sold. In fact, that is exactly what happens in a commercial letter of credit negotiation. The due course holder of the original transport document is able to claim delivery of the goods because it is a document of title, the “key to the warehouse”. Can such unique object be transformed into an electronic item? We do not think so. An electronic version of the negotiable transport document cannot be bought and sold simply because of the nature of electronic data. An electronic version of the negotiable transport document is nothing but information. The physical “document” is what is being bought and sold, not the “information”. Therefore, one must dispel the notion that an “electronic record” can be “negotiable” and that it can be traded like a negotiable transport document. Since, in our view, an electronic record cannot be “negotiable”, there cannot be a “holder” of a [negotiable] electronic record. In our opinion, the term “holder” in the Draft Instrument (Article 1.12) should be restricted to mean the holder of the set of original negotiable transport [paper] document only. 

On the premise that an electronic record cannot be traded, how is electronic commerce going to be possible? In order to consider this, one must look at the function of the negotiable transport document. If the function of the negotiable transport document can be duplicated electronically, then its physical form really is irrelevant. The function of the negotiable transport document as a document of title is to protect the rights of the party who has financial interest in the goods and to facilitate the transfer of such rights, hence “negotiability”. This is achieved by the phrase: “consigned to the order of…” In other words, the party to whom the goods are consigned is the party who has control over the goods, subject to the terms of the contract of carriage. Therefore, the controlling party plays the key role in electronic commerce. The Draft Instrument should clearly define what “controlling party” means and establish its role and responsibilities. Our suggested guideline for a definition of “controlling party” is as follows:

a) When no negotiable transport documents or electronic records are issued, the definition of controlling party is according to the CMI Uniform Rules on Sea Waybills. [The appropriate sections of the rules to be inserted].

b) When a negotiable transport document is issued, the controlling party is the “holder” of the full set of duly endorsed negotiable transport documents.

c) When a ‘to order’ electronic record is issued, the controlling party is the named party to whose order the goods are consigned. For the purpose of ‘to order’ electronic records, consignee must not be “to order of “bearer” or “holder”.

Since, in our view, an electronic record cannot be “negotiated”, it would also be inappropriate to use the term “negotiable electronic record”. We suggest, instead, the term “to order electronic record” as being the functional equivalent of the ‘to order’ bill of lading.

A “Right of control” protocol is the method by which the rights of a holder of negotiable transport document or the named party in a “to order electronic record” as well as the liability of the carrier can be protected. Article 11.2 sets the rules for the transfer of control between the parties. We feel the article need some improvement. For example, in the case of non-negotiable contracts of carriage, the rules should be those of the CMI Uniform Rules on Sea Waybills. Article 11.2(a)(i) should not allow for a third party to be named as “controlling party”, for that in effect brings into the contract of carriage a third party into an otherwise “straight” consignment. In a waybill contract of carriage, delivery normally proceeds uninterrupted to the named consignee, unless the shipper intervenes. There should be no onus on the part of the carrier to seek instructions from a third party prior to delivery to a named consignee. In the case of a “to order electronic record”, article 11.2(c)(i) states that the “holder” of an electronic record is the sole controlling party. However, it is not clear how a carrier can determine whether the “holder” of an electronic record is a rightful holder. Article 11.2(c)(ii) provides for the “holder” to demonstrate that he is the rightful holder through a procedure established under article 2.4 but that article is also unclear as to how a “holder” would be able to demonstrate his rightful “holdership”. Such a system would presumably require the existence of an authoritative central repository of information from where a carrier can obtain authentication of the claim of the “holder” of an electronic record, similar to a title registry office for real estate transactions or a motor vehicle registry bureau but on a worldwide scale. The registry that would maintain the records would need to have up-to-the-second information from both the buyer and seller because all it takes is a second for an electronic record to change hands unless the transaction is executed at the registry itself. This “stock exchange” type of electronic commerce framework seems to us to be quite cumbersome when the alternative is a simple buying and selling of a negotiable transport document between two parties. We feel that the legal framework should make things as easy as possible without creating new burdens.

As we stated earlier, we believe the key to electronic commerce is the controlling party. In a contract of carriage made out “to order”, the controlling party solely has the right of control, whether it is a negotiable transport document or an electronic record. In a negotiable transport document, such rights are transferred by means of an endorsement on the back of the negotiable transport document. In a consigned ‘to order’ electronic record, the “endorsement” would be by means of an electronic instruction from the controlling party to the carrier as provided for in article 2.4. Therefore, rather than for an electronic record to change hands and for the “holder” of such electronic record to demonstrate to the carrier that he is the “holder”, or for the carrier to verify whether the “holder” is a rightful holder, it should simply be the duty of the party ‘to whose order’ the goods were consigned, i.e.: the controlling party, to notify the carrier when the right of control has been transferred in favour of a named consignee. The duty of the carrier upon receiving such instructions would be to amend the name of the “to order of” party in the electronic record with the name of the new consignee, who becomes the new controlling party. This is our idea of how an “electronic endorsement” will work to facilitate electronic commerce. It avoids the need for any “holder” to demonstrate that it is the “holder” or for the carrier or any of its performing parties to verify its claim of “holdership” or for a registry to process all transactions and maintain accurate records “on-line”. The moment the goods arrive or delivery is claimed by the controlling party on record, the carrier should be able to effect delivery according to the instructions of the controlling party, that is, whoever is shown as the “to order of” party in the consignee field of an electronic record at any given time, without any additional burden of verification with any registries or incur liability from any failure to do so. To this end, the Draft Instrument should have a definition of “endorsement” for both negotiable transport documents and electronic records.

We feel that the above will address the vast majority of consignments made under commercial letters of credit where the buyer is also the ultimate consignee that takes delivery. We recognize, however, that there may be certain situations, particularly in the commodities trade, where the consignee is a trader that resells the consignment perhaps to another trader, prior to any delivery being claimed. As controlling party, it may instruct the carrier to re-consign the goods to the order of another party. A problem arises in respect of timing of payment and execution of instructions to change the controlling party. A buyer would not make payment with the expectation that the controlling party will instruct the carrier to re-consign the goods in its favour. A seller would not instruct the carrier to change the controlling party to a new party without first receiving payment. The carrier is certainly not responsible if the controlling party who received payment fails to instruct the carrier to change the controlling party, nor would the carrier be responsible if after having instructed the carrier to change the controlling party, the controlling party does not receive payment. Yet, should the carrier play a role in a commercial transaction involving electronic records? We think not. For such instances, we believe the appropriate mechanism is the negotiable [paper] transport document, which can be made to order of bearer and can be bought and sold any number of times without notification to the carrier. An electronic record could always be annulled in exchange for the issuance of a negotiable transport document per article 2.2.2. in order to accommodate these unusual situations. Alternatively, the trader can appoint a bank that will act as an intermediary to simultaneously execute payment of the goods and transfer the title to the goods. In such as case, the endorsee of the original electronic record would simply advise the carrier to change the consignee to the order of another bank that will act as the intermediary, perhaps under another letter of credit. Still, if the parties so desire, the endorsee could simply transfer right of control to the order of the new buyer. We suggest, however, that when an electronic record is issued, the consignee must be to the order of a named party and not to “bearer” or “holder”. 

2. Liability Issues

Article 1.17 “Performing party”

We agree with this definition of “performing party”, which has the same effect as “actual carrier” in the Hamburg Rules but includes all types of bailees, in the context of multimodal transport. We feel, however, that the bracketed language “[or fails to perform in whole or in part]” is redundant, given the meaning of the phrase: “person that physically performs”. If a party that was supposed to physically perform but did not actually have custody of the goods, then that party did not physically perform and therefore is not a performing party and should not be liable in tort or in contract to the cargo owner. It may, however, have contractual liability owing to any non-performance but such liability would be toward the contracting carrier only and not to cargo interests. 

Similarly, if a party who is retained by a shipper as agent physically handles the goods, such party should be deemed “performing party” and should not be excluded from the definition. An “agent” is usually one that makes arrangements on behalf of its principal with another party. If the agent actually performs any of the physical work related to the carriage, then it is not truly an agent but is one of the principals in the chain of custody. Therefore, the second sentence of the definition, in our opinion, should be deleted.

Deleting the second sentence of article 1.17, in our view, would also serve to facilitate supply chain management contracts or the so-called 3PL [third party logistics] services performed by a subsidiary or subcontractor of the carrier because the subcontractor would have the option of either providing the service as a performing party under the contract of carriage or it could ask the carrier or shipper to simply limit the scope of the contract of carriage and enter into a separate warehousing and distribution contract outside the carrier’s period of responsibility and the scope of the Instrument. Under the present definition, the moment a service provider is retained by a shipper, it is automatically deemed not to be a performing party for the purposes of the application of the Instrument, even if its work was part of the multimodal carriage.

Article 1.19 “Shipper”

We feel that the definition of “shipper” is too simplistic. “Shipper” should not be limited to the person that enters into a contract of carriage with a carrier. The party that enters into a contract of carriage with a carrier could in fact be acting on behalf of another party, the actual shipper or a number of shippers. This has significance when considering the liabilities of the shipper in Chapter 7 , which may in fact be the liability of the actual shipper, consignor or cargo owner. We suggest that the definition of “shipper” in the Hamburg Rules is more precise in the context of this Instrument.

Article 3.1 (a) and (b)

In view of the multimodal nature envisioned by the Instrument, the inclusion of the port of loading and port of discharge in brackets in article 3.1(a) and 3.1(b) is redundant and would cause unnecessary conflicts of jurisdiction. Canadian traffic, particularly, would become subject to U.S. law and to U.S. jurisdiction by virtue of the port of loading or port of discharge being in the United States and vice-versa, U.S. traffic over Canadian ports would be subject to dual jurisdiction. 

