A Legal and Economic Analysis of the Volume Contract Concept Under the Rotterdam Rules: Selected Issues in Perspective

The prevailing regimes for the carriage of goods by sea are "one-way mandatory," which means that contracts must not derogate from the convention to the shipper's detriment, but derogation that increases the carrier's obligations is allowed. The Rotterdam Rules provides for volume contracts that allow the parties to enter into mutually negotiated agreements through which they can derogate from the Rules, subject to certain safeguards, regardless of whether such derogation increases or decreases the carrier's obligations. This article attempts to probe into the emergence of the contract paradigm of free bargaining norms where there is in place a volume contract. The uniqueness of individual contracts between shippers and carriers has long been recognized in the United States. This uniqueness, it would appear, has influenced the development of the volume contract concept in the Rotterdam Rules and has provided the impetus for introducing bargaining freedom in carriage of goods wholly or partly by sea. The article analyzes the various economic and legal implications associated with volume contracts such as distributional consequences among shippers, the trade-off between efficiency and equity, and the connection between freedom of contract and discrimination in terms of trade practices inherent in the liner conference system. Furthermore, an examination is made of the co-related issues such as implications of volume contracts on the global supply chain management and explores its future role in international trade. [PUBLICATION ABSTRACT]