Legal PinchApril 2011

Transcription

1 Legal PinchApril 2011 QUARTERLY NEWSLETTER Maritime Law: The Rotterdam Rules Gather Speed Maritime Contract of Carriage: Supreme Court s Ruling on Delivery Date Central Bank Regulation: Declaration Required for Transporting More Than AED 100K

2 Editorial The Arabian Gulf has a maritime trading tradition that stretches back centuries, and in the contemporary period UAE has capitalized on this tradition by becoming a hub for regional maritime transportation that extends beyond the Gulf to areas such as Central, and South Asia, as well as East Africa. The UAE appears to be committed to its established position as a significant player in the maritime transportation sector, and maritime transport practitioners in UAE have formed a preparatory committee to establish a UAE chapter of the International Maritime Committee (CMI). This issue of Legal Pinch highlights the recent developments relating to maritime commerce in the UAE, such as The 1st Transport and Maritime Law Conference held in Abu Dhabi in February to review the Rotterdam Rules, which our firm was honored to co-sponsor. Ali Al Aidarous We also briefly touch upon the recent amendments to the margin trading regulations issued by ESCA, aimed at providing greater flexibility and protection to investors, and new Central Bank directions on transportation of cash and bearer notes across UAE borders. We hope you will enjoy the topics covered by the issue, and as always look forward to your feedback. Legislative Update SCA s Board Decision No. 5 of 2011 Amending the Margin Trading Regulations The Securities and Commodities Authority (SCA) has issued Decision No. (5) of 2011, amending its Decision No. (25/R) of 2008 Concerning Margin Trading, that affects certain articles. The amendment came into force with its publication in the Federal Official Gazette, Edition No. 518, February The main feature of the amendment can be summarized as follows: 1. The restriction that limited margin trading to certain securities authorized by the market, previously imposed by Article (9) of the Decision No. (25/R) of 2008, has now been lifted by this amendment. 2. With the lifting of such restriction, SCA felt the need to enhance protection for the investor by introducing an express requirement under Article (9) of the amendment for having an explicit margin trading agreement by and between the investor and the broker, with certain specific requirements such as investor s express consent to mortgage the securities financed on margin, giving the broker the right to sell the securities in the event the investor fails to cover any shortfall as prescribed in the Decision, and to grant the investor the right to dispose off the securities financed on margin according to the applicable procedure in the market. Given these main changes, certain other amendments were carried out to maintain overall conformity with the above major changes. 1

3 Legislative Update UAE Central Bank Regulations Relating to Transferring of Cash and Bearer Instruments Across Borders Pursuant to Article (6) of the Federal Law No. (4) of 2002 regarding Criminalization of Money Laundering, and with the aim of tracing funds that may have been obtained from illegal sources, the UAE Central Bank has issued regulations establishing the ceiling for declaring transportation of cash and bearer instruments that can be easily converted into cash, such as traveler s cheques and bearer bonds, across UAE borders. According to this Regulation, any traveler who crosses the UAE borders, whether inbound or outbound, must make a declaration if he or she is carrying more than AED 100, in cash and/ or bearer instruments, irrespective of whether this is in Dirhams or in foreign currency. This regulation applies to all travelers over the age of 18, and if a minor is carrying any amounts, then these are added to the ceiling of the minor s guardian. Furthermore, shipment of cash and bearer instruments in excess of the established ceiling across UAE borders via postal or courier services in favor of natural persons, are also subject to the Regulation. Customs officials at airports, seaports, and border crossings are required to place notices informing the travelers of their obligation under this Regulation, and make available the appropriate forms where travelers can make the necessary declaration. The officials are also authorized to inquire from random travelers whether they are carrying cash and/or bearer instruments exceeding AED 100,000.00, and if the response is positive then the officials are required to direct such travelers to fill out the appropriate forms. In the event a traveler fails to declare amounts exceeding the ceiling established by the Regulation, and the customs officials find the justification for such failure unconvincing, then the officials are permitted to seize the cash and/ or bearer instruments, and refer the matter to the office of the Attorney General for initiating legal proceedings against the offending traveler under Article (18) of Federal Law No. (4) of 2002 regarding Criminalization of Money Laundering. The regulations were published in the Federal Official Gazette, Edition No. 518, February 2011, and will come into force six months after publication. 2

