The Abolition of the Nautical Fault Exemption: To Be or Not To Be

Abstract: Historically, the nautical fault exception was justified on the basis that shipowners lacked the ways to control their ships by communication on long voyages and so masters had to act in their own judgement. Modern communications have defeated this underlying rationale but shipowners still want to claim the benefit of the exception. As a matter of statutory regulation, the exception traces back to the United States Hart Act 1893 and adopted by the international law known as the Hague Rules. However, the issue is now in the front burner of debate and is attracting considerable attention because in the new Rotterdam Rules it has been abolished. Thus, notwithstanding its long existence, the exemption is still controversial because of the imbalance in bargaining power between carrier and shipper or cargo-owner interests. The purpose of this research is to delve into the NFE issue in the context of carrier liability and attempt to demystify some of its attributes. It is necessary to review the history of carriage of goods by sea at first, following with the concept of NFE discussed in contextual detail. The important issue in this research is the analysis of the argument for and against the abolition of the NFE and what impact such abolition may have on carrier liability. The discussion invariably extends to a consideration of the economics of abolition of the NFE. In addition the implications for the Chinese shipping industry, if the NFE is abolished, are discussed. As well, existing positions adopted within China in relation to the acceptance or rejection of the Rotterdam Rules is examined in light of the present situation of China. Hopefully this paper will make the reader have a clear understanding of the NFE and the present situation related to this issue.