From the steamship era to the digital age – 100 years of the Hague Rules
14 February 2025
In August last year, the shipping community celebrated and reflected on a significant milestone - 100 years of the Hague Rules.
At the Comité Maritime International (CMI)’s Colloquium held in Sweden this year, the Berlingieri Lecture was delivered by Professor Michael Sturley of The University of Texas. In his lecture, Professor Sturley spoke about the 100-year history of the Hague Rules, the reasoning behind their adoption and the lessons we can learn from them today. In Professor Sturley’s words, the Hague Rules have been “remarkably successful”, largely because they govern most of the world’s maritime trade. [1]
The Hague Rules were created in the 19th century when e-commerce and logistical advancements such as containerisation could not have been foreseen. It is timely to now review the Rotterdam Rules, which were developed to modernise the Hague Rules and to seek greater unification of international maritime law (noting the Hamburg Rules and other hybrid regimes co-exist with the Hague Rules).
A short history of the Hague Rules
On 25 August 1924 the international maritime community concluded the world’s first multinational treaty to provide uniform rules for the carriage of goods by sea – the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, better known as the Hague Rules. The Hague Rules were designed to allocate risk of loss for damage to ocean cargo carried under bills of lading. Before the Hague Rules, a carrier was absolutely liable for cargo damage unless it could prove that either: its negligence had not contributed to the loss; or that one of four ‘accepted causes’ were responsible for the loss (an act of God, public enemies, shipper’s fault, or inherent vice). This was the position in both civil and common law jurisdictions. In other words, the carrier assumed very broad liability for cargo damage.
The introduction of the Hague Rules was not without criticism. Lord Justice Scrutton, one of the most respected jurists of his time, publicly criticised the Hague Rules stating they were unclear and would lead to increased litigation. However, by 1938 and in spite of Lord Justice Scrutton’s reservations, the majority of the world’s shipping nations had signed up to the convention. The 1968 Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, agreed in Visby, Sweden, slightly revised the Hague Rules and gave us the Hague-Visby Rules. In 1979 there were further amendments by way of the SDR Protocol. However, none of these amendments addressed the basic liability provisions, which are unchanged to this day.
In fairness to the architects of the Hague Rules, during the Brussels meetings the President of CMI Monsieur Louis Franck stated:
There is no intention of establishing an all-embracing code covering the affreightment or carriage of goods by sea. What is intended is the formulation of a limited number of rules relevant to bills of lading…
It is clear that the Hague Rules never intended to be ‘all things to all people’. Despite this, while the Hague Rules are widely regarded as effective, we can’t ignore the fact that they were created in the steamship era. Technologies such as containerisation, door-to-door trade and e-commerce could not have been contemplated by the drafters.
Australia and the Hague Rules
Australia acceded and gave the force of law to the Hague Rules, the Visby Protocol and the SDR Protocol through Schedule 1 of Carriage of Goods by Sea Act 1991 (Cth) (COGSA). Following a Commonwealth Department of Transport review during 1995 – 1996, the Carriage of Goods by Sea Amendment Act 1997 was passed, which contained a schedule of modifications of the Hague Rules contained in schedule 1A. These rules, known as the Amended Hague Rules, were implemented on 30 June 1998, and aimed to improve Australia’s marine cargo liability regime by extending the scope of carrier liability. They depart from the Hague Rules in a number of respects, most notably they extend the operation of the Hague Rules within the limits of a port or wharf in Australia. [2] The Explanatory Memorandum to the Regulations giving this effect said that:
The Carriage of Goods by Sea Regulations 1998…will modify the operation in Australia of the amended Hague Rules. The changes are in summary:
- ensuring coverage by the COGSA of a wide range of contracts of carriage, including electronic documents (rather than just bills of lading)
- covering cargo carried on deck, in most circumstances
- extending COGSA coverage from the current “hook-to-hook” coverage to provide ‘”terminal-to-terminal coverage”
- providing limited recompense for shippers’ losses due to delays, except where the delays are “excusable delays”, and
- extending coverage to importers in limited circumstances.
While the Amended Hague Rules extended the Hague Rules for the benefit of Australian shippers, it is worth considering whether the Hague Rules remain fit for purpose. One example is that liability for deck cargo can be entirely excluded by a carrier under Article 6A of the Hague Rules. This is arguably no longer appropriate, given the volume of containers carried above deck on Ultra Large Container Vessels. Whether carriers should continue to be able to operate in a Hague Rules environment for deck cargo requires consideration by the Australian shipping community.
Multi-party transport and ‘door-to- door’ trade
The Hague Rules is a regime between only two parties: the shipper and the carrier. However, depending on who enters into the contract with the shipper, the shipowner or charterer may be party to the regime as the carrier. Under Article 4 bis, the Visby Protocol extended the carrier’s defences and ability to limit liability to a “servant or agent of the carrier” but not to a subcontractor (for example, a stevedore). In addition, the obligations and liabilities of the carrier were not extended. This is a significant flaw in the Hague Rules, given subcontracting is an integral part of international shipping. As we know, carriers operate by subcontracting numerous functions such as loading, unloading goods, and performing multimodal transport tasks.
The Rotterdam Rules address these issues by introducing the concept of a performing party (PP) as well as a maritime performing party (MPP). An MPP is any party that contributes to the maritime leg, including loading and unloading of goods and a PP is any party that performs inland components. Whether a party is the carrier, MPP or PP will determine the scope of its liability under the Rules.