Even for a unimodal port-to-port contract of carriage, “place of receipt” and “place of delivery” are more precise than “port of loading” and “port of discharge” by virtue of article 4.1.1 because they allow for the exact point where the carrier’s responsibility commences and the point where it ends to be precisely stated on the contract of carriage. Under Hague and Hague-Visby Rules, the precise demarcation was the ship’s rail. However, under the Instrument, the period of responsibility of “port-to-port” could be subject to many interpretations, such as city limits of the port, perimeter of the port compound, terminal of the carrier, berth, crane, etc…

Article 3.3.1

We believe the term “charter party” should be defined in order to avoid any confusion as to what it is and is not, in light of the increasing use of “service contracts” or “time/volume contracts” and other types of long-term transportation service agreements or “contracts of affreightment” that could be conceived of in the future between carriers and shippers. Under the present rules, a contract of carriage is either a charter party or a bill of lading/waybill. One is the private hire of a ship or a part thereof at privately agreed upon terms and conditions and the other is for goods tendered to a common carrier that offers a scheduled service to the public at terms and conditions subject to national laws or international conventions. There is no similarity between the two, whatsoever. A service contract can be entered into for any number of containers over any number of ships and voyages. The vast majority of cargoes today is being carried by common carriers on the basis of service or time/volume contracts, ranging from one container per sailing to a thousand or more, under bills of lading or waybills issued pursuant to them that are subject to maritime conventions or national sea carriage laws. If these contracts of carriage were to be exempt from the Instrument, either as an exclusion or as falling under the definition of “charter party”, it would mean that the Instrument would have no practical use and any national sea carriage laws derived therefrom would hardly have any applicability in commercial trade. We do not believe it to be in the interest of public order and we consider it a step backwards to the “free-for-all” era before the 19th century U.S. Harter Act or the 1924 Hague Rules.

Article 4.2.1 Carriage preceding or subsequent to sea carriage

The bracketed article 4.2.1 provides that, within the carrier’s period of responsibility, the liability limitations to be set by the Instrument will prevail over national laws that may concurrently apply over the particular segment of inland carriage, unless there was another international convention that applied, (such as CMR or COTIF). We understand the rationale for this may be based on the general principle that international conventions must have precedence over national laws (as otherwise it would not be an international convention.) However, there is no reason why an international convention cannot adopt within its regime, a “network liability” that incorporates national laws that are applicable to the particular inland segment. Such an incorporation of national regimes into an international convention does not mean that a national law has precedence over the international convention. It merely means that the international convention recognizes the sovereignty of individual states to enact their own liability regimes over their own territory and a harmonization of national laws or regional conventions with international convention. In any event, under article 4.2.2, an international convention such as CMR would not be applicable unless the inland carriage traverses two or more CMR signatory states; therefore, the provisions of the Instrument would have precedence over individual national laws of even those of CMR signatory states, creating further confusion for all parties. For example, if the intended route were Paris via Antwerp, CMR would have precedence over the provisions of the Instrument. However, if the ship discharged at Le Havre, then the provisions of the Instrument would take precedence over French national law. 

In practice, such a network liability system would make it difficult for a subcontracted inland carrier to know whether its carriage was subject to national law or to international convention. It may refuse the carriage if it were subject to conditions other than those on its waybill. This poses a problem particularly where a national law provides for freedom of contract on inland liability limits and the inland carrier has no knowledge that its performance was actually subject to an international convention at much higher limitations as a “performing party”, in spite of the fact that it had negotiated a maximum liability (released rate) with the party who engaged its services. We suggest that the network liability regime of the Instrument be harmonized with those of national regimes for the sake of concurrent uniformity and certainty, as if separate inland contracts of carriage were entered into with individual inland carriers by the shipper, with the fallback proviso that the liability limitations of the sea leg would apply if the place where loss or damages occurred cannot be reasonably determined. Our suggested system of network liability would not conflict with the network liability regime of the UNCTAD/ICC Rules, which are currently in commercial use to a large degree but the proposed network system does conflict with the regime in the UNCTADD/ICC Rules. 

The Draft Instrument proposes a network liability regime, which deals with the goods during transit. It, however, does not address the liability of the carrier or performing party when the goods are in temporary storage, perhaps while awaiting trans-shipment or inland on-carriage. Most national inland liability regimes do not cover the liability of goods stored in a warehouse. We would suggest that the United Nations Convention on the Liability of Transport Terminals in International Trade (Vienna, 1991) be incorporated into the Draft Instrument to fill this void.

Article 4.3 Mixed contracts of carriage and forwarding

We feel that the “contracting out” provision of Article 4.3 is contrary to today’s commercial reality of multimodalism. If a carrier quotes a door-to-door or a terminal-to-terminal rate, then the undertaking is that of a door-to-door or a terminal-to-terminal carriage. On the other hand, if a carrier wishes to accept only a port-to-port undertaking, then the contract of carriage ought to be strictly port-to-port. Limiting the period of responsibility while reaping financial benefits over the full length of the journey would seem to be for no real purpose other than to avoid contractual liability over inland transport segments, in our opinion. If the “network liability” regime were based on our suggestion as stated in the paragraph above, we believe that the acceptance of responsibility for the entire length of the journey would not be as much an issue as there would not be a gap between the carrier’s contractual liability limitation and the performing party’s liability limitation and it would benefit the shipper with the convenience of having only one contract of carriage and one carrier to deal with. Especially, in electronic commerce, it is difficult to envision how a carrier and shipper can “expressly agree” to a limited period of responsibility while there would likely be only one electronic record for the entire transport. How, for example, would a carrier provide a shipper with contractual details of the inland segment of transport, for which it arranges as shipper’s agent, when in fact, the inland carrier would be entering into a contract of carriage, not with the shipper but with the carrier? Who would be responsible for effecting release of a shipment made under a letter of credit or against payment of C.O.D. charges at the final destination: the first principal carrier, whose period of responsibility would have ended partway or the second principal carrier who would have made no such undertaking with the shipper and with whom the shipper must deal with? We suggest that article 4.3 should be deleted in its entirety.

Articles 5.2.1 and 5.2.2

We find articles 5.2.1 and 5.2.2 to be contradictory with one another. If it is the carrier’s responsibility to exercise due diligence to “properly and carefully load, handle, stow, carry, keep, care for and discharge the goods” from the time it or its performing party receives the goods into their custody as defined under article 4.1.1, how can the carrier not be subject to the Instrument at all, by virtue of acting as shipper’s agent? Loading, handling, stowing, carrying, keeping and caring for before loading and after discharge are the carrier’s duty, not the shipper’s, under liner bill of lading terms. Again, we argue that common carriage by container and liner shipping are not at all like charter parties, where the charterer must supply its own stevedoring. In many cases the port labour and container terminal workers are actually employees of the carrier. It would seem absurd for the carrier to act as shipper’s agent and arrange stevedoring services that are actually performed by its own employees or agents. The Hague Rules, albeit tackle-to-tackle, nevertheless oblige the carrier to exercise due diligence before loading and after discharge and we see no reason why this paradigm should change. 

A difficult problem that may arise if before loading and after discharge functions were to be done by the carrier as agents of the shipper is in the Himalaya issue. While the undertaking by the carrier to act as shipper’s agent may serve the purpose of contracting out of liability for those functions, it also puts the party actually doing the work outside of Himalaya protection. Since such party would be under the shipper’s employ and not the carrier’s, it would not be able to benefit from the contractual terms and conditions of the carrier’s contract as a performing party, since it would not be considered a “performing party” per the second sentence of article 1.17, which begs the question: What is the liability limitation and exemptions from liability of such a party? Under the Instrument, it appears there is none as it falls outside of the scope of application. In our opinion, article 5.2.2 has the undesirable effect of removing “Himalaya” protection from parties who would otherwise be entitled to this protection as regular service providers to the carrier. If the intention was that the carrier did not wish to include certain functions within its period of responsibility, then it should not be performing as agent of the shipper; rather the shipper should make its own arrangement totally outside the scope of the contract of carriage. For example, the shipper should simply arrange for a warehouse on its own to stuff the container and then have the loaded container delivered into the custody of the carrier or its performing party as a shipper loaded container, if that were to be the case. A carrier should not be undertaking any of the work relating to the carriage within the scope of the contract of carriage on a non-responsible basis.

IV. Conclusion and Executive Summary

We congratulate CMI for succeeding in its monumental task in coming up with such a comprehensive Instrument in such a short period for UNCITRAL. We agree that there is a need to create a workable framework, in which electronic commerce can operate and indeed be promoted, as well as to modernize and unify sea carriage laws and to expand its scope multimodally. In forming our submission, we have limited our commentary only to areas that concern our industry, in which we felt we might have some expertise. In electronic commerce issues, we have focused our thoughts on how new rules can be devised in electronic communication and right of control protocols to mirror existing document based procedures without adding new burdens. On multimodal liability issues we have taken a perspective of harmonization of existing regimes in a way that would not result in the creation of new or increased liabilities for the carrier or its performing parties, nor of their exemption from liabilities they presently have. In particular, we have addressed the issue of contractual and tort liability in the context of bailment and the “Himalaya” principle. 

APPENDIX

UNCITRAL

Draft instrument on transport law

1. Throughout this paper, the expression “Hamburg Rules” refers to the 1978 United Nations Convention on the Carriage of Goods by Sea; the expression “Hague Rules” refers to the 1924 International Convention relating to the Unification of Certain Rules relating to Bills of Lading; the expression “Hague-Visby Rules” refers to the Hague Rules as amended by the Protocol of 23 February 1968 to amend the Brussels international Convention of 25 August 1924 for the unification of certain rules of law relating to bills of lading.

1. DEFINITIONS

For the purposes of this instrument:

1.1 “Carrier” means a person that enters into a contract of carriage with a shipper.

