EU Maritime Transport Law 9781509909520, 9781509905607

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Preface

The law of the European Union (EU) is now a major source of law in almost all regulatory areas. In the 21st century, maritime law – in particular the regulation of shipping – makes no exception anymore. Over the decades and largely driven by both the jurisprudence of the Court of Justice of the EU and the dynamic regulatory reaction to some disastrous shipping accidents in EU waters, EU maritime law has emerged to become an integral part of the EU’s internal market. This area of law has hardened and deepened to cover various aspects of competition law and transport law in general as well as various maritime-related safety and security issues. This development has occurred despite the important position of the International Maritime Organisation (IMO) as the world’s primary regulator for – in the words of the IMO itself – “safe, secure and efficient shipping on clean oceans”. Though being a member of the United Nations Convention on the Law of the Sea (UNCLOS) the EU is still not a member of the IMO in its own rights. However, all EU member States are active members and participants in all IMO matters. Their individual position as sovereign IMO members is carefully coordinated in Brussels – under active leadership of the European Commission – mostly resulting in a common policy position of the “EU block” at the IMO in London. There are even some recent examples of IMO legal acts being identified as incompatible with EU law, thus resulting in new legal conflicts between those two regulators. Generally, EU maritime law now covers a wide array of both public law and even private law aspects of shipping as well. It is inextricably interlinked with the work of the IMO and, ultimately, both regulators cannot globally succeed without the other. Even the EU’s regional rules for the regulation of international shipping affect the rest of the world, for example, by introducing stricter regional environmental standards to be adhered to both by EU-flagged vessels and non-EU flags when entering EU waters and, in particular, EU ports. The rise of EU maritime law as a separate source of law is also the result of shipping being one of the key factors for economic growth and prosperity throughout Europe’s history. About half of the EU’s population lives less than 50 km from the sea. Waterborne freight transport has proved to be a vital instrument for the development of the EU’s trade whether national, intra-EU or external. Today, the maritime industry is an important source of revenues and jobs in Europe. But there are also dangers and risks inherent to maritime transport. The EU’s reliance on maritime transport means that it is as surrounded and penetrated by the risk of pollution from shipping, both chronic and catastrophic, as it is by the sea itself. The words of the European Commission are both true in a positive and in a negative way: “Maritime transport has a direct impact on the quality of life of citizens.” As a result, the EU has the strongest interests in

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promoting safe, secure and efficient intra-European and international shipping on clean oceans and seas, – assuring the long-term competitiveness of European shipping and related maritime industries in world markets, and – assisting the entire seaborne transport system to adapt to the challenges of the 21st century. This Commentary strives to be a reference work for everyone seeking to know more about how EU 21st century maritime law affects commercial practices and even the rights of consumers (for example as passengers of vessels) and everyone else (for example via the prescription of strict environmental standards for shipping). We have chosen to divide the book into five chapters, acknowledging that not every regulatory area of maritime law and not every single legal act can be analysed as intensely and as detailed as the provisions of a single comprehensive convention could be commented on. Thus, Chapter 1 introduces the overall regulatory framework for maritime transport in the EU. Above all, Chapter 1 serves as a legal and historic foundation for all following specific chapters. It also includes some information on issues like infrastructure, system development and integration, including port policy, and the EU’s maritime-related external relations, which are cross-cutting topics not addressed specifically elsewhere in the Commentary. Furthermore, Chapter 1 also contains a separate summary on the regulation of inland waterway transport in the EU. As stated in Chapter 1, it is possible to break down the maritime policy of the EU into some core areas, most importantly – seafarers’ recruitment, training and working conditions, – market access and conditions for offering maritime transport services, – maritime safety and pollution control; – maritime security. This list of leading topics governs the following structure of the Commentary: At the outset, Chapter 2 addresses further cross-cutting issues which – under the current status of EU law and international law – are difficult to comment on via sole reference to specific statutes and provisions. Still in a “non-commentary style”, this chapter addresses the general role of EU regulatory activity for carriage of goods by sea contracts as well as conflict of laws and jurisdictional issues in the maritime context. The final topic of Chapter 2 – cross-cutting questions of EU law and international maritime labour law – is also directly interlinked with possible conflicts of laws. After that, Chapter 3 discusses the most important EU legal instruments to create a liberalised and competitive market in maritime services, arguably the most important and most traditional challenge related to intra-EU matters. Two of the six sub-chapters in Chapter 3 also address the difficult modern issue of passenger rights, generally when travelling by sea and on inland waterways and particularly, in the event of accidents possibly triggering certain liability claims. Arguably, Chapter 4 (adding up to not less than 14 sub-chapters) forms both the heart and backbone of this Brussels Commentary. It is centred on the everVI

