Professor Tetley's articles in Fairplay Magazine
The Hitchhiker's Guide to Maritime Law
(Fairplay - May 22, 2003)
I have often been asked how got into the practice of maritime law. Herewith the answer.
In 1952, I joined Martineau Walker (a large Montreal law firm and got into maritime law under strange circumstances. I had planned to be a tax lawyer and while studying law took accountancy at night with the Association of Chartered Accountants. But I never got a tax client, and I am in fact still waiting for my first tax case. During my second week in Martineau Walker, a New York cargo insurance manager appeared in my office. Her had been dissatisfied with the two large Montreal law firms doing maritime law, being Holden, Hutchison and Beauregard, Brisset, very good firms, with years of maritime practice, but who nevertheless acted for either shipowners or charterers and who handled cargo claims with secondary attention.
The American insurance manager had a very small $200.00 cargo claim for shortage of flour shipped in cotton bags to Montreal. The partners at Martineau Walker told me that, because I looked old, (although all of 25 years, my hair was already falling out), they were going to introduce him to me and he would never suspect my youth and lack of experience. I was mortified, but jobs were hard to get then and now, and so I took the file (my first marine file) and went to work. I wrote a very long opinion (saying there was no chance of recovery) and he replied that I shouldn't write such long opinions in the future. He, however, sent another claim for a number of thousands of dollars for a shipment on a vessel called the SUNWHIT. I studied the claim carefully and saw that it was a good one and that we should be successful.
I spoke to Bob Walker, one of the senior partners, and suggested to him that I should go to New York to see the claims manager who had sent the claim. Bob Walker was of the old school, who had been brought up in the Great Depression and said there was no money for such nonsense. I therefore hitch-hiked to New York, saw the claims manager, who phoned up claims managers from seven other marine insurance companies in New York (in the William Street, Pearl Street, Wall Street, Fulton Street area) and told each of them that he had a bright-eyed and bushy-tailed lawyer in his office from Montreal and did they have any claims on the SUNWHIT. In those days there were no containers and when a ship had cargo damage many cargo underwriters were affected. I went around and saw them all in their offices and picked up files from each of them. I checked out of the YMCA and in celebration, bought a set of golf clubs in a new golf bag and then hitch-hiked back to Montreal along the old highway #2 carrying the files and the golf bag. As I stood on the road, the truck drivers would shout "fore" out of the windows of their trucks as they rolled by. Eventually, one of them picked me up and took me all the way to Montreal.
In Montreal, I signed out files from the Registry of the Admiralty Court and studied how one sued in Admiralty. (Our firm had never acted in Admiralty). I gave notice to Saguenay Shipping, who declined all responsibility for their ship, the SUNWHIT, but when I sued, they paid up after some pyrotechnics by Clem Holden & Lucien Beauregard and I sent out one of the biggest bills in the firm since before the Depression.
This article was published in Fairplay Magazine on May 22, 2003.
The Starsin - The House of Lords And the Third Alternative (The Demise Clause, Rule 3(8) and International Law)
(Fairplay - May 8, 2003)
The validity of the demise and identity of carrier clauses in bills of lading has been the subject of a long reasoned decision of the House of Lords in "The Starsin", where it was held that the charterer was the carrier, having signed the front of the bill of lading as opposed to the shipowner, who was identified in barely legible printed clauses on the back of the bill of lading.
Demise clauses found in bills of lading stipulate that the sole carrier is the shipowner, unless the ship happens to be chartered by demise, when the charterer is deemed to be the carrier. The debate in "The Starsin" in first instance, in appeal and in the Lords (apart from diversions on the Himalaya clause and on suit in tort) was founded on contradictions between the front and back of the bill of lading. In particular did the master or agent sign on behalf of the shipowner or the charterer - i.e. was it a shipowner's bill of lading or a charterer's bill?
There is, however, a third possible alternative , which is that both the shipowner and the charterer are the carrier and cannot be otherwise, if they each carry out any of the responsibilities under the Hague/Visby Rules. Rule 3(8), it will be remembered, is of a public policy/order nature and forbids any "clause, covenant or agreement in a contract of carriage relieving the carrier or the ship" from responsibility under the Rules. Because the shipowner and the charterer in fact share responsibilities in loading, carrying, caring for and discharging cargo, they should both be the carrier in respect of third parties. To allow them to stipulate that one of them is not the carrier is the most opprobrious of non-responsibility clauses.
Lord Justice Rix, who dissented in appeal and was upheld in the Lords, had in fact raised the possibility of liability of both the owner and charterer to third parties. Under the heading "Another possibility: Owners liable as well as charterers?" he wrote: "Nevertheless, I raised in argument the possibility that there did not have to be a black and white choice between owners' bills and charterers' bills and that the true analysis in such a case may well be that the owners as well as the charterers are liable on the bills."
Rix L.J. discussed the third alternative for two pages and then unfortunately concluded: "In the circumstances, where the point was never discussed below, is not a part of the formal appeal, has arisen merely from an enquiry from the bench, and has had no real opportunity for debate, I would for myself be reluctant to make or take a decision based upon it."
Rix L.J. relied for the most part on the agency theory, but there are many other reasons for joint liability of the charterer and the owner, in particular the public policy/order nature of the Hague/Visby Rules as seen in Rule 3 (8).
The Hague/Visby Rules, too, are an international treaty, which should be interpreted in an international sense, and not solely in the light of English common law rules on the authority of the master or agents to sign bill of lading contracts.
As Lord McMillan famously said in Stag Line vs. Foscolo in 1932:
"It is important to remember that the Act of 1924 [i.e. The Hague Rules, 1924], was the outcome of an International Conference and that the rules in the Schedule have an international currency. As these rules must come under the consideration of foreign Courts, it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation."
In other words, the Hague and Hague/Visby Rules are an international convention and should be construed as such. Thus English common law rules, focusing on whose behalf the master and agents signed the bills of lading, whether for owners or charterers, cannot overcome the internationally accepted meaning of the Rules.
In this respect, it is noteworthy as well that the courts of many countries, which are also party to the Hague or Hague/Visby Rules, have deemed the demise clause as violating Rule 3(8) and as void as against third parties, who may therefore hold the charterer and shipowner jointly responsible.
In recent years, new considerations have also entered into the equation, including the Vienna Convention on the Law of Treaties of 1969, to which the UK and over 90 other nations are party and which stipulates that a convention "must be interpreted in good faith …in the light of its object and purpose".
Bills of lading, too, in the hands of third parties, are documents of international, commercial integrity and the Uniform Customs and Practice for Documentary Credits, 1993 of the ICC, better known as "UCP 500", require that the carrier be clearly identified on the face of the bill of lading. As has been said, this requirement is wholly inconsistent with a demise clause or an identity of carrier clause.
