• 2012 November 27

    Passionless insurance

    Insurance in the field of water transport has become an integral part of the shipping business. Delegates of the 2nd International Conference of the Union of Marine Insurers (UMI) "Marine Insurance in Russia 2012", held recently in Moscow, addressed the legislative innovations in the field of insurance of Russian inland waterway transport, the effects of international sanctions for marine insurance market, the results of Russia’s accession to the international conventions. PortNews was the event technical coordinator.

    Sailing on rivers without fear

     

     

     

     

     

     

     

     

     

     

     

     

    With recent changes in the Russian legislation, revamping inland waterways management and navigation requirements open a new page in Russia history of river shipping, Vitaly Klyuev, Deputy Director of the Department of State Policy for Maritime and River Transport of the Ministry of Transportation (the ministry developed the relevant laws) told the conference. He explained that the Federal Law (№ 131, 07.28.12) amends legislatives acts, including the Code of Inland Water Transport (IWTC).

    The most interesting are the changes in the part of insurance set out in Art. 121 of the mentioned law, establishing the liability of shipowners for the damage caused to vessels. Paragraph 4 reads that the operation of ships is only permitted if the insurance of liability of the shipowner or the availability of other financial security (bank guarantee of liability for damage caused to the ship.) Although the article does not introduce compulsory insurance in the manner prescribed by the Russian law on insurance business. Therefore, in theory, the vessel stay without insured liability, but she can not be operated. That is, in fact, it turns out that Russia introduces compulsory insurance. In this part the law comes into force as of January 1, 2013.

    The article clearly defines the risks to be insured. These are the responsibility of the ship owner for the damage caused by the collision of a ship with other vessels, damage to third party’s property or loss of property. Another important factor is the insurance of liability for damage of infrastructure (not only the harbor wall, but to state-owned hydraulic structures, channels, artificially created waterways and turning circles).
    The legislation separately specifies risks associated with harm from pollution from ship caused by oil and other substances that can harm the environment and third parties, as well as the risks associated with shipowners' liability for salvage of the stricken ship and cargo, or other objects, on board the sunken ship. If the owner tries to evade his duties in salvage operation, the sunken ship can be raised by the newly created Authority of Inland Waterways Basin (IWBA), and the salvage costs are to be reimbursed through the insurance system, under Art. 121 IWTC.

    Article 121 establishes the amount of insurance coverage of the civil liability of the shipowner depending on gross tonnage. In order to ensure the requirement enforcement, the legislation prescribes the ship to have a tonnage certificate, which is issued by the classification society Russian River Register (RRR) and will be used for various purposes, including to determine the minimum amount of insurance or other financial security.

    A novelty in part of insurance is Article 121.1. This is a completely new article, emerged from maritime practice, which provides for limiting liability of the shipowner. It is important that the shipowner's liability under this article may only be restricted only if the occurred risks are insured. The IWTC provides for tools to compel shipowners to insure liability in accordance with the law.

    Another innovation is the creation of a system of Port State Control on Inland Waterway. To make the system practicable, a special post of Captain of Inland Waterways Basin was created. The Port State Control system has been effective as from 30 August 2012.

    Among the documents subject to inspection by IW Port State Control officers is a document proving fulfillment of the requirements of the law in respect of liability insurance of the owner. The vessel operation without of the document would be prohibited, the ship will be ceased until the shipowner fulfill Article 121 requirements.

    The system of Port State Control has yielded results. Fulfillment of the requirements that have already been in force is permanently checked. There had been more than 200 inspections conducted from September to October, which resulted in about 5000 violations of all kinds found on board of inland ships, over 300 cases of detention of vessels to eliminate the most serious violations.

    To increase the safety the shipowner must have safety management system (SMS, similar to the ISM Code at the sea). The system should be effective as from January 1, 2013 (when the navigation season starts) with every shipping company and every vessel having a classification society’s SMS certificate.

    If the vessel has been insured under the international obligations or voluntarily by the shipowner and the insurance includes the risks specified by Article 121, and the insurance amount is not less than the minimum amount specified in the Article 121, it is considered that the liability of the shipowner is fully implemented. According to the Transportation Ministry, major ship owners have these risks insured for an amount not less than those specified in the amendments to IWTC.

    A similar clause is in relation to SMS. If the owner has the documents proving that the requirements under the ISM Code are fulfilled, it is considered that the owner fully met the requirements of SMS and he does not need additional documents.

    The requirements for vessels time charter are also changing. The term ‘bareboat charter’ does not exist for Inland Waterways and it was not possible to apply it to IWTC. This charter scheme is used today uncontrollably. Such rules will no longer be applied as from 1 January 2012, and the vessel can be chartered without the crew (bareboat charter) only once. Sub-bareboat charter shall be prohibited from January 1, 2013. The charter agreement takes effect only after registration in the agency that registered the ship – the IW Authority.

    Sea port harbor master, within the Port State Control system, inspecting the ships and certificates under the international treaties of the Russian Federation and the national legislation on insurance or other financial security for pollution from ships, or any other damage caused by the ship. This "other damage" is present in the chapter on insurance. Ships registered under the Russian flag in the Russian International Register of Shipping (RIRS), and foreign-flagged vessels, if they are subject to this rule, can be insured not only in Russian insurance companies, but in the foreign ones as well.  

