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The following question also makes the feasibility of the enhancing carrier’s duty of care doubtful since there is a factor preventing the carrier from taking more precaution. In the normal course of the carriage of goods by sea, the carrier lacks information of the cargo on which it is obliged to excise the duty of care. Different goods have different characters and therefore need different degree of care. However, the carrier is not in the best position to get this essential information. If they would like to obtain certain information, they have to spend more money on that. It will definitely increase the transport cost and therefore the cargo owner has to pay more for the carriage, which the cargo owner is reluctant to see. [128]
D Criticism 4: Allocation of Risk and the Dual Insurance.
Apart from the issue of duty of care, Brian Makins gave another dimension, the principle of risk allocation, to prove the justification of the nautical fault defence. The significant difference between carriage by sea and by other modes is that the great value of cargo is carried in one ship. The risk which always arises from the nautical fault and fire, is too heavy to be borne by one party. Under the Hague Rules, a carrier assumes the risk of the loss of ship and the cargo owner assumes the risk of the loss of cargo. Eventually risks assumed by the cargo owners will be transferred to their insurers in various countries given that every cargo owner is obliged to insure its cargo. “It gives a good spread of risk and reduces the economic consequences of a total loss”.[129]
The Hamburg Rules are intended to impose insurance responsibility on carriers. However, the abolition of the nautical fault defence will not lead to the abandonment of the cargo insurance by cargo owners. Basically the payment from cargo insurers is more prompt and there is no lengthy litigation. More importantly cargo insurance can be against carriers’ insolvency and the risk of insolvency of a carrier is comparatively high if the Hamburg Rules are introduced. [130] The last reason for the cargo owner insuring its cargo is the liability limit is still there under the Hamburg Rules even if the carrier assumes the liability for the loss or damage to cargo resulting from the nautical fault. The cargo owner has to deal with the rest of the loss by itself.
If the carrier is obliged to assume the limited liability for the nautical fault, it is bound to take the insurance to cover the potential loss. The increased insurance cost will definitely cause the increase of the freight rate [131].
E Rebuttal
The foresaid criticism against the Hamburg Rules on the abolition of the nautical fault defence seems persuasive at a first glance. However, the principle of the allocation of risk is to impose the risk on those who are in the best position to avoid risk.[132] It will be ridiculous to say cargo owners are in the best position to prevent loss or damage to the cargo on board resulting from the nautical fault. It is carriers that are obliged to improve the facilities and management of ship and therefore guarantee the safe arrival of cargo. Less cargo information a carrier has than the cargo owner, which is natural and unlikely to change, can not be the excuse of the nautical fault.
It is also ridiculous to sacrifice cargo owners’ interests so as to reduce carriers’ risk in the carriage by sea. The justification of the nautical fault defence is far from enough if it is only based on the theory that the risk of a carrier is too heavy. Brain Makins accused the Hamburg Rules of lack of the sense of law by citing what Cleton said: “It all ended up in a kind of bargaining which completely left out legal considerations”[133] . However, when he intended to defend the nautical fault defence he totally abandoned the principles of risk allocation and fell into what he accused. In his eyes the balance of interests and economic considerations seem to be the priority.
As for the issue of the increase of the freight rate, there is still no reliable figures supporting this point of view.[134] The first reason may be that insurance companies are reluctant to reveal any information which is confidential and therefore critical for their business. The second reason might be that there is no such information in any usable form at all.[135]
If the proponents of the nautical fault defence can make some favourable hypothesis, like what the proponents of the nautical fault defence are doing now, the abolition of the nautical fault defence also provides a good picture for both the carrier and the cargo owner. Thanks to the loss of the protection of the nautical fault defence, the carrier has to pay more attention to taking care of the cargo. The risk of loss or damage to the cargo will significantly reduced and therefore the insurance cost will be significantly reduced.[136] The shift of insurance burden to the P&I clubs, which have cheaper insurance policies than cargo insurance, also helps reduce the overall insurance costs.[137]
VII RECENT DEVELOPMENTS RELATING TO THE NAUTICAL FAULT DEFENCE
A Comite Maritime International’s Work
During 2000, the CMI International Subcommittee invited all its maritime law association members, along with some non-government organisations including FIATA, the Baltic and International Maritime Council (BIMCO), ICC, ICS, IUMI and the International Group of P&I Clubs to discuss the possible solutions to the problems relating to carriage of goods by sea.[138] Finally an outline of the future instrument was made in Singapore in February 2001.[139]
In that draft, there was a consensus that the nautical fault defence should be removed. The only dispute is whether the instrument should adopt the stringent liability regime. The Draft Outline Instrument 5.1 provides two options. The first one was modelled on the Hague Rules art 4 (2)(q), but its effect was similar to the Hamburg Rules art 5 (1). It reads as follows: [140]
The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when it receives the goods and the time of delivery, as well as for any delay in delivery, unless the carrier can prove that the loss, damage or delay did not result from any fault or neglect on the part of the carrier or its servants or agents.
The second option was modelled on Article 172 of Convention on the Contract for the International Carriage of Goods by Road (CMR) which imposes a more stringent liability on carriers. A carrier can be relieved from the liability for the loss or damage to the cargo only in six listed occasions. In any other occasions he shall be presumably regarded at fault.[141] In contrast, there were no limits for the first option. The carrier can be relieved from the liability in whatever circumstances in which he was not at fault.
A subsequent working group meeting in New York two month later still adhered to the principle of abolition of the nautical fault defence although there were some minor changes with regard to the liability regime.[142]
B UNCITRAL’s Work
CMI has been co-operating with the UNCITRAL since it began its work on the uniformity of the international transport law. Actually many UNCITRAL documents, for instance, Possible Future Work on Transport Law (A/CN.9/497) for thirty-fourth session in Vienna on Jun 25 to Jul 13, 2001, Transport Law: Possible Future Work (A/CN.9/476) for thirty-third session in New York on Jun 12 to Jul 7, were generally bases on CMI’s work.
On January 15, 2002, UNCITRAL decided to establish a working group (Working Group on Transport Law) and continue to discuss the important issues arising from the carriage of goods by sea with the co-operation of the CMI. [143] However, the nautical fault defence will not be involved. Roughly there are two reasons. First, at the CMI’s Singapore Conference, the majority of delegates supported the abolition of the nautical fault defence. Therefore “the review of the liability regime was not the main objective of the suggested work; rather, what was necessary was to provide modern solutions to the issues that either were not adequately dealt with or were not dealt with at all in treaties”[144] , for instance, the influence of e-commerce [145]. Secondly, A revision of liability regime will likely discourage some countries from adhering to the Hamburg Rules[146] .
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