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Preface

growing subject of the protection of the marine environment and the related acts of EU maritime safety law. The majority of the sub-chapters of Chapter 4 comment on EU Regulations and Directives which are part of the so-called “Erika packages”, a series of legislative acts adopted in the aftermath of the “Erika” oil tanker casualty which occurred in 1999 off the coast of France. Another maritime disaster in EU waters, the break-up of the oil tanker “Prestige” in late 2002, has fuelled the follow-up dynamics of the “Erika packages” even more. Six of the 14 sub-chapters are directly linked to the “Erika III package”, the latest (2005-2009) and most important “wave” of EU legislative activity in this field. In an effort to also address one of the latest legislative acts within the context of Chapter 4, a basic commentary on the EU’s new Regulation on the monitoring, reporting and verification (MRV) of carbon dioxide emissions from shipping and its future practical implications concludes the discussion of the various environmentally-related sub-areas. Some critical readers might miss an individual commentary on the legislative acts paving the way for the most important establishment of the Lisbon-situated European Maritime Safety Agency (EMSA) in 2002. However, the EMSA and its continuously widening tasks – especially in support of the European Commission in monitoring the implementation of all legal acts discussed in Chapter 4 – are addressed in the various specific rationae materiae of almost all other sub-chapters. In sum, it seemed appropriate to us to refrain from commenting on the intra-EU provisions on the configuration and finance of the EMSA itself. Chapter 5 concludes the Commentary by addressing the globally important challenges of security, in particular in relation to maritime transport and port infrastructure. This represents a topic which has gained the most practical prominence in the aftermath of the terrorist attacks of 11 September 2001. Reviewing all specific regulatory topics addressed and all sub-chapters chosen for inclusion in the Commentary, there would still be a list of possible further themes and acts. Some of them are cross-cutting with other subject-matters like, e.g., waste management, as addressed by the relevant EU Regulation on ship-recycling, adopted in 2013 and implemented over the next years. Nevertheless, we think that the choice of topics and the relevant EU legal acts commented on is brought down to a sound and round figure. Additionally, the professional qualities of all authors involved should make the Commentary an essential reading to students, researchers, academics and practitioners. It is the result of arduous work involving many setbacks and shifted deadlines. However, in the end, this new Commentary shall still contribute to making a partly impenetrable, protracted and dynamic area of law more accessible to readers throughout the whole world. Henning Jessen Hamburg, December 2015

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List of Authors

Mateusz Bek, LL.B. (Soton), LL.M., Maritime Law (Soton), UK Chapter 5, III. Prof. Dr. Alexander Block, LL.M., Federal University of Applied Administrative Sciences, Brühl, Germany Chapter 2, III. Dr. Thomas Brinkmann, LL.M. (Tulane), Partner, Schackow & Partner Law Firm, Bremen, Germany Chapter 4, III. Sir Robert Coleman, ret., UK, former Director-General at the European Commission, former EU Liaison Officer of the Baltic and International Maritime Council (BIMCO) Chapters 1, 3–5, I. Prof. Dr. Henning Jessen, LL.M. (Tulane), Institute for Maritime Law and the Law of the Sea, Law Faculty, University of Hamburg, Germany Chapters 1, 3–5, I.; 1. II.; 2. III.; 4. VI.–VII., XIII.–XIV. Timo Noftz, LL.M. (King’s College London), Partner at Norton Rose Fulbright LLP, Hamburg, Germany Chapter 3, V. Dr. Alexandros Ntovas, Lecturer in International Shipping Law, Queen Mary University of London Centre for Commercial Law Studies, London UK Chapter 5, II. Dr. Melis Özdel, Lecturer in maritime and commercial law, head of graduate maritime law studies at University College London (UCL) and deputy director of the UCL Centre for Commercial Law Chapters 2, I.–II.