2. This definition follows the same principle as laid down in the Hague-Visby Rules and the Hague Rules: the carrier is a contractual person. A carrier may have entered into the contract either on its own behalf and in its own name or through an employee or agent acting on its behalf and in its name. A carrier will typically perform all of its functions through such persons.

1.2 “Consignee” means a person entitled to take delivery of the goods under a contract of carriage or a transport document or electronic record.

3. This definition excludes a person who is entitled to take delivery of the goods on some other basis than the contract of carriage, e.g. the true owner of stolen goods.

1.3 “Consignor” means a person that delivers the goods to a carrier for carriage. 

4. A consignor may include the shipper, the person referred to in article 7.7 or somebody else who on their behalf or on their request actually delivers the goods to the carrier or to the performing party. See also the commentary to article 7.7.

1.4 “Container” includes any type of container, transportable tank or flat, swapbody, or any similar unit load used to consolidate goods, and any equipment ancillary to such unit load.

1.5 “Contract of carriage” means a contract under which a carrier, against payment of freight, undertakes to carry goods wholly or partly by sea from one place to another.

5. This definition includes carriage preceding or subsequent to carriage by sea if such carriage is covered by the same contract.

1.6 “Contract particulars” means any information relating to the contract of carriage or to the goods (including terms, notations, signatures and endorsements) that appears in a transport document or an electronic record.

1.7 Controlling party means the person that pursuant to article 11.2 is entitled to exercise the right of control.

1.8 “Electronic communication” means communication by electronic, optical, or digital images or by similar means with the result that the information communicated is accessible so as to be usable for subsequent reference. Communication includes generation, storing, sending, and receiving.

1.9 “Electronic record” means information in one or more messages issued by electronic communication pursuant to a contract of carriage by a carrier or a performing party that

(a) evidences a carrier's or a performing party's receipt of goods under a contract of carriage, or

(b) evidences or contains a contract of carriage,
or both.

It includes information attached or otherwise linked to the electronic record contemporaneously with or subsequent to its issue by the carrier or a performing party.

6. This definition should cover every type of system actual and future. It follows as much as possible the content of the definition of transport document. It is apt to include information added after its issuance, for example, under article 11.2 (c)(iii). This will also cover electronic signature logically associated with an electronic record as well as electronic endorsement which could also be attached or otherwise logically associated with the electronic record.

1.10 “Freight” means the remuneration payable to a carrier for the carriage of goods under a contract of carriage. 

1.11 “Goods” means the wares, merchandise, and articles of every kind whatsoever that a carrier or a performing party received for carriage and includes the packing and any equipment and container not supplied by or on behalf of a carrier or a performing party.

7. This provision covers substantially the definitions of 'goods' in the Hague-Visby Rules and Hamburg Rules. Carriage of goods on deck is dealt with in article 6.6 and live animals in article 17.2(a).

1.12 “Holder” means a person that

(a) is for the time being in possession of a negotiable transport document or has the exclusive [access to] [control of] a negotiable electronic record, and

(b) either:

(i) if the document is an order document, is identified in it as the shipper or the consignee, or is the person to whom the document is duly endorsed, or

(ii) if the document is a blank endorsed order document or bearer document, is the bearer thereof, or

(iii) if a negotiable electronic record is used, is pursuant to article 2.4 able to demonstrate that it has [access to] [control of] such record. 

8. This definition may include the shipper, the consignee, and any possible intermediate holder. An agent of any of these persons acting in its own name may be a holder. It may be considered whether paragraph (a) should require a holder to be in “lawful” possession of a negotiable transport document. Using the term “lawful” without specifying what is meant by “lawful” possession could, however, invite reference to national law, thus undermining uniformity. Specifying what is meant by “lawful” possession would greatly expand the scope of the draft instrument. In any event, paragraph (b)(i) largely addresses the underlying concern for order documents. For bearer documents, it was thought that there is no real problem in practice that needs to be addressed here. If a practical problem did exist, it would not concern bearer documents in a wrongdoer’s hands (a problem for which other remedies exist) but documents in the hands of a good faith purchaser who claims through a wrongdoer. It is thought that such a good faith purchaser deserves protection, and that those who choose to use bearer documents should recognize such risks.

9. It is believed that paragraph (b)(iii) adequately covers not only register-based systems but also systems using PDF format in conjunction with other technology, systems giving access to the carrier database through a password or other security arrangement, and other systems.

10. The words between brackets are meant as alternatives between which a choice has to be made in the light of ongoing developments. “Access” may have too technical a connotation and “control” a too legal one.

1.13 “Negotiable electronic record” means an electronic record 

(i) that indicates, by statements such as “to order”, or “negotiable”, or other appropriate statements recognized as having the same effect by the law governing the record, that the goods have been consigned to the order of the shipper or to the order of the consignee, and is not explicitly stated as being "non-negotiable" or "not negotiable", and

(ii) is subject to rules of procedure as referred to in article 2.4, which include adequate provisions relating to the transfer of that record to a further holder and the manner in which the holder of that record is able to demonstrate that it is such holder.

11. The words “referred to” ensure that the parties can simply incorporate by reference a rule book applicable to their systems, if any, rather than include the full text of the applicable procedures.

1.14 “Negotiable transport document” means a transport document that indicates, by wording such as "to order" or "negotiable" or other appropriate wording recognized as having the same effect by the law governing the document, that the goods have been consigned to the order of the shipper, to the order of the consignee, or to bearer, and is not explicitly stated as being "non-negotiable" or "not negotiable".

12. The purpose of this definition is to give indications for identifying a negotiable transport document by scrutinizing its face. Further indications already appear in the definition of “transport document” in article 1.20 below. The rules as to delivery under such a document appear in article

10.3.2. The rules as to transfer of such a document appear in article 12.1. Both of these rely on the definition of “holder” which appears in article 1.12.

13. The use of the word “negotiable” has been much discussed, and it is undoubtedly true that in some countries the use of the word is not technically correct when applied to a bill of lading. One may consider to use the word “transferable” as being more neutral. The draft instrument uses the expression “negotiable” on the grounds that even if in some legal systems inaccurate, it is well understood internationally (as is evidenced by the use of the word “non-negotiable” in article VI of the Hague Rules), and that a change of nomenclature might encourage a belief that a change of substance was intended.

1.15 Non-negotiable electronic record means an electronic record that does not qualify as a negotiable electronic record.

1.16 “Non-negotiable transport document” means a transport document that does not qualify as a negotiable transport document. 

1.17 “Performing party” means a person other than the carrier that physically performs [or fails to perform in whole or in part] any of the carrier’s responsibilities under a contract of carriage for the carriage, handling, custody, or storage of the goods, to the extent that that person acts, either directly or indirectly, at the carrier’s request or under the carrier’s supervision or control, regardless of whether that person is a party to, identified in, or has legal responsibility under the contract of carriage. The term “performing party” does not include any person who is retained by a shipper or consignee, or is an employee, agent, contractor, or subcontractor of a person (other than the carrier) who is retained by a shipper or consignee.

14. There is a broad range of views on the “performing party” definition. At one end of the range, some favour including any party that performs any of the carrier’s responsibilities under a contract of carriage if that party is working, directly or indirectly, for the carrier. It is felt that such a broad definition would bring into the draft instrument’s coverage any person that could plausibly be a defendant in a tort, bailment, or other non-contractual action when cargo was lost or damaged. It would thus achieve greater uniformity by reducing the number of actions that could be brought outside of the instrument. Such a broad definition might be drafted with the following language at the start of the first sentence: “a person that performs, undertakes to perform, or procures to be performed any of a contracting carrier’s responsibilities under a contract of carriage, to the extent that . . . .”.

15. At the other end of the range, some advocate excluding the “performing party” definition entirely. In their view, such a definition is unnecessary because the defined “performing party” should be irrelevant under the draft instrument’s substantive rules. It is argued that the draft instrument should govern relations only between the shipper and the carrier, and that it should not govern relations between the shipper and those that are engaged, either directly or indirectly, by the carrier.

16. Between these two views at either end of the spectrum, any number of intermediate positions are possible. The two views that in discussion have been referred to most often are the relatively restrictive definition represented by the current text and a relatively inclusive definition that might be drafted with the following language at the start of the first sentence: “a person other than the carrier that performs or undertakes to perform any of the carrier’s responsibilities under a contract of carriage for the carriage, handling, custody, or storage of the goods, to the extent that . . . .”

17. Both of these intermediate positions limit the “performing party” definition to those that are involved in the carrier’s core responsibilities — carriage, handling, custody, or storage of the goods. Thus, ocean carriers, inland carriers, stevedores, and terminal operators, for example, would be included under either “performing party” definition. In contrast, a security company that guards a container yard, an intermediary responsible only for preparing documents on the carrier’s behalf, and a ship yard that repairs a vessel (thus ensuring seaworthiness) on the carrier’s behalf would not be included under either definition.

18. The difference between these two definitions is in the treatment of intermediate contractors. A basic hypothetical example may well illustrate the distinction. If, for instance, the non-vessel operating carrier (NVOC) contracts to carry goods from a port in one country (Rotterdam, for example) to an inland city in another country (Ottawa, for example), it thus qualifies as the “carrier.” Suppose that the NVOC then contracts with an ocean carrier for the carriage from Rotterdam to a Canadian port and with a trucking company for the inland carriage. If the ocean carrier arranges to have the goods carried on a vessel belonging to a different ocean carrier that has been time chartered to the first ocean carrier, and to have that vessel loaded and unloaded by independent stevedores, then both ocean carriers and both stevedores are performing parties under the relatively inclusive definition, but only the second ocean carrier and the stevedores are performing parties under the relatively restrictive definition represented by the current text. Although the first ocean carrier “undertakes to perform” the ocean carriage, it does not “physically” perform the ocean carriage. Similarly, if the trucking company subcontracts with an independent driver who owns its own truck to carry the goods from the Canadian port to Ottawa, both the trucking company and the truck’s owner-driver are performing parties under the relatively inclusive definition, but only the truck’s owner-driver is a performing party under the relatively restrictive definition. Although the trucking company “undertakes to perform” the inland carriage, it does not “physically” perform the inland carriage.

