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OP-ED: The saviour of the shipping industry

  • Published at 12:56 am October 30th, 2020
Shipping cargo
Photo: BIGSTOCK

Protection and indemnity clubs protect the shipping industry in more ways than one

International commerce, including the carriage of goods and the safe passage by sea, largely depends on the shipping industry. Ships are acting as the carriers of such which is bound to abide by international laws whether the route is the high sea or other foreign territories. 

International Conventions like the United Nations Convention for the Law of the Sea 1982 (UNCLOS) and the United Nations Convention on the Carriage of Goods by Sea 1978 are of importance here. There are certain responsibilities provided by these conventions on the shipping authority to ensure certain that risk management, precautionary mechanisms, supporting claims, environmental safety, and many other aspects are ensured. 

For example, Article 94 of the UNCLOS requires ships to carry the flag of the country in which it is incorporated to ensure effective jurisdiction and control in administrative, technical, and social matters. For this purpose, ship owners have created a non-governmental, non-profit mutual or cooperative association called the Protection & Indemnity (P&I) club that consists of ship owners, operators, charterers, and seafarers concerned with protection against liability claims from the crew, passengers, and third parties. The focus of this write-up is to elaborate on the significance of the club by illustrating the onus of the parties.

Thirteen P&I clubs around the world have come forward and created an international group of P&I clubs: IGP&I. Clubs provide compensations to seafarers if any dispute or any risk management crisis arises in the form of insurance, called P&I Insurance. 

Such insurance covers various areas of the industry such as personal injury, illness, and death claims from the crew and passengers, stowaways and repatriation arrangement, cargo claims for damage or loss, irrecoverable GA contributions, liability due to collisions, damage to fixed and floating objects (jetty, pier, marine animals, rig, fishery facilities, etc), liability under approved towage contracts, removal of wreckage, salvage operations, civil liabilities imposed due to pollution or oil spill, and other fines and expenditures as the circumstances vary depending on the demand of the premium owners. 

The supervisory power confers to the committee of directors representing the ship-owner members to control the club and its activities. In addition, a P&I club has correspondents for serving its members from various sectors worldwide. 

A correspondent may be a firm of insurance specialists or an insurance company who may work for one or more than one club. A law firm with maritime law practitioners may also work as correspondent to the P&I clubs. 

Often the investigation correspondents visit the area if any collision, loss of life, or any environmental pollution takes place. 

There are various functions of a club. Ensuring the protection of ship owners and operators against third-party liabilities not covered by hull and machinery policies is the main priority of the club. However, the club will usually only accept risks on chartered-in-tonnage where the member also has owned vessels entered with the organization.

In addition, the club works for fleets but tends to prefer the owners as it is the ship owners’ club in the first place. The club also inspects the vessels or ships to ensure that precautions have been taken. 

Such inspection can be done before the registration and during the membership if the club deems it necessary at any point in time. The health check-up of the fleets, crew, members, master, and captain of the ship is required before it sails. 

Besides, the health of the ship remains the primary concern. The club strives to keep loss risks to a minimum for the members of the clubs and keeps them updated on issues of concern from time to time. Producing standard forms for letters of indemnity and posting bonds against members when under arrest are also the two major important tasks of the clubs, including issuing handbooks containing club rules and a list of correspondents. 

In conclusion, the three major elements of the shipping industry, such as the ship, the seafarers and the cargo which carries the goods, are subject to the P&I club and its insurances. This has made the club culture more accepted around the world as the Rotterdam rules and European Union Directive 2009/20/EC admit its significance. 

In 1874, the UK courts encouraged club insurance for covering cargo liabilities and after the incident of Torrey Canyon in 1976, club cultural has received more acceptance. No doubt the P&I clubs are the saviours of the shipping industry around the world. 

Md Asif Mahbub Tanvir is an Apprentice Lawyer, Dhaka Judge Court.

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