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AIRTHIJR ROBINSON & HEDDERWICKIS
IJBRARY
1997
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CARRIAGE OF GOODS BY SEA AMENDMENT BILL 1997
EXPLANATORY MEMORANDUM
(Circulated by Authority of the Minister for Transport and Regional
Development, the Honourable John Sharp MP)
88751 Cat No.9691634 ISBN 06445044579
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Printed by Authority by the Commonwealth Government Printer
Carnage of Goods by Sea Amendment Bill 1997
OUTLINE
The Carriage of Goods by Sea Act 1991 ("the COGSA") gives effect in
Australia to an international convention ("the amended Hague Rules")
relating to carrier liability for loss or damage to marine cargoes. The Act
` contains an automatic trigger (at s2(3)) which will bring an alternative
international regime, commonly known as the Hamburg Rules, into force in
Australia on 20 October 1997.
This Bill will amend the COGSA to remove the trigger for implementing the
Hamburg Rules from the Act and replace it with a mechanism for regular
review of the situation regarding international adoption of the Hamburg
Rules.
Further, the Bill will add to the COGSA a regulation-making power which will
enable a number of other amendments to be made to the way the amended
Hague Rules operate in Australia. These changes will reflect an agreement
reached between all affected industry stakeholders to enable the Act to:
- cover all relevant contracts of carriage, with certain limited
exceptions;
- cover Australian importers where the contract of carriage does not
incorporate one of the international conventions on cargo
liability;
- extend coverage to cargoes agreed to be carried on deck;
- extend the duration of carrier liability to a terminal-to-terminal basis
(from a "hook-to-hook" basis now); and
- provide some recompense for shippers' losses due to delays.
Background
` The Carriage of Goods By Sea Act 1991 received Royal Assent on
31 October 1991. Sections 1 to 11, 17 to 21 and Schedule I commenced on
assent. The object of the Act, as set out in section 3, is to, among other
things, introduce a regime of marine cargo liability that is equitable and
efficient and is compatible with arrangements existing in countries that are
major trading partners of Australia.
The COGSA provides for two separate international agreements on carriage
of goods by sea. The first is comprised by the Hague Rules which are Articles
I to 10 of the International Convention for the Unification of Certain Rules of
Law relating to Bills of Lading 1924 (the Brussels Convention), (as set out in
sections 4 and 7). The COGSA repealed the Sea-Carriage of Goods Act 1924
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(by virtue of subsection 20(1)), which made provision for the. Brussels
Convention and the Hague Rules. Section 8 of the COGSA provides that,
subject to section 10, the Hague Rules have the force of law in Australia.
The second international agreement provided for in the COGSA is comprised
by the Hamburg Rules which are Articles I to 26 of the United Nations
Convention on the Carriage of Goods by Sea (the Hamburg Rules), which is
Annex I of the Final Act of the United Nations Conference on the Carriage of
Goods by Sea 1978, as well as Annex II of that Final Act (sections 4 and 12).
At this point in time, general international practice is based on the Hague
Rules as amended. In particular, Australia's major trading partners currently
operate under the Hague Rules rather than the Hamburg Rules. It is
acknowledged that the Hamburg Rules place greater liabilities on carriers
than currently exist under the Hague Rules.
Subsection 2(3) of the COGSA provides for a mechanism to "trigger" the
introduction into Australian domestic law of the Hamburg Rules, which may
replace the amended Hague Rules currently given effect by the COGSA.
That is, if Part 3 and Schedule 2 of the COGSA (containing provisions for the
Hamburg Rules) are not proclaimed to commence within three years of Royal
Assent, they are to commence on the expiration of those three years, unless
both Houses of Parliament pass a resolution to either repeal Part 3 and
Schedule 2, or to defer consideration of the Hamburg Rules for another three
years. The trigger was due to operate on 1 November 1994.
Prior to 1 November 1994 there was a vigorous debate between shipper
interests proposing the implementation of the Hamburg Rules and carrier
interests opposing this. The view emerged that while the existing
arrangements had some deficiencies, there were also drawbacks to the
Hamburg Rules, both in terms of the drafting of the Rules themselves, and
because Australia's major trading partners have not adopted them.