19. All of the possibilities discussed here assume a functional definition, depending on whether a person is performing some of the carrier’s duties under the contract of carriage, without regard for any contractual formalities. Under the relatively restrictive definition represented by the current text, several separate contracts may intervene between the carrier and a performing party. Under the relatively inclusive definition, the class of “performing parties” would include not only the carrier’s immediate sub-contractors but also the entire line of subsidiary persons that perform the contract (i.e., the sub-contractor’s sub-contractors, that party’s sub-contractors, and so on down the line to the party that physically performs the carrier’s duties).

20. The second sentence of the definition clarifies that “performing parties” are only those that work, directly or indirectly, for the contracting carrier. If the consignor or consignee has an employee or agent performing a task that would otherwise be the carrier’s responsibility under the contract of carriage, that employee or agent would not thereby become a “performing party.”

21. The phrase “or fails to perform in whole or in part” is bracketed, as the Working Group may decide that it is not necessary. It may indeed be argued that a person that fails to perform a task that it was obligated to perform is already covered by the phrase “a person . . . that physically performs.” Conversely, it may be argued that a person that fails to perform a task does not “physically perform,” and argued that the bracketed language is necessary to ensure that a person is treated as a “performing party” whether it performs its duties perfectly, performs its duties poorly, or fails to perform its duties at all.

1.18 “Right of control” has the meaning given in article 11.1.

1.19 “Shipper” means a person that enters into a contract of carriage with a carrier.

22. This definition mirrors the definition of “carrier”. The shipper is a contractual person who may have entered into the contract either on its own behalf and in its own name or through an employee or agent acting on its behalf and in its name. A shipper will typically perform all of its functions through such persons. The shipper may be the same person as the consignee, as is the case in many FOB (“free on board”) sales. See also the commentary to article 7.7.

1.20 “Transport document” means a document issued pursuant to a contract of carriage by a carrier or a performing party that

(a) evidences a carrier’s or a performing party’s receipt of goods under a contract of carriage, or

(b) evidences or contains a contract of carriage,
or both.

23. This definition should be read as preliminary to those of “negotiable transport document” and “non-negotiable transport document” in articles 1.14 and 1.16. Paragraph (a) would include a bill of lading issued to, and still in the possession of, a charterer, which does not evidence or contain a contract of carriage but functions only as a receipt, and some types of receipt issued before carriage or during transhipment. Paragraph (b) would include a bill of lading when operating as such, and a waybill.

2. ELECTRONIC COMMUNICATION

2.1 Anything that is to be in or on a transport document in pursuance of this instrument may be recorded or communicated by using electronic communication instead of by means of the transport document, provided the issuance and subsequent use of an electronic record is with the express or implied consent of the carrier and the shipper.

24. This provision lays down the general principle of equivalence between electronic and paper communication for the purpose of this draft instrument. Further, the emphasis is on the consent of the parties to communicate electronically.

25. It is felt that it is not necessary to mention the subsequent holder as well. By accepting the transfer of an electronic record a holder agrees to use electronic procedures; otherwise it could not become a holder.

2.2.1 If a negotiable transport document has been issued and the carrier and the holder agree to replace that document by a negotiable electronic record,

(a) the holder shall surrender the negotiable transport document, or all of them if more than one has been issued, to the carrier; and

(b) the carrier shall issue to the holder a negotiable electronic record that includes a statement that it is issued in substitution for the negotiable transport document,

whereupon the negotiable transport document ceases to have any effect or validity.

2.2.2 If a negotiable electronic record has been issued and the carrier and the holder agree to replace that electronic record by a negotiable transport document,

(a) the carrier shall issue to the holder, in substitution for that electronic record, a negotiable transport document that includes a statement that it is issued in substitution for the negotiable electronic record; and

(b) upon such substitution, the electronic record ceases to have any effect or validity.

26. It is expected that for a certain period there is a need for a provision dealing with a switch between a paper document and its electronic equivalent and vice versa. This article sets out a substitution rule and provides that in the case of such substitution no concurrent documents could be in circulation.

2.3 The notices and confirmation referred to in articles 6.9.1, 6.9.2, 6.9.3, 8.2.1 (b) and (c), 10.2, 10.4.2, the declaration in article 14.3 and the agreement as to weight in article 8.3.1 (c) may be made using electronic communication, provided the use of such means is with the express or implied consent of the party by whom it is communicated and of the party to whom it is communicated. Otherwise, it must be made in writing.

27. This article provides that all communications specifically provided for in this draft instrument may be made electronically provided that the parties to the communication so agree.

2.4 The use of a negotiable electronic record is subject to rules of procedure agreed between the carrier and the shipper or the holder mentioned in article 2.2.1. The rules of procedure shall be referred to in the contract particulars and shall include adequate provisions relating to

(a) the transfer of that record to a further holder,

(b) the manner in which the holder of that record is able to demonstrate that it is such holder, and

(c) the way in which confirmation is given that

(i) delivery to the consignee has been effected; or

(ii) pursuant to articles 2.2.2 or 10.3.2(i)(b), the negotiable electronic record has ceased to have any effect or validity. 

28. In order to achieve equivalence between a paper negotiable document and an electronic negotiable record, the agreed rules governing the use of such record have to include provisions relating to the typical ‘document of title’ functions of the record. In paragraph (a) it is specified that the rules have to provide for ‘electronic endorsements’ and in paragraph (b) that they have to provide for the electronic equivalency of the identification function of a paper document of title. (See also the definition of “holder” under article 1.13). In paragraph (c) it is provided that the manner in which it is confirmed that a record is exhausted has to be indicated in the agreed rules as well.

29. The words “referred to” in this provision ensure that the parties could simply incorporate by reference the agreed rules applicable to their systems rather than include the full text of the applicable procedures.

3. SCOPE OF APPLICATION

3.1 Subject to article 3.3.1, the provisions of this instrument apply to all contracts of carriage in which the place of receipt and the place of delivery are in different States if

(a) the place of receipt [or port of loading] specified either in the contract of carriage or in the contract particulars is located in a Contracting State, or

(b) the place of delivery [or port of discharge] specified either in the contract of carriage or in the contract particulars is located in a Contracting State, or

(c) [the actual place of delivery is one of the optional places of delivery specified either in the contract of carriage or in the contract particulars and is located in a Contracting State, or]

(d) [the contract of carriage is entered into in a Contracting State or the contract particulars state that the transport document or electronic record is issued in a Contracting State, or]

(e) the contract of carriage provides that the provisions of this instrument, or the law of any State giving effect to them, are to govern the contract.

30. Historically, the application of transport conventions has been tied to the issuance of a particular type of transport document, such as a bill of lading. Over time, bills of lading have been increasingly replaced by other, often non-negotiable, documents. Moreover, with the growth of electronic commerce it may be anticipated that traditional documents, perhaps even the electronic records as defined in this draft instrument, will also become less relevant. The scope of application of this draft instrument has therefore been defined without reference to whether a transport document (of any type) is or is to be issued.

31. Views are divided as to whether the port of loading should be included in paragraph (a) as a place that invokes the application of the draft instrument. For port-to-port shipments, it is agreed that the port of loading should trigger the application of the draft instrument, but the port of loading would already be included as the place of receipt. For door-to-door shipments when the port of loading and the place of receipt are in the same State, it would also be unnecessary to mention both. For door-to-door shipments when the port of loading and the place of receipt are in different States, some object that the identity of the port of loading is an essentially random factor having no necessary connection with the overall (i.e., door-to-door) performance of the contract, and that it should therefore not be included in paragraph (a). Nevertheless, it could also be argued that the identity of the port of loading is not a random factor when it is “specified either in the contract of carriage or in the contract particulars.” On the contrary, the identity of the port of loading is an essential aspect of a predominately maritime contract and should be included in a predominately maritime convention. Furthermore, including the port of loading in paragraph (a) would broaden the scope of application of the draft instrument and produce greater uniformity.

32. The debate on paragraph (b) as to whether the port of discharge should be included mirrors the debate on paragraph (a) concerning the inclusion of the port of loading.

33. Views are divided as to whether paragraph (c) should be included. Some object that it might be uncertain when the goods were received by the carrier whether the draft instrument would apply or not. Views are also divided as to whether paragraph (d) should be included. Paragraph (d) may give rise to some uncertainty as to where the contract of carriage was entered into or the electronic record issued.

34. Paragraph (e) is in accord with the provisions of article X of the Hague-Visby Rules, but concern has been expressed that paragraph (e) might have unintended consequences. Some fear that a charter party, for example, might have a choice-of-law clause calling for the law of a country that had ratified the draft instrument, and that this might have the effect not only of subjecting the charter party to this draft instrument but also of invalidating specific clauses in the charter party that were inconsistent with the draft instrument, notwithstanding the parties’ express agreement to those inconsistent terms. It is agreed that this result would be undesirable, but doubt has been expressed that this result would be likely under the current language in paragraph (e).

35. It has also been questioned how the courts would apply the reference to “the law of any State giving effect to them” in paragraph (e) if a State had enacted a national law based on thedraft instrument that did not fully conform to the draft instrument.

3.2 The provisions of this instrument apply without regard to the nationality of the ship, the carrier, the performing parties, the shipper, the consignee, or any other interested parties.

36. In order to avoid any doubt, this provision lists certain factors that might otherwise have been thought relevant but that are instead explicitly made irrelevant for determining the application of this draft instrument.

3.3.1 The provisions of this instrument do not apply to charter parties, [contracts of affreightment, volume contracts, or similar agreements].