Demise clauses are now also incompatible with the "UNIDROIT Principles of International Commercial Contracts" 1994, which at art. 1.7 (1) require each party to a contract "to act in accordance with good faith and fair dealing in international trade." Is a demise clause in good faith when the parties to a charterparty may decide between themselves that only one of them (or even another person, such as a shipowner registered in Panama or Vanuatu) is the carrier under bills of lading? Is it fair dealing in international trade for the owner and charterer to then issue a bill of lading to that effect to third parties?
It is unfortunate that the liability of both the shipowner and charterer under Rule 3(8) of the Hague and Hague/Visby Rules was not pleaded before the House of Lords in "The Starsin". The question is still open in consequence. Let us hope that the third alternative will be raised in the U.K., in the near future. Uniformity of international law requires uniformity of interpretation of international conventions and documents, including the Hague/Visby Rules and bills of lading.
This article was published in Fairplay Magazine, as a letter to the editor, on May 8, 2003.
The UNCITRAL Draft Convention - Governing Means Choosing. Can one draft details, without first agreeing on the principles?
(Fairplay Magazine, March 20, 2003 at p. 28)
I was in London on my annual lecture, museum and theatre safari during the last week of February when a friend invited me to come along as a member of the Canadian delegation to the Comité Maritime International (CMI), Subcommittee on Transport Law. The congenial meeting was held in the boardroom of Clyde & Co., where delegates from ten nations and ten international institutions were industriously studying the UNCITRAL Draft Convention on international carriage of goods.
It should be remembered that the UNCITRAL Draft had been prepared by the CMI after years of meetings and then sent to UNCITRAL at the end of 2001. Since then UNCITRAL has convened two, long conferences in New York and Vienna (one of two weeks and one of one week). Unfortunately, as of now, only five of the 17 articles of the Convention have even been reviewed by UNCITRAL, let alone adopted. And most important of all, the basic principles (i.e., the scope of the Convention) have not been decided upon. Would the Convention be door-to-door or port-to-port? Would it apply to service contracts and/or to charterparties? Would there be a uniform or a network system of carrier liability? Would national mandatory provisions be included? Would European Union mandatory laws be excluded? Would there be general national opting-out?
It became clear during the London meeting that the Draft transport convention as prepared by the CMI and received by UNCITRAL had many exceptions, many exclusions and many matters left in the alternative. In effect, few of the important, but difficult choices had been made.
This view was reinforced by the preliminary remarks of the UNCITRAL representative present at the meeting, who noted that the Draft was in a form and terminology quite unusual to UNCITRAL and to international law. He also observed that the work was proceeding very, very slowly and was testing the UNCITRAL budget of time and money.
A further two-week session of UNCITRAL will be held from March 24 to April 4, 2003 in New York. The first week will be concerned with details of the Convention, and only the second week with the basic principles. The English and Norwegian delegates and others proposed that the principles be discussed first. That question, too, was left up in the air.
A new transport convention (or amendments to what we already have) is an international priority and the work and decisions, which have now shifted to UNCITRAL, are important. Let us hope that very soon there will be decisions on the principles and thus finality. Those decisions will be difficult, but cannot be delayed forever. Governing means choosing.
This article was published in Fairplay Magazine, as a letter to the editor, on March 20, 2003 at p. 28.
The ISM Code Brings Change - And for the Best
(Fairplay Magazine, June 7, 2001 at pp. 25-26)
We all resist change; in fact Robert Browning said, "I despise change" and in 1944, Republican presidential candidate Thomas L. Dewey, a "sure winner", conjured up the unfortunate electoral slogan "It is time for a change" and lost to Franklin Delano Roosevelt and again in 1948 to Harry S. Truman.
The International Safety Management Code (ISM Code) has brought about change and in fact may have caused the most profound changes in maritime law in 50 years. And the changes are for the best. It is important therefore to look at the alterations in the law, and how they will be felt in the years to come.
First of all, the ISM Code has set a new standard of responsibility in all maritime law. It has changed the rules by saying that shipowners and operators are responsible for their management, not merely for defects in the ship or for the fault of the master and crew. And the concept of seaworthiness has been enlarged, by adding ship safety management to ship seaworthiness and crew competence.
This has been and will be earth-shaking. For example, in carriage of goods by sea, the Hague and Hague/Visby Rules at art. 4(2)(a) have permitted the carrier to avoid liability for error in navigation and management. The Code now raises the standard of management and makes the management portion of the article almost redundant. Thus the CMI/UNCITRAL carriage of goods committee recently had general support in Singapore for its recommendation that error in navigation and management in art. 4(2)(a) of Hague/Visby, be dropped.
The ISM Code also puts added responsibility into the pollution conventions, the limitation conventions, marine insurance and all maritime law.
For example, the ISM Code has given Classification Societies and Port State Control a new strata of responsibility, which must be verified before certification of a vessel. It is not sufficient to see that the ship is seaworthy in order to be in class; its management must be in order as well. And part of the recent uproar in the world of classification societies has been caused by marginal societies being unable to inspect not only for ship seaworthiness, but for ship management too.
General average has changed as well. Now for a shipowner to claim "remedies" or "defences" under Rule "D" of the York/Antwerp Rules, 1994, it must not itself have been at fault for the seaworthiness of its ship, or for its own safety management.
Similarly marine insurance has changed. The ISM Code affects the assured’s duty of disclosure, as well as the implied warranty of seaworthiness in hull insurance, while in liability insurance, the International Group of P. & I. Clubs made Code compliance a condition of cover in member clubs. Although precise facts and figures will be known only when IMO has completed its recently-announced assessment of the Code’s impact, preliminary indications are that the Code has resulted in improved safety of bulk carriers in particular, thus reducing the liability of underwriters in respect of that class of vessel (see generally the report by the Swedish P. & I. Club published in TradeWinds, December 3, 1999, p. 21, entitled "Swedish study confirms ISM reduces claims").
This improved "loss experience" may also reflect more vigorous ship safety enforcement, especially by the United States, where the ISM Code was incorporated into U.S. legislation in 1996 and is now applied as part of that country’s Port State Control, under detailed regulations strictly enforced by the U.S. Coast Guard.
In effect, there is a new principle of maritime responsibility for us all. Seaworthiness has been redefined and not only means the ship, but also the safety management of shipowners, operators and managers. The Code, as well, makes anyone responsible for ISM compliance, liable for non-conformities, and not merely the "company". In fact, the traditional "corporate veil" is being pierced in criminal indictments now under way in the U.S. against "designated persons" under the Code, who failed to see that the ship complied with the Code.
How did this revolutionary change come about? The author was William O’Neil, Secretary General of the IMO, who went straight to the heart of the problem. He had the Code drafted, then adopted after many meetings and finally attached to the Safety of Life at Sea Convention (SOLAS) 1974 as Chapter IX. Thus he used the fast-track "tacit acceptance procedure", rather than trying to adopt a whole new international convention according to the traditional procedure, with all the intricate diplomatic initiatives involved and all the years required for negotiation and ratification. The ISM Code therefore arrived on the scene almost without a struggle.
