Sea Freight Conditions

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Sea Freight

The basis for iniform and international rules for carriage of goods by sea was created back in 1924 through the adoption the Haag Rules.

These rules were further improved into the Haag-Visby Rules in 1968. Today the rules are considered the most frequently applied legal bases for the worlds most important trading and shipping nations. Subsequently, an updating and increase of shopowners liability were attempted through a UN adoption of the Hamburg Rules in 1978. These ruler were, however, only acceded to by a few countries.

The latest attempt was made through the Rotterdam Convention in 2008, which opens for yet another increased shipowners liability and not least the possibility of agreementsregarding multimodal transport solutions which include carriage of goods by sea.

The hope is that these new rules will be strongly supported by the important nation USA among others.

Most countries have, to a greater or lesser extent, incorporated elements from these different conventions into their own body of legislation so that any disagreement shall be solvedon the bases of the relevant countries adoption or non-adoption of the different rules.

The Merchant Shipping Act (applying to Denmark)

The Merchant Shipping Act is based on the Haag-Visby Convention of 1968, which was adopted by Denmark on 20 November 1975. The latest convention, the Hamburg Conventionof 1978, was not adopted by Denmark, but the rules are incorporated in the present Merchant Shipping Act in so far as it is possible out of consideration for the Haag-Visby Convention.

Special reference is made to the Merchant Shipping Act, part 13+14 regarding liability for goods.

Paragraph 4: Contracts
  • Part 13: Regarding carriage of goods §251-§320
  • Part 14: Regarding charter of ships §321-§400
Rotterdam Rules

The 'United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea' - or 'Rotterdam Rules' - was adopted by the UN General Assembly on 11 December 2008.

The Rotterdam Rules extend and modernize the existing international rules relating to the contract of maritime carriage of goods. The aim is that the Convention will replace the Hague Rules, the Hague-Visby Rules and the Hamburg Rules and that it will achieve uniformity of law in the field of maritime carriage, as well as provide for modern industry needs in terms of door-to-door carriage. The Rotterdam Rules are the first rules governing the carriage of goods by sea and connecting or previous transport by land.

Like most international Conventions, the Rotterdam Rules represent a compromise.

The most significant changes compared to The Hague-Visby rules are to the benefit of cargo owners.

Some provisions of significant interest are the following:
  • Article 12 of the Rotterdam Rules states that the period of responsibility of the carrier of the goods under the Convention "begins when the carrier or a performing party receives the goods for carriage and ends when the goods are delivered". The new Convention provides for door-to-door carriage where the Hague-Visby rules provide for a period of responsibility to govern the carriage of goods from loading on board until discharge.
  • The Rotterdam Rules maintain a fault-based regime where it comes to the carrier's liability. The carrier is liable where cargo interests prove that the loss, damage or delay took place during the period of the carrier's responsibility. However the carrier is relieved if it can prove that the cause is not attributable to its fault (which includes servants) or falls within the scope of listed defenses, like for example fire and perils of the sea.
  • The error of navigation exemption has been excluded, which from a practical point of view, significantly weakens the defenses available to the carrier, as it concerns an exemption which is frequently relied upon by carriers in practice.
  • The obligation for the carrier to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage has been extended to also cover the voyage by the wording "during the voyage by sea" as included in article 14.
  • The limits of liability have been increased. Compared to The Hague-Visby rules, the limits per kilogram have been increased from 2 up to 3 SDR, while the limit per package has been increased up to 875 SDR.
  • The time limit for commencement of legal proceedings in respect of cargo claims has been extended up to 2 years from the date of delivery in the Rotterdam Rules.
  • The Rotterdam Rules contain important changes regarding jurisdiction. Based on the principle that exclusive jurisdiction clauses may only be recognized if they meet the strict requirements of the Rotterdam Rules, jurisdiction may be found at the domicile of the carrier, the agreed place of receipt or delivery, or the place of the port where the goods are initially loaded or finally discharged.
Hamburg Rules of 1978
United Nations Convention on the Carriage of Goods by Sea, 1978

During the 1970's pressure mounted from developing countries and major shipper nations for a full re-examination of cargo liability regimes.

Many, especially developing countries, took the view that the Hague Rules had been developed by "colonial maritime nations" in 1924, largely for the benefit of their maritime interests, and that the imbalance between shipowners and shipper interests needed to be redressed. This led to the negotiation in 1978 of the United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules).

Rather than just amending the Hague Rules, the Hamburg Rules adopted a new approach to cargo liability. Under the Hamburg Rules the carrier is held responsible for the loss of or damage to goods whilst in their charge, unless they can prove that all reasonable measures to avoid damage or loss were taken. Carrier liability is extended to reflect the different categories of cargo now carried, new technology and loading methods, and other practical problems incurred by shippers such as losses incurred through delays in delivery.

The Hamburg Rules were adopted on 31 March 1978 at a diplomatic conference held at Hamburg. The Convention entered into force on 1 November 1992 when the pre-requisite number of countries acceded to the Convention. However, none of the world's major trading nations have acceded to the Hamburg Rules, nor have its provisions been widely incorporated in national legislation, reflecting a general view that the Hamburg Rules have over-compensated in their effort to redress a perceived imbalance in the Hague Rules in favour of shipowners. The Hamburg Rules probably cover less.

Hague Visby Rules

Although most European states are parties to the Hague-Visby Rules, it should be noted that there are a significant number of countries, such as the USA, which are party to the more restrictive unamended Hague Rules.

The Hague-Visby Rules apply to any bill of lading or similar document of title relating to the carriage of goods between ports in different states, if the bill of lading is issued in a contracting state; or the carriage is from a port in a contracting state; or the contract expressly provides that the Rules shall govern. The carrier must issue a bill of lading which shows details the condition and either number of packages, or the weight, or the quantity of the goods. The exporter is responsible for giving accurate particulars of the goods; packing the goods properly and making claims within set limits. The sea carrier must properly and carefully load, handle, stow, carry and discharge the goods. However, the carrier can deny liability in the event of fire; perils, dangers and accidents of the sea; strikes and inherent vice, etc.

Compensation is calculated in relation to the value of the goods at the time and place at which the goods are, or should have been, discharged from the ship. The shipper can opt to be compensated either on a per package (providing the number of packages is stated on the bill of lading), or per kg of gross weight basis. Compensation is fixed per package or per kg.

Hague Rules of 1924

The Hague Rules represented the first attempt by the international community to find a workable and uniform means of dealing with the problem of shipowners regularly excluding themselves from all liability for loss or damage of cargo. The objective of the Hague Rules has to establish a minimum mandatory liability of carriers which could be derogated from.

Under the Hague Rules the shipper bears the cost of lost/damaged goods if they cannot prove that the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo, i.e. the carrier can avoid liability for risks resulting from human errors provided they exercise due diligence and their vessel is properly manned and seaworthy. These provisions have frequently been the subject of discussion between shipowners and cargo interests on whether they provide an appropriate balance in liability.

The Hague Rules form the basis of national legislation in almost all of the world's major trading nations, and probably cover more than 90 per cent of world trade. The Hague Rules have been updated by two protocols, but neither addressed the basic liability provisions, which remain unchanged.

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Hague Rules