§ 5.20 p.m.
§ LORD DIPLOCK
My Lords, I beg to move that this Bill be now read a second time. It is, I think, a non-controversial Bill; at any rate, in another place it went through "on the nod" without a word being said about it. If our Parliamentary processes are to work, I apprehend that something should be said about its subject matter and its purpose before it goes upon the Statute Book.
1029 Its subject matter is the rather technical subject of bills of lading. Although it is technical, it is of very considerable importance to the trade and commerce of this country and of the world. The purpose of the Bill is to enable the United Kingdom to ratify a protocol amending the international Convention generally known as the Hague Rules. The Protocol was signed by this country and by 20 other countries in Brussels in 1968. Your Lordships will be aware that the bill of lading is a document which, for many years, and indeed for several centuries, has lain at the base of much of international trade. It is a document of title to goods, and contains also the terms of the contract between the carrier and the owner of the goods. It is a negotiable instrument which enables the goods to be sold, and money to be raised on them, while they are still in transit.
In order that it may play its role effectively in international trade, it is essential that the contract of carriage should contain standard terms regulating the mutual rights and liabilities of the shipowner and the persons interested in the goods, so that it may be known by everyone concerned in international trade and commerce, by sellers and by buyers, by insurers and by bankers, exactly where they stand and what the liabilities are. Those standard terms were settled in the Hague Rules at the Brussels Conference of 1924, which passed the international Convention commonly known by that name. They were incorporated into United Kingdom law by the Carriage of Goods by Sea Act 1924.
That Convention has probably been the most successful and the most widely accepted of international Conventions relating to overseas trade. The majority of the great commercial countries of the world are parties to it, and also the rules are used voluntarily in a great portion of the trade between countries which are not parties to the Convention. I believe that the success of this original Convention stems from the fact that it originated from the International Maritime Committee, which was composed of national associations which, in turn, consisted not of theoretical lawyers but, in the case of the British Maritime Law Association 1030 at any rate, all the interests concerned in international trade.
The Amendments to the Hague Rules which are contained in the Protocol of 1968 originated, to a large extent, from the same source, but it so happens that the major Amendment relating to the limits of liability of the carrier comes not from the International Maritime Committee but from the Brussels Conference itself, a very much larger body in which the Amendment was first proposed. It was considered for many months while the Conference was adjourned, and was ultimately passed at the Conference, at which 52 countries were represented, in February, 1968.
As leader of the United Kingdom delegation at the conference, and as chairman of the drafting committee, I am in a position to say that the Protocol has the approbation of all commercial interests involved in this country: shippers as well as shipowners; insurers of cargo as well as the clubs and bankers, and others who are interested in the export of goods. The Protocol does not come into effect until it has been ratified by ten nations, five of which must have a gross tonnage of shipping of one million tons or more. At both the original Conference in 1924 and at the Brussels Conference of 1968, and in the negotiations which led up to it, this country took a leading part, and it is, I venture to suggest, fitting that we should take a leading part in ratifying it. The shipping and commercial interests in this country have been pressing us to do so, but we cannot until the necessary legislation is passed. A Bill in similar form to this was introduced in another place last year but was a casualty of the Election, and now it comes before your Lordships for the first time as a result of its being re-introduced.
The Bill replaces the Carriage of Goods by Sea Act 1924. It makes the amended rules set out in the Schedule part of the law of this country instead of the original rules scheduled to the Act of 1924. This has been done in the interests of clarity instead of amending the 1924 Act, so that you can turn to a single document, the Schedule, in order to find out the standard form of terms of carriage of goods by sea.
1031 I think it is right at this stage that I should refer to the two major amendments which result from the Brussels Protocol. The first relates to the limit of shipowners' liability, and it is to be found in Article IV (5) of the Schedule. The limit of liability was originally fixed in 1924 and embodied in the Carriage of Goods by Sea Act 1924 at £100 sterling gold value per unit or package loaded. That limit is unsuitable to-day for at least two reasons, and has indeed in one respect been unsuitable for quite a time. The first reason is devaluation, the fall in value of money. Although the Hague Rules contain a gold value clause this is in a very elementary form and has not been adopted, at any rate uniformly, among the many countries which have adopted the rules.