William O’Neil, the Secretary-General of IMO, is an engineer, not a lawyer. Is this the route that should be followed for the adoption of other international laws? And perhaps other international bodies should consider a simple change in a general principle (in this case seaworthiness), which affects all international conventions, rather than a complicated convention with a myriad of changes in principle and detail. The US MLA Senate COGSA proposal tried to change a great many details of carriage of goods, notably bills of lading, loading of containers, through carriage, different types of carrier, including freight forwarders, arbitration and jurisdiction clauses, etc., etc., and seems to have been put on long-term, if not permanent, "hold" at the US MLA, last month in New York. The CMI/UNCITRAL committee on Issues of Transport Law may be falling into the same trap with its detailed proposition, based in part on the American proposal.
Recently a Fairplay editorial (May 3, 2001 at p. 3) suggested that the U.S. and the E.U. were leading in maritime legislation, and not IMO. May I respectfully differ? The United States has not adopted most of the world’s international maritime law conventions, such as the Hague/Visby Rules, the Collision Convention 1910, the Limitation Conventions of 1924, 1957 or 1976, the Pollution Conventions, the Liens Conventions, etc., etc. The E.U. has some excellent internal laws, but the E.U., as led by France, has on occasion acted by leaps and starts after a maritime disaster (e.g. The Erika). Both the U.S. and the E.U. would be better off not turning their backs on IMO and the rest of the world on international maritime matters.
This is not to say that the United States and the E.U. have not adopted good laws. The rules of OPA ‘90 on doublebottoms are now being adopted by responsible bodies, while the E.U. laws on internal matters, including land transport and conflict of laws, are world leaders. The European Union’s proposed directive on classification societies merits special attention from us all as well. And the attitude of the European NGO -- the European Maritime Law Organization (EMLO) is reassuring. It recently studied many of the above matters at its very interesting conference in London this month. Both the U.S. and the E.U. must continue to act, but must also be part of the world legal order and must not go off on tangents with new rules of responsibility after each major disaster.
This article was published in the June 7, 2001 issue of Fairplay Magazine.
Towards a new Cogsa: Carriage of goods by sea and leadership
(Fairplay Magazine, October 28, 1999 at p. 21)
The dilemma of leadership in a democracy, as Disraeli realised, is that at times the leader must lead the electorate and at others, he must be its servant. Which route one takes depends on the circumstances. Disraeli cynically thought that as leader, he was the master and never the servant.
The Comité Maritime International (CMI) faced the dilemma recently, with a happy result in the end. At its AGM in New York this May, the report of the Sub-committee on Carriage of Goods by Sea was brought down, after years of meetings and questionnaires. The Sub-committee chairman concluded that no international convention should be proposed, and even referred to his report as "bringing forth a mouse".
Barry Oland, president of the Canadian Maritime Law Association, objected to the failure to produce a draft convention, which he believed should lie somewhere between the Hague/Visby Rules and the Hamburg Rules. He proposed that a committee be formed, of two or three persons, to draft such a convention for our inspection.
CMI officers sitting in front of the room immediately rose and opposed the proposition. President Patrick Griggs, chairman of the meeting, presumably invoking a CMI version of Roberts' Rules, spoke three times; secretary-general Alexander von Ziegler spoke four times; vice-president Frank Wiswall spoke twice and the chairman of the Carriage of Goods by Sea Sub-committee spoke once. All opposed for various reasons, including that the CMI could not go it alone, but required the support of some international body to hold a diplomatic conference or the support of some government.
I spoke in favour and pointed out that the CMI could propose an international convention, just as UNIDROIT did in the case of the international conventions on leasing and on factoring. (UNIDROIT has less history and no more status or clout than the CMI, yet convinced Canada to host the necessary diplomatic conferences in Ottawa in 1988.) As an alternative, the CMI could convince the Belgian government, as it had in 1924, 1968 and 1979, to host a Carriage of Goods by Sea Diplomatic Conference. Lastly, it was pointed out that the CMI could draft such a convention with UNCTAD or UNCITRAL.
Barry Oland reiterated his views. The only person to agree was Howard McCormack, the president of the US Maritime Law Association, who nevertheless conditioned his support on the draft not delaying the adoption of the proposed US Senate Carriage of Goods by Sea Act (COGSA). The proposition of Mr. Oland was rejected.
The saga did not end, however. It would seem that, fortunately, a sort of steering committee of the CMI meets informally and publicly from time to time in London. At the June 30 meeting, Lloyd Watkins of the international [dot] group [at] btinternet [dot] com (International Group of P & I Clubs) said that the CMI would lose all credibility if its sub-committee study on carriage of goods were put in a drawer. He added that the time had come to produce a draft text of a cargo liability convention and to present it to UNCITRAL.
Also present at the meeting were Griggs, von Ziegler and representatives of IUMI, FIATA and the CMI international shipping law working group. Both Griggs and von Ziegler acknowledged that Barry Oland of the Canadian MLA had made the very same point at New York. It was agreed that Patrick Griggs would solicit the views of various interests to see whether there really was support for the CMI to draft something.
Apparently Griggs found there was. In September, he went back on the CMI position taken in New York and announced in a press release that the CMI and UNCITRAL would prepare such a draft international instrument. (see FAIRPLAY, September 23). Although Disraeli might smile at the above volte-face, the CMI seems to be on the right track, thanks to Oland, Watkins, the steering committee and Griggs, who had the courage to change his mind.
The CMI Executive Council meets in London on November 11, 1999, no doubt to approve the above decision. May I suggest that, if the Council does not want to be known as a rubber stamp and a flying circus, it might take the initiative of choosing the members of the drafting committee from persons who did not oppose the Canadian proposal. Two such persons, who could do the job, are Barry Oland and Lloyd Watkins.
May I also suggest that the drafting committee should avoid the CMI practice of sending out questionnaires; rather it should proceed directly to a draft convention (perhaps to be named the Oland/Watkins Rules). Nor should the new draft contain alternatives, but should be issued with a brief position paper. In this way, many of the problems of the past will be avoided.
In the same spirit, the Executive might also consider reversing its decision not to oppose the proposed American Senate COGSA, which departs completely from international uniformity. The Griggs press release of September hints at this as well.
This article was published in the October 28, 1999 issue of Fairplay Magazine.
Justice is Fairness-Is General Average Fair?
(Fairplay Magazine, October 14, 1999 at p. 27)
Political philosopher John Rawls has pointed out that "justice is fairness" and when laws are not fair, problems arise in the courts, in business and in human relations.
General average is under attack again and the shipping industry may legimately ask itself whether general average is fair, and if not, what can be done about it.
General average is a system of dividing those expenses, between the shipowner, the charterer and cargo etc., which were made for the benefit of all parties after a peril at sea. Adjustment of the contributions, which each party must make, has been carried out for over 100 years, in accordance with the terms of the York-Antwerp Rules. Revision of the Rules is done periodically by the Comité Maritime International (CMI).
