A Study On Limits Of Liability Of Multimodal Transport Operator

With the support from the shipping sector, multimodal transport has gained agiant leap due to its advantages over traditional unimodal transport, while its legalsystem, not only with abundant lacunas but also short of mandatory rules bothinternationally and domestically, impedes multimodal transport’s further advancement.One of the reasons why United Nations Convention on International MultimodalTransport of Goods (MTC1980) does not come into force is that carriers’ limits ofliability varies greatly over different legs, as a consequence a compromise could notbe easily reached in the consideration of fierce resistance from transport industry.Under this scenario, with an eye from multimodal transport operator (M.T.O.) andbased upon sea carrier’s package limitation of liability, a variety of study approaches,such as case law study, empirical research, comparative study, historic research aswell as legal hermeneutics etc, have been utilized to explore the limits of liabilityregime (the Regime(s))in the area of international carriage of goods.It could comprise of potential subjects (the identification of M.T.O. andHimalaya-covered third parties), recoverable loss which could be limited by theRegime, units of account of the limits, definition of package, the economic lossarising from delay of cargo in delivery, and loss of limits of liability etc.of the Regime,all of which have been scrutinized for China’s reference. After all above issues of theRegime has been analysed in light with the discussion from the perspective of China’slegislation and judicial practice, a vision of M.T.O.’s limits of liability regimes hasbeen presented at the end of this paper. This study could be divided into an introduction, a main body and a conclusion.In the introduction, the background, significance, scope and main topics, logicalstructure and methodology of this study have been presented. The main bodyexamines the Regimes’ substantive rules from the view of M.T.O., in which threeparts (5Chapters)included: Chapter1and2as part one and two respectively as wellas Chapter3~5as the final one. Apart from discussing the subject of the Regime,Chapter1mainly provides a description of multimodal legal system and then anappraisal on Rotterdam Rules (R.R.) from the backwash on China’s Maritime Code’s(C.M.C.).Chapter2as a prerequisite of the discussion on the substantive rules of theRegime tries to explain the subjects who is entitled to invoke limits of liabilityprovision under multimodal transport contract.What’s more, the backwash and effectarising from the new multimodal convention. is also discussed, such as for the portoperator inter alia. In the core part specific issues of general or specific limits ofliability has been examined respectively in Chapter3and4in light of the differentcategory of loss under the Regimes’ coverage. In response to the rights of limitingliability, there are also loss of such a right (breaking the limits of liability) which isreviewed in Chapter5. Details of the aforesaid Chapters are as follows:Chapter1gives an overview of multimodal transport law system as well as thean appraisal of R.R. The main task of this Chapter is to introduce the history andstatus quo of international and national multimodal transport legal framework whichalso includes unimodal transport law. From the first task in this Chapter, on one hand,MTC, as a mandatory multimodal convention, could not come into forcetantamounting to contractual clauses, nevertheless contributes multimodal transportrules in parallel with institutions’ standard contractual clauses. On the other, lack ofuniform rules in multimodal transport legal system due to regionalization andnationalization thereof has exacerbated the fragrant status of the applicable law ofM.T.O.. In practice, the fact that transport industry has adopted own rules alsocontributes to such a chaos of its kind. Meanwhile under the context ofinternationalization of carriage of goods, China’s multimodal transport legal systemalso exists various problems, such as, in fragrant manner with numerous loopholes,which probably impede a sustainable and sound development of multimodal transportindustry. On this occasion, it is necessary to appraise the extent of impact onmultimodal carriage legislation (especially for China) as far as the innovation theRegime under the updated convention R.R.concerned. Under such a circumstance, the Regime of M.T.O. also embraces such a dilemma. This is also the initial motive tostudy M.T.O.’s limits of liability regime in a mechanical manner for the purpose ofminimizing the conflicts of limits of liability rules and improve China’s multimodaltransport legislation.Chapter2is centered on the subjects of the Regime. The subjects who may beentitled to limit liability could be roughly divided into two categories. The first one isM.T.O.,the role of which could be played by segmented carrier, actual carrier, freightforwarder or non-vessel of common carrier, to name a few. However the identificationof M.T.O should be judged by case-by-case approach. Another kind is the thirdparties under multimodal transport contract who may limit its liability via Himalayaclauses or other methods alike. Those third beneficiary parties may also coverunimodal carrier, port operator or freight forwarder. In a word, those two differentkinds of subjects’ identification depend on their contractual legal relations inmultimodal carriage, and case-by-case scrutiny is also necessary. Therefore Sectionone of this Chapter firstly discussed the basic legal theory of multimodal transportcontract, then followed by the two different kinds of subjects (the third partiesrepresented by port operator) at the same time, the Rotterdam Rules innovative termMaritime Performing Party(M.P.P.) is also focused on as to Regimes’ Subject.Chapter3, mainly on the general rules of physical loss arising from cargo’s lossor damage, constitutes five aspects. The first one introduces the history andjustification