Third EU safety package poses protection question

The Insurance Directive 2009/20/EC that forms part of the eight regulations and directives which make up the Third European Union Maritime Safety Package is intended to increase the level of protection available to claimants as a result of loss or damage caused by incidents involving ships

Among other things, it seeks to ensure that all ships above a specified tonnage entering EU ports have proper insurance in place, and are able to produce proof of cover in the form of an authentic certificate of insurance. However, it remains to be seen whether the final wording of the insurance directive provides much comfort to the victims of maritime incidents. The legislative dossiers which constitute the Third EU Maritime Safety Package entered force on June 17, 2009, although they will not take effect in EU member states until they have been implemented into the domestic law of individual states. Directive EU 2009/20/EC of the European Parliament and the Council is that part of the safety package that relates to the insurance of ship owners for maritime claims. It requires owners of ships of more than 300 gt to maintain insurance cover subject to limitation under the 1996 Limitation of Liability for Maritime Claims Protocol, and up to the maximum amounts specified in that protocol. Under the terms of the directive, member states are required to enact laws, regulations and administrative procedures necessary to comply with the directive before January 1, 2012, although the International Group of P&I Clubs has said that it understands that some member states may give effect to the directive towards the end of the 2010-2011 policy year, which concludes on February 20, 2011.The directive requires that cover is evidenced by a certificate of insurance when ships enter an EU port, or fly the flag of a member state. Initial indications are that the directive will be enforced through port state control, and that a standard certificate of entry with a P&I club, for example, will be acceptable evidence to show that the necessary insurance cover is in place. This is good news for owners and their clubs, even though the nature of the information required to be shown will necessitate some changes to be made to the traditional certificates of entry issued by the clubs, for example by including the address of the registered office of the registered owner of the vessel. But there is also some not-so-good news for those claimants who may need to seek compensation for damages and losses caused by incidents involving ships. The directive has been some years in the making. In 2005, the European Commission published a proposal for a Directive on the Civil Liability and Financial Guarantees of Ship owners. This draft included an article (Article 10) relating to direct action against the provider of the financial guarantee for civil liability, which stipulated: “Any requests for compensation for damage caused by the ship maybe addressed directly to the provider of the financial guarantee for civil liability covering the owner’s civil liability. The provider of the financial guarantee may rely on the means of defence which the owner himself would be entitled to invoke, with the exception of those based on the owner declaring bankruptcy or going into liquidation. The provider of the financial guarantee may also rely on the fact that the damage was the result of intentional fault on the part of the owner. However, it may not rely on any of the means of defence that it could have invoked in an action brought against it by the owner. The provider of the financial guarantee may, in all cases, require the owner to be joined in the proceedings.”In short, this draft article provides claimants with a right to direct action against insurers for damage caused by an insured vessel. But nowhere in the final wording of Directive 2009/20/EC does this provision, or anything approximating to it, appear. The direct action by the claimant against the insurer is no longer an option under the Third EU Maritime Safety Package. P&I Clubs traditionally grant cover on the basis of the ‘Pay to be Paid’ principle, whereby they are, in many jurisdictions, not obliged to make any payment to anyone until owners have first settled the losses with the claimant. Many ships are owned by single-ship companies and, in the event of a serious incident, that can make it unlikely that the owner is willing or able to settle a loss with the claimant first. So the fact that no direct recourse against the insurer is available under the Third EU Maritime Safety Package raises serious questions about whether the EU is achieving its stated objective of increasing the level of protection available to claimants as a result of loss or damage caused by incidents involving ships.

“Published in Lloyd’s List on January 20, 2010.”