Because the £100 had got out of scale as long ago as 1950, the shipping interests in this country entered into what is known as the "gold clause agreement", by which they voluntarily undertook to pay up to an increased limit of £200. But this is an unsatisfactory way of dealing with the problem because, while this may be done voluntarily in this country, the same voluntary steps are not taken elsewhere and the Hague Rules fail in their purpose of having standard terms from whatever country the goods are shipped. Furthermore, that agreement has become unsuitable, because it was based upon conventional stowage in 1924 and, broadly speaking, the size of the unit or package then was what one stevedore could hump upon his back. As your Lordships know, a large proportion of the sea trade is now done in containers, which are of a size which makes a £100 limit quite out of scale with the nature and grandeur of the damage which can be done.
The Protocol deals with the problem in this way. It provides two forms of limitation. First, there is the limitation by unit or package, and that has been raised to 10,000 gold francs. There is now a sophisticated gold value clause, the value of which at present in sterling is £270. In addition, there is a weight limitation of 30 francs per kilogram, which in sterling is 80p per kilogram, and the relevant limitation is whichever of these figures is higher. So that if you have a small and valuable package 1032 shipped by traditional methods, the package limitation will be the higher. If, however, the weight of the unit is over 6⅔ tons, you cross the bridge at which the weight limitation becomes the higher and is available.
The Article contains also a clause known as the "container clause", which was designed to solve the difficulty which arose once containers were introduced. The difficulty was knowing whether the container itself was the package, so that the shipment was a single package, or whether the various packages within the container were individual packages, which would of course affect the limitation of liability of the shipowner. The way in which the difficulty has been dealt with is to leave it to the option of the parties whether to enumerate in a bill of lading the number of packages in a container, in which case they will count as packages for the purposes of the limitation; or not to enumerate them, in which case the container will count as the unit and will obviously count in the weight limitation. No doubt that option gives to the parties the opportunity of deciding whether to insure the extra risk with their cargo underwriters, or whether to rely upon recoveries from the shipowner. As before, the Protocol, like the Hague Rules, leaves it open to the carrier and the shipper to agree higher limits of liability of the shipowner if they wish. What it forbids is any agreement for lower limits.
The next Article to which I ought to draw attention is Article IV bis, which is an Article inserted as a result of a decision of the courts in this country. I do not think the same problem applies to other countries. It was held in the "Himalaya" case that if, instead of suing the shipowner, the carrier, you sued the master of the ship or the agent of the carrier, then he was not as a matter of law entitled to avail himself of the limitation of the Hague Rules. Since in these days owners cannot allow their employees to be made bankrupt by being parties to large claims for damages, this provided a way of driving a coach and four through the relevant provisions of the Hague Rules. Article IV bis is intended to deal with this, by providing that the limitations shall be available to servants or agents of the carrier if they are sued.
1033 I should now like to draw attention to Article X, which deals with the application of the Rules. Under the 1924 Act the Rules applied to bills of lading issued in this country. That was not, in fact, a complete compliance with the requirements of the Convention itself. We ought to have applied them to bills of lading issued in any contracting State. I think the reason we did not do so was that we passed the 1924 Act before the final draft of the Convention was made in Brussels, and were working upon an earlier draft. However, the object of Article X is to give as wide a scope to the Rules as is possible, and they will be applied as a matter of law in this country where the bill of lading is issued in a contracting State—that is to say, not only in this country, but in every country party to the Convention—or where the carriage is from a port in a contracting State, or where the contract itself voluntarily provides that the Rules shall apply to it.