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List of Authors

Prof. Dr. Dr. h.c. Marian Paschke, Professor, Institute for the Law of the Sea, Hamburg, Germany Chapter 3, II. Michael Pimm, English solicitor and a consultant with Orrick, Herrington & Sutcliffe (Europe) LLP. Chapters 4, IV., VIII., XI.–XII. Antonios Politis, Research Associate at the Institute for the Law of the Sea and Maritime Law, University of Hamburg Chapter 3, VII. Prof. Dr. Orestis Schinas, HSBA Hamburg School of Business Administration, Hamburg, Germany Chapters 4, II., V. Sara Vatankhah, LL.M. (East Anglia), Legal Counsel (Maritime Law), German Shipowners’ Association (Verband Deutscher Reeder), Hamburg, Germany Chapter 4, X. Michael Jürgen Werner, Partner, Norton Rose Fulbright LLP, Brussels Office, Belgium Chapters 3, III.–IV.; 4, IX. Dr. Christine Wersel, TUI AG, Hamburg, Germany Chapter 3, VI.

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Abbreviations AFS AIS Art. BGB BGBl BGH BIMCO CAS CC CCNR CESNI cf. CFR Chap. CIF CIP Cir. CJEU CMI Co. CO2 COGSA COSS CPT DAP DAT DEQ DES DOC e.g. EC ECR ECSA Ed(s) EDI edn EEA EEC EEDI EEOI EEZ ELAA ELR EMEC EMSA ENI EP Et al Et seq. Etc.

Anti-Fouling System Automatic Identification System Article Bürgerliches Gesetzbuch (Germany) Bundesgesetzblatt Bundesgerichtshof (Germany) Baltic and International Maritime Council Condition Assessment Scheme (for oil tankers) Civil Code Central Commission for the Navigation of the Rhine Comité Européen pour l’Élaboration de Standards dans le Domaine de Navigation Intérieure Confer Cost and Freight (INCOTERMS) Chapter Cost, insurance, freight (INCOTERM) Carriage and insurance paid to (INCOTERM) Circuit Court of Justice of the European Union Comité Maritime International Company Carbon Dioxide Carriage of Goods by Sea Act Committee on Safe Seas and the Prevention of Pollution from Ships Carriage paid to (INCOTERM) Delivered at place (INCOTERM) Delivered at terminal (INCOTERM) Delivered ex quay (INCOTERM) Delivered ex ship (INCOTERM) Document of Compliance for example European Communities European Court Report European Community Shipowners’ Associations Editor(s) Electronic Data Interchange Edition European Environment Agency European Economic Community Energy Efficiency Design Index Energy Efficiency Operational Indicator Exclusive Economic Zone European Liner Affairs Association European Law Review European Marine Equipment Council European Maritime Safety Agency European Vessel Identification Number European Parliament and others and the following Etcetera XV

Abbreviations

ETS EU European J. Law & Econ. FS FSI GHG GPS Hague Rules (HR) Hague-Visby Rules (HVR) Hamburg Rules HGB HSSC i.e. i.r.o. i.t.o. IACS ICC ICCLR ICJ ICLQ ICS Id. ILO IHR IMO Inc. INCOTERMS INTERCARGO INTERTANKO IOPC Fund ISF ISM Code ISPS Code ITF ITOPF ITLOS IUMI LMAA LLMC LNG Ltd. MARPOL 73/78 MBM MEPC MLC 2006 MoU MRV MSC n NAIADES