Unfortunately, the most recent version of Rules is the result of only a modest revision at the CMI Conference in Sydney in 1994 and the York-Antwerp Rules are still considered by some persons to still heavily favour shipowners. For example, they cause cargo to pay for some expenditures, even when the shipowner was at fault or when there was no peril at all. Engine breakdowns, on occasion, can also be the cause of a general average expense claim by shipowners.
As a result, some good faith, competitive carriers try to avoid a full adjustment by insuring smaller general average expenditures directly with hull and machinery underwriters.
Recently, in a well documented study, the International Union of Marine Insurance (IUMI) proposed, that the York-Antwerp Rules 1994 be revised by the Comité Maritime International (CMI). And in May of this year, at the CMI Annual General Meeting in New York, it was formally agreed to proceed, with Thomas Reme of Hamburg in charge.
Dr. Reme is a very competent and experienced lawyer, but a relatively new boy on the CMI Executive Council, where 10 or 20 year careers on the Council are apparently necessary, before one is deemed mature enough to get into the swing of things. Unfortunately, you can teach a new dog old tricks and Dr Reme, instead of acting immediately, adopted the well-known CMI practice (is it a disease?) of sending out a questionnaire to the 50 CMI national associations. Fortunately there was only one question, which read:
"Is there widespread need and desire outside the insurance field for a full review of the York-Antwerp Rules?"
But is the question reasonable? Is this a question for national associations, even if they should all reply? Is this not a question for the CMI Executive? The CMI is the official custodian of the Rules and must give leadership. Certainly the CMI Executive had instructions at the AGM in New York to proceed. Why are they now asking the question?
And in any event, is not the desire of the insurance industry sufficient?
General average is in considerable disrepute. At the CMI Conference in Sydney in 1994, the Royal Average Adjuster of a Nordic country told me that G.A. should be abolished. A leading Belgian average adjuster said much the same thing.
But G.A. cannot be abolished, except by an international convention, because it is part of the general maritime law, which applies without a statute. Besides, there will always be "adjusting" after a loss. The real problem, in my view, lies in the present version of the York-Antwerp Rules, which can make an adjustment quite lop-sided.
General average "is not dead, it doth but sleep" and every now and then it wakes up, with very harmful results for the ocean shipping industry. (G.A., does not exist in air or land transport, incidentally, or anywhere else.)
My own view is that there is a place for general average adjustment and a real need for a revision of the York-Antwerp Rules.
The ten IUMI comments, in general, seem reasonable, but please stop the questionnaires and present us with a draft text to chew on.
This article was published in the October 14, 1999 issue of Fairplay Magazine.
Are You On The Web? Do Lawyers Need the Web and EMail?
(Fairplay Magazine, September 16, 1999 at p. 27 - in part only)
The web and communicating by E-mail have transformed research in law schools, law firms and ocean carriers, while businessmen are also using the web and E-mail in their daily business. The ultimate change in our way of doing things, may ultimately prove to be as important as the invention of the printing press.
For over three years, I have been a guest on the website of Christopher Giaschi, a fine admiralty lawyer in Vancouver, Canada. Giaschi's site has little propaganda, but considerable useful information, and was recently described by a South African professor as the first and best admiralty law site, while a Connecticut history professor declared that, although it was Canadian in nature, it was the best place to start on the WWW for admiralty law. Amongst other things, I have put recent exams and suggested answers on the site, as well as a 90-page glossary of maritime law terms, including translations of some terms into French, Spanish, Italian and German. (I also have some Canadian history - "The Two Most Important Events in Canadian History".)
The website has elicited some esoteric E-mails, all of which I acknowledge and to which I usually give brief answers. I try to avoid A.L. Menken's standard written reply of sixty years ago (which he had engraved on a rubber stamp), that he had done the research for his thesis, would the correspondent do his own research too.
I have never received a proposal of marriage, although Giaschi has, but the messages are often amusing. The following is a sampling of some I have received. (Omitted is the effusively complimentary first paragraph, with which they invariably begin):
(from Swedish law student): "I am doing my masters thesis on the ISM-code. I am wondering if you could answer a few specific questions for me and if you do, if I can refer to those answers in my thesis...."
(from Puerto Rican doctor): "S.O.S., S.O.S., S.O.S., Greetings, so happy to find your website. The Marina, where my boat is presently docked, claims suit in Rem for alleged past dock dues. The Marina is threatening to evict us and to confiscate my boat if the sum is not paid. Our attorney abandoned us due to fear of retribution by Marina since he also has a boat there. I need to know...."
(from U.K. law student): "I am a final year student and as part of my finals I am currently trying to write a paper concerning a comparison of the Hague-Visby and the Hamburg Rules. I am focusing on the obligations of the parties involved and the ways these differ under the two conventions. Could you..."
(from New York security analyst with a high yield investment fund): "We are currently looking into the bonds of a large cruise ship company. It has come to my attention that certain maritime liens may come before secured bond holders in bankruptcy, should the ships have to be sold. I must admit that prior to looking into cruise line bonds, I had never heard of a maritime lien. Your web site has been an invaluable tool for sorting out some of the jargon. I was wondering if you could recommend a book, that would explain the priority of maritime liens in a bankruptcy proceeding...." Answer "Ahem, why of course."
(from student in Turkey): "I am a trainee and I would like to get more information about CIF, CFR, FOB very urgently. If you'd like to send me, I'll be glad...."
(from Florida): "I've been trying unsuccessfully to find information for a novel I am writing about a murder on a U.S. ship in international waters. It just doesn't seem practical that the U.S. Coast Guard would be involved. Do you think you might be able, Sir, to answer my question?...."
(from researcher for a Philippines' politician): "I would like to ask for your assistance on where to find a copy of the text concerning maritime commerce. Our Code of Commerce was inherited by us from the Spanish in 1898, and the provisions on maritime commerce are still in effect. Professor, can you suggest to me what law is the most modern with regard to the regulation of maritime commerce. Point me to the site so that I may download it and make it adaptable to our country. I hope that you will be able to respond as soon as you can...."
(from American insurance company employee): "I will be purchasing your book, for my future reference. Can you shed some light on a topic which was brought to my attention this morning. One of our Cargo Underwriters has asked me about an 'Optional Stowage Bill of Lading' and..." (from law student in Texas): "I have been asked to perform research on something believed to be called the 'Treaty of Canada'. Would you..."
(from law student in Virginia): "I just perused your web page which posts dialogue you have had regarding your recent article. I am relatively new to the dynamics of COGSA - as a matter of fact, I first learned of COGSA 2 months ago when I decided to throw my hat in the ring for the national Judge John R. Brown Admiralty Moot Court Competition. The issue I was assigned to grapple with was that of COGSA's "perils of the sea" defense - in particularly, how American courts have seen fit to make the element of "foreseeability". I was wondering if you would provide me with (perhaps shooting me an email) some ideas (policy arguments, sources I might examine, or, even better, your own analysis). I hope the weather in Montreal isn't treating you too bad - Virginia has been pretty mild of late, but this weekend things are supposed to get a little scary."
