Owners’ and Charterers’ Interests in Charterparty

For many years the clauses in a bill of lading have been subject to statute law, the defences that a shipowner may claim in order to avoid paying compensation for damage to the cargo, which is entrusted to his care for the voyage, are limited by international conventions. The latest of these conventions have been codified into the Hague Visby rules and have been incorporated into English national legislation as the Carriage of Goods by Sea Act 1971. The Hamburg Rules of 1978 became effective in 1992 and cover the additional obligations of carriers under multi-modal transport. The purpose of these rules is to protect the shipper, who may have little experience of the perils of the sea, from a shipowner who could, and certainly did, make use of the monopoly powers which the conference system provided in order to avoid any liability for damage to the cargo. It remains to be seen how the new Rotterdam Rules will affect the market. They were created on 23rd September 2009 with ratification from 16 countries; the requisite additional 4 countries (giving the minimum 20 countries for international regulations) included the USA in October 2009 but to date the UK has NOT yet ratified the Rotterdam Rules. As most charterparties are governed by English Law, the viability of the Rotterdam Rules will probably have to wait until the UK (or at least England) ratifies them. The construction of charterparty forms, on the other hand, has always been left up to the owners and charterers to agree, the assumption being that both shipowners and charterers understood the complexities of chartering and could therefore be left to draw up a charterparty without the need for any statutes to provide protection. The consequences of this are that when a charter is being negotiated, the choice of charterparty form is one of the first items discussed in the negotiations. When freight rates are high, then the owner has a better chance to obtain what he considers to be a fair charterparty, or at least to have the most objectionable clauses removed from the charterer’s preferred form. When the market favours the charterer, then the charterer will be able to impose his favoured form without any modification.For many years the clauses in a bill of lading have been subject to statute law, the defences that a shipowner may claim in order to avoid paying compensation for damage to the cargo, which is entrusted to his care for the voyage, are limited by international conventions. The latest of these conventions have been codified into the Hague Visby rules and have been incorporated into English national legislation as the Carriage of Goods by Sea Act 1971. The Hamburg Rules of 1978 became effective in 1992 and cover the additional obligations of carriers under multi-modal transport. The purpose of these rules is to protect the shipper, who may have little experience of the perils of the sea, from a shipowner who could, and certainly did, make use of the monopoly powers which the conference system provided in order to avoid any liability for damage to the cargo. It remains to be seen how the new Rotterdam Rules will affect the market. They were created on 23rd September 2009 with ratification from 16 countries; the requisite additional 4 countries (giving the minimum 20 countries for international regulations) included the USA in October 2009 but to date the UK has NOT yet ratified the Rotterdam Rules. As most charterparties are governed by English Law, the viability of the Rotterdam Rules will probably have to wait until the UK (or at least England) ratifies them. The construction of charterparty forms, on the other hand, has always been left up to the owners and charterers to agree, the assumption being that both shipowners and charterers understood the complexities of chartering and could therefore be left to draw up a charterparty without the need for any statutes to provide protection. The consequences of this are that when a charter is being negotiated, the choice of charterparty form is one of the first items discussed in the negotiations. When freight rates are high, then the owner has a better chance to obtain what he considers to be a fair charterparty, or at least to have the most objectionable clauses removed from the charterer’s preferred form. When the market favours the charterer, then the charterer will be able to impose his favoured form without any modification.For many years the clauses in a bill of lading have been subject to statute law, the defences that a shipowner may claim in order to avoid paying compensation for damage to the cargo, which is entrusted to his care for the voyage, are limited by international conventions. The latest of these conventions have been codified into the Hague Visby rules and have been incorporated into English national legislation as the Carriage of Goods by Sea Act 1971. The Hamburg Rules of 1978 became effective in 1992 and cover the additional obligations of carriers under multi-modal transport. The purpose of these rules is to protect the shipper, who may have little experience of the perils of the sea, from a shipowner who could, and certainly did, make use of the monopoly powers which the conference system provided in order to avoid any liability for damage to the cargo. It remains to be seen how the new Rotterdam Rules will affect the market. They were created on 23rd September 2009 with ratification from 16 countries; the requisite additional 4 countries (giving the minimum 20 countries for international regulations) included the USA in October 2009 but to date the UK has NOT yet ratified the Rotterdam Rules. As most charterparties are governed by English Law, the viability of the Rotterdam Rules will probably have to wait until the UK (or at least England) ratifies them. The construction of charterparty forms, on the other hand, has always been left up to the owners and charterers to agree, the assumption being that both shipowners and charterers understood the complexities of chartering and could therefore be left to draw up a charterparty without the need for any statutes to provide protection. The consequences of this are that when a charter is being negotiated, the choice of charterparty form is one of the first items discussed in the negotiations. When freight rates are high, then the owner has a better chance to obtain what he considers to be a fair charterparty, or at least to have the most objectionable clauses removed from the charterer’s preferred form. When the market favours the charterer, then the charterer will be able to impose his favoured form without any modification.