37. The wide applicability of this draft instrument under article 3.1 implies that certain exceptions should be made. Some contracts may qualify as “contracts of carriage” for which it is neither necessary nor desirable to apply mandatory law. Moreover, some provisions of this draft instrument may be less suitable for application to certain contracts of carriage. Charter parties, for example, have long been excluded from mandatory law. Widespread support exists for similarly excluding contracts of affreightment, volume contracts, towage contracts, and similar agreements. But opinions are divided as to whether the term “charter parties” should be defined, and as to the extent to which other similar contracts should also be excluded.

38. Efforts to define charter parties have led to discussions for a long time. The lack of a definition in prior conventions has not caused great difficulties in practice, and some argue that it might be risky to attempt a definition at a time when commercial practices are changing rapidly. Others feel that a definition is necessary because the charter party exclusion is assuming increased importance in the draft instrument.

39. If it is ultimately concluded that a definition is necessary, something along the following lines might be suitable: “contracts for the [use] [disposal] [provision] of a ship, or part thereof, to be employed in the carriage of goods, whether on time- or voyage basis, such as a charter party, or a slot- or space-charter.” The three bracketed terms, “[use] [disposal] [provision],” are meant as alternatives. One of the three should be chosen.

40. The issue as to the exclusion of other similar contracts is unresolved. Although there is general support for the proposition that some contracts similar to charter parties should receive the same treatment as charter parties, it remains unclear how far the exclusion should be extended. Towage contracts were first mentioned fairly late in the consultation process, and thus they are mentioned only here in the commentary rather than in the draft text.

41. One suggestion is to extend charter party treatment to modern equivalents of the charter party, such as slot charters and space charters, but to recognize a different sort of freedom of contract for negotiated contracts between sophisticated parties that less closely resemble traditional charter parties, such as contracts of affreightment and volume contracts. The suggestion has been made that contracts of affreightment and volume contracts should be subject to the draft instrument as a default rule, but that the parties to these contracts should have the freedom to derogate from the terms of the draft instrument. Such derogations, however, would only be binding on the immediate parties to the contract. Transport documents issued under these contracts would still need to comply with the terms of this draft instrument when they are passed to a third party who is not bound by the original parties’ agreement.

42. If it is ultimately concluded that a definition of these additional terms is necessary, something along the following lines might be suitable: “A volume contract is a written contract between one or more shippers and one or more carriers in which the shipper or shippers agree to provide a certain volume or portion of cargo over a fixed period of time and the carrier or carriers agree to a certain freight rate or rate schedule and service level. A towage contract is a contract for the towing or pushing of floating objects, whether on time or voyage basis.”

43. Some consider that it would be valuable to stress that in cases in which the draft instrument did not apply as a matter of law it would still be open to the parties to incorporate the terms of the draft instrument into their agreement as a matter of contract. This contractual incorporation could be done in whole (incorporating the entire draft instrument) or in part (incorporating selected provisions of the draft instrument).

3.3.2 Notwithstanding the provisions of article 3.3.1, if a negotiable transport document or a negotiable electronic record is issued pursuant to a charter party, [contract of affreightment, volume contract, or similar agreement], then the provisions of this instrument apply to the contract evidenced by or contained in that document or that electronic record from the time when and to the extent that the document or the electronic record governs the relations between the carrier and a holder other than the charterer.

44. Whether the bracketed language is included in this provision will turn on whether similar bracketed language is included in article 3.3.1. If the bracketed language is included, then the reference to the “charterer” at the end of the article will need to be redrafted. Including volume contracts in this provision may make article 3.4 unnecessary.

3.4 If a contract provides for the future carriage of goods in a series of shipments, the provisions of this instrument apply to each shipment to the extent that articles 3.1, 3.2, and 3.3 so specify.

45. This provision may need to be revised or deleted in light of the resolution of the issue discussed in the commentary to article 3.3.1.

4. PERIOD OF RESPONSIBILITY

4.1.1 Subject to the provisions of article 4.3, the responsibility of the carrier for the goods under this instrument covers the period from the time when the carrier or a performing party has received the goods for carriage until the time when the goods are delivered to the consignee.

4.1.2 The time and location of receipt of the goods is the time and location agreed in the contract of carriage or, failing any specific provision relating to the receipt of the goods in such contract, the time and location that is in accordance with the customs, practices, or usages in the trade. In the absence of any such provisions in the contract of carriage or of such customs, practices, or usages, the time and location of receipt of the goods is when and where the carrier or a performing party actually takes custody of the goods.

46. Because of their legal consequences, it is considered important that the beginning and the end of the period of responsibility of the carrier should be specified as precisely as possible. 

47. The provision emphasizes that receipt is primarily a contractual matter. As an example: if it is agreed that the carrier will receive a cargo of oil 'when passing ship's manifolds', then the responsibility of the carrier for the oil starts at such place and point in time. Of course, often the agreed place and time of delivery of the goods to the carrier and their actual taking into custody will coincide. But they may differ, in which case the agreed time and place prevails. When no express or implied agreement has been made about the time and place of receipt, but certain customs, practices or usages of the trade, including those at the place of receipt, exist, then such customs, practices or usages apply. If no agreement, customs, practices or usages are applicable a general fall back provision applies. In such case the actual taking of the goods into the custody of the carrier is the relevant time and place of receipt.

4.1.3 The time and location of delivery of the goods is the time and location agreed in the contract of carriage, or, failing any specific provision relating to the delivery of the goods in such contract, the time and location that is in accordance with the customs, practices, or usages in the trade. In the absence of any such specific provision in the contract of carriage or of such customs, practices, or usages, the time and location of delivery is that of the discharge or unloading of the goods from the final vessel or vehicle in which they are carried under the contract of carriage.

48. Articles 4.1.2 and 4.1.3 together secure that when “tackle-to-tackle” transport is agreed (as will often be the case in bulk trades), the responsibility of the carrier does not extend beyond tackle.

4.1.4 If the carrier is required to hand over the goods at the place of delivery to an authority or other third party to whom, pursuant to law or regulation applicable at the place of delivery, the goods must be handed over and from whom the consignee may collect them, such handing over will be regarded as a delivery of the goods by the carrier to the consignee under article 4.1.3.

4.2.1 Carriage preceding or subsequent to sea carriage
Where a claim or dispute arises out of loss of or damage to goods or delay occurring solely during either of the following periods:

(a) from the time of receipt of the goods by the carrier or a performing party to the time of their loading on to the vessel;

(b) from the time of their discharge from the vessel to the time of their delivery to the consignee;
and, at the time of such loss, damage or delay, there are provisions of an international convention that

(i) according to their terms apply to all or any of the carrier's activities under the contract of carriage during that period, [irrespective whether the issuance of any particular document is needed in order to make such international convention applicable], and

(ii) make specific provisions for carrier's liability, limitation of liability, or time for suit, and

(iii) cannot be departed from by private contract either at all or to the detriment of the shipper, 

such provisions, to the extent that they are mandatory as indicated in (iii) above, prevail over the provisions of this instrument.

[4.2.2 Article 4.2.1 applies regardless of the national law otherwise applicable to the contract of carriage.]

49. The great majority of contracts of carriage by sea include land carriage, whether occurring before or after the sea leg or both. It is necessary therefore to make provision for the relationship between this draft instrument and conventions governing inland transport which may apply in some (particularly European) countries. This article deals with that problem, and provides for a network system, but one as minimal as possible. The draft instrument is only displaced where a convention which constitutes mandatory law for inland carriage is applicable to the inland leg of a contract for carriage by sea, and it is clear that the loss or damage in question occurred solely in the course of the inland carriage. This means that where the damage occurred during more than one leg of the carriage, or where it cannot be proved where the loss or damage occurred, this draft instrument will prevail during the whole door to door transit period.

50. The draft instrument leaves it open for countries adhering to it to exclude it wholly or in part from the inland carriage by giving any future international convention mandatory status, whether for a particular mode of inland transport, or for the inland part of any contract for carriage by sea which includes such transport. It could also be argued that provisions of the national law of a contracting state relating to inland carriage should prevail over the corresponding provisions of this draft instrument, but this would further restrict the uniform applicability of the draft instrument.

51. The essence of such a network system is that the provisions mandatorily applicable to inland transport apply directly to the contractual relationship between the carrier on the one hand and the shipper or consignee on the other. If the inland transport has been subcontracted by the carrier, they apply to the relation between carrier and subcarrier also. But in respect of the first relationship the provisions of this draft instrument may supplement the provisions mandatorily applicable to the inland transport; whereas as between carrier and subcarrier the inland provisions are alone relevant (supplemented as necessary by any applicable national law). If a cargo claim is directed by a third party against a performing party by virtue of the provisions of article 6.3.1, that party is liable to the claimant in the same way as the carrier, that is to say, under the provisions of this draft instrument, subject to mandatory provisions governing the inland leg of the transport.

52. It should also be noted that the proposed limited network system only applies to provisions directly relating to the liability of the carrier, including limitation and time for suit. Provisions in other conventions that may indirectly affect liability, such as jurisdiction provisions, should not be affected. Also many other legal provisions mandatorily applicable to inland transport are not supposed to be replaced by this draft instrument because they are directed specifically to inland transport rather than to a contract involving carriage by sea. Two examples may be given. The first is the requirements of the 1956 Convention on the Contract for the International Carriage of Goods by Road (“CMR”) relating to the consignment note. These may apply between carrier and subcarrier, but their application to the main contract of carriage regulated by this draft instrument would be inconsistent with the document (or electronic record) required by this draft instrument for the whole journey. The second example is the provisions of the CMR relating to the right to give instructions to the carrier (articles 12-14). These again can only be applied to the relation between carrier and subcarrier (in which relation the carrier is “sender”): for the main contract of carriage, chapter 11 of this draft instrument must apply.