In October 1994, both Houses of Parliament passed resolutions to defer the
question of acceptance or repeal of the Hamburg Rules for another three
years. Discussions were to continue with industry to develop a regime
providing fair and reasonable protection for both shippers and carriers.
The Cargo Liability Working Group was set up in 1995 to examine the issues
involved in this debate and make recommendations to improve the cargo
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liability regime for Australian shippers. The Group included representatives
of shippers, carriers, shipowners, marine insurers and maritime law groups.
In October 1995, the Report of the Marine Cargo Liability Working Group was
presented to leading representatives of the industry interests concerned,
which endorsed a package of measures.
FINANCIAL IMPACT STATEMENT
The Bill will have no effect on Commonwealth expenditure or revenue.
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REGULATION IMPACT STATEMENT
A Problem
The Carriage of Goods by Sea Act 1991 ("the COGSA"), governs the extent
to which carriers are liable under statute law for loss or damage to seaborne
cargo. As noted above, the COGSA provides for the amended Hague Rules
now in force to be replaced automatically by the Hamburg Rules on 20
October 1997, unless prevented by Resolutions of both Houses of the
Parliament (this is commonly referred to as the "Hamburg Rules trigger").
Both the amended Hague Rules (Schedule I to the COGSA) and the
Hamburg Rules (Schedule 2 to the COGSA) set out conditions under which,
and the maximum extent to which carriers will be liable for loss or damage to
sea cargoes The Hamburg Rules a more recent convention than the
amended Hague Rules, broaden the conditions under which carriers will be
liable and increase the maximum extent of such liability, at the same time
reversing the burden of proof from the shipper to the carrier
At the time the trigger provision was inserted it was expected that the
Hamburg Rules would be widely adopted by major trading nations in place of
regimes based on the Hague Rules or its variants. In fact the Hamburg Rules
have not attracted support by major trading nations including Australia's
major trading partners. Only about I % of Australia's international trade is
with parties to the Hamburg Rules Convention.
That support does not appear likely in the forseeable future, as there is a
widespread industry view that the Hamburg Rules provide for a less efficient
apportionment of risk than the Hague Rules and also that the drafting of the
Hamburg Rules is deficient. Industry is concerned that adoption of the
Hamburg Rules would increase total transport costs, through incompatibility
with Hague Rules regimes, uncertainty and increased litigation.
The industry-agreed compromise which is the basis of these amendments is
based on the view that it is not appropriate that Australia adopt the Hamburg
Rules at this time, but that various amendments should be made to enhance
the extent of the protection afforded to Australian shippers of marine cargoes.
The Bill therefore provides for the repeal of the trigger provisions and their
replacement by a mechanism for regular reviews of whether the amended
Hague Rules should be replaced by the Hamburg Rules in the COGSA
These reviews are to take particular note of the extent to which Australia's
major trading partners have adopted the Hamburg Rules
B Alternatives
A 1995 industry forum discussed options available for improving Australia's
marine cargo liability regime. It was felt that, while there were shortcomings
in the existing COGSA regime, it was not appropriate to introduce the
Hamburg Rules at the time, primarily because the regimes of our major
trading partners are based on the Hague Rules or the Hague-Visby Rules.
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An industry working group was set up to examine the issues and explore
whether it was possible to develop a regime that was broadly acceptable to
all parties. The working group examined the options for meeting industry
concerns about the existing COGSA regime. The group developed a
compromise solution in which carriers conceded significant extensions in the
protection offered to shippers, in return for the removal of the automatic
trigger for the Hamburg Rules, and its replacement with a review mechanism.
This compromise was then adopted at a second industry forum, and the
package of measures was subsequently approved by the Minister.
The industry-agreed approach will maintain the Hague Rules basis of the
COGSA, thus maintaining compatibilitywith the regimes of our major trading
partners, while broadening the protection the COGSA provides to Australian
shippers, in some ways similarly to the intent of the Hamburg Rules.
