Govt makes third-party liability cover mandatory for ships calling at ports

Govt makes third-party liability cover mandatory for ships calling at ports
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First Published: Sun, Jun 17 2012. 11 30 PM IST

Maritime claims: A ship at the Nhava Sheva port in Navi Mumbai. The government is asking for valid insurance certificates as ports are often unaware if a ship’s cover has been revoked due to?non-payme
Maritime claims: A ship at the Nhava Sheva port in Navi Mumbai. The government is asking for valid insurance certificates as ports are often unaware if a ship’s cover has been revoked due to?non-payme
Updated: Sun, Jun 17 2012. 11 30 PM IST
Bangalore: India has made it mandatory for foreign-registered ships entering the country’s ports to hold a valid third-party liability cover against maritime claims such as oil pollution and wreck removal.
Such third-party liability risks have to be insured with the London-based International Group of Protection and Indemnity Clubs (IG Clubs) or such other insurance company authorized by the government, according to the rules that became effective this month.
The Merchant Shipping (Regulation of Entry of Ships into Ports, Anchorages and Offshore facilities) Rules, 2012, were framed under the Merchant Shipping Act, 1958.
Indian-registered ships are exempted from these rules.
“The operator of the vessels other than Indian vessels shall have a valid protection and indemnity insurance policy against maritime claims to enter into the Indian coastal waters,” M.C. Jauhari, joint secretary at the shipping ministry, wrote in the gazette notification notifying the rules.
The rules are applicable to foreign-registered ships of 300 gross tonnes or more.
In addition, a foreign-registered oil, product or chemical tanker that’s over 20 years old should be classed with a member of the International Association of Classification Societies (IACS) or with an organization authorized by the Indian maritime administration.
This also applies to general cargo ships, bulk carriers, offshore support vessels, passenger ships or any other type of cargo vessel that’s older than 25 years, or a liquefied natural gas or liquefied petroleum gas tanker over 30 years old.
Operators of foreign-registered ships should submit copies of the insurance policies and the certificates of class of the vessels to port authorities 48 hours before arrival.
In shipping, third-party liabilities arising from operating ships such as oil pollution, wreck removal and damage to port property are commonly referred to as protection and indemnity (P&I).
Globally, such third-party risks are insured with IG Clubs, a 13-member group based in London that between them provides covers for oil pollution and wreck removal for at least 90% of the world’s ocean-going ships by capacity.
Typically, P&I cover is given for a year, but shipowners have the flexibility to pay the premium every three months. In case of a default in paying the premium, the cover ceases.
The government is asking for valid insurance certificates because ports are often unaware if a ship’s cover has been revoked due to non-payment of the premium.
This was noticed after a couple of mishaps along the coast.
Maritime claims: A ship at the Nhava Sheva port in Navi Mumbai. The government is asking for valid insurance certificates as ports are often unaware if a ship’s cover has been revoked due to?non-payment of?premium. Adeel Halim/Bloomberg
IACS is a global body of ship classification societies that sets technical rules on safety and protection of ships, confirm that designs and calculations meet these rules, surveys ships and structures during the process of construction and commissioning, and periodically surveys vessels to ensure that they continue to meet the rules as per the requirements of the International Maritime Organization, the global maritime regulator.
Ships that are not classed or certified by any of the 13 IACS members are not allowed to take to the sea.
“The intention behind framing the rules is good,” said Prashant Pratap, a Mumbai-based independent maritime lawyer.
All ships coming to India must have compulsory third-party liability cover but implementing the rules will pose a problem for the ports, he added.
“The rules have been framed under the Merchant Shipping Act. Unless the government makes some corresponding changes in regulation under the Indian Ports Act, 1908, which applies to all the ports, the government will have a problem in ensuring that the ports implement the rules,” Pratap said, adding that the rules have to become mandatory under the statutes that governs ports to make them enforceable.
S.C. Mathur, the chief nautical officer at Gujarat Maritime Board, said the shipping ministry notified the rules without consulting the stakeholders.
Mathur pointed out a few lacuna in the rules. “For instance, the rules should be applicable to Indian ships also. Otherwise, if an Indian ship is involved in a mishap and the ship’s owner refuses to pay for the damages, the Union government will have to assume liability for oil pollution and wreck removal, which will run into a few hundred crores (of rupees),” he said.
“The new rules will affect a majority of the ships coming to India,” said Dinesh Gautama, adviser to the Container Shipping Lines Association.
“It will have serious repercussions on bulk carriers which are not even recovering their operating expenses, given the downturn in the shipping industry. As a result, ships are getting classed with non-IACS members and non-IG Clubs to keep their operating costs low. So shipowners should have the freedom and not restriction in matters relating to classification societies and protection and indemnity insurance,” he added.
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First Published: Sun, Jun 17 2012. 11 30 PM IST
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