(from a former student in Montreal): "This is Jimmy. I am writing to you today to ask for your assistance and advice in a task I have to undertake and, more specifically, a legal opinion which I have to submit in a few weeks - which has to do
with maritime law. Your advice and great knowledge would really be helpful to me...."
Many messages are touching, including the desire of a Chilean lawyer and a European insurance company employee to do courses by E-Mail, which so far is impossible.
Most large law firms have websites now, but I doubt if any real business is obtained from having a site. It is more like being listed in the phone book. Rather reputation and personal knowledge of a lawyer are still the main criteria for choosing him or her. On the other hand, writing a thoughtful article on the law in a shipping journal such as Fairplay, is apparently far more beneficial for practising lawyers, even consulting professors. Last year I wrote a critical, but fair, article in Fairplay, on the work of an executive of a Non-Governmental Organization (NGO). A partner in the executive's firm particularly referred to the article and sent me an interesting consultation concerning an appeal before the Norwegian supreme court.
Perhaps the printed word, which you can hold in your hands, is still important.
A portion of this article was published in the September 16, 1999 issue of Fairplay Magazine
What Happened in New York? A "Mouse" and a "Boot in the Butt"
(from Fairplay Magazine, June 17, 1999 at p. 24)
The United States Maritime Law Association (U.S. MLA) celebrated its 100th anniversary last month in New York and the Comite Maritime International (CMI), already 102 years old, joined in, by holding its Annual General Assembly at the same time and place in a week of both delightful social events and useful maritime law meetings.
At the discussions on carriage of goods, there were many pious pronouncements on uniformity of international maritime law, but the U.S. MLA Executive was steadfast in its desire to go it alone in promoting its competely different "land and sea", carriage of goods act, with its three types of carrier, one of whom includes "consolidators, packers, warehousers ... servants, agents, contractors", etc. The proposed law also contains complicated changes in burdens of proof and covers carriage from, to and within foreign countries.
The statute, as well, has the most nationalistic of arbitration and jurisdiction provisions. Even South Africa, when it was an "international pariah", and excluded from the family of nations (the UN, the British Commonwealth, the Olympics, the CMI and world cricket), in self-defence, adopted less chauvinistic jurisdiction and arbitration provisions, and in any event, imposed the Hague/Visby Rules. Similarly, the German, Chinese and Nordic statutes impose the Hague/Visby Rules or close thereto, rather than a very different statute.
The U.S., which has failed to adopt the 1910 Collision Convention, the 1924, 1957 and 1976 Limitation Conventions, the international pollution conventions, etc., etc., is now turning its back on the Hague Rules, which it adopted in 1936.
Yet the authors of the U.S. MLA proposal are aware that it is a completely new statute, in meaning, numbering and wording, which puts much past U.S. case law on the scrap heap. At the U.S. MLA Carriage of Goods Sub-committee meeting, the Chairman interrupted my criticisms of the proposal, in order to take five minutes to blame the complicated drafting, wording and numbering on the Senate legislative committee. But is this admission and casting of the blame enough? Should not something be done, by the U.S. MLA itself?
The next day at the MLA Annual General Meeting, the same Chairman reported that the MLA was adamant in proceeding with the US proposed bill and added that he hoped the bill would give the CMI "a boot in the butt" to get it going in the adoption of an international convention. The room was filled with members of the Executive Council of the CMI, but they were silent.
Of course, there is no excuse for the U.S. MLA proposal, not even the inexcusable inaction of the CMI. The proposal's original intention was to counteract the U.S. Supreme Court's Sky Reefer decision, which improperly sent a claim to Japan, where there was little or no connection. That could have been easily corrected by the adoption of articles 21 and 22 of the Hamburg Rules on jurisdiction and arbitration which, incidentally, is what Canada is doing. Instead the U.S. bill tries to kill the gnat with a sledgehammer and completely departs from U.S. COGSA 1936 (the Hague Rules), which have such a rich American and international jurisprudence.
It is time for Americans and non-Americans to speak up and it is also time for the handful of MLA members, who are really behind the Senate COGSA bill, to propose the Hague/Visby Rules with the Hamburg jurisdiction and arbitration articles and any other Hamburg provisions they may wish. They will thus make a genuine contribution to American and international maritime law, rather than put it back 65 years.
On the last day of the Conference, the CMI, at its annual general assembly, confirmed its intention to do nothing about international uniformity of carriage of goods by sea law. The Chairman for the past eleven years of the CMI Carriage of Goods by Sea Sub-committee deposited his report to the effect that no new convention was proposed after all those years of meetings. He then opined that one might think that he was "bringing forth a mouse"! Exactly the sentiment of many in the audience.
Despite "the boot in the butt", the CMI also refused to criticize the American proposal, saying that the CMI could not interfere with national legislation. But is that not the purpose of the CMI - to convince individual nations to adopt uniform international conventions? The CMI, instead, has decided to conduct a long term make-work study featuring 40 esoteric questions such as "When is freight earned? Is it desirable that the moment of delivery both under the contract of sale and the contract of carriage should coincide?" The questions are strangely reminiscent of another CMI diversionary questionnaire of 1996, which has not been heard from since.
As to the U.S. MLA Centenary celebration in New York, it was a beautifully organized event, where much good work on many maritime matters was done, but where the U.S. MLA and the CMI added little to their reputations and credibility in respect to carriage of goods. The meetings will be known for many things, but especially for having brought forth a "mouse" and "a boot in the butt".
Nota bene: I have put the U.S. MLA Senate text on my web site, because it seems to be no where else. See www.mcgill.ca/maritimelaw/maritime-admiralty/cogsa/
This article was published in the June 17, 1999 issue of Fairplay Magazine.
NGO's and Transparency - A Fitting Way To Celebrate in New York
(From Fairplay Magazine, April 22, 1999 at p. 40)
Non-governmental organizations (NGO's) are a creation of the past hundred years and one of the most venerable and most effective has been the Comité Maritime International (CMI), which is in its 102nd year.
The CMI, amongst many other international conventions, adopted the world's most important international carriage of goods by sea rules, the Hague/Visby Rules (1968/1979). UNCITRAL, a much younger NGO (formed in 1966), adopted its own international carriage of goods by sea rules - the Hamburg Rules (1978).
But neither the CMI nor UNCITRAL has been able to update its own particular Rules or to make them compatible one with another, despite the fact that shipping nations all over the world have been crying for such updating and uniformity.
NGO's, as they get older, must keep up with a changing world. Yet the CMI has debated uniformity at its assemblies at Knokke-Zoute (1989), Paris (1990), Sydney (1994) and Antwerp (1997) and at endless meetings of an international working group, which meetings UNCITRAL has attended. Unfortunately, no new draft convention on carriage of goods by sea has been produced or recommended.
The international shipping community is thus torn between Hague/Visby and Hamburg and is like the donkey who starved to death when it was was placed equidistant between two bales of hay and did not know in which direction to turn its head.