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Emissions Trading Scheme European Union European Journal of Law and Economics Festschrift Flag State Implementation Greenhouse Gas Global Positioning System International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1968 United Nations Convention on the Carriage of Goods by Sea 1982 Handelsgesetzbuch (Commercial Code, Germany) Harmonized System of Surveys and Certification that is in respect of in terms of International Association of Classification Societies International Chamber of Commerce International Company and Commercial Law Review International Court of Justice International & Comparative Law Quarterly International Chamber of Shipping the same person International Labour Organization Internationales Handelsrecht, Zeitschrift für das Recht des internationalen Warenkaufs- und -vertriebs International Maritime Organization Incorporated International Commercial Terms of the ICC (revised in 2010) International Association of Dry Cargo Shipowners Independent Tanker Owners Association International Oil Pollution Compensation Fund International Shipping Federation International Safety Mangement Code International Ship and Port Facility Security Code International Transportworkers’ Federation International Tanker Owners Pollution Federation International Tribunal for the Law of the Sea International Union of Marine Insurance London Maritime Arbitrators’ Association Convention on Limitation of Liability for Maritime Claims Liquid Natural Gas Limited International Convention for the Prevention of Pollution from Ships 1973/1978, as amended Market-based measures Marine Environment Protection Committee (IMO) Maritime Labour Convention 2006 Memorandum of Understanding Monitoring, Reporting, Verification Maritime Safety Committee (IMO) Note Integrated European Action Programme for Inland Waterway Transport

Abbreviations

New York Convention NJW No. NOX NVOCC OLG OUP p.(p) Para(s) Paris MoU PC P&I Clubs PSC PSJ Pub QACE Reg RIS Ros Rome I Rome II Ro-Ro Rotterdam Rules Sched Sect. Sent. SDR SECA SEEMP SMC SMS SOLAS SOX STCW Convention Supp. TEU TFEU U.S.C. UCC UCC Rep Serv. UCP 600 UK UN UNCITRAL UNCLOS UNCTAD

Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 Neue Juristische Wochenschrift Number Nitrogen oxides Non-Vessel Operating Common Carrier Oberlandesgericht Oxford University Press Page(s) Paragraph(s) Paris Memorandum of Understanding on Port State Control Privy Council Protection and Indemnity Clubs Port State Control Port State Jurisdiction Publication Quality Assessment and Certification Entity Regulation River Information System Recognized Organizations Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations Regulation (EC) No 864/2007 regarding the conflict of laws Roll on Roll off UN Convention on Contracts for The International Carriage of Goods Wholly or Partly by Sea 2008 Schedule Section Sentence Special drawing right Sulphur emission control area Ship Energy Efficiency Management Plan Safety Management Certificate Safety Management System International Convention on the Safety of Life at Sea, 1974 (as amended) Sulphur oxides International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 (as amended) Supplement Twenty-foot equivalent units Treaty on the Functioning of the European Union United States Code Uniform Commercial Code (US) Uniform Commercial Code Reporting Service Uniform Customs and Practice United Kingdom United Nations United Nations Commission on International Trade Law United Nations Convention on the Law of the Sea, 1982 United Nations Conference on Trade and Development

XVII

Abbreviations

UNFCCC US USD USDC v VAT VLCC Vol. VUWLR WCS W.D. WL WLR WTO

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United Nation Framework Convention on Climate Change United States of America United States Dollar United States District Court versus Value Added Tax Very Large Crude Carrier Volume Victoria University of Wellington Law Review World Council of Shipping Western District West Law, Database The Weekly Law Reports World Trade Organization

Chapter 1: General Introduction: The Regulatory Framework for Maritime Transport in the European Union