53. For the limited network system to apply, the damage must have occurred during the pre-carriage or on-carriage. In this respect a choice can be made between the place where the damage is caused, where it occurs and where it is detected. The time of detection is often after delivery and, thus, would not produce a balanced result. The place where the damage is caused may be before the voyage begins, e.g. in case of the damage caused by the shipper having the cargo badly stowed in a container. The most serious objection against the place where the damage is caused is that the question of proper causation according to the applicable law has to be resolved before it can be determined whether the provisions of this draft instrument or of another convention are applicable. The place where a damage has occurred is a factual matter, is usually relatively easy to establish and may be expected to produce fair results. Therefore, the place of occurrence is suggested as the proper choice within the scope of the network system and article 4.2.1 so provides.

54. It is intended that article 4.2.2 should make article 4.2.1 mandatory whatever law governs the contract of carriage (as under article 7.2 of the Rome Convention on the Law Applicable to Contractual Obligations). As an example may be taken a contract of carriage from Singapore to Antwerp, Belgium, under which the goods are to be shipped through a Dutch port of discharge, Rotterdam, and carried thence by land. The contract is governed by Singapore law, whether by express choice of the parties or by operation of other principles of the conflict of laws. Before a court in a country adhering to this draft instrument, Singapore law would be displaced to the extent that mandatory provisions of an international convention governing road haulage, also adopted by that country, are applicable to the inland leg of the journey.

55. The bracketed language in article 4.2.1(i) reflects the situation under the 1980 Convention concerning International Carriage by Rail (“COTIF Convention”), where the applicability of the Convention is tied to the issue of a railway bill.

4.3 Mixed contracts of carriage and forwarding

4.3.1 The parties may expressly agree in the contract of carriage that in respect of a specified part or parts of the transport of the goods the carrier, acting as agent, will arrange carriage by another carrier or carriers.

4.3.2 In such event the carrier shall exercise due diligence in selecting the other carrier, conclude a contract with such other carrier on usual and normal terms, and do everything that is reasonably required to enable such other carrier to perform duly under its contract.

56. This is the first of several articles in which it is provided that the parties may “expressly agree” on some issues. This phrase implies something beyond a pre-printed clause in the standard terms and conditions in the fine print on the back of a transport document (or the electronic equivalent). Rather, there should be some indication that the issue was the subject of discussion between the parties, and that each party in fact agreed to it. At the very least, a term that has been “expressly agreed” (both under this article and under other articles in which the same phrase is employed) should be stated separately on the transport document or electronic record. For example, declarations of higher value for the purpose of avoiding package limitations of current conventions are customarily indicated in a separate box on the face of the bill of lading. Similar treatment would be appropriate in this context.

57. These mixed contracts are a common feature in the liner trade. However, their legal character is not always well understood and, in practice, many create ambiguities. They may refer to “connecting carrier” arrangements. Such arrangements may apply where a carrier is able to carry out only part of the voyage with a vessel under its own control and has agreed with the shipper to take care that the other part(s) are carried out by other carrier(s) with whom it may have an arrangement to do so. Occasionally the connecting carrier may be an inland carrier.

58. Article 4.3.1 is intended to make clear that this type of contract is perfectly legitimate. If a transport document or an electronic record is issued, the mixed character must be reflected in such document or record, so as to protect third parties relying on the contents of such documents or records. Article 4.3.2 puts some basic obligations on the carrier, when acting in its capacity as agent, and is meant to protect the shipper and/or the consignee.

5. OBLIGATIONS OF THE CARRIER

5.1 The carrier shall, subject to the provisions of this instrument and in accordance with the terms of the contract of carriage, carry the goods to the place of destination and deliver them to the consignee.

59. This provision states the basic obligation of the carrier. The reference to the provisions of this instrument makes clear that the terms of the contract do not stand alone.

5.2.1 The carrier shall during the period of its responsibility as defined in article 4.1, and subject to article 4.2, properly and carefully load, handle, stow, carry, keep, care for and discharge the goods.

5.2.2 The parties may agree that certain of the functions referred to in article 5.2.1 shall be performed by or on behalf of the shipper, the controlling party or the consignee. Such an agreement must be referred to in the contract particulars.

5.3 Notwithstanding the provisions of articles 5.1, 5.2, and 5.4, the carrier may decline to load, or may unload, destroy, or render goods harmless or take such other measures as are reasonable if goods are, or reasonably appear likely during its period of responsibility to become, a danger to persons or property or an illegal or unacceptable danger to the environment.

5.4 The carrier is bound, before, at the beginning of, [and during] the voyage by sea, to exercise due diligence to:
(a) make [and keep] the ship seaworthy;
(b) properly man, equip and supply the ship;
(c) make [and keep] the holds and all other parts of the ship in which the goods are carried, including containers where supplied by the carrier, in or upon which the goods are carried fit and safe for their reception, carriage and preservation.

5.5 Notwithstanding the provisions of articles 5.1, 5.2, and 5.4, the carrier in the case of carriage by sea [or by inland waterway] may sacrifice goods when the sacrifice is reasonably made for the common safety or for the purpose of preserving other property involved in the common adventure.

60. The above provisions state the obligations of the carrier as positive duties, and are similar in effect to articles II and III.1 of the Hague and Hague-Visby Rules. A body of opinion exists that the general liability regime of article 6.1 below makes a positive provision such as this unnecessary, but the majority view has favoured the retention of such a provision. It spells out not only the carrier's obligations with regard to the carriage, but also those with respect to the ship, which are consistent with its public law obligations regarding safety and the preservation of the environment. Including such a provision would also preserve the benefit of much existing case law. 

61. As regards article 5.4 the words in square brackets "and during" "and keep", if inserted, would make the seaworthiness duty continuous throughout the voyage, which is not so under the Hague and Hague-Visby Rules. The change has received support on the basis that it would seem somewhat out of tune with the ISM Code and safe shipping requirements for the law to be stated otherwise. Some think however that if the ship becomes unseaworthy during the voyage, the duty to put matters right may, depending on the circumstances, be part of the duty to care for the goods, already contained in article 5.2.1; this is particularly so if the defence of nautical fault is abolished (as to which see below). It is also said that a continuing duty may impose harsh and sometimes impracticable duties on the carrier while at sea and hence significantly broaden its responsibilities; and that it would also require the generating of new case law to work out its meaning and implications.

62. As regards containers, the wide definition in article article 1.4 should be borne in mind.

63. Article 5.2.2 is intended to make provision for FIO(S) clauses and the like, which are rare in the liner trade but common in the charter party trade. The applicability of this draft instrument to negotiable transport documents issued under a charter party makes this provision desirable.

64. The provision as to sacrifice in article 5.5 is confined to sea (or water) transport because the notion of sacrifice for the preservation of the common adventure is a maritime one, linking with general average. The opinion has been expressed that it is not necessary to deal with this point in the draft instrument.

65. There has been a proposal for a specific provision requiring carriers in refrigerated trades to make available temperature data on request. It was thought that this was too specific for a general instrument such as this. If it were to be thought appropriate it might be considered in connection with article 6.9.4.

6. LIABILITY OF THE CARRIER

6.1 Basis of liability

6.1.1 The carrier is liable for loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence that caused the loss, damage or delay took place during the period of the carrier's responsibility as defined in article 4, unless the carrier proves that neither its fault nor that of any person referred to in article 6.3.2(a) caused or contributed to the loss, damage or delay.

66. This provision constitutes the basic rule of liability. The overall result is similar to that of article 5.1 of the Hamburg Rules and the technique to that of article IV.2(q) of the Hague Rules. The actual wording is however not the same as either.

67. The Hamburg Rules require that the carrier prove that it, its servants or agents took all measures that could reasonably be required to avoid the occurrence and its consequences. Article IV.2(q) of the Hague Rules requires that the carrier show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents of servants of the carrier contributed to the loss or damage. This article refers to the fault of the carrier itself or that of persons performing its functions, the latter being incorporated by the reference to article 6.3.

68. The question of carrier's liability for delay is provided for and commented on in article 6.4.

6.1.2 [Notwithstanding the provisions of article 6.1.1 the carrier is not responsible for loss, damage or delay arising or resulting from

(a) act, neglect or default of the master, mariner, pilot or other servants of the carrier in the navigation or in the management of the ship;

(b) fire on the ship, unless caused by the fault or privity of the carrier.]

69. These are the first two of the carrier’s traditional exceptions, as provided in the Hague and Hague-Visby Rules. There is considerable opposition to the retention of either. As regards paragraph (a) there is little support for the “management” element, which is simply productive of disputes as to the difference between management of the ship and the carrier’s normal duties as to care and carriage of the goods. The general exception is however justified by some on the basis that, should it be removed, there would be a considerable change to the existing position regarding spreading of the risks of sea carriage, which would of course impact on the insurance position. It would not be possible to retain this exception as part of the modified “presumption” regime which is set out in article 6.1.3 below, since it is a direct exoneration for negligence: it must either be an exoneration or be deleted. The exception is therefore preserved here in its original form to make the position clear.

70. There is also a view that even if this exception is removed, an exception should remain for “act, neglect or default of a compulsory pilot in the navigation of the ship”, on the ground that this covers a situation in which the carrier can justifiably feel aggrieved at being expected to answer. Such an exception would most naturally be a genuine exoneration. It could alternatively be included under the presumption regime set out below, though since by its wording it relates to loss caused not by the negligence of the carrier it would be slightly less appropriate there.

71. As regards paragraph (b), the Hague and Hague-Visby Rules not only reduce the circumstances in which the carrier might be liable in respect of fire (by requiring actual fault or privity, and probably also some form of management failure by the carrier) but can also be taken to impose a burden of proof on the claimant. The Hamburg Rules do not appear to require management failure but specifically impose the burden of proof on the claimant. The above provision follows the Hague and Hague-Visby Rules. The fire exception has however been modified to make clear that the fire must be on the carrying vessel: the Hague and Hague-Visby Rules wording gives no indication in this respect.

