Thursday, November 6, 2008

Scope for Arbitration in Multimodal transport contracts

Arbitration in Multimodal Transport Contracts.
(By V.M. Syam Kumar, Lecturer for Maritime Law, National University for Advanced Legal Studies, Kaloor, Cochin.)
Arbitration in Multimodal Transport Law:
Arbitration as a dispute resolution mechanism has displayed great agility and dexterity in adapting itself to suit the requirements of various branches of law. We have seen the role of arbitration in disputes involving ships and its effectiveness in settling maritime disputes of various nature. The effectiveness of arbitration in maritime dispute resolution has lead to the rise of a distinct branch of arbitration termed Maritime Arbitration capable of having an independent existence.
Norm making activity is a continuing process and does not come to a stand still so long as social intercourse continues. Increase in global trade and technological advancements in the means of marine transport have necessitated the creation of new and varied legal norms even within the field of maritime arbitration. Multimodal Transport Law is one such innovation of trade and technology which calls for separate consideration.
What is Multimodal Transportation?
International carriage of goods may be executed by sea, air, or land or by a combination of all or any of them. If it is done by only one among such modes, it is a Unimodal transport. Carriage involving more than one mode of transport is termed as Multimodal Transportation or Combined Transportation. Since 1950’s containers proved to be a suitable means for effecting multimodal transport. Consolidation of cargo into containers gave a fillip to multimodal transportation of goods across the globe. Containerisation also gave rise to very peculiar legal issues which required separate treatment under the regime of Multimodal Transportation.
Distinctiveness of Multimodal Transportation.
Transport documents are an integral part of international carriage. The nature and form of these documents varies from one mode of transport to the other. The rights, duties and liabilities arising there from also vary considerably. The liability regime governing a common carrier is different from that applicable to an ocean carrier. Similarly, the regimes applicable to the carriage of goods by land or rail are distinct from the one pertaining to the carriage of goods by air. This explains the reason for distinct documents covering each mode of transportation. The liabilities under each mode as evidenced by the concerned document also keeps on changing from time to time due to various factors, ranging from modern advancements in carriage technology to the security concerns arising from the ever changing global political scenario. With the advent of containerization, wherein containers which would from its point of origin till the place of delivery be subjected to varied modes of transportation, road, rail sea or air, this myriad of liability regimes under the varied documents gave rise to complex legal issues of great practical and commercial importance.
Factors leading to the growth of Multimodal Transport law:
Unimodal transports were governed by separate laws which developed independently and distinct from each other through both legislative enactments and judicial pronouncements. Each unimodal transport law preferred to remain as a water tight compartment. They were reluctant to admit into its realm a combination of two or more modes of transport. The independent growth of these unimodal transport laws both in national and international levels would be reveled by the plethora of legislations which govern each of them. A great number of International Conventions dealing separately with each mode of transport like the Convention on the Contract for the International Carriage of Goods by Road, 1956 (C.M.R. Convention), Convention for the Unification of Rules Relating to International Carriage by Air, Warsaw, 1929, Convention Concerning International Carriage by rail, 1980 (C.O.T.I.F.), International Convention for the Unification of Certain Rules Relating to Bills of Lading, Brussels, 1924 (The Hague Rules) evolved. In tandem with the said international Conventions National laws were also enunciated by nation states, at times with considerable variation from the Conventions so as to meet the local requirements. The separate norms and liability regimes in each of these Conventions gave rise to certain practical problems. When more than one transport document is issued and different rules are applicable to each document, the question as to where and when the loss, damage or delay has occurred will have to be answered with certainty. Proving the time and cause of loss or damage with sufficient evidence will be difficult and many time impossible for the cargo owner. Due to this, the actual point of time when the loss, damage or delay occasioned or the cause for the same may never be known with certainty necessary to maintain a claim. Hence the issuance of a number of documents became incompatible with a combined transport operation. The same proved to be disadvantageous to the operators too since they may not be able to gain the optimum economic benefit of new transport techniques. Moreover, with the passage of time and due to the rapid growth of international trade it was revealed that carriages by other modes were incidental to the unimodal transport and that there was a need for elaborate provisions for combined transportation.
All this lead to the evolution of a single document called Combined Transport Document or the Multi Modal Transport Document whereby the operator assumes liability for the whole journey instead of issuing several documents.
International attempts towards evolving a Start to Finish Document:
Upon realization of the need for a single document that would govern the rights, duties and liabilities during the journey of a Container from the start to the finish, the initial efforts were to incorporate provisions enabling the same in the existing Conventions regarding the particular unimodal transport. Hence many of the Conventions made provisions for multimodal transport. But these only confounded the situation further and soon proved to be unworkable. On the other hand the legal difficulties faced by the combined transport operators when different types of documents were used for combined transport operations based on different rules compelled the operators to issue single document for the entire carriage. But due to the absence of compulsory rules governing multimodal transportation, the terms used in the documents differed widely. Attempts were made by different international agencies to unify the different documents in use. ICC prepared a set of Rules on Combined Transport Documents and recommended their use. UNCTAD set up an Inter Governmental Preparatory Group to prepare a draft convention which was put to discussion in the Diplomatice Draft Conference in Geneva and finally the Convention on International Multimodal Transport of Goods, 1980 was adopted. Taking cue from the Convention the Indian parliament enacted the Multimodal Transport of Goods Act, 1993 with certain modification to suit the peculiar conditions in India.
Indian Law governing Multimodal Transport
The Multimodal Transport of Goods Act, 1993 is divided into five chapters under the heads (1) Preliminary aspects (2) Regulation of Multimodal transportation (3) Multimodal Transport Document (4) Responsibilities and liabilities of the Multimodal Transport Operator (5) Miscellaneous aspects. A schedule is also attached to the Act which brings in certain amendments to (1) The Carriers Act,1865 (2) The Indian Carriage of Goods by Sea Act, 1925 (3) The Sale of Goods Act, 1930.