    The requirements for shipping on the Northern Sea Route also contain that the ship may be allowed to sail on the NSR only if it satisfies the requirements of the rules of navigation, and also has liability insurance for environmental damage and other damage that may be caused by ships.

    At sea of sanctions

    Another issue that has been considered at the conference - is the relationship between different international sanctions with marine insurance market.

    According to Deputy Director of Maritime Department of Rosgosstrakh Alexei Bachurin, the UK from middle of the 20 century boycotted the purchase of oil from Iran. Then the action was supported by other countries. The UN Security Council issued Resolution No 1929, which considerably expanded the list of sanctions. Previously, they were commercial in nature, banned import / export to certain countries and did not address the issues of insurance ship owners market.

    "Insurers felt that the right to assume or not a particular risk was strongly violated by norms that were not directly applied to Russia. For example, by the U.S. or UK rules, because we have implemented reinsurance abroad," Bachurin said.

    As Deputy CEO of Sovcomflot Vladimir Mednikov said, almost all international trade is carried out in USD, so any unilateral sanctions by the country, which prohibits a particular company to use the U.S. financial system, may lead to serious consequences. "This is the death of a club of mutual insurance, where the vast majority of transactions are conducted in USD,” Mednikov said. "Not giving some entities a possibility to be insured and to operate in a particular currency, such sanctions have risen sharply in its effectiveness. This may affect a lot of people who have not violated any law."

    Deputy Director of the Legal Department of the Russian Ministry of Foreign Affairs Dmitry Gonchar told the conference a detailed story of the sanctions against Iran and Syria, which affect shipping industry.

    In relation to Iran these are resolutions 1803 (March 3, 2008) and 1929 (June 9, 2010), which made possible the inspections of Iranian cargo to identify violations of the sanctions against the country. In particular, Resolution 1929 calls upon States to carry out on their territories, in accordance with their national legislation and international law, the inspection of all cargo bound to / from Iran if the government has information that gives reasonable grounds to believe that the cargo contains the items, prohibited by the resolution.

    It is also possible for the state to request authorization for inspection on the high seas with the consent of the flag State. After the inspection the officers prepare a written report. By the same resolution, the State is prohibited to provide bunkering services, or other supplies to ships owned or chartered by Iran when there is information that the vessels may carry items, the supply, sale, transfer or export of which is prohibited by the UN Security Council resolutions. In September 2008, the United States, in addition to the Security Council sanctions, imposed unilateral sanctions against Iran. In particular, the U.S. imposed sanctions on Iran's shipping company and the bank, as well as restrictions on the ability of Iranian individuals and entities to use the U.S. financial system to perform transactions with each other.

    The Russian government in the course of contacts with the United States has consistently stressed that Russia does not recognize the extraterritorial unilateral U.S. sanctions against Iran."We always warn our American colleagues that if these sanctions hit Russian companies or banks, it will have negative consequences for our bilateral relations and prospects of further relations with the United States in Iran Six format," the Foreign Ministry official said.

    The decision on Syria adopted by the European Union in July 2012 gave the Member States the opportunity to inspect the ships in ports, as well as in the territorial sea of the Member States, with the consent of the flag State to determine whether the goods transported have items, delivery of which is prohibited or requires special permission.

    The Russian Foreign Ministry said that the enforcement of the arms embargo on Syria must be in strict accordance with international maritime law, including the right of safe passage of ships through the territorial sea of the EU member states.

    In case, when a ship is sailing through the territorial sea without entering internal waters of the State implementing the right of way, the requirement to provide information about the cargo, as well as unwarranted inspection by the competent authorities of the coastal State of the vessel may be considered as a violation of the UN Convention on the Law of the Sea.

    This binding (both in the case of the UN Security Council sanctions and unilateral sanctions) is made to the flag State of the vessel and the permission for inspection of such vessel should be requested from the state flag. Therefore, if the vessel is sailing under the Russian flag, the request is submitted to the competent Russian authorities, who, in consultation with the shipowner give a positive or negative response, which, however, will most likely be negative than positive. But when it comes to a vessel, say, flying the flag of Curacao, then the request will be submitted to Curacao. "And here is a big question, what is the future of this request," said Dmitry Gonchar.

    Continuing the subject of international law, Vitaly Klyuev said that Russia today is a party of almost all international conventions in the field of maritime safety and protection of pollution from ships. Recently, Russia has acceded to the International Convention on the control of anti-biofouling and Annex 6 of MARPOL on protection of air pollution from ships. Russia is a party of the Convention, which has not yet entered into force on Ballast Water Management (expected to be effective as from 2013).

    Recently, on August 21, 2012, Russia and the Philippines in Geneva at the headquarters of the International Labour Organization simultaneously deposited the instruments of ratification on the Maritime Labour Convention in 2006. Within a year the convention will come into force, as Russia and the Philippines were the last two countries that joined the member states, which can now put into effect the Convention, from August 21, 2013. Each member state of the Convention requires that ships flying its flag would have the financial security that provides adequate repatriation of seafarers. The MLC Article 60 establishes the obligation of the shipowner to insure the wages and other payments due to the ship's crew, including the cost of repatriation. Thus, the MLC settled in the Russian Federation the financial security of the shipowner liability for repatriation of seafarers. Russia has been long a party of all other conventions.

    Nadezhda Malysheva, Vitaly Chernov.