4 Feature Article The Impact of The Rotterdam Rules On Maritime Trade The 1st Transport and Maritime Law Conference in Abu Dhabi was organized by Paris Sorbonne University Abu Dhabi and the National Transport Authority on the Rotterdam Rules, on February 2 and 3, 2011, which was also co-sponsored by Ali Al Aidarous International Legal Practice. On December 11, 2008 the United Nations General Assembly adopted the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea. The signing ceremony was held in Rotterdam on September 25, 2009, hence the name Rotterdam Rules. Objectives of the Rotterdam Rules Two main purposes of the Rotterdam Rules are to restore a single regulatory regime for worldwide maritime trade, and to update provisions which have lagged behind modernization over the last 30 years in trade practice, user demands, and technology. Consequently, the Convention is a much more detailed instrument than its predecessors. While some experts have said such detailed provisions will bring clarity to the rules, others have said that it will achieve the opposite and provoke an endless stream of litigation. Significant Developments Explaining the intricate details of the Rotterdam Rules is clearly beyond the scope of this brief article, but it is worth having an insight into some of the more significant developments, and raising awareness about them: 1. In the Rotterdam Rules the definition of the contract of carriage endorses the door to door concept, even though the period of responsibility can be contractually limited. It is not a multimodal convention but applies only if the contract provides for a sea leg. The Rules are therefore said to be a wet multimodal or maritime plus convention. Specific conflict provisions apply when another international instrument such as the CMR may concurrently apply to part of the carriage. According to the Rules there are situation where other unimodal international instruments can take precedence. 2. The Rotterdam Rules also introduce the notion of Volume Contract, which is one of the most controversial new provisions. Volume contracts developed in the 1980s in the container trade where NVOCC s buy volumes of container spaces over a period of time. In the Rotterdam Rules, subject to certain conditions, volume contracts fall outside the scope of the convention and are subject to freedom of contract. Even though this reflects a commercial practice, some wonder whether the possibility of using this type of agreement to contract out of the mandatory Rules will not lead to abuses to the detriment of the shippers. It is worth noting that in countries where specific NVOCC s legislations exist (US or China for instance), such commercial practices are controlled by the authorities and specific regulations of public economic order. The Rotterdam Rules do not offer such protections. 3. The concepts of performing party and 3

5 maritime performing party are introduced in the Rotterdam Rules. One can distinguish the performing party from the contractual carrier. The maritime performing party is one who conducts business wholly within a port area (terminal operator for instance), and who can be sued directly by the claimant. This notion is particularly important from the terminal operator s perspective since it will become subject to the same liability limits as the carrier, whose limits are usually higher than limits provided in terminal operators terms or regulations. 4. The concept of controlling party is introduced with reference to the goods. If the shipper is presumed to be the controlling party, according to Article 51 it can transfer the right of control to another party such as the consignee, the documentary shipper, or another person (Buyer/Seller). However, this might raise some difficulties when applied to the electronic commerce provisions. 5. On the use of containers, the carriage on deck which has become the rule is now expressly allowed provided that the container is suitable for deck carriage and that the deck is specially fitted to carry containers. 6. On the carrier s liability side, modernization has taken away the defense of error in navigation. Other traditional exceptions remain valid unless the claimants prove that the loss, damage, or delay was caused by unseaworthiness of the ship. 7. The Rotterdam Rules include a higher carrier s limitation of liability than in the previous conventions (3 SDR per kilo and 875 SDR per package, whichever is the higher), and the time limit for filing a suit is extended to two years. This seems to be a progress from the shipper s perspective. 8. One novelty of the Rotterdam Rules is the specification of liability rules for the shipper. While the liability of the carrier remains a fault based liability with the possibility to raise exceptions, the liability of the shipper is a strict liability regime and no limitations of liability apply or even can be negotiated (Article 79). Such provisions seem to increase the burden on the shipper, however such rules reflect the current liability of the shipper based on general contractual law before most jurisdictions. 9. Finally, The Rotterdam Rules include optional provisions on jurisdiction and arbitration. The fact that contracting States may opt out of these provisions means that the parties to a contract will have to check if they have to adopt a certain jurisdiction, and arbitration regime to govern their contract. Future Prospects and UAE Participation Will the Rotterdam Rules come into force? Many in the shipping industry are optimistic, but obviously all will depend on the final decision of the leading maritime States. There are opponents of the Rules, and some of their criticism may be legitimate. However, in such a complex drafting process it is difficult to satisfy all interests. The drafting of the Rotterdam Rules, including the CMI preliminary works, took more than ten years during which the States and all the industry representatives were able to provide their comments and lobby their interests. The Rotterdam Rules might not be perfect but they came out of a certain consensus and balance of interests, and reflect modern practices. The UAE is not yet a party to any of the existing international conventions related to the carriage of goods by sea. The provisions on carriage of goods in the UAE Federal Maritime Law (26) of 1981 have been inspired from those in the Kuwaiti Maritime Law, which itself has been taken from various sources including the Hague Rules 1924, and the French Maritime Law of Currently, beside national laws, the international carriage of goods by sea is regulated either by the Hague Rules 1924 or the Hague-Visby Rules or the Hamburg Rules On 26 January 2011, the Federal National Council has approved the draft of a new federal maritime law but it has yet to come into force and its content has not been released to the public. 4