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I. Maritime Transportation A. The Regulatory Framework for Maritime Transport in the European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Importance and Inherent Risks of Maritime Transport . . . . . . . . . 2. The EU Treaty Framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Political Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Vital Role of the Court of Justice of the European Union . . . c) Legal Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. EU Decision-Making and Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. The Core Areas of EU Maritime Law and Policy. . . . . . . . . . . . . . . . . . . . . . . . . 1. Market Access and Conditions for Offering Maritime Transport Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Seafarers’ Recruitment, Training and Working Conditions . . . . . . . . . 3. Maritime Safety and Pollution Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Vessel- and Port-Related Maritime Security. . . . . . . . . . . . . . . . . . . . . . . . . . 5. In Particular: Maritime Infrastructure, System Development and Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Legal Bases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Ports and Port Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) “Motorways of the Sea” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Political Promotion of Short Sea Shipping . . . . . . . . . . . . . . . . . . . . . . . . e) Ship Information, Navigation, Management and Surveillance Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. In Particular: The External Dimension of the EU’s Maritime Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Regional Organisations in International Maritime Law . . . . . . . . . b) The EU Treaty Framework for Its External Maritime Relations c) Early Success: Market Access to Maritime Services . . . . . . . . . . . . . d) Again: Maritime Security Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Action and Inertia Within International Organisations . . . . . . . . . . f) International Organisations: Possible Next Steps . . . . . . . . . . . . . . . . g) Bilateral and Multilateral Relations: Future Steps in Transport

1 2 8 9 13 16 20 29 31 37 40 48 51 56 58 65 69 72 81 87 95 100 104 105 111 118

Parts of the introductory chapters to this Brussels Commentary on EU Maritime Transport Law were first published in a series of shorter versions by Sir Robert Coleman, former Director General in DG TREN (now DG MOVE) and former EU Liaison Officer of the Baltic and International Maritime Council (BIMCO).1 The texts serve as a comprehensive introduction to the development of the EU’s maritime law in various regulatory areas. However, due to restraints in space it cannot serve as a general introduction to EU Law. Nevertheless, ref1 BIMCO Bulletin 2012, Vol. 107 (2), pp. 44; BIMCO Bulletin 2012, Vol. 107 (3), pp. 62; BIMCO Bulletin 2012, Vol. 107 (4), pp. 50; BIMCO Bulletin 2012, Vol. 107 (5), pp. 24; BIMCO Bulletin 2012, Vol. 107 (6), pp. 38; BIMCO Bulletin 2013, Vol. 108 (1), pp. 20; BIMCO Bulletin 2013, Vol. 108 (2), pp. 38.

