MARITIME & SHIPPING: CERTAIN CONFUSIONS & CLARIFICATIONS

MARITIME & SHIPPING: CERTAIN CONFUSIONS & CLARIFICATIONS

• F R Chowdhury 29 March 2019

1. Ship registry cannot be privatised: Registration of ships is an integral part of maritime administration. They cannot be separated from one another. Maritime administration is a sovereign function of the government. It should be run by an appropriate authority set up by the government preferably headed by a chief executive who may be referred to as a director general. The functions of this office are by no means commercial in nature and cannot be auctioned or sold off to the highest bidder. It is only corrupt government who sell their sovereign rights and functions to foreign businessmen to make personal fortune. If there is any shortage of expertise, experts and advisers/ consultants can be hired for a specific period but the administration must remain a part of the government preferably headed by an own national who may be a maritime expert or renowned lawyer or a retired admiral of the navy.

1. Maritime Administration & Port Authority: Most of the poor developing countries think maritime administration is part of the port department or authority. This is because in the colonial days the national administration was run by the colonial powers. People could only see and know about local port operations. For any independent country, even if it does not have any coast line, there must be a maritime administration. The maritime administration is the national policy and planning authority in respect of registration of ships, safe operation of ships and protection of marine environment, seafarers’ training, certification and employment, humanitarian search and rescue, and combating accidental pollution. In many countries they have Coastguard to look after SAR and Combating accidental pollution.

Port is a service provider and operates on commercial footing. In a country with large coastline there may be several ports. They may have separate independent authority for the operation of each port. In some case cases, they may have single national ports authority with an executive head for each port. Port authorities operate independent of maritime administration except that maritime administration ensures that pilotage standards are maintained at international level, proper VTS is in operation, dangerous goods are handled within the port area as per instruction of maritime administration and all marine activities are carried out by duly qualified people in compliance with rules and regulations. All preliminary/ safety inquiry shall be conducted by the maritime administration even if the port authority conducts its own inquiry for accidents within port limits. The maritime administration or the coastguard, acting on behalf of the government, shall approve security plan of the port and oversee its operation.

The system of operation of ports varies from country to country. In a small state with a single port, it can be operated directly by the government perhaps by a department known as port department. But elsewhere there would be separate authority for operation of ports. Ports may also be privatised for better efficiency. They are sometime operated by giant global companies but government retains full control over key elements.

1. Port State Control:  Maritime Administration has three different roles as – Flag State, Coastal State and Port State. In respect of flag state the jurisdiction of maritime administration extends over its ships (ships under its flag) all over the world, wherever they may be. A ship has to comply with requirements of its flag state at all times. The ship has to also comply with the requirements of the state where it trades. Fortunately, because of common international conventions, the requirements are more or less identical. Every party state to a convention has to ensure that its own ships comply with the requirements at all times and the foreign ships visiting its ports also comply with the same standards. The term port state control refers to the administration of the state in which the port is located. It does not refer to the administration of the port.   

The administration of the port such as harbour master etc. cannot detain a ship on safety ground and again charge the vessel for the stay. It compromises business interest. It is not allowed. Only maritime administration can exercise this control to ensure common safety standards are enforced without any discrimination.

In order to avoid unnecessary duplication and to ensure uniform application a number of neighbouring/ regional states may form MOU (memorandum of understanding) for conduct of PSC in a coordinated manner. It merely facilitates operation of PSC to a common and uniform standard. However, a state may conduct PSC on its own as done by the USA.

1. Seafarers’ training and certification: Seafarers’ certificates are professional competency certificates. They combine essential knowledge with mandatory experience (period of sea-service) to give the competence. They are different from academic degree or diploma that is purely based on knowledge. Academic system of education and their standards vary from country to country. That is why the STCW Convention makes no reference to academic background but deals directly with period of service, functions and competence. That is also the reason to make administration responsible for issue of final document (certificate of competency).

However, each member state should take into consideration its own system of education and try to adjust the requirement of underpinning knowledge with academic background. For example an administration should determine a level of education that would be compliant with the understanding of officers’ syllabuses. Most countries consider HSC (Higher School Certificate) with English, Mathematics and Physics or “A” level with those subjects or equivalent (perhaps an engineering diploma) as entry level qualification for cadets. STCW does not include English, Mathematics, Physics and IT as its syllabus but because it is not practicable to cover the syllabus without the knowledge of those subjects, training school must cover them.

IMO is concerned with safety and environment. It is not concerned with profit or loss. That is why STCW convention does not refer to any requirement relating to the commercial world of shipping. However, we all know that a ship-master is a key figure or central point for viable and commercial operation of ship. National syllabus must contain essential knowledge of commercial shipping for the master’s syllabus. In the international shipping market there would be higher demand for such knowledgeable masters. STCW includes all aspects like age, medical fitness and period of service, knowledge, function and assessment. However, it does not make any reference to a separate oral examination. At least for the highest sea-going qualification (master mariner and Class 1 Engineer’s certificate) an oral examination should be made mandatory to ensure good grooming and presentation, common sense and presence of mind. This will enhance the image of national certification system.