of the Regime. The second is to discuss the controversial issue withrespect to the loss covered by the Regime, and the view has been held that thecoverage of loss by the Regime under C.M.C. shall be extended. Thirdly, since thedetermination of which kind of cargo units to calculate damages is a headache inpractice, the third task is to analyze the theories underlying Hague Rules by means ofcase law review involved with US1906COGSA. In this regard China is notconfronted with such a trouble. The forth item refers to units of account of limits ofliability in the form of pound sterling, Poincare gold francs and S.D.R. all of whichowns its pros and cons. Therefore it is preferred to deal with in a holistic view underthe Regime. Due to the fact that S.D.R. is the most common usage currently, the mostsatisfactory means of units of account still depends on the future evolvement ofinternational currency in practice.Chapter4is to systematically discuss the Regime applied in the economic lossspecifically arising from delay in delivery in five Sections. Firstly, the liability of delay in delivery was examined on a macro-scale in following three points: therelation between delay in delivery’s definition and the punctuality taken intoconsideration; the different effect of delay in delivery under different basis of liability;and the controversial issue as to which kind of loss can be compensated in the contextto delay in delivery. The next two Sections centered on Regimes applied under thecircumstance of delay in delivery incurred in the maritime and non-maritime legs. Insea segment, besides a distinction with deviation analyzed, the issue on whether theloss arising from delay in delivery can be recoverable and limited under Hague Visbyrules regime is also explored. And the impact of Hamburg Rules in this regard is alsointroduced. In other segments, generally speaking, such a kind of loss can berecovered though different views also held in civil aviation leg as of the definition ofdelay. In Section4a hypothetical case has been discussed under three multimodaltransport rules.The last section is from China’s perspective to analyse M.T.O.’s limitsof liability in delay in delivery. Due to the unsatisfactory application of C.M.C. andContract Law of China, a corresponding proposal has been produced accordingly.Also comprising of five Sections, Chapter5focused on rules on the loss of rightto limit liability, i.e. breaking limits of liability. In this Chapter special attention hasbeen paid to the degrees of fault of the Regimes of the subject. Section1gives anoverview of its historical source, justification and impact of the provision of breakinglimits of liability, and then the idea behind breaking limits of liability has also beentouched, such as deviation doctrine, fundamental breach theory and contractconstruction principle. Section2and3has discussed in turn on its features withregard to carriage by air, sea, road, rail, inland waterways. Thereafter three questionson multimodal transport has been discussed briefly in Section4. It can be said thatsection2-4is in parallel with each other, but the issues under air leg enjoys a priorityover the other modes because two tests have been initially introduced under1929Warsaw Convention(“willful misconduct”) and1955Hague Protocol respectively(“anact or omission done with intent to cause damage or recklessly and with knowledgethat damage would probably result”), consequently relative disputes have come out inpractice, mainly focused on how to judge the faults from a subjective or objectiveview which varies greatly between common law countries and civil law nations. Sucha disagreement also appears in the unimodal legs as well as the multimodal journey,which will do harm to reach uniform rules of the Regime. As usual, the last part willintroduce and compare the relative China’s multimodal legislation and practice in this respect. Since M.T.O. lacks the test of breaking limits of liability but issues stillemerge in national judicial practice, especially in wet multimodal transport. After anarduous exploration, critiques on the provisions to deprive carrier’s rights to limits ofliability directly in China’s judicial interpretation have been taken severely, followedby the suggestions that the test of breaking limits of liability shall be applied on thebasis of network system approach in the process of improving China’s multimodallegal system.Finally, with the aim of building up China’s sound limits of liability regime forM.T.O. in the near future, a conclusion has been finally reached after adherence tosuch principles as sustainability and uniformity of laws, appreciation of value ofefficiency as a priority over fairness, a holistic view featured with heterogeneouscharacters in the law-making process and also to the idea of preserving harmonizationwith diversity from a macro viewpoint. The conclusion may be summarized includingbut not limited to the following points: Firstly as far as the Subjects concerned, toexpand the coverage of the subject of the Regime, so that the inland carrier issupposed to establish its own limited liability regime in light with the minimumlimited network liability approach adopted by R.R. and specifically providing portoperator is entitled to limit its liability after a prudent reference to M.P.P.from R.R.Secondly, the liability which can be limited should also be extended to cover somedamages, such as the economic loss attributable to misdelivery of cargo. Thirdly, thelevel of monetary limitation, package/unit approach as well as units of account(S.D.R.) mechanism are all suitable for China, thus needless to change. Fourthly,M.T.O.’ liability of delay in delivery shall be limited according to freight-basedcalculation has been produced by means of revising the definition of delay in deliveryunder C.M.C..Last but not least, in the breaking limits of liability mechanism,legislative loopholes and disputes in practice make it a necessity to revise China’sContract Law as well as unimodal leg’s applicable laws.