As to the Bill itself, Clause 1 is the important clause. It provides that the Rules shall have the force of law, and, also, that the Rules shall be applicable to coastal shipping and to shipping between this country and the Republic of Ireland in cases where the contract requires the issue of a bill of lading. I should perhaps be frank and say that that is unlikely to have any wide commercial importance, because it is very rare for the contract of carriage on these short sea carriages to require a bill of lading. A different kind of document is normally used, because nobody really needs to deal with goods which are on so short a transit as that. Clause 1 has been agreed by all the interests concerned in the coastal and Irish trade.
Finally, my Lords, Clause 6 provides for the repeal of the 1924 Act and for the coming into effect of the new Act upon a date appointed by Order-in-Council. That date will of course not be until the ten countries have ratified the Protocol so that it comes into force. When it comes into force, it may be necessary to make some transitional provisions for the case of long-term charter parties which provide for the issue of bills of lading. Provision is made in Clause 6(5) for Orders-in-Council to be made to deal with transitional provisions of that kind. That will give time for 1034 discussion between the interests concerned.
My Lords, it is, I venture to think, important to the commerce of this country and of the world that this Bill should pass into law as soon as possible. As I have said, it is, I think, not controversial, and I hope that it will commend itself to your Lordships' House. I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Diplock.)
§ 5.41 p.m.
§ LORD KENNET
My Lords, I am sure the whole House will be most indebted to Lord Diplock for the great thoroughness with which he has explained this dry but important measure, and also for the amount of work which we all know he has done over the years in getting drafted the Protocol which is appended to this Bill. The House will understand me if I say that I feel we should not attach too much importance to the fact that the Bill went through the House of Commons "on the nod". In recent days and weeks many items which would otherwise have attracted attention in the House of Commons have been doing that, but I am fully with Lord Diplock in saying that that is all the more reason why we should have a good look at the Bill here.
The fact that this ratification Bill has been introduced by a noble and learned Lord who, though the most distinguished and learned of judges, is a private Member of this House, I take as an indication that the Government are not absolutely committed to the Bill, or to its timing, and that they do not as fiercely wish it to go into law at once as they would have done had they themselves introduced it, as is probably more often done than not in the case of ratification Bills. I do not entirely share Lord Diplock's view that the Bill is uncontroversial, and I propose to put a number of questions, mainly to the Government. They are on foreign policy and on the shape of the world, and not on the commercial details of this Bill.
The Bill introduces this Protocol of 1968, which amends the Protocol of 1924. There is one respect in which it is of considerable international interest to the nations of the world, and it is this. If I 1035 understand it aright, the 1968 Protocol shifts the balance of liability as between the cargo owner and the shipowner. This is very natural and right, and such things need shifting from time to time. The 1968 Protocol, which is before the House, improves the position of the cargo owner as against that of the shipowner. This is only part of it, but it is the part that gives rise to political considerations. The underdeveloped countries are predominantly cargo owners, not shipowners; the developed countries, and particularly this country, are more shipowners than cargo owners. Therefore, if one amends or disturbs that balance, one is ipso facto making an adjustment which amends or disturbs the balance of prosperity as between developed and underdeveloped countries.
The 1968 Protocol was submitted to and endorsed by an international body, the Brussels Diplomatic Conference, on which underdeveloped countries are in a minority. Whether it is for that reason or for another, I do not know, but it is a fact that two bodies on which the underdeveloped countries are in a majority—namely, the United Nations Conference on Trade and Development, UNCTAD and the United Nations Commission on International Trade Law, UNCITRAL—are seized of the question. UNCTAD has referred the matter to the Commission on International Trade Law and requested its opinion, and has specifically requested an opinion on the desirability of a fundamental revision of these matters. These two bodies, I understand, have been convinced by their underdeveloped members, who are in the majority, that although the 1968 Protocol redresses the balance between cargo owning interests and shipowning interests slightly in their favour, it does not do so nearly enough, and they will probably wish to see a further-going change of the same sort. The noble and learned Lord, Lord Diplock, said that the Protocol which is before the House has the approbation of all the concerned commercial interests in this country. I am sure it does. But the point is that it does not have the approbation of all the concerned commercial interests in all the countries of the world, and especially those in the countries which we must be 1036 particularly solicitous of, the underdeveloped countries.