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erences on general EU law are included in the notes. The objective of the different introductory sections to the book is to identify specifically – as a first step – the different and evolving areas of the EU’s maritime transport policy and the evolution of the legal instruments applicable. With the explicit approval of the original author, those parts of the introductory texts which have been published before by Sir Coleman have been edited, updated and supplemented with further comments and academic references by Prof. Dr. Henning Jessen, LL.M. (Tulane) in his function as the Co-Editor of this book. Literature: Antapasēs/Athanassiou/Røsæg (eds.), Competition and Regulation in Shipping and Shipping Related Industries (2009); Anyanova, The EC and Enhancing Ship and Port Facility Security, pp. 101, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Aperte/Baird, Motorways of the Sea Policy in Europe, Maritime Policy and Management (40) 2013, pp. 10; Asariotis/Benamara (eds.), Maritime Transport and the Climate Change Challenge (2012); Brinkmann, Der UNCTAD-Verhaltenskodex für Linienkonferenzen (1993); Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487; Chalmers/Davies/Monti, European Union Law (2nd ed. 2010); Christodoulou-Varotsi, Maritime Safety Law and Policies of the European Union and the United States of America: Antagonism or Synergy? (2008); Chuah, Liner Conferences in the EU and the Proposed Review of EC Regulation 4056/86, LMCLQ 2005, pp. 207; Chuah, The Third Maritime Safety Package – Objectives and Challenges, Journal of International Maritime Law 2009, p. 271; Chuah, Extension of the Block Exemption for Liner Shipping Consortia, Journal of International Maritime Law 2014, pp. 143; Cinelli, The EU Military Land-Based Action Against Somali Piracy – Critical Remarks, pp. 75, in: Andreone/Bevilacqua/Cataldi/Cinelli (eds.), Insecurity at Sea: Piracy and Other Risks to Navigation (2013); Craig/de Búrca, EU Law – Text, Cases and Materials (5th ed., 2011); Dux, Specially Protected Marine Areas in the Exclusive Economic Zone (2011); Engberg, The EU and Military Operations: A Comparative Analysis (2013); Engels, European Ship Recycling Regulation (2013); Finger/Holvad (eds.), Regulating Transport in Europe (2013); Gathii, The Use of Force, Freedom of Commerce, and Double Standards in Prosecuting Pirates in Kenya, American University Law Review (59) 2010, pp. 130; Geiß/Petrig, Piracy and Armed Robbery on Sea – The Legal Framework for Counter-Piracy Operations in Somalia and the Gulf of Aden (2011); Güner-Özbek, The European Maritime Safety Agency “EMSA“, pp. 71, in: Ehlers/ Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Guilfoyle, Piracy off Somalia: UN Security Council Resolution 1816 and IMO Regional Counter-Piracy Efforts, International and Comparative Law Quarterly (57) 2008, pp. 695; Haralambides, The Economics of Bulk Shipping Pools, Maritime Policy and Management 1996, pp. 221; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige (2012); van Hooydonk, The Impact of EU Environmental Law on Ports and Waterways (2006); van Hooydonk, The European Port Services Directive: The Good or the Last Try?, Journal of International Maritime Law 2005, pp. 188; van Hooydonk, Prospects after the Rejection of the European Port Services Directive, Il Diritto Marittimo 2004, pp. 851; Ingerowski, Basic Principles of European Sea Fisheries Law and Policy, pp. 175, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Jenisch, EU Maritime Transport – Maritime Policy, Legislation and Administration, WMU Journal of Maritime Affairs 2004, pp. 67; Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, German Yearbook of International Law (48) 2005, pp. 223; Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/Pawlik/Neumann (eds.), The Human Element in Container Shipping (2012); Johnson/Turner, Strategy and Policy for 2

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General Introduction Trans-European Networks (2007); Juda, The European Union and Ocean Use Management: The Marine Strategy and the Maritime Policy, Ocean Development & International Law 2007, pp. 259; Knauff, in: Ruffert (ed.), Europäisches Sektorales Wirtschaftsrecht (EnzEur Vol. 5, 2013), § 6 (Transportrecht); König, Port State Control: An Assessment of European Practice, pp. 37, in: Ehlers et al. (eds.), Marine Issues: From a Scientific, Political and Legal Perspective (2002); König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements, pp. 767, in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes – Liber Amicorum Judge Thomas A. Mensah (2007); Koliousis/Koliousis/Papadimitriou, Estimating the Impact of Road Transport Deregulation in Short Sea Shipping: Experience from Deregulation in the European Union, International Journal of Shipping and Transport Logistics 2013, pp. 500; Koivurova, A Note on the European Union’s Integrated Maritime Policy, Ocean Development & International Law 2009, pp. 171; Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 499, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Liu, Access to the Market of Port Services – the European Port Package II, pp. 247, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Lorenzon, Safety and Compliance, pp. 339, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Markus/Salomon, The Law and Policy Behind the Upcoming Reform of the Common Fisheries Policy, Journal for European Environmental Planning Law 2012, pp. 257; Markus/Schlacke, Die Meeresstrategie-Rahmenrichtlinie der Europäischen Gemeinschaft, Zeitschrift für Umweltrecht 2009, pp. 464; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013); McNicholas, Maritime Security – An Introduction (2008); Mensah, The Place of the ISPS Code in the Legal International Regime, WMU Journal of Maritime Affairs 2003, pp. 17; Michel, War, Terror and Carriage by Sea (2004); Molenaar, The EC Directive on Port State Control in Context, International Journal of Marine and Coastal Law 1996, pp. 241; Ng/Sauri/Turro, Short Sea Shipping in Europe: Issues, Policies and Challenges, pp. 196, in: Finger/Holvad (eds.), Regulating Transport in Europe (2013); Østreng et al., Shipping in Arctic Waters: A Comparison of the Northeast, Northwest and Trans Polar Passages (2013); Packard, Shipping Pools (1989); Pallis, Maritime Interests in the EU Policy-making, WMU Journal of Maritime Affairs 2007, pp. 3; Peters, The EC and Regional Organizations for the Protection of the Sea, pp. 149, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313; Power, EC Shipping Law (2nd ed., 1998); Ringbom, The EU Maritime Safety Policy and International Law (2008); Salvarani, The EC Directive on Port State Control: A Policy Statement, International Journal of Marine and Coastal Law 1996, pp. 225; Serdy, Public International Law Aspects of Shipping Regulation, pp. 303, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Skaridov, Northern Sea Route: Legal Issues and Current Transportation Practice, pp. 283, in: Nordquist/Moore/Heidar (eds.), Changes in the Arctic Environment and the Law of the Sea (2010); Tonelli, The EU Fight Against Piracy in the Horn of Africa: The External Action at Stake, pp. 53, in: Andreone/Bevilacqua/Cataldi/Cinelli (eds.), Insecurity at Sea: Piracy and Other Risks to Navigation (2013); Treves, Law of the Sea in the European Union and in the Mediterranean, pp. 313, in: Scheiber/Paik (eds.), Regions, Institutions, and Law of the Sea: Studies in Ocean Governance (2013); Tsimplis, Marine Pollution from Shipping Activities, pp. 368, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Vatankhah, The Contribution of the EC to Maritime Safety in View of the “Third Maritime Safety Package" of the European Commission, pp. 41, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Vesky, Port and Maritime Security (2008); Weidemann, International Governance of the Arctic Marine Environment (2014); Widdershoven, European Administrative Law, pp. 245, in: Seerden (ed.), Administrative Law of the European Union, its Member States and the United States (3rd ed., 2012).