C: Impact
The Bill will increase the range of circumstances under which carriers will be
made liable for loss or damage to marine cargoes, but not the maximum
liability levels. Peak bodies representing carriers, the Australian Shipowners'
Association (ASA) and the Australian Chamber of Shipping (ACOS), have
agreed to the industry-initiated package which gave rise to this Bill.
The enhancement of carrier liability will increase the incentive for the mostly
overseas-owned shipping companies (represented by ACOS) to reduce loss,
damage or delay to Australian cargoes. This should put downward pressure
on the costs of marine cargo insurance cover for Australian shippers. While
the carriers may experience some increase in costs from the enhancement of
carrier liability, such cost increases would be greater if the Hamburg Rules
were to be implemented.
D: Other
The Bill is the result of extensive negotiations with all affected interests. An
information paper describing the proposed amendments was circulated to
industry interests before drafting commenced. The draft Bill itself has been
circulated to these interests and modified as a result of comments received.
Regulations can only be made after consultation with industry. The
regulations will be subject to a Regulation Impact Statement analysis or a
Legislative Instrument Proposal on the commencement of the Legislative
Instrument Bill 1996, currently before Parliament.
E: Review
The Bill provides for regular Ministerial reviews of the question of whether the
amended Hague Rules, as they will be then in force in the COGSA after the
current amendments and regulations are made, should be replaced by the
Hamburg Rules. In these reviews, the Minister must consult shippers, cargo
owners, shipowners, carriers, marine insurers and maritime law associations.
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Carnage of Goods by Sea Amendment Bill 1997
Clause 1: Short title
Clause I provides that the Bill may be cited as the Carriage of Goods by Sea
AmendmentAct 1997.
Clause 2: Commencement
Clause 2 provides for the Act to commence on the day it receives Royal
Assent.
Clause 3: Schedule(s)
Clause 3 provides for the amendment of the Acts specified in the Schedule to
the Bill as set out in the Schedule.
Schedule I - Amendment of the Carnage of Goods by Sea Act 1991
Item 1: Subsections 2(2). (3). (4). (5) and (6)
These provisions repeal the so-called "Hamburg Rules trigger", and provide
for the automatic repeal of Schedule 2 to the Act (ie. the Hamburg Rules) and
associated provisions if, after 10 years from the commencement of this Item,
the Minister has not tabled a statement in accordance with proposed
subsection 2A(4) setting out a decision that the amended Hague Rules
should be replaced by the Hamburg rules.
Item 2: When Part 3 and Schedule 2 may commence
This Item inserts new section 2A which introduces a mechanism for regular
reviews by the Minister of the extent to which Australia's major trading
have adopted the Hamburg Rules. Such a review, including industry
partners
consultations, must be undertaken before the Minister makes a decision
whether the Hamburg Rules should be brought into force in the COGSA. The
Minister's decision is to be tabled in each House of the Parliament.
New subsection 2A(2) requires the first review to be completed within 5 years
) of the commencement of the section and subsequent reviews at 5 yearly
intervals. In conducting the reviews, the Minister is required to consult with
shippers, cargo owners, ship owners, carriers, marine insurers and maritime
law associations (new paragraph 2A(3)(b)). New paragraph 2A(7) defines
marine insurers and maritime law associations for the purposes of paragraph
2A(3)(b).
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Item 3: Paragraph 3(2)(a)
Item 3 modifies the wording of the object of the Act in order to reflect the
effects of the package of changes to the COGSA made by this Bill and to be
made by regulations made in accordance with new section 7.
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Item 4: Para~raph3(2)(b)
Item 4 modifies the wording of the object of the Act in order to reflect the need
for a Ministerial review and decision before the Hamburg Rules can replace
the amended Hague Rules in the COGSA.
Item 5: Subsection 4(1)
Item 5 inserts a definition of marine insurers, as the Minister must consult with
representatives of marine insurers in conducting a review under new section 2A.