My Lords, there is another fact. It was in 1968 that this Protocol was approved by the Brussels Diplomatic Conference. It is now 1971. Not a single country has yet ratified it: we are the first to do so. Why is this? Is it because other countries know that those two United Nations bodies are seized of the matter, and have objections to the Protocol and want to go further? Or is it for another reason; and, if so, what? I should like to ask Lord Lothian quite specifically: have any communications been made by UNCTAD or by the Commission on International Trade Law, either to the Brussels Diplomatic Conference as such or to any of its sub-groups, or to the Government of this country or to the Government of the United States, for instance, which is another great shipping country? Have any communications been made by the Governments of underdeveloped countries singly to the Brussels Conference or to the Government of our country, asking that the matter be stayed, that the Protocol be not ratified and put into effect, until the examination proceeding in the U.N. is complete? I think the House would wish to know what the answers to those questions are.
Why do we have to ratify ahead of any other country? May it not appear a gratuitous slap in the face for the underdeveloped countries if we do so? I may be wrong about all this, but I believe that the Government ought to explain in what way I am wrong, if I am, and I look forward to hearing a lot more about this political background. If the answers we get do not seem to noble Lords on this side of the House as satisfying on the political level as Lord Diplock's exposition was on the commercial and legal levels, then we on this side shall want to reserve the liberty of action which we naturally have as regards later stages of this Bill.
§ 5.49 p.m.
§ LORD CHORLEY
My Lords, should like to speak for a few minutes on this Bill. It is, of course, a highly technical Bill, as the noble and learned Lord, Lord Diplock, has pointed out, and, looking round, one sees that quite obviously 1037 a long speech on such a highly technical subject would be far from welcome. On the other hand, the so-called Hague Rules just about span my career as a maritime lawyer and I have been interested in them ever since Sir Henry Duke, an eminent lawyer who became President of the Admiralty Court and a Member of your Lordships' House as Lord Merrivale, presided over a conference at Gray's Inn—I think it was in 1920—when this standard form of contract for the carriage of goods by sea was agreed upon. It was a mere accident that they came to be called the Hague Rules; they should have been called the "London Rules." Their existence was due entirely to the initiative of this country at the end of the First World War.
Eventually after conferences at The Hague, from which the Rules got their name, it was the Brussels Conference and Convention of 1924 which finally brought them into play. But it was interesting, as the noble and learned Lord pointed out, that the Carriage of Goods by Sea Act was passed into law in this country before the Brussels Convention was carried through in Brussels. This marked the interest and enthusiasm which this country and the British Commonwealth of Nations had in getting this international system of rules for the carriage of goods by sea made into law. This was really the first important international maritime convention. There were earlier ones in respect of such matters as salvage; but there was nothing as important as this. I have always thought that it was a matter of great prestige for English shipping and forwarding interests that they should have succeeded in hammering out this very important international branch of shipping law.
The question of how the Convention has worked, how far The Hague Rules have succeeded, is a difficult one to answer with any confidence. The noble and learned Lord said that The Hague Rules worked remarkably well. That is, on the whole, my own view of the matter; but the profession itself, the commercial lawyers, are very much divided about it. As the noble and learned Lord knows, the present editor of Carver's, the well-known book on the carriage of goods by sea, devotes pages to showing how ineffective and almost futile The Hague Rules are, a view which other lawyers 1038 hold, too: although I think the majority of commercial and maritime lawyers consider that on the whole The Hague Rules have worked reasonably well.
They survived for a long time without being altered. A number of rather controversial decisions have been made, particularly the one to which the noble and learned Lord referred—the one about the masters being held liable—but probably the most controversial of the decisions was that on the "Muncaster Castle", in which the basis of the original compromise between the shipowners and the forwarding interests was wrecked by a decision in your Lordships' House. But I do not want to go into the pros and cons of that problem. The shipowners have tried to get the matter put right al an international conference held at Visby, in Sweden, at which the draft Rules were drawn up. They are often referred to as the Visby Rules.
