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Uniform railway law: Market demand or a dream about the past?

Posted: 26 February 2021 | | No comments yet

Platon Guryanov, Head of the International Practice within the Legal Department of Russian Railways (RZD), discusses the importance of collaboration and in-depth discussion in the finer detail of Europe’s rail regulations.

Uniform railway law: Market demand or a dream about the past?

At the end of the nineteenth century, the Berne Convention established the rules of carriage for rail throughout Europe. They were afterwards split (due to political and economic reasons) into two branches: COTIF and SMGS/SMPS. At the turn of the millennium, the United Nations (UN) made a dedicated effort to create common railway regulations for the Eurasian Continent. The draft entitled ‘Legal provisions towards unified railway law in the pan-European region and along Euro-Asian transport (URL)’ was to be finalised in January 2020 by the working group under the auspices of the Inland Transport Committee of the UN Economic Commission for Europe. However, serious controversies between the parties at their last meeting meant that the document was not approved.

What went wrong?

So, we ask, what went wrong with an idea to give uniform convention to the last mode of transport which didn’t have it (compared to CMR for road, Hamburg Rules for maritime transport and the Montreal Convention for aviation)?

The parties did not agree on two issues: What the content of the document, and what its scope of application, should be.

The negotiations started with the ‘Joint Declaration on the promotion of Euro-Asian rail transport and activities towards unified railway law’ of 2013, signed by the transport ministers of 37 states – among them, Belarus, Finland, France, Germany, Kazakhstan, Poland and Russia. The ministers set the goal of establishing legal conditions for railways, equivalent to those which already exist for competing modes. The drafters’ first efforts, which focused on the development of a set of rules on carriage of goods, lasted for more than nine years.

Navigating principal differences

The draft URL inevitably needed to represent a compromise between SMGS and CIM, and their principal differences.

For example, SMGS establishes strict rules on the form of the consignment note, while CIM leaves this to be determined by the parties in the contract of carriage. Also, the transit periods in SMGS are longer, standards of indemnification due to late delivery are lower, and periods of prescription are shorter.

Any departure from the abovementioned provisions would have effects on railway business, especially if we take into account the distances on the Eurasian route and related possibilities of delays and losses.

In order to avoid a deadlock situation, the working group preferred to get round some of these sensitive topics by referencing to reasonable acts of a diligent carrier (as for transit periods) or leaving them unregulated (e.g. prescription periods).

It resulted in the higher simplicity of the draft in comparison with the two existing legal regimes. For example, whereas SMGS contains ample rules on packing, loading, filling in of documents and similar rules for the CIM area are elaborated by the CIT, the draft URL remains silent on those matters.

Can over simplification lead to over complication?

The Russian party, which became the main critic of such simplicity, insisted that the existing detailed rules result from the everyday operation of railway undertakings and, hence, should not be avoided. Otherwise, normal, everyday transport operation would be at risk. This is even more important for those states with an monopoly in the railway sector, where the task of government is not to allow a carrier to force non-favourable conditions on customers.

Another ground for criticism by the Russian party was that the drafters did not maintain the balance between provisions of CIM and SMGS in favour of the former, which could create difficulties for carriers in the SMGS area.

Another controversy that disallowed the draft’s approval, apart from the substance of the URL, was the issue of the scope of application.

It should be mentioned that, from the working group’s first meetings, there were contradictory views on what the new regime should be. Some members insisted that the new law had to be a single set of unified rules for any cross-border rail transport in the Euro-Asian area in order to replace COTIF and SMGS/SMPS, and to contain provisions on infrastructure, rolling stock, wagon use, transport of dangerous goods etc. Other participants took the position that it would be enough to adopt the unified rules for the contract of carriage of goods as an interface law between the OTIF and OSJD regimes, both of which should be left intact.

Interpretation of language

Those two approaches stem from the different interpretations of the text of the Joint Declaration. According to it, the ministers pursue “the establishment of a unified set of transparent and predictable provisions and legal rules for Euro-Asian rail transport operations in all countries concerned that would facilitate border crossing procedures, particularly for transit traffic”. The term “unified” left room for interpretation, and the room got quite noisy due to never-ending arguments between the two camps. For the first, represented mainly by Russia, “unified” means the only, while for the other (e.g. the EU and its members), it reads as one more.

Hence, the latter camp insisted on the wording, according to which the URL would apply if the points of departure and delivery are situated in different countries and neither the provisions of CIM nor SMGS or bilateral or multilateral agreements between Contracting States apply to the contract covering the entire journey.

The former objected against any mentioning of those two treaties as a violation of the Joint Declaration’s principles. Moreover, it wanted the URL to become a part of general convention, which should not be put into force until the whole set of documents (on the carriage of passengers, use of wagons, infrastructure etc.) is prepared.

On the contrary, the ‘EU party’ insisted on the adoption of the new document as it is, to provide the legal regulation in an expedite manner, if not for whole countries, then just for particular corridors.

Other influencing factors

But whatever parties say about provisions of the draft document, one can see deeper grounds behind the failure to adopt the URL.

Firstly, there were multiple types of participants in the drafting process – states, railway carriers (DB, RZD, PKP etc.), international organisations (OTIF, OSJD), associations of railway undertakings (CIT, FIATA) and freight forwarders. The only power that could have brought their different interests together is an anticipation of future profits for the industry, which the new regime could bring.

The Joint Declaration presumes “that different legal regimes along Euro-Asian rail transport links increase cost, reduce competitiveness and impede the development of effective rail transport operations and efficient railways business”.

But, although intuitively it is better to have a single railway convention instead of several, in fact, there is no estimation of how costs would decrease and competitiveness increase, if we have a single regime. In other words, there is no anticipation of future profits.

Moreover, the coronavirus pandemic showed that the main obstacles for rail carriages had been of an infrastructural, rather than of a legal, nature. Once the infrastructure capacity hurdle was overcome, rail transport proved itself to be fast and reliable – and, consequently, has increased its competitiveness.

As for the differences between the legal regimes, an average customer, if they have a clear overall calculation of delivery costs and periods, wouldn’t normally scrutinise what transit periods or limits of responsibility are applicable on every part of the route. The modern development of digital products makes it a realistic objective to provide such estimation.

A good example of a digital product that mitigates the differences of legal regimes, providing a smooth transportation between COTIF and OSJD countries without reconsignment, is an electronic CIM/SMGS consignment note. The only big legal obstacle to its use is a refusal of the EU tax authorities to accept an electronic consignment note as a customs document. However, this problem doesn’t belong to the sphere of transport law, so there is no need to develop the new Berne Convention in order to resolve it.

Besides, the lack of market interest could be a reasonable explanation of the fact that the average number of participants of the working group meetings was only between six and eight, and countries like Belorussia and China, important for the organisation of East-West transit, never took part (except at the last meeting, in which a Chinese delegate was present).

Platon GuraynovPlaton Guryanov earned a Master of Laws degree from the University College London. He worked on matters of Russia’s accession to WTO at the Ministry of Economic Development before joining the Russian Railways (RZD). In RZD, Platon heads the International Practice within the Legal Department and represents the company in CIT as a member of its Executive Committee. His sphere of competence includes creating a railway-friendly international regulatory environment at the level of both governmental and non-governmental organisations, as well as bilateral cooperation. He also provides legal support to the company’s top management in negotiations on various matters, such as infrastructure projects and international operational activity.

This article reflects a private opinion, not that of the Russian Railways or Russell Publishing Ltd.

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