Item 6: Subsection 4(1)
Item 6 inserts a definition of maritime law associations, as the Minister must
consult with representatives of maritime law associations in conducting a
review under new section 2A
Item 7: The amended Hague Rules
Item 7 repeals section 7 of the COGSA and replaces it with a new section
which sets out the modified meaning of the term "amended Hague Rules" to
reflect the changes to be made by regulations to implement elements of the
industry-endorsed package concerned with the type of sea carriage
documents to which the COGSA applies, deck cargo, importer coverage,
duration of liability, and liability for losses due t~delay.
The concepts behind these changes can be simply expressed. However,
given the nature of international conventions, the modifications to the
amended Hague Rules to make these changes are technically complex and
lengthy. Given the need not to overburden Parliament's business agenda
and recognising that the resources of the Office of Parliamentary Counsel are
under pressure, it is quite appropriate that such technical matters be handled
by regulation.
Accordingly, the Bill includes a very precise regulation making power which
will enable the subsequent drafting and making of regulations to implement
these changes. This might be regarded as an "Henry VIII clause", which is a
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clause that permits the making of regulations which have the effect of
amending the operation of an Act.
Such clauses are used in Commonwealth laws regularly, and enable the
expeditious passage of legislation. The regulations are, of course, subject to
disallowance, and will be required by the Act to be made only after
consultation with relevant industry stakeholders.
Subsection 7(1) sets out the new meaning of the term "amended Hague
Rules" as being the text in Schedule I as modified in accordance with
regulations made under subsection 7(2).
Subsection 7(2) will add to the Act a Schedule of Modifications which
modifies the text of Schedule I (ie. the amended Hague Rules) by making
regulations for the purposes set out in subparagraphs (a) to (e) inclusive of
the subsection.
The intention is that regulations will be made to the effect that, as agreed by
industry:
· all relevant shipping documents will be covered, including sea waybills
and certain consignment notes as well as bills of lading, and including
electronic forms of such documents. Consignment notes in the coastal
trades will not be covered unless for the coastal carriage of export or
import cargoes.
· an importer's contract of carriage will be covered where the contract of
carriage does not incorporate, or otherwise have effect subject to, one
of the international conventions listed in subsection 6.
· deck cargo will be covered, provided that, no later than the time of
booking the cargo the specific stowage requirements of the shipper
have been notified to and agreed by the carrier
· carrier liability will be extended to the period where the cargo is in the
carrier's care within the limits of the wharf or terminal at the port of
loading and discharge.
carriers will be made liable for loss due to delay, to the Hamburg Rules
limit of 2.5 times the freight payable on the goods delayed, except
where the delay is an excusable delay
It is intended that the list of excuses for delay will be based broadly on
the list of excuses for deviation in the Marine Insurance Act 1909.
Subsection 7(3) provides for consequential amendments to be made to the
COGSA necessary or appropriate having regard to the modifications to the
amended Hague Rules made under subsection 7(2).
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Subsection 7(4) provides that, before regulations are made for the purposes
of section 7, the Minister must consult with shippers, cargo owners, ship
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owners, carriers, marine insurers and maritime law associations about the
proposed regulations.
Subsection 7(5) provides that the amendments made by regulations have the
same effect as if they had been made by the Act, for the purposes of the
Amendments Incorporation Act 1905.
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Subsection 7(6) provides a definition of "relevant international conventions"
for the purposes of new subparagraph 7(2)(b).
Item 8: Arbitration
Item 8 adds subsection 11(3) which makes clear that an arbitration in
Australia does not offend section II of the COGSA. Subsection 11(2) states
that an agreement is of no effect which purports to preclude or limit the
jurisdiction of a court of the Commonwealth, or of a State or Territory.
Item 9: Regulations
This Item inserts a standard regulation-making power in the COGSA to
enable the Governor-General to make regulations as detailed in the new
section 7 and for other necessary and convenient purposes.
Item 10: Schedule I (heading)
Item 10 modifies the heading to Schedule I (the Amended Hague Rules) to
reflect the modification of the Rules by the regulations to be made under the
provisions inserted by Item 7.
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