The whole Act is divided into five chapters under the heads (1) Preliminary aspects (2) Regulation of multimodal transportation (3) Multimodal Transport Document (4) responsibilities and liabilities of the multimodal transport operator (5) Miscellaneous aspects. A schedule is also attached to the act which brings in certain amendments to 1) The Carriers Act, 1865, 2) the Indian carriage of Goods by Sea Act, 1925, 3) and the Sale of Goods Act, 1930.
‘Multimodal transportation’ as defined by Section 2(k) of the Act means carriage of goods by two or more modes of transport from the place of acceptance of the goods in India to a place of delivery of the goods outside India. So a transport to be a multimodal transport, 3 conditions has to be satisfied: (1) the goods are to be carried by two or more modes of transport (2) the place of acceptance of the goods should be in India.(3) the place of delivery of the goods should be outside India.
Section 2(j) precisely defines what are the modes of transport sought after by the Act. They include carriage of goods: 1) by road , 2) by rail, 3) by inland waterways, or 4) by sea. Here the air mode of transport is clearly excluded. The definition of the ‘modes of transport’ makes the intention of the framers of the Act, unambiguous, in avoiding air mode.
The term Multimodal Transport Operation is defined exactly in the same way as it is defined in the International Convention but goes on further to say that the person should be registered under sub-section (3) of Sec.4 . So by the definition, the operator may not own or control the modes of transport. It may be a shipping company or a non-shopping but having a minimum annual turnover of 50 lakh rupees. The Act also makes it mandatory that the operator has offices or agents in not less than 2 other countries. The operator can enter into agreement with the sub-contractors, for eg, unimodal carriers and terminal operators.
The term ‘goods’ has also been defined by the Act. It includes: (1) containers, pallets or similar articles of transport used to consolidate goods, and (2) animals.
Rights & Liabilities of Multimodal Transport Operator (MTO) under the Act
Amongst many other obligations provided in the Act the principal provisions regarding the rights and liabilities are incorporated in Chapter IV of the Act. Chapter IV contains eight sections, which expressly state the liabilities of M.T.O.; and the responsibilities of the consignor.
Rights of the M.T.O.
Amongst many provisions, which are guaranteed by the Act the principal provisions regarding the rights of the M.T.O. is as follows:
(i) Rights of an M.T.O. under Sec. 12
Sec. 12 relates to the responsibility of the consignor which are inter alia the rights of the M.T.O. Sec. 12(1) states that the consignor shall be deemed to have guaranteed to the M.T.O. the adequacy and accuracy, at the time the M.T.O. takes charge of the goods, of the particulars referred to in Sec. 9(a) and Sec. 9(b) as furnished by the consignor for insertion in the multimodal transport document. Sec. 12(2) states that the consignor shall have to indemnify the M.T.O, against loss resulting from inadequacy or inaccuracy of the particulars. But this right of the M.T.O. shall in no way limit his liability under the multimodal transport contract to any person other than the consignor.
(ii) Rights of M.T.O. while carrying dangerous goods.
Sec. 21 assets the rights of M.T.O, in a specific situation when dangerous goods are carried. The consignor has the burden of informing the carrier as to be character of the goods and if necessary the precautions to be taken during their transport. Sec.21(2) will not be invoked if the operator has taken the goods, in his charge with knowledge of their dangerous character,.Sec.21(2) states that the failure of the consignor to inform (1) will make him liable to the M.T.O. for all loss resulting from the multimodal transportation of goods and (2) if needed the goods may be unloaded, destroyed or rendered innocuous as the circumstances may require, without payment of compensation.
(iii) Rights to exercise lien on the goods.
The M.T.O. shall have a lien on the goods for any amount due under the multimodal contract. He is also entitled to a lien on the documents in his possession. The period during which the goods are in the possession of M.T.O, while exercising his right of lien shall not be included for the purposes of calculating the time of delay under any of the provisions of the Act.
Scope for Arbitration in Multimodal transport contracts
The Indian statute governing Multimodal transportation is at variance with the international convention on many notable aspects notwithstanding its general acceptance of the norms laid down by the Convention. Though in the Schedule of the Act attempts have been made to amend the other statutes in force in India relating to and having direct effect on the Multimodal transportation, the said amendments have failed to plug the inconsistencies remaining in the field. A detailed discussion thereof would be out of place here. From the point of view of Arbitration, the Act specifically incorporates Sec.26 which provides that the parties to a multimodal transport contract may provide that any dispute which may arise in relation to multimodal transportation under the provisions of the Act shall be referred to arbitration. Sub clause thereto also provides that the arbitration proceeding may be instituted at such place or in accordance with such procedure as may be specified in the multimodal transport document.
Containerization and multimodal transportation is thus the new face of international trade. The efficacy of the new mode being proved and accepted, reliance on the same is bound to increase in the years to come. Increase in the number of disputes would be a concomitant and unavoidable phenomenon. The said disputes are to be resolved with least friction and waste. It is even more imperative since in commercial practice time is the essence of commercial ventures and the same cannot be wasted by recourse to the cumbersome procedure of the traditional court based settlement process. Arbitration has been accepted by the statute as the desirable means of dispute resolution. In view of the very peculiar rights, duties and liability regime in existence in multimodal transport contracts and the usages and practices that are endemic to the said branch of transportation, arbitration of such disputes would require not only persons trained in the said branch of transport law but also peculiar methods and processes as evolved in the case of maritime arbitration.
* * *