72. The exception is usually justified on the ground that accidents by fire raise serious problems of proof, and it is preserved here in its Hague and Hague-Visby Rules form in view of that opinion. It is not however necessary that this exception appears as a direct exoneration: the phrase “fire on the vessel” could if desired be placed within the events listed under the “presumption” regime set out below for the remaining Hague and Hague-Visby Rules excepted perils. That would necessitate removing the restriction to the actual fault or privity of the carrier. The result would then be very similar to that created by the Hamburg Rules by reason of the conjoined effect of article 6.3.2, under which the carrier is responsible for the acts of those carrying out its responsibilities under its control. The claimant’s burden of proof would not be increased.

73. It is of course possible to take the view that no special exception is required, and that fire can be dealt with under the general rule of article 6.1.1.

6.1.3 Notwithstanding the provisions of article 6.1.1, if the carrier proves that loss of or damage to the goods or delay in delivery has been caused by one of the following events it is presumed, in the absence of proof to the contrary, that neither its fault nor that of a performing party has caused or contributed to cause that loss, damage or delay.

74. This provision represents a much modified (but in some respects extended) version of most of the remaining excepted perils of the Hague and Hague-Visby Rules: in particular they appear here only as presumptions. The consultations indicated a division of opinion as to whether the traditional excepted perils should be retained as exonerations from liability or whether they should appear (in so far as possible) as presumptions only. The basis for the second approach is that certain events are typical of situations where the carrier is not at fault; and that it is justifiable, where the carrier proves such an event, for the burden of proof to be reversed.

75. A body of opinion would however prefer to retain all the excepted perils, whether with or without the nautical fault exception, as genuine exonerations, i.e. exceptions from liability. Certainly the nautical fault exception would only be effective as such, and it is for that reason preserved in article 6.1.2 above as a direct exoneration.

76. Another view is that since most of the exceptions are usually interpreted as not applying where the carrier is negligent, there is not a great deal of difference in practice between the two approaches.

77. A quite different approach however is that the exceptions should be deleted completely, since the events to which they refer are covered by the general principle of liability. This is opposed on the grounds that in some countries the complete deletion of the catalogue might be taken by judges inexperienced in maritime law as indicating an intention to change the law. It is said that even if the list is not needed in some countries, it is useful in others and does no harm in those countries that do not need it.

78. For expository purposes the matters concerned are referred to in this commentary as "exceptions", though there is obviously a substantial difference, in theory at least, between them as exonerations, and as events raising a presumption only. What follows is therefore a new presentation of the exceptions (mostly, but not all, the traditional ones) as part of a presumption-based regime. In accordance with a view frequently expressed in the consultations, these exceptions are listed in approximately the familiar order in which they appear in the Hague and Hague-Visby Rules. Their preservation can be justified in part on the basis that they have generated valuable case law over the decades since 1924.

79. It has been mentioned above that many of the exceptions are usually interpreted as only applicable where the carrier has not been negligent in incurring the excepted peril. But there are at least two other exceptions which are, at least in some jurisdictions, specifically defined in terms requiring the absence of negligence on the carrier's part. They are Act of God and perils of the sea. To establish these excepted perils at present, it would, at least in some jurisdictions, be necessary for the carrier to prove by way of defence that it was not negligent in getting into the situation involved. Both an Act of God and a peril of the sea can be defined as acts occurring without a carrier's negligence which could not reasonably have been guarded against. To define them for a "presumption" regime without reference to absence of fault is not so easy. New definitions might have to be evolved, referring only to serious external events which could raise a (rebuttable) presumption of non-liability. This might involve loss of existing case law in some jurisdictions. For this reason these two excepted perils are listed in brackets at the end. They would not sit well in a presumption-based regime and it seems likely that situations which might attract either of them could fairly easily be dealt with under the basic rule of article 6.1.1.

(i) [Act of God], war, hostilities, armed conflict, piracy, terrorism, riots and civil commotions; 

80. These are basically traditional exceptions, but "hostilities, armed conflict, piracy and terrorism" have been added to expand on the word "war", which might or might not at present be interpreted to cover some of the other matters. They will of course require interpretation. "Act of God" appears in brackets because, though traditional, it is usually defined by reference to the absence of negligence, which means that, as suggested above, it does not sit easily as creating a presumption.

(ii) quarantine restrictions; interference by or impediments created by governments, public authorities rulers or people [including interference by or pursuant to legal process];

81. This is a survival of the old "restraint of princes" exception. There may be doubt as to what the phrase "public authorities" is taken to cover in various countries. It may therefore be prudent to retain a reference to judicial restraints. 

(iii) act or omission of the shipper, the controlling party or the consignee;

82. "Controlling party" is defined in article 1.7.

(iv) strikes, lock-outs, stoppages or restraints of labour;

(v) saving or attempting to save life or property at sea;

(vi) wastage in bulk or weight or any other loss or damage arising from inherent quality, defect, or vice of the goods;

(vii) insufficiency or defective condition of packing or marking;

83. The English version of the Hague Rules used the words "insufficiency or inadequacy" (French "imperfection"). The words "defective condition" may make it clearer that the provision covers marks which fade, are washed out in rain, etc.

(viii) latent defects not discoverable by due diligence.

84. The meaning of this Hague Rules exception is notoriously unclear. In particular, it gives no indication as to in what the defect must be, whether in the ship, the goods or shore equipment. It appears that in some jurisdictions reliance on it may have advantages connected with the burden of proof. The matter could be clarified by referring to the ship, its apparatus and equipment.

(ix) handling, loading, stowage or unloading of the goods by or on behalf of the shipper, the controlling party or the consignee;

85. The purpose of this provision, which is new, is to make provision for situations where article 5.2.2 permits functions to be performed by these parties.

(x) acts of the carrier or a performing party in pursuance of the powers conferred by article 5.3 and 5.5 when the goods have been become a danger to persons, property or the environment or have been sacrificed;

[(xi) perils, dangers and accidents of the sea or other navigable waters;]

86. If the exceptions are retained as exonerations this provision should be restored somewhere nearer its original position as exception (iii). If however the presumption technique is adopted, for the reasons given above it is doubtful whether this exception could effectively be retained at all.

87. Most of the above exceptions relate to carriage by sea. It is for consideration whether further exceptions should be introduced to cover typical incidents of land carriage, or whether these would be adequately dealt with by the general provision in article 6.1.1.

6.1.4 [If loss, damage or delay in delivery is caused in part by an event for which the carrier is not liable and in part by an event for which the carrier is liable, the carrier is liable for all the loss, damage, or delay in delivery except to the extent that it proves that a specified part of the loss was caused by an event for which it is not liable.]
[If loss, damage, or delay in delivery is caused in part by an event for which the carrier is not liable and in part by an event for which the carrier is liable, then the carrier is

(a) liable for the loss, damage, or delay in delivery to the extent that the party seeking to recover for the loss, damage, or delay proves that it was attributable to one or more events for which the carrier is liable; and

(b) not liable for the loss, damage, or delay in delivery to the extent the carrier proves that it is attributable to one or more events for which the carrier is not liable.
If there is no evidence on which the overall apportionment can be established, then the carrier is liable for one-half of the loss, damage, or delay in delivery.]

88. These alternative provisions deal with concurrent and consecutive causes of damage, and apply regardless of whether any of the provisions of articles 6.1.2 and 6.1.3 are adopted: a provision would be required even if article 6.1.1 formed the sole liability regime.

89. The first alternative is intended to be much the same in effect as article 5.7 of the Hamburg Rules (as well as current law in many countries), but it has been sought to simplify the wording and make clear where the burden of proof lies.

90. The second alternative is intended to introduce an entirely new approach in which the burden of proof is shared, and each party bears the risk of non-persuasion in certain respects. The consultation process revealed some support for such a new approach. Most significantly, the second alternative would relieve the carrier of the burden of having to prove a negative. Several delegates and industry representatives report that the practical effect of the current regimes that are similar to the first alternative is to impose full liability on the carrier whenever there are multiple causes of loss or damage.

91. The final sentence at the end of the second alternative is a fall-back provision to cover the rare situations in which adequate proof is lacking. It is intended as a last resort when a court is entirely unable to apportion the loss. Such a provision would be unnecessary under the first alternative. The fall-back rule under the first alternative would be to impose full liability on the carrier whenever the carrier is unable to discharge its burden of proof.

6.2 Calculation of compensation

6.2.1 If the carrier is liable for loss of or damage to the goods, the compensation payable shall be calculated by reference to the value of such goods at the place and time of delivery according to the contract of carriage.

6.2.2 The value of the goods shall be fixed according to the commodity exchange price or, if there is no such price, according to their market price or, if there is no commodity exchange price or market price, by reference to the normal value of the goods of the same kind and quality at the place of delivery.

6.2.3 In case of loss of or damage to the goods and save as provided for in article 6.4, the carrier shall not be liable for payment of any compensation beyond what is provided for in articles 6.2.1 and 6.2.2.

92. This provision follows the principle apparently reflected in the Hague-Visby Rules article IV.5(b). It clarifies what is believed to be the intention of the Hague-Visby language to include a decrease in the value of the goods and to exclude consequential damages. Loss or damage due to delay is dealt with in article 6.4.

6.3 Liability of performing parties

6.3.1 

(a) A performing party is subject to the responsibilities and liabilities imposed on the carrier under this instrument, and entitled to the carrier’s rights and immunities provided by this instrument (i) during the period in which it has custody of the goods; and (ii) at any other time to the extent that it is participating in the performance of any of the activities contemplated by the contract of carriage.