6 Case Law What is the Delivery Date for Statute of Limitations Purpose? 5 Although many precedents of both the UAE Federal Supreme Court, and Dubai Supreme Court have established that the statute of limitations mentioned in Article 287(a) of the UAE Commercial Maritime Law No. 26 of 1981, and its amendments thereto, provide that the one year time limitation for claims arising from a maritime carriage contract, should commence from the actual delivery date, or from the date on which the delivery should have taken place, we found it appropriate in this edition of Legal Pinch to highlight the UAE Federal Supreme Court s ruling in Appeal No. 116 for the 19 th judicial year, dated October 10, 1998 that dealt with prolonged delivery; which to a great extent is in line with Article 62.3 of the Rotterdam Rules, though the latter Rules deal with the partial delivery of the goods. The facts of this precedent can be summarized in that an insurance company brought, based on its subrogation rights, an action against a carrier for a shortage and damages to the sugar consignment shipped from Belgium to Port Khalid in Sharjah. However, the carrier took the defense that the claim was time barred under Article 287 which was accepted by the Lower Court and the Court of Appeal, forcing the Claimant to appeal before the Federal Supreme Court The Federal Supreme Court overruled the Court of Appeals judgment, and in doing so it pointed out that since the statement of the Port Khalid s Director indicated that the delivery of the goods in question commenced on June 6, 1989 and completed on September 29, 1989, therefore the date of the completion of delivery should be considered in calculating the one year time bar provided in Article 287(a), and not the commencement date of the delivery. Article 287(a) of the UAE Commercial Maritime Law No. 26 of 1981: Upon denial and absence of legal excuse the following shall be dismissed: (a) Claims arising from a maritime carriage contract by lapse of one year after the date of cargo delivery or the date on which the delivery should have taken place.

7 Events First Transport and Maritime Law Conference in Abu Dhabi Dr. Jean Michel Moriniere moderating the Conference The distinguished speakers and panelists at the Conference The National Transport Authority and Paris- Sorbonne University Abu Dhabi, under the patronage of H.H. Sheikh Hamdan Bin Mubarak Al Nahyan, held a well organized conference at the Paris-Sorbonne University Abu Dhabi campus on Reem Island from February 2 3, The conference focused on the features and implementation of The Rotterdam Rules, formally known as the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, which were adopted by the United Nations General Assembly in December 2008, and are in the process of receiving signatures from various countries. The Rotterdam Rules aim to unify maritime regulations worldwide, and simultaneously update them to reflect modern transportation practices and technological advances that have had a profound Mr. Ali Al Aidarous with fellow members of CMI, UAE (under establishment). effect on ship borne trade. The conference was organized through the tireless efforts of Dr. Jean-Michel Moriniere who moderated the conference, and where Mr. Ali Al Aidarous was one of the panelists discussing the applicability and relevance of the Rotterdam Rules to the UAE. Welcome, Mr. Karamalla! We are pleased to welcome Mr. Karamalla Kurgusawy, who joins our Abu Dhabi office. Mr. Karamalla is a former diplomat and journalist, and has been a representative of Sudan in Germany, Czechoslovakia, Japan, and Pakistan, as well as at the Arab League. Mr. Karamalla is an experienced international negotiator, and has been working as a legal advisor and writer in the AGCC region since Mr. Karamalla received his LL.B from Cairo University in 1972, and was admitted to the Sudanese Bar the same year. 6

8 Spring in United Arab Emirates For the fourth time your answer is I don t really know! So, what s the point of this discussion? Invaluable Legal Advice! Sir, if you don t keep asking questions, you ll never get proper advice. a Pinch of Legal Life Ali Al Aidarous International Legal Practice Suite 101 Zalfa Bldg. Al Garhoud Street, Dubai, UAE legal@alialaidarous.com, (+971 4) Suite M02, Abdulla Al Mulla Bldg., Al Muroor Street, Abu Dhabi, UAE abudhabi@alialaidarous.com (+971 2) DISCLAIMER & COPYRIGHT NOTICE The contents of Legal Pinch are not intended to be a substitute for specific legal advice on individual matters. All reproduction and copyrights reserved. The opinions expressed by guests may not necessarily reflect the view of Ali Al Aidarous International Legal Practice.