Now the CMI and UNCITRAL have dropped the matter and have gone off on a long-term, general study of liablity "being the first steps towards a broadly based convention on aspects of marine transport,
not otherwise covered by existing conventions."
Does this sound like fiddling while Rome burns? In any event, many shipping nations, in despair, are going off on their own and adopting non-uniform changes to their national carriage of goods by sea laws.
Not the least of these is the U.S. Maritime Law Association (U.S. MLA), a one hundred year old NGO, which is proposing a statute of a nationalistic and very non-uniform nature. The new COGSA would, for example, cover shipments from Canada by rail or truck to New York, then by ship to Antwerp and then by rail or truck to Geneva. It would apply to shipments in the other direction as well and to three types of carrier - being "contracting", "ocean" and "performing" , which latter includes "consolidators, packers, warehousers and their servants, agents, contractors, and subcontractors...".
The unfortunate decision of the U.S. Supreme Court in the SKY REEFER is properly countered. The result, however, is that where there is a clause in a contract of carriage calling for jurisdiction or arbitration outside the United States, then that clause is void, including in the example given above of Canada/New York/Antwerp/Geneva and also in a shipment in the other direction.
There is considerable international criticism of the proposed U.S. law and for example, the Canadian MLA sub-committee on carriage of goods, in a published report, has listed seven major defects in the proposed law. But the U.S. bill is now in its 5th Senate draft, and is presumably moving forward to adoption.
How did we fall into this lack of uniformity mess? No doubt because UNCITRAL and the CMI are reluctant to act. UNCITRAL wants the Hamburg Rules or nothing at all and is virtually silent. The CMI has not wanted to offend any of its members on one side or the other and has produced a report of alternatives, concluding that nothing should be done at this time.
The CMI has even refused to comment on the American proposal, because it cannot "interfere in the legislative process of member states." But in not "interfering" with the law of the world's greatest shipper nation, the CMI has refused to assist the other fifty-four CMI member states in achieving international uniformity.
Part of the problem is perhaps that neither organization is completely "transparent", the new flavour of the times. UNCITRAL rarely takes an official position on its practices, while the CMI often gets its back up over public criticism or suggestions. In my last epistle in Fairplay, I made suggestions on the activities of the CMI and the president answered with an ad hominem comment about me - "gadfly". Ad hominems, incidentally, only demean their author, not their object.
In any event, my suggestions were mild compared with a letter, of the Canadian Maritime Law Association, unanimously approved by the all members of its Executive Committee. Are they too, "gadflies"?
And is the work of the proponents of the Senate bill completely transparent? Should not a draft be published in one of the excellent semi-annual U.S. MLA publications? None of the five Senate drafts has been so published, since the first draft, adopted by the MLA at its AGM in 1996. The latest Senate proposal, of January, 1999, incidentally, is completely different in wording and numbering from the MLA draft of three years ago.
We should not be afraid of open discussion. The officials at UNCITRAL, the Executive of the CMI and the Executive of the U.S. MLA are all rough, tough lawyers, who win and lose cases. They can enter into civilized discussions of their administrations and their projects.
The U.S. MLA will celebrate its Centenary from May 1 to 5 in New York and the CMI will hold its annual meeting at the same time in the same place. UNCITRAL will also be represented. The meeting would be a very appropriate place to have an open discussion on international carriage of goods by sea law and the most recent U.S. MLA/Senate draft. Taking a step towards uniformity would be a very appropriate way to celebrate the U.S. MLA's 100 years.
For my part, I will continue to follow the admonition of Adlai Stevenson: "Even if the others stop telling lies about me, I will not stop telling the truth about them." Open discussion is essential for mutual respect and mutual support.
This article was first published, with slight modifications, in the April 22, 1999 issue of Fairplay Magazine.
The Demise of the Demise Clause?
(From Fairplay Magazine, December 3, 1998)
Years ago, I wrote that the demise clause (similar to the identity of carrier clause) was dead. Recently, however, it has risen from the ashes in two Canadian judgments, which seem to me to be quite flawed.
The demise clause, it should be remembered, appears in bills of lading and stipulates that "if the ship is not owned or chartered by demise to the company issuing the bill of lading", then the contract is solely with the owner or demise charterer and that the company issuing the bill of lading is agent only and has "no personal liability whatsoever".
Its cousin, the identity of carrier clause, is more direct and to the same effect. It declares that, in every case, the carrier is the shipowner and the charterer is only the agent.
The problem for the shipper (or consignee), is that the shipowner is often some obscure company, with head office in some obscure place.
Now the Federal Court of Canada, in Union Carbide v. Fednav (The "Hudson Bay"), 1998 AMC 429 (the link is to the French version of the judgment only), and the Canadian Federal Court of Appeal.
The Canadian decisions also rely on the The Berkshire of Brandon J. in 1974 and Paterson Steamships Ltd. of the Supreme Court of Canada in 1951. Both these decisions merely held, however, that the suit taken against the shipowner was valid, while the observations about the responsibility of the charterer were obvious obiter dicta, because suit was not taken against the charterers. A number of subsequent Canadian judgments, where both the charterer and the owner have been parties to the suit, have found them both responsible.
Why should the identity of carrier clause (and the demise clause) be invalid as against the charterer and why should both the owner and charterer together be held responsible? The reasons are numerous and include the following:
1) The identity of carrier clause contradicts the appearance of the charterer's name at the head of the bill of lading. It contradicts the fact that the charterer advertises the liner trade it is conducting, sends out bills and collects freight for its own account and does not pay that freight to the shipowner. Rather, the charterer has a different contract with the shipowner (the charterparty) and pays hire to the shipowner, irrespective of the bill of lading freight it collects.
2) The charterer is actually carrying out some of the obligatory responsibilities of the "carrier" under the Hague/Visby Rules, including the choice of the ship, some of the details of loading, stowing, and discharging the ship and the directing the ship's course and deciding on its next port of call.
3) In particular, Article 3(8) of the Hague/Visby Rules prohibits non-responsibility clauses. Identity of carrier and demise clauses are not-too-subtle, non-respnsibility clauses.
4) If one cannot accept that the charterer and the shipowner are jointly and severally responsible, then one must at least accept that each is a carrier and that they are jointly responsible.
5) There are other reasons, which I have explicated ad nauseum, elsewhere.
It is interesting that the Hamburg Rules hold both the contracting carrier and the actual carrier responsible, as does the new Nordic Code and the recent American Maritime Law Association proposed COGSA '98. If the Courts of Canada cannot recognize that an identity of carrier clause is only a non-responsibility clause and that the real contract of carriage, as seen from the bill of lading, the booking note, the advertisements, the tariff, the system of billing and payment, is really with both parties, then Canada should adopt the Hamburg Rules.
In 1993, the Canadian government adopted the Hague/Visby Rules and the Hamburg Rules, but did not put the latter into force. The Hamburg Rules come up for reconsideration, before the Canadian Parliament in 1999. The discussion should be interesting.