Himalaya clauses are the widely accepted commercial response to extend the Hague Rules to subcontractors, thereby extending the carrier’s defences and limits of liability to subcontractors. They often also contain circular indemnity clauses, with all roads leading to the carrier’s avoidance of liability.
The Rotterdam Rules could recalibrate the balance between cargo and carrier’s interests – while MPPs receive a carrier’s defences and liabilities, they also take their obligations and liabilities – the result being that in taking benefits they must also take the burdens.
The Hague Rules only apply to the sea leg of the carriage, traditionally referred to as ‘tackle-to-tackle’. While the Amended Hague Rules in Australia have extended the scope to port limits, that’s the end of the line (so to speak). There is no ability to extend their application further.
The Rotterdam Rules on the other hand, extend the period of responsibility of the carrier from when the carrier or a performing party receives the goods for carriage and ends when they are delivered. Essentially, they are a ‘door-to-door’ regime.
E-commerce
Another criticism of the Hague Rules is that they hinder cross-border trade by failing to account for advancements in technology. The current paper-based bill of lading system has been accused of being costly and causing delay. If the goods reach the importer in advance of the bill of lading, the importer will not have the required document of title to present to the carrier and collect the goods. This can result in demurrage costs and other economic losses. Digital trade facilitation is a potential solution to the challenges posed by the current paper-based bills of lading. [3]
It is relevant that the Australian state- based Sea Carriage Documents legislation and COGSA do not prevent the use of e-BLs in circumstances where the e-BL has been given legal effect by contract (as contemplated by the Explanatory Memorandum). However, these Acts do not set out specific criteria or limitations about how the underlying contract must enable bills of lading, for example, there is no requirement that a specific system be used to maintain a unique electronic record of the bill of lading. Further, these Acts apply only to specified documents, including bills of lading.
While Australia already has a legal framework that confirms the legal equality of various paper and electronic communications under Australian law, namely, the Electronic Transactions Act 1999 (Cth) and its state and territory counterparts (the ETAs), initial views are that the ETAs are currently insufficient to legally enable electronic transferable records generally. [4]
Rotterdam Rules and E-commerce
Although the final product was prepared by United Nations Commission on International Trade Law (UNCITRAL), the initial draft of the Rotterdam Rules was the work of CMI. The Rotterdam Rules first opened for signature in September 2009, however to date, only 5 member states have ratified the Rotterdam Rules and only 20 member states are signatories.
In light of the many out-dated features of the Hague Rules, the CMI Executive is now seeking international support for the signing and ratification of the instrument. Importantly, the Rotterdam Rules recognise that sea transport documents can be used in electronic form. UNCITRAL is now seeking law reform on negotiable instruments and documents of title used in cross-border trade, through recognition of electronic documents through the Model Law on Electronic Transferable Records 2017 (MLETR).
Australia is currently considering the proposed implementation of MLETR. Based on early indications, it is anticipated that MLETR will sit alongside COGSA to recognise electronic bills of lading by giving them the same legal recognition as their traditional paper-based equivalents. MLETR is broader than the Rotterdam Rules as it covers all transferrable documents in electronic form (including assignable marine insurance documents), whereas the Rotterdam Rules focus exclusively on transport documents. Their intention is different – unlike the Rotterdam Rules, MLETR does not deal with legal effects or parties’ rights, be they contractual or proprietary. Nevertheless, MLETR is more onerous than the Rotterdam Rules in its requirements for recognition or validity of documents.
Under MLETR, an e-BL will need to satisfy criteria to be considered the functional equivalent to its paper counterpart, having a requirement of possession. In particular, it must be demonstrated that:
- only one person can have exclusive control of the e-BL
- the e-BL must be appropriately reliable for its purpose, having regard to factors such as security, verifiability, and industry standards.
In June 2023, the Australian Government announced it would work to create a simpler, more effective and sustainable cross-border trade environment for Australia and released a consultation paper on a Simplified Trade System (STS). [5] The STS Implementation Taskforce is still engaging with the public on STS reforms. The reform task has been left to the Attorney-General’s Department (AGD) to consider as part of their consultation into the proposed implementation of MLETR. [6]
The AGD’s public consultation into the proposed implementation of MLETR closed on 28 October 2024. The AGD will analyse the responses and undertake further work to implement the appropriate legislation for implementing MLETR. At this stage, it is not clear how MLETR will be implemented into Australian law, but MLETR is on track to become the international standard for legislating in this space.
In summary, it is contemplated that the Rotterdam Rules will work in concert with MLETR; they have different purposes not principles. Therefore, an e-BL system that complies with MLETR will have no difficulty operating within the Rotterdam Rules framework.
Conclusion
While we celebrate the long history of the Hague Rules, we keenly await developments in the modernisation of sea carriage laws. International debate surrounding the implementation of the Rotterdam Rules has existed for almost 20 years, but momentum appears to be growing for many reasons, some of which have been highlighted in this paper. There is now impetus for international standardisation of the use of electronic documents in the carriage of goods by sea. MLETR may not be the entire answer and would arguably operate more effectively in this context with the support of the Rotterdam Rules.
[1] Sturley, Michael F., “The 2024 Berlingieri Lecture: The Hague Rules at 100”, p 55.
[2] See Article 1 Rule 3
[3] Asia-Pacific Policy Support Unit – Digitising Trade: The Role of Paperless Platforms
[4] Attorney-General’s Department – MLETR – Consultation Paper
[6] Attorney-General’s Department – MLETR – Consultation Paper
Note: this article first appeared in Shipping Australia Limited, Annual Review 2024, published January 2025.