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Chapter 1, I.

A. The Regulatory Framework for Maritime Transport in the European Union 1

Nearly half a century after the entry into force of the Treaty of Rome, European Union2 laws and policies on maritime and other waterborne transport now constitute a vast area of law, most of which has been continuously developed since the 1970s.3 There is no real sign in the 21st century that the increasing rate of innovation is slowing down and the continuing enlargement of the EU is widening the geographical scope of the legal instruments adopted. In maritime transport law, this development has been driven by the importance and inherent risks of maritime transport, actual and potential, for the EU, both economically and as a vital component of the multimodal transport system which the EU is seeking to promote.4 But the EU has become involved in policy making and the legal regulation of maritime transport not simply because of its importance to the EU’s economy and transport system. Under the founding treaties, the EU also has received a specific mandate to achieve certain objectives in the field and a set of legal powers, procedures and instruments for so doing. In 2009 (and confirmed in 2014 through the “Athens Declaration”), the European Commission has presented a communication summarizing the applicable strategic goals and recommendations for the EU’s maritime transport policy until 2018.5 The 2009 communication is also set in the broader context of EU Transport Policy6 and the EU Integrated Maritime Policy (the so-called “Blue Paper”).7 In this context, however, separated from the relevant “polically loaded” Commission communications,this introductory chapter to the Commentary will describe both the mandate in maritime transport and the EU’s implementation 2 The term “European Union” as well as “EU” are used to include the Union in all of its manifestations including the European Community or Communities (EC), the European Coal and Steel Community and EURATOM unless the context requires a more specific term. Since they are the most common, references to Treaty articles are to the articles of the Treaty on the Functioning of the European Union (TFEU), formerly the Treaty Establishing the European Community (TEC), with more specific references being used where necessary, for example, to the Treaty on the European Union (TEU). In both cases, the article numbers for the provisions currently in force are those following the ratification of the Lisbon Treaty in December 2009, with the numbers preceding the Lisbon Treaty in parentheses. 3 For an extensive overview of this evolution see Power, EC Shipping Law (2nd ed., 1998), pp. 1 and more recently Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 320 et seq.) The second source also contains a lot of useful further academic references on p. 313, note 3. 4 The last political step in this policy area was initiated by the establishment of the socalled”Connecting Europe Facility“ which serves as the legal basis to identify and support EUwide transport funding priorities in a multimodal context, see Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013 establishing the Connecting Europe Facility. 5 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Strategic goals and recommendations for the EU’s maritime transport policy until 2018, COM(2009) 8 final of 21 January 2009. 6 Keep Europe moving: a transport policy for sustainable mobility, COM(2006) 314 of 22 June 2006. 7 COM(2007) 575 of 10 October 2007.