I refer to this because—and here I have a great deal of sympathy with what fell from the lips of the noble Lord in front of me—this shows the real difficulty, once you get an international convention of this kind, of getting it amended. I do not think that this upsets the balance at all. It hardly does anything apart from adjusting the problems which arise from inflation and from the fact that the original limited liability had become completely ridiculous by the time the Wisby Conference was held. Indeed, as the noble and learned Lord pointed out, it has been put right by a conventional agreement between shipowners, shippers and insurance interests in London, by the so-called "gold clause".
This Convention is almost completely colourless. The obvious thing to do was to put the monetary side of it right. It contains this other clause, special to this country, which arose from the fact that the English courts took a different view of the responsibilities of the master of a ship from that taken by the courts of other maritime countries. My complaint about this Convention is the same as that of my noble friend in front of me: that it really hardly alters the position. It is not as if these discussions had not been going on: they have been going on since the end of the last war. The Wisby Conference was not the first conference at which these matters were discussed. If one works through the records of these 1039 various conferences, particularly the Wisby Conference, one finds a really astonishing amount of work put into them. Very able arguments were put forward on both sides. The result is that what one might call a ridiculous mouse came out of these labours.
The essential matter raised by this Bill and this Conference is the quite extraordinary difficulty of getting international conventions of this kind amended. When my noble friend Lord Kennet says that the undeveloped countries have a grievance, he is right. Of course they have: but they are not in a position to get it put right. I shall be surprised if the spokesman for the Government can explain, to-day or later, how that would happen. Unless you carry all these countries with you you cannot get an amendment. The noble and learned Lord, who has been through all these things, will confirm that it is almost impossible.
I think that one of the real difficulties in the way of international legislation in acting for the maritime commercial and overseas trade generally is the fact that you must get unanimity on the part of all the nations engaged in the matter. I find it difficult to see how this could happen. I do not think that we have any alternative but to accept this Bill ratifying this Convention. It is true that we shall be the first to do so; but in 1924, with the Carriage of Goods by Sea Act, we were in advance of the Convention. It is true to say that something like 10 years passed before any other important maritime country ratified the original Brussels Convention. I think that one of the first to ratify was that important maritime State, Hungary. Certainly, it took the United States of America and others of the great maritime nations 10 years to do so; and I should not be surprised if at the end of 10 years, ratification of the present Convention will have been compartively small. Therefore, the sooner we get on with the business of ratifying this Bill, the better. I must say that I shall see it pass without an enormous amount of satisfaction.
§ 5.59 p.m.
§ THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE (THE MARQUESS OF LOTHIAN)
My Lords, I 1040 should like briefly to thank noble Lords who have spoken, particularly the noble and learned Lord, Lord Diplock, and on behalf of Her Majesty's Government to welcome this Bill. I would make it plain to the noble Lord, Lord Kennet, that the fact that this Bill has been moved by a private Member, although a very distinguished private Member, in no way indicates that the Government are unenthusiastic about it—any more than I think were the previous Government with their Bill which unfortunately was a casualty of the Election.
I am grateful to the noble and learned Lord, Lord Diplock, not only for putting his Bill forward to-day but also for the most valuable work he put in at the 1968 Brussels Conference where he led the United Kingdom delegation with great distinction and, as noble Lords know, filled the crucial role of Chairman of the Drafting Committee. The noble and learned Lord has explained with great clarity the purpose of his Bill. I would add only that the Brussels Protocol—which the Bill, if enacted, will empower the Government to ratify—provides a real improvement in The Hague Rules relating to bills of lading. As the noble and learned Lord said, all sides of industry—carriers, shippers and the underwriters—wish to see it enacted, and have asked the Government to support it; and this we are pleased to do.