This article was first published in the December 3, 1998 issue of Fairplay Magazine.
Support Griggs: Plan of Action for the CMI
(From Fairplay Magazine, October 22, 1998)
Should the work of a public body, such as the CMI, be analyzed in a public journal like FAIRPLAY or should comment be limited to private "in house" observations at executive and annual general meetings? Last year, the CMI Executive asked for criticisms and suggestions as to its operations and some national associations sent in often quite critical reports; Canada's comments covered eleven pages.
Patrick Griggs, the incoming President of the CMI, summarised the answers in a document which was distributed and discussed openly at the CMI Centenary Conference in Antwerp in June 1997. In two articles in FAIRPLAY, I reported on the state of the CMI, relying for the most part on the Patrick's written summary. Patrick replied in FAIRPLAY with raised eyebrows worthy of Laurel and Hardy in their prime, but did not take issue with the veracity of my observations. My remarks were really his, in any event, and as the new President, he was properly showing support for his Executive Council.
Other officers, however, made it clear that they strongly disapproved of any public criticism. One executive announced in tones of the "vierge offensee", that he disagreed with my assessment, although the Canadian Maritime Law Association (CMLA), in its report, had been much more critical. In a letter to me alone, however, he set out his real objection, which he called "washing one's dirty linen in public."
If some of the "old guard" were upset by the publicity, I otherwise received universal support in favour of the public airing of the CMI's problems, which was deemed necessary if reform was to take place. After all, it was the CMI's Executive Council, itself, which opened "the Pandora's Box ".
And what has the CMI done in the past year? Patrick Griggs has made herculean efforts, but change has been cautious and slow. For example, the Executive Council did not immediately act on the report at Antwerp, but sent out yet another questionnaire on how its operations should be conducted and months later issued yet another report on what it should do. Here are excerpts:
"Avoiding the perception that the CMI is a Shipowners' Organization".
"Civil Law and Common Law (and Europe). It was obseved that many of the civil law countries resent the common law emphasis in maritime law, while at the same time there is concern in the common law jurisdictions that the CMI is 'eurocentric'."
"The election of younger people to the Executive Council is to be strongly encouraged."
"With a view to reducing the impression that the CMI is a European-dominated organization, it may be that some changes need to be made in relation to the composition of the Executive Council,..."
And what did the Executive Council do in the light of its own second report? It elected a nominating committee, composed solely of very senior persons from northwestern Europe, whose whole careers have been spent working either for or with shipowners and P & I Clubs. This nominating committee (whose members, individually, are fine persons) did not nominate new members to the Executive Council, but renewed Council members to further four-year terms, including one member who had been there for three previous terms. The unofficial reason was that "to do otherwise would have hurt personalities and feelings."
Of the fifteen persons permitted to attend Council meetings, eight are from northwestern Europe, two more are from southern Europe and the remaining five are from the rest of the world. This is apart from the Treasurer and the Assistant Administrator who are necessarily from Belgium, the headquarters.
Carriage of goods by sea, has been the jewel in the CMI crown, since 1924, but the Executive Council has defaulted on its responsibilities here too. After years of questionnaires, reports and meetings, including at Knokke-le-Zoute in 1989, at Paris in 1990 and Antwerp in 1997, a final draft on Carriage of Goods was not deposited at Antwerp last year or at the Annual General Meeting in London this year. Instead, the Executive decided to drop the matter and with UNCITRAL to conduct "exploratory work on the feasibility of uniform rules in areas not covered by Hamburg Rules and the Hague Regime and in the context of that work, liability issues might be looked at."
This make-work project was first proposed in a panel at the CMI Conference in Antwerp in 1997, where no one on the panel other than the proposer, supported it. Nor did anyone of the over 100 persons present in the room. And how can the CMI (despite the appointment of an all-star sub-committee) hope to find general rules on liability for collision salvage, charterparties, general average, towage, etc., when it failed either to adopt or even submit a particular regime under a single bills of lading convention? Perhaps this is why the CMI News Letter described the project as "largely an information gathering exercise promoted by UNCITRAL. The CMI has not been charged to draft a new document."
But there is hope, elsewhere on the carriage of goods by sea horizon. A group of lawyers from nine European countries, who have no attachment to shipowners or shippers or cargo insurers or P & I (or who have renounced such attachments) are preparing a strict liability, intermodal regime, which will be the basis of a Directive of the European Union. It will start out as non-mandatory and will be such that carriers, outside the European Union, could join in, too.
The project demonstrates that there is a will to unify carriage of goods by sea in the European Union, which desire, I believe, extends to the rest of the world.
And what is the future of the CMI? I believe that its continued existence is essential, being the only independent, non-governmental body which can influence and has influenced, uniformity in international maritime law. But to do so in the future, it must become more independent and more representative.
Patrick Griggs, the energetic new President, should be given leeway to form a more dynamic and broadly based Executive Council. (It is no secret that he has tried to get some members of Council to resign and others not to seek re-election.) Perhaps all members of the Executive Council (with the exception of the President) should resign in writing. Then Patrick could freely make his choices from former members and new recruits. The Nominating Committe could endorse them and then could itself resign.
Perhaps past-presidents, who seem to have lifetime status on the Council and as committee chairmen, could also renounce that status and the constitution could be changed. One past-president has simultaneously had many posts on the Executive Council, including the chairmanship for years of the very important, but ineffective carriage of goods by sea sub-committee. Patrick Griggs needs support and we should allow him freedom to do the job.
This article was first published in the October 22, 1998 issue of Fairplay Magazine.
Law Conventions Trampled: US COGSA Sails Its Own Quirky Course
(From Fairplay Magazine, October 15, 1998)
The United States Maritime Law Association (U.S. MLA) is the most active, democratic and organized of the fifty-five national maritime law associations, which make up the Comité Maritime International (CMI). It is also the largest national association with over 4000 members and a large annual budget, which it uses wisely. It has many publications, holds numerous meetings and participates in all CMI activities, as well as all American maritime law matters.
One of the projects of the U.S. MLA is a proposed new U.S. Carriage of Goods by Sea Act (new COGSA) which is now before a committee of the U.S. Senate. The new COGSA contains the following useful improvements over U.S. COGSA 1936:
a) it abolishes the error in management and navigation defense as in the Hamburg Rules,
b) it adopts the package and kilo limitations of the Visby Rules,
c) it covers before loading and after discharge for the "contracting carrier", much like Hamburg,
d) It covers deck cargo as in Hamburg,
e) it covers bills of lading, waybills and electronic documents as in Hamburg,
f) its rules on prescription apply to suit, indemnity actions and arbitration as in Hamburg,
g) it resolves problems of arbitration and jurisdiction clauses, created by the U.S. Supreme Court in Sky Reefer, but in a very nationalistic fashion.
