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LONDON-The International Maritime Organization, a London-based United Nations agency, is considering proposals for a new international treaty mandating that shipowners carry liability insurance.
Currently, about 95% of the world's shipowners already have some form of liability coverage, through protection and indemnity clubs, private insurance or self-insurance. As a result, some shipping groups contend the IMO's moves are unnecessary and would complicate existing liability requirements.
At a meeting late last month, an IMO correspondence group examined whether a uniform system could be adopted for merchant ships to demonstrate they have the means to meet potential third-party liabilities. It plans to study the matter further and report to the IMO's legal committee in October.
Although IMO member countries are by no means unanimous in believing there is a need for compulsory third-party liability protection, Eric Roseag, the correspondence group's coordinator, said group members decided at their last meeting that two areas deserved to be examined as a priority.
Those priority areas are financial security for:
Passenger claims, possibly in the form of a convention similar to the 1969 Civil Liability Convention on Oil Pollution.
Other maritime claims currently covered by P&I clubs, possibly in the form of rules for standardized insurance certificates with some provisions for direct action against insurers.
An insurance mandate could be satisfied with P&I cover, policies from insurance companies, bank guarantees, state insurance or self-insurance.
About 90% of merchant shipping tonnage already is insured for third-party liabilities through P&I clubs, and a further 5% is covered either in the commercial market, or through self-insurance or state liability cover.
The United Kingdom, backed by Norway, is leading the move within the IMO for a convention governing compulsory third See IMO on next pagIMO
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party insurance cover or proof of financial security to cover liabilities, maintaining there is no uniform regime worldwide covering shipowner liabilities.
However, Chris Horrocks, secretary general of the International Chamber of Shipping, which represents national shipowners' associations that account for about half the world's merchant tonnage, said, "Creating a whole new legal mechanism to deal with what is essentially a small minority of the shipping community is like using a sledgehammer to crack what is a fairly small nut."
He said the proposals also would create problems, such as determining what insurance companies or P&I clubs would be acceptable as insurers under the proposed regime and whether shipping companies would continue to be allowed to maintain high deductibles on their insurance policies.
The International Group of P&I Clubs takes a similar view, stating that there is little need for compulsory insurance when such a vast majority of shipowners already have insurance protection.
The IMO already has in place the 1974 Athens Convention, which sets various passenger liability limits. These were updated by a 1990 amendment, which sets a limit of 175,000 special drawing rights ($238,665) per loss of life. However, not many countries are party to the amendment.
The United Kingdom first put forward to the IMO its proposals for shipowners to demonstrate financial security for third-party liabilities last year in the wake of a number of serious oil spills in U.K. waters and such well-publicized ferry disasters as the Herald of Free Enterprise capsizing in the English Channel in 1987 with the loss of 187 lives and the Estonia sinking in the North Sea in 1994, causing 852 deaths.
In a written submission to the IMO, the U.K. Department of Transport cited its own difficulties in recovering some (British pounds) 800,000 ($1.3 million) of costs arising from action taken to control pollution from four separate shipping casualties in the past three years.
The U.K. DOT maintains that while the IMO's 1969 Civil Liability Convention establishes shipowner pollution liability in some circumstances, most third-party liabilities are generally a matter dictated by national laws. And while the IMO's Hazardous and Noxious Substances Convention should, when implemented, offer a similar liability regime in this area of spills, the United Kingdom maintains that "victims of other types of damages can face considerable problems in obtaining monies that a court has awarded to them." It singled out coastal communities affected by pollution incidents and ferry passengers as those who would benefit by compulsory third-party liability insurance.
The United Kingdom already is planning unilateral action requiring ships calling at its ports or operating in U.K. waters to have compulsory insurance or be able to demonstrate financial security to meet third-party liabilities, but it would like to see such action adopted on a global scale.
However, the DOT acknowledges that in trying to tackle the problem, there is the difficulty that few shipowner liabilities are specifically defined in international law, and it is impossible to draw up a definitive list of all the liabilities they face. One solution might be to define the nature of liabilities in broad terms, possibly by defining the relevant third parties.