(b) If the carrier agrees to assume responsibilities other than those imposed on the carrier under this instrument, or agrees that its liability for the delay in delivery of, loss of, or damage to or in connection with the goods is higher than the limits imposed under articles 6.4.2, 6.6.4, and

6.7, a performing party is not bound by this agreement unless the performing party expressly agrees to accept such responsibilities or such limits.

93. Paragraph (a) imposes liability on “performing parties” – those that perform the carrier’s core obligations under the contract of carriage. This provision does not define the extent of the performing parties’ liability. That is determined under other provisions. In particular, the extent of the liability is specified in part by article 4.2, which establishes a “network” system that also applies to performing parties (such as inland carriers).

94. It is important to distinguish the performing party’s liability from the carrier’s liability. The carrier is liable (subject to the terms of this draft instrument) under the contract of carriage for the entire period of responsibility under article 4.1. A performing carrier, in contrast, is not liable under the contract of carriage, and under this draft instrument it is not liable in tort. In return for escaping liability in tort, the performing carrier assumes liability under the draft instrument during the period it has custody of the goods or when it is otherwise participating in the performance of the contract of carriage. The burden is on the cargo claimant to show that the loss or damage occurred under circumstances that are sufficient to impose liability on the relevant performing party.

95. Paragraph (b) provides that each performing party is entitled to its own liability determination. A carrier’s agreement to assume higher liability (an agreement for which the carrier alone has presumably been compensated) does not bind a performing party that did not assume the same agreement. Thus, a performing party may safely rely on the terms of this draft instrument in the absence of its own express agreement to the contrary.

96. Views have been expressed that this article should be deleted and that claims under the draft instrument should be directed solely to the carrier with which the shipper contracted. According to a different view, however, the performing party should be separately defined under this instrument, and its liability should be limited to the part of the carriage that it performed.

97. The principal debate on this provision is reflected in the “performing party” definition. Those who argue for a broader liability regime favour a more inclusive definition of “performing party,” while those who argue for a narrower liability regime favour a more restrictive definition. The basic hypothetical example in the commentary to article 1.17 once again provides a useful illustration. Those who argue for a broader liability regime contend that the trucking company that sub-contracts its obligations to an independent owner-driver should be liable directly to the cargo claimant if the truck’s owner-driver negligently damages the cargo. The trucking company would be liable to the carrier under its contract, and thus the cargo claimant could reach the trucking company indirectly (unless the carrier could not be sued for some reason). In many jurisdictions, the trucking company would also be liable to the cargo claimant directly in tort. Providing a direct action under this draft instrument would simplify the process, better protect the cargo claimant’s interests, and achieve greater uniformity. Those who argue for a narrower liability regime contend that the trucking company that sub-contracts its obligations to an independent owner-driver should not be liable under this draft instrument. A consignee that seeks to recover for damage negligently caused by the truck’s owner-driver should be able to recover only from the NVOC that entered into the contract of carriage or from the negligent owner-driver. Protecting the trucking company that entrusted the cargo to the negligent owner-driver protects the independence of its sub-contract with the carrier.

6.3.2 

(a) Subject to article 6.3.3, the carrier is responsible for the acts and omissions of

(i) any performing party, and 

(ii) any other person, including a performing party’s sub-contractors and agents, who performs or undertakes to perform any of the carrier’s responsibilities under the contract of carriage, to the extent that the person acts, either directly or indirectly, at the carrier’s request or under the carrier’s supervision or control, as if such acts or omissions were its own. A carrier is responsible under this provision only when the performing party’s or other person’s act or omission is within the scope of its contract, employment, or agency.

(b) Subject to article 6.3.3, a performing party is responsible for the acts and omissions of any person to whom it has delegated the performance of any of the carrier’s responsibilities under the contract of carriage, including its sub-contractors, employees, and agents, as if such acts or omissions were its own. A performing party is responsible under this provision only when the act or omission of the person concerned is within the scope of its contract, employment.

98. Article 6.3.2 confirms that the carrier is responsible for the acts and omissions of all those who work under it (when they act within the scope of their contract, employment, or agency, as the case may be). A performing party is similarly responsible for the acts and omissions of all those who work under it.

6.3.3 If an action is brought against any person, other than the carrier, mentioned in article 6.3.2, that person is entitled to the benefit of the defences and limitations of liability available to the carrier under this instrument if it proves that it acted within the scope of its contract, employment, or agency.

6.3.4 If more than one person is liable for the loss of, damage to, or delay in delivery of the goods, their liability is joint and several but only up to the limits provided for in articles 6.4, 6.6 and 6.7.

6.3.5 Without prejudice to the provisions of article 6.8, the aggregate liability of all such persons shall not exceed the overall limits of liability under this instrument

6.4 Delay

6.4.1 Delay in delivery occurs when the goods are not delivered at the place of destination provided for in the contract of carriage within any time expressly agreed upon [or, in the absence of such agreement, within the time it would be reasonable to expect of a diligent carrier, having regard to the terms of the contract, the characteristics of the transport, and the circumstances of the voyage].

99. The first part of the above provision has widespread support; the second part in brackets is more controversial. The phrase “the terms of the contract” provides for situations where the carrier expressly does not guarantee arrival times.

6.4.2 If delay in delivery causes loss not resulting from loss of or damage to the goods carried and hence not covered by article 6.2, the amount payable as compensation for such loss is limited to an amount equivalent to [. . . times the freight payable on the goods delayed]. The total amount payable under this provision and article 6.7.1 shall not exceed the limit that would be established under article 6.7.1 in respect of the total loss of the goods concerned.

100. Where delay causes loss of or damages to the goods a limit on damage is contained in the general limitation of article 6.7.1. The present provision creates a special limit for other loss caused by delay. This can be called "economic" or "non-physical" loss, and is sometimes referred to as "consequential" loss. But none of these terms has agreed meanings: all loss is economic, the loss in itself is not non-physical, and the meaning of the phrase "consequential loss" is not agreed between legal systems. It has been thought best therefore to put forward the formulation above.

101. As to the amount, the Hamburg Rules provide that the liability of the carrier for delay in delivery is limited to an amount equivalent to two and a half times the freight payable for the goods delayed, but not exceeding the total freight payable under the contract. Another example is the law of Australia where the amount payable is the lowest of the actual amount of the loss, or two and a half times the sea freight payable for the goods delayed; or the total amount payable as sea freight for all of the goods shipped by the shipper concerned under the contract of carriage concerned.

102. The second sentence ensures that the overall limitation on amount contained in article 6.7.1 is not exceeded by any operation of this provision.

6.5 Deviation

(a) The carrier is not liable for loss, damage, or delay in delivery caused by a deviation to save or attempt to save life or property at sea, or by any other reasonable deviation.

(b) Where under national law a deviation of itself constitutes a breach of the carrier's obligations, such breach only has effect consistently with the provisions of this instrument.

103. The intention of this provision is that the draft instrument is not displaced by deviation, whether geographical or otherwise. Under some legal systems a misperformance by the carrier which can be described as a deviation has been held to displace the exceptions, especially the package or unit limitation of the Hague and (possibly) Hague-Visby Rules. It is intended that this should no longer be possible: like the Hague-Visby Rules, this draft instrument contains (in article 6.8) its own provisions for loss of the right to limit.

6.6 Deck cargo

6.6.1 Goods may be carried on or above deck only if

(i) such carriage is required by applicable laws or administrative rules or regulations, or

(ii) they are carried in or on containers on decks that are specially fitted to carry such containers, or

(iii) in cases not covered by paragraphs (i) or (ii) of this article, the carriage on deck is in accordance with the contract of carriage, or complies with the customs, usages, and practices of the trade, or follows from other usages or practices in the trade in question.

6.6.2 If the goods have been shipped in accordance with article 6.6.1(i) and (iii), the carrier is not liable for loss of or damage to these goods or delay in delivery caused by the special risks involved in their carriage on deck. If the goods are carried on or above deck pursuant to article 6.6.1 (ii), the carrier is liable for loss of or damage to such goods, or for delay in delivery, under the terms of this instrument without regard to whether they are carried on or above deck. If the goods are carried on deck in cases other than those permitted under article 6.6.1, the carrier is liable, irrespective of the provisions of article 6.1, for loss of or damage to the goods or delay in delivery that are exclusively the consequence of their carriage on deck.

6.6.3 If the goods have been shipped in accordance with article 6.6.1(iii), the fact that particular goods are carried on deck must be included in the contract particulars. Failing this, the carrier has the burden of proving that carriage on deck complies with article 6.6.1(iii) and, if a negotiable transport document or a negotiable electronic record is issued, is not entitled to invoke that provision against a third party that has acquired such negotiable transport document or electronic record in good faith.

6.6.4 If the carrier under this article 6.6 is liable for loss or damage to goods carried on deck or for delay in their delivery, its liability is limited to the extent provided for in articles 6.4 and 6.7; however, if the carrier and shipper expressly have agreed that the goods will be carried under deck, the carrier is not entitled to limit its liability for any loss of or damage to the goods that exclusively resulted from their carriage on deck.

6.7 Limits of liability

6.7.1 Subject to article 6.4.2 the carrier’s liability for loss of or damage to or in connection with the goods is limited to […] units of account per package or other shipping unit, or […] units of account per kilogram of the gross weight of the goods lost or damaged, whichever is the higher, except where the nature and value of the goods has been declared by the shipper before shipment and included in the contract particulars, [or where a higher amount than the amount of limitation of liability set out in this article has been agreed upon between the carrier and the shipper.]

6.7.2 When goods are carried in or on a container, the packages or shipping units enumerated in the contract particulars as packed in or on such container are deemed packages or shipping units. If not so enumerated, the goods in or on such container are deemed one shipping unit.

6.7.3 The unit of account referred to in this article is the Special Drawing Right as defined by the International Monetary Fund. The amounts mentioned in this article are to be converted into the national c