The new COGSA was negotiated extensively, everyone had a say and seemed to receive a quid pro quo. As a result it is unfortunately quite unlike the Hague or Hague/Visby or Hamburg Rules and cannot be a guide for international law or the law of any other nation. In particular:
1) There are complicating definitions of three types of carrier - "ocean", "contracting" and "performing". The Nordic countries and Hamburg have only two. Nor are the American carriers declared jointly and severally responsible.
2) The "performing carrier", who would benefit and be bound under the new act, is extended to "consolidators, packers, warehousers and their servants, agents, contractors and subcontractors".
3) The Pomerene Act 1916/1994 on bills of lading only applies outwards, but almost all its provisions have been included in the new act and will therefore apply inwards and outwards. In consequence foreign bills of lading will be subject to the U.S. Bills of Lading Act.
4) The Harter Act 1893 has not been abolished, so that there seem to be two different regimes for after discharge and inland water carriage in the U.S.
5) The new COGSA applies to inland rail and truck carriage, where there is carriage by sea under the same contract. Thus it would apply to the whole carriage by through bill of lading by truck from Omaha, Nebraska to Montreal and then by sea to Southampton. Through bill truck carriage in Europe and then by sea to the United States would also be subject to the Act.
6) There are very complicated new burdens of proof and even a new provision for negligence in navigation and management, if the cargo claimant tries to raise it.
Thus the proposal departs much more from international norms and practice, than the new laws of China, the Nordic countries, Australia and New Zealand.
And a new major problem has arisen. The text of the proposal, which was first adopted at the AGM of the U.S. MLA in May 1996, has now been completely redrafted by the Senate Drafting Committee, who cut it down by one-third. (I am referring to the fourth Senate draft of June 19, 1998.) The result is that much of the terminology and all of the numbering of US COGSA 1936 (which was virtually a carbon copy of the Hague Rules) is gone.
In consequence, the new COGSA will be in an unfamiliar language and format, causing confusion to American and foreign shippers, shipowners, carriers, merchants, judges and lawyers. Much of the old references and decisions will be redundant or at least be subject to a very difficult concordance, in those rare cases where that could be possible and useful.
A principal and virtually unanimous purpose of the new U.S. COGSA was to overcome the unfortunate Sky Reefer decision of the U.S. Supreme Court, which ignored forum non conveniens. The new American provisions on arbitration and jurisdiction, however, joined with the American insistence that the new COGSA apply to and from the United States and to inland through carriage as well, make it, perhaps, the most chauvinistic statute in international transport law.
Why has this astounding text been proposed? No doubt because in the American democratic and political tradition, the U.S. Maritime Law Association consulted every group in the shipping industry and added in many of their particular requests to arrive at this ultimate compromise.
Perhaps it would have been better, had U.S. MLA proposed the adoption of the Hague/Visby Rules, or perhaps the Hague/Visby Rules mixed with the Hamburg provisions, now found in its new proposal? Should the MLA have succumbed to the demands of pressure groups to add the particular amendment, which that group happened to favour? As a law society, perhaps it would have been better for the MLA to have drafted as perfect a legal document as possible, within the international mainstream, and to have left the politics to Congress? Not being compromised, the MLA could then have fought hard to have its proposal passed by Congress.
It is difficult for a non-American to criticize a bill before the U.S. Congress, but Canada is the biggest trading partner of the United States and vice versa. The provisions of the new COGSA on inward, outward and through carriage, as well as arbitration and jurisdiction, make it very much a Canadian problem. The industrial and trading might of the U.S. makes the proposal an international problem as well.
It is time all of us took a very careful look at the proposal. It is time to speak up.
This article was first published in the October 15, 1998 issue of Fairplay Magazine.
Maxwell Order - Robert Maxwell Lives On
Robert Maxwell, the international publisher, was lost at sea, off the stern of his yacht, thus simultaneously avoiding the jurisdiction of the bankruptcy and admiralty courts. In death, however, he has caused the creation of a legal procedure of considerable importance -- the Maxwell order. It is a method of reconciling jurisdiction of the bankruptcy courts of two different nations, for example the United Kingdom and the United States, in respect of a single bankrupt.
Origin of the Maxwell Order
The «Maxwell order» originated in Re Maxwell Communications Corporation plc.,  B.C.L.C. 465, where Maxwell Corp., a British company, petitioned the High Court in England for an «administration order» under the U.K. Insolvency Act 1986. Because 80% of its assets were in the U.S., the company also petitioned the U.S. Bankruptcy Court for reorganization under the U.S Bankruptcy Code. The High Court appointed joint administrators under the U.K. statute, and the U.S. Bankruptcy Court appointed an examiner under chap. 11 of the U.S. Bankruptcy Code.
To assist in promoting the reorganization of the debtor, the High Court deferred to the jurisdiction of the U.S. Bankruptcy Court, while still preserving its own jurisdiction. The High Court also authorized the U.K. joint administrators to consent to the U.S. court making a «joint agreement approval order», approving an agreement between them and the U.S. examiner.
Joint Agreement - U.K./U.S.
The joint agreement provided for the U.K. joint administrators and the U.S. examiner to investigate the assets and liabilities of the debtor; to exchange information; to act to harmonize the judicial proceedings in both countries, for the benefit of the creditors and stockholders and other "parties in interest"; to identify issues to be resolved in facilitating the debtor's reorganization; and to promote consensus among parties in interest in proposing, confirming and consummating a plan of reorganization consistent with the U.S. Bankruptcy Code.
U.K. Standing in U.S. and vice versa
The U.S. court gave the U.K. joint administrators standing as parties in interest, permitting them to appear in the U.S. proceedings. The U.K. High Court, for its part, permitted the U.S. examiner to appear in the U.K. proceedings. Both courts retained their jurisdiction, and the joint administrators and examiner were relieved of the obligation of doing anything which might be a breach of their respective duties under applicable laws.
A Maxwell order is thus a triumph of international cooperation by the bankruptcy courts of two different nations.
Use in Canada and throughout the World
Other bankruptcy courts, in Canada and elsewhere, might use Maxwell orders to promote the practical and equitable solution to transborder reorganizations, thereby avoiding the problems associated with conflicts of law and conflicts of jurisdiction.
International Conventions and the UNCITRAL Model Law
Other hopeful signs of progress towards a more international response to the problems flowing from the bankruptcy of multinational corporations are the European Convention on Certain Aspects of Bankruptcy, adopted by the Council of Euprope at Istanbul on June 5, 1990, the European Convention on Insolvency Proceedings, adopted by the European Union at Brussels on November 23, 1995 and the Model Law on Cross-Border Insolvency, adopted by the United Nations Commission on International Trade Law (UNCITRAL) at Vienna on May 30, 1997. The Model Law in particular includes provisions similar to Maxwell orders, granting foreign insolvency representatives direct access to local courts and providing for cross-border judicial cooperation in respect of both reorganizations and liquidations. There is hope that the Model Law will garner widespread international support. It is also noteworthy that the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) are parties to the Nordic Bankruptcy Convention, adopted over sixty years ago, on November 7, 1933!