As explained earlier, no degree or diploma can be equated to a certificate of competency, no college or university should be allowed to issue the certificate of competency even if that college is operated by the government. It should be the maritime administration who can assess, approve and monitor courses conducted by any institute. It should also be the administration to issue the final certificate of competency when all requirements are complied with.

1. Accident/ casualty and Inquiry/ investigation etc. : One provision SOLAS, MARPOL, LL and STCW Conventions have in common is the national requirement for inquiry and investigation. The idea is to find reason why it happened and to learn lessons that it does not happen again. It is not interested in apportionment of blame, any fine, penalty or compensation. It does not mean there should be no penal provision. Those are national matters and countries can have their own provisions. IMO is concerned about safety, security and environment. That is why IMO wants to know why it happened and how it can be prevented in future. Will it require a review of any existing requirements and make any new requirements? The aspects of IMO and Convention requirements are met by a preliminary inquiry or safety inquiry or technical inquiry. In some countries there is a separate board or authority to conduct such investigation so that they can work beyond the influence of the maritime administration. In the UK, it is done by the MAIB (Marine Accident Investigation Bureau) and in the United States it is done by NTSB (National Transport Safety Board). However, in most other countries, it is done by the maritime administration. Their report does not recommend or prescribe any fine, penalty, jail etc. because they have no power to do so. They are simply carrying out the national obligations imposed by IMO Conventions to find reason why it happened and find remedial measures to avoid same in future. By analysing such investigation reports the world community may devise newer requirements for the safety and security of shipping and protection of the environment.

This, however, it does not mean that a person will get away with his/ her crime. There must be additional national measure to take action against professional negligence such as revoking or suspending the certificate of competency or even fine or jail.  Apportionment of blame or any punitive measure can only be taken by a judicial inquiry. The judicial inquiry does not take findings of the preliminary safety inquiry into any consideration. It investigates through country’s own legal system where the accused will have every opportunity to defend him/ her. The judicial inquiry normally ordered by the minister in public interest and it does not settle any claim or dispute.

Let us take example 1 where a ship while berthing alongside hit and damaged the crane on the jetty. The preliminary safety inquiry will only find why it happened and if it could be prevented. If there is a talk of gross professional negligence then the minister should order a public inquiry to decide if the certificate of the master or the licence of the pilot should be revoked. Such legal provision in MSA will enhance the image of the country apart from the fact that the insurance industry will respect the rule of law and have greater confidence.  So far the damage is concerned; the port authority must go to the court against the ship seeking compensation. The company will move the underwriters/ insurer. The court may take time to settle the case but the ship will perhaps be released on financial bond/ guarantee provided by a P&I club.

Example 2 where two ships collide at sea: Each flag state shall conduct its own preliminary safety inquiry. Where professional negligence is evident, the flag state may order a judicial inquiry to deal with the competence of the master or the officer of the watch. In this case the insurance will insist both ships should sue each other. However, the final settlement may even be done through arbitration.

It must be clearly understood that the role of the maritime administration or that of government initiated judicial inquiry is for the purpose of upholding the regulatory requirements and performance of officers in line with their competence for the greater interest of public safety. It works as a deterrent against negligence. It does not go into commercial claims or compensation. The normal judicial system or agreed arbitration will settle all disputes, claims and compensation.

State should be a party to IMO developed arrangements of various funds so that it can be quickly compensated in case of pollution related cases.

1. Role of classification societies: Only permanent members of IACS may be recognised to undertake such functions as may be determined by the administration. The recognised organizations shall be bound to provide all information about a ship or company or about the activities of the society as demanded by the authority. The administration shall reserve the right to check or audit the functions performed by a recognised organization.

1. State owned national Shipping Corporation: Government is supposed to facilitate growth of trade, commerce and industry. Government is generally not expected to engage in business. However, in view of greater national interest, many countries have state owned airlines, shipping corporations, telecommunication services, nationalised bank and insurance, radio and television stations. It must be clearly understood that state owned Shipping Corporation is just another shipping company except that the state i.e. people of the state are the owners. Because government runs the state, it has to also operate the Shipping Corporation. At no stage it should be considered as a government department or agency. Its legal status remains as a commercial concern. As a matter of fact it should be operated by the persons so appointed by the government without any interference from the government. The maritime administration should consider the chairman and managing director as owners of the company instead of any government official.

1. Tonnage tax: Flag states collect fees for registration of ships and mortgages. Thereafter it also charges periodically at a lower rate for renewal of registration. At the end of the financial year the company pays to the treasury corporate tax based on the audited report of profit. That is the normal procedure.

However, many countries have simplified the procedure. Instead of any corporate tax, they collect tonnage tax (based on the tonnage of the ship) at the time of renewal of registration. In economic term it is very much like a capacity tax and thereafter the government does not bother whether the company makes any loss or profit.

It is advantageous to the maritime administration to have the system of tonnage tax so that ship-owners are not suddenly affected by budgetary declaration by finance ministry. The provision must be included as part of the MSA (merchant shipping act).

1. Open register: Open registers allow ships owned by foreign national to be registered. There are many ways – a) the foreign owners have a company in the country and then have ships registered under ownership of that company; b) the original foreign company registered as a foreign maritime entity and then ships are registered under ownership of that FME; c) some countries just directly register the ship no matter where the owning company is registered.