The noble Lord, Lord Kennet, raised the question of the undeveloped countries and, I think, implied that there was no great hurry to ratify this Protocol because of the activities in UNCTAD and UNCITRAL. It is perfectly true that UNCITRAL is now considering how to deal with this problem, but Her Majesty's Government, feel that so far it has concerned itself with procedure and, whatever the result, it will be a very long time before any real agreement on revised rules can be expected. Therefore we think that we should go ahead at present. I should like to make clear that this does not in any way prejudice any future work done by UNCITRAL. Having said that, my Lords, I would like once again to extend a welcome to the Bill and I hope that the House will now give it a Second Reading.
§ LORD KENNET
My Lords, can the noble Lord not tell us why nobody else 1041 has ratified in three years, and whether there has, or has not, been any communication from the developing countries as grouped in UNCTAD or UNCITRAL, or indeed singly, on this question?
§ THE MARQUESS OF LOTHIAN
My Lords, so far as I am advised, the British Government have not received representations. I cannot answer for the Brussels Conference on this point. The noble Lord, Lord Kennet, asked why no other country has so far passed a Bill to ratify the Protocol. I suspect that that question should be asked of other countries, but we feel that it is time to give a lead.
§ 6.3 p.m.
§ LORD DIPLOCK
My noble and learned friend Lord Chorley has pointed out—and I can endorse his remarks—the extreme difficulty in getting agreement on international conventions. I would venture to say that the moral of that is, let us take advantage of the agreement that we have managed to get, amending The Hague Rules, which, so far as I can see, everyone agrees is an improvement. If we do not take advantage of it by ratifying the Convention, the same unrealistic limits of 1924 will continue. I think everyone agrees that the new limits are better than the old.
I am familiar with the work now being started by UNCTAD and UNCITRAL in the sense that I have seen the papers. They are embarking on a study in depth of the whole problem of international transport of goods. I can speak only as an outsider, but one with some experience in this field, when I say that I agree with the noble Marquess, Lord Lothian, that it is likely to be many years before any international agreement comes out of that. The Brussels Conference does not continue its session throughout. I can tell the noble Lord, Lord Kennet, that, so far as I know, the International Maritime Committee, which is the moving spirit of the Brussels Conference, has had no communication from the developing countries. It is true that UNCITRAL has been writing round to the maritime associations asking for their comments and views in the study which is being dome on international transport. I would say that at the Brussels Conference 52 nations were represented, and although the developing countries were in a minority, 1042 at any rate there were 23 which were clearly developing countries.
Finally, my Lords, I should like to say this. I do not think it right to look upon these Rules, and changes in them, as being some struggle between shippers, cargo owners and shipowners for shifting liability here and there. The risks involved in sea carriage are part of the cost of carriage, and what the Hague Rules are about is whether it is cheaper and more economic to cover that risk in the cargo insurance premium or to cover it by the higher rate of freight involved by the premium which the shipowner pays to his protection and indemnity club or insurer. As the trade is arranged now, I think that it is cheaper and more economic to do it through cargo insurance. It is essential to insure the cargo anyway, because there are other risks; and it is cheaper to put this additional risk into the insurance premium.
I venture to think that the practical demonstration of that is this: over all the years that have passed since 1924, or shortly after, when the Hague Rules came into effect, there has been a right of the parties, if they wish, to declare a higher value of goods and to raise the limit to that higher value. That option has always been available. Naturally, if the parties exercise that option, they pay a higher freight for the higher risk. But I think that over those years it would be difficult to find more than a handful of cases each year in which the parties had exercised that option. The reason for that is that it is cheaper to insure that risk, cover that risk, in your cargo insurance than to pay for it in the freight and for the shipowner to cover it. That is what the Hague Rules are about. They are about commerce and industry in real life and the way it can be most economically conducted. I venture to think, my Lords, that this Bill will assist in enabling it to be conducted efficiently. The Bill has the approval and the approbation in this country just as much of cargo owners and shippers of goods as it has of shipowners.
My Lords, I should not like to close without thanking my noble friends for the kind remarks which they have made about my introduction of this Bill. I feel that I ought to apologise for introducing it as a Private Member. I do not think that this is unusual in this case, because 1043 when this Bill was introduced in the last Session of Parliament it was also introduced by a Private Member.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.