The Hindu Business Line : New rules on wreck removal, pollution cover — P&I Clubs see red over Shipping Ministry move

THE International Group of Protection and Indemnity (P&I) Clubs has opposed a Shipping Ministry move to deny entry to ships into the Indian territorial waters if they do not have adequate and explicit cover for wreck removal and oil pollution risks from a P&I Club.

They are especially peeved with the clause in the proposed Wreck Removal Rules which says that "in case of a mishap, the entire cost of wreck removal/pollution control shall be recovered from the P&I Club covering the ship which sank/caused pollution."

"It would appear that the intention of the proposed Wreck Removal Rulesis to fasten the wreck removal/pollution liability on the P&I Club," an official attached to an International Group of P&I Club told Business Line.

Making their position clear on the adequacy of coverage, he said: "A copy of the vessel's Certificate of Entry showing cover `as per Rules of the P&I Club' should be taken as prima facie evidence of adequate coverage for wreck removal and oil pollution as long as these risks are not specifically and expressly excluded on the certificate itself. This is the global practice."

Explaining further, he said that P&I Clubs indemnify ship-owners against any claims that may arise in different ports to the extent of their legal liability. In other words, they reimburse the owners when they discharge such liability and seek reimbursement under the principle of `pay to be paid'.

P&I Clubs do not walk into their members' shoes or assume their commercial and/or statutory liabilities. They only reimburse the amount paid by the members, in accordance with the Rules of the P&I Club and the terms of entry of that particular member. The only exception is when a P&I Club gives a Letter of Undertaking.

As such, the logic behind the Ministry's proposed Rules is unclear. "No clarity is provided as to how the ports are to ascertain exactly what constitutes adequate proof for wreck removal and oil pollution coverage. In the absence of any clarity on this issue, the system would be unworkable and open to individual interpretations of each port as to the kind of documents to ask for to ascertain adequacy of coverage for these risks. Such a system would be a logistical nightmare for the ship-owners and their insurers," the P&I Club official asserted.

Given this scenario, the P&I Clubs have sought status quo on the issue till the Wreck Removal Convention (WRC), now being drafted by a legal committee of the International Maritime Organisation (IMO), becomes statute in India and then amend the Indian Ports Act, 1908 to bring it in line with the provisions of the WRC.

The WRC draft is expected to come up for consideration by the diplomatic conference in 2004-05. "In all probability, India will be a signatory to this Convention. It, therefore, makes little sense to notify new rules or amend the Indian Ports Act at this stage and later go through the entire exercise once the WRC becomes statute in India," the official said. Besides, he pointed out that the proposed Rules are " unworkable".

The rigid stand adopted by the P&I Clubs has stopped the Shipping Ministry in its tracks and made it defer the notification of the Wreck Removal Rules until the clauses are discussed with the stakeholders.

As per the Ministry's Wreck Removal Rules to be framed under Section 6 of the Indian Ports Act, 1908, all ports must ensure with the ship-owners that their vessels are covered against wreck removal and oil pollution risks by a P&I Club, which is also a member of an International Group of P&I Club, before granting entry. Ships not complying with this clause will be denied permission to enter the port.

For non-Solas vessels, the burden of wreck removal and oil pollution risks would be with the owners and they must have adequate insurance coverage if not covered by a P&I Club.

For the purpose of uninterrupted navigation, the proposed Rules also confer powers on the Conservator or an officer authorised by him to raise, remove or destroy any vessel wrecked, stranded or sunk in any port if the owner/agent of the vessel fails to remove the wreck within a stipulated period.

The Ministry's proposed Rules will also have an impact on the four subsidiaries of the state-owned General Insurance Corporation (GIC) — New India Assurance, United India Insurance, Oriental Insurance and National Insurance.

Currently, the International Group of P&I Clubs provide indemnity cover to about 90 per cent of the world's ocean-going tonnage while the remaining 10 per cent is covered with fixed premium companies and with hull underwriters including the GIC subsidiaries.

The clauses, as currently drafted, denying port entry to non-International Group of P&I Club tonnage would automatically exclude the remaining 10 per cent of the tonnage and this shall be construed as "discriminatory" and "unconstitutional".

The P&I Clubs contend that the proposed Rules on wreck removal are ultra vires Section 6 of the Indian Ports Act and this requires an amendment to the Act itself rather than a notification, as planned. Besides, the issue of oil pollution is already covered under Section 32 (D) of the Merchant Shipping Act, 1958 and, hence, there is no provision under the Indian Ports Act to legislate or enact Rules concerning oil pollution.