In a small country with limited trade and lack of local entrepreneurs, it is perhaps better to become open register and attract foreign investment. But in other cases, foreign ship-owners may dominate national flag in such a way that local potentials will have no opportunity to grow. In an absolute open register, cabotage will have no significance. Some countries have a combination of both. Ships up to certain tonnage, say about 10,000 GT kept exclusively for own vessels (domestic and coastal services) and then for bigger ships make it an open register. This way the foreign ship-owners will not be able to make any business out of domestic or near-coastal trade.

An extensive debate and public consultation should decide the type of register a nation wants to operate. The legislation should then be drafted accordingly. An open registry has to be based on tonnage tax. In an open register there shall be no duty or tax for coming into or leaving the register. Foreign ship-owners shall gain confidence provided system remains steady and not change frequently.

1. Registration under bare-boat charter: The administration must retain this provision. It must be available both ways. Subject to owners and charterers agreeing and the provision being incorporated in charter-party ships should be allowed to be registered and when required, such registration can also be suspended for a period. MSA (merchant shipping act) must have the provision.

1. Cabotage: The term cabotage means reserving the right to carry goods or passengers from any one point to another within the country for own flag vessel. This must be clearly spelled out in MSA with a provision for grant of exemption/ waiver so that trade is not hampered.

Some countries extend cabotage to include all vessels operating within national waters and include even rigs and platforms that operate within EEZ. They must all be registered locally.

1. Foreign nationals working in national waters: Foreign nationals who are employed on port and harbour craft or on domestically operated vessels or even on rigs or platforms within EEZ (that do not undertake foreign voyage) should be considered as if employed within the country. They shall require work permit and such permit shall not be issued so long duly qualified own nationals are available.

1. Seafarers’ travel (joining or leaving a vessel): Normal requirements for passport and visa apply.  However, for the sake of world trade and smooth operation of ships, the absence of visa may be considered, in exceptional cases, provided the seafarer can justify the urgent need for travel and satisfy the immigration department that s/he has the following:

1. A valid passport;
2. A valid SID (Seafarers’ Identity Document);
3. Discharge Book or Record book to show recent employment;
4. Certificate of Competency to justify the post employed for;
5. Seafarer’s Health Certificate;
6. Account of Wages (for repatriating seafarer);
7. Employer’s letter supported by local agent’s letter (details of the seafarer and of the ship).

1. Marine Environment: There should be no misunderstanding about liability of a state in respect of pollution damage. Liability will always rest on ships and its operators which in turn are shared by an arrangement of insurance net-work. Every state should sign up to all IMO Conventions relating to protection of marine environment in its own interest. If we are party to a convention then we can enforce PSC to same standards to protect our water. Every state should make preparation for implementing 2020 emission target.

State should also become party to all compensatory fund conventions. That way the state can be compensated or supplementary compensation can be obtained without waiting for outcome of the court cases.

Because we have only one earth, we have to protect it. OPRC (Oil Pollution preparedness, Response & Cooperation) convention requires us to fight and contain marine pollution no matter who is at fault or who has to compensate. The greater idea is to cause lesser pollution for the nature to absorb. There should be contingency plans for every port; and countries with vast coast line should have similar plans for regions. There should be regular drills and exercises to ensure operational efficiency.

1. Coastal state obligations: Every coastal state has certain duties and obligations. States normally have Coastguard to provide SAR and arrangement for combating accidental pollution. It has also to provide navigational facilities and weather warnings. It is also expected that coastal state shall respond for radio medical aid. Commercial salvage is not an obligation but can be done conveniently (to earn extra money) if resources are available.

1. ILO-MLC-2006: ILO has consolidated most of its maritime labour conventions into MLC-2006 making it easier for countries to adopt and implement. Most countries have decided to implement through maritime administration to maintain “one window service”. With the world being increasingly more concerned about human rights, there is no way to get away without implementing MLC-2006 and other ILO Conventions.

1. Up-dating national judicial system: Whatever may be the basic judicial system of the country, those relating to shipping and maritime matters must be harmonised because they are strictly international in nature. The lower or otherwise subordinate courts should not be allowed to accept or entertain marine disputes. If allowed, they may order injunction in any case without understanding the financial consequences. MSA should make it clear that for any judicial reference it shall not refer to a court below a district court or regional high court. Legal proceedings for arrest of a ship should only be allowed at a court not lower than regional high court. The legal system should take into cognigence internationally recognised arbitration and allow enforcements of awards.

Every country should have appropriate legislation, competent administration, documented procedures and proper record keeping. There should be periodic review of the system for possible improvements. Legislation is the basic foundation and it must not keep anything in ambiguity. A proper merchant shipping act is vital for any country. Once a year there should be seminar attended by maximum number of people (including surveyors and examiners) to discuss various matters so that ambiguity and confusions can be removed; and efficiency improved.

States should prepare and present itself for IMO audit. Preparation for 2020 emission control is the most immediate requirement.
London, 29-March-2019.                      <fazlu.chowdhury@btinternet.com>