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powers and their continuing legal evolution from its origins up until the present era. 1. The Importance and Inherent Risks of Maritime Transport

A satellite’s eye view of Europe and its immediate neighbours focussing in 2 particular on its surrounding seas, its land masses, and its coastline of close to 70.000 km, its major rivers and navigable waterways is really quite remarkable. Europe from the Atlantic to the Urals is, in the most simple of terms and subject to only slight exaggeration, a huge, heavily indented peninsula running from east to west, with a number of islands offshore, some of them much bigger than others. Also, the continent is endowed with major rivers and canals running mainly from the north-west mainland coast to the south and east, though with some important discontinuities or bottlenecks, for example, along the RhineDanube corridors. Important land barriers are formed by mountains, in particular, the Alps, the Pyrenees and the Dolomites. The EU now covers the western, central and increasingly the eastern part of this peninsula and enjoys special economic and political relations with its close neighbours in the European Economic Area, in the Mediterranean and on its eastern border which now touches Russia, the Ukraine and Turkey among others.8 What is particularly striking, though often taken for granted, is how Europe 3 and, thus the EU are almost surrounded by the sea and also penetrated by it as well as by waterways, navigable or capable of being made so. About half of the EU’s population lives less than 50 km from the sea. The EU’s history confirms that the movement of persons and goods by water, both in times of peace and war, has necessarily played a vital part in its development and in all probability will continue to do so. Trade data confirm this diagnosis. At present, around 80% by volume of all 4 trade between the EU and the rest of the world is transported by sea.9 Probably more significantly, around 70% of freight transport in tonne-kilometres between Member States and at least 40% of all internal trade, including trade within individual Member States, is sea-borne.10 This is in sharp contrast to the USA, for example, where the corresponding share is only about 16% and, in the period around the turn of the 20th century, has been in relative and indeed real decline, notably in relation to rail freight and road haulage.11 In contrast, in the EU, since the 1970s, the annual growth rates for maritime freight transport as a whole have been close to those for road haulage at around 2% to 3% annually, with short sea 8 See also Juda, The European Union and Ocean Use Management: The Marine Strategy and the Maritime Policy, Ocean Development & International Law 2007, pp. 259;Treves, Law of the Sea in the European Union and in the Mediterranean, pp. 313 (at 315), in: Scheiber/Paik (eds.), Regions, Institutions, and Law of the Sea: Studies in Ocean Governance (2013). 9 See, e.g., the foreword to the ”UNCTAD Review of Maritime Transport 2013“. 10 With inland waterway transport accounting for just a further 2% to 3%. 11 US and EU statistics on modal split are not presented on the same basis and are not directly comparable but the difference is so substantial that it remains of legitimate interest.

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shipping in recent years equaling them.12 The fastest growth has been in containerised cargo which almost doubled in the seven years between 1995 and 2002 and has been growing at an annual average rate of over 8%. On the passenger side, the cruise industry has also been growing rapidly with recent annual growth rates of 10%. 5 A substantial part of the EU maritime freight traffic is of hydrocarbons and a further significant proportion consists of other dangerous and polluting goods. But hydrocarbons represent the lion’s share: They constitute more than 40% of the world’s sea-borne trade in tonne-kilometres, while close to 90% of the EU’s oil comes by sea. In 2010, the EU’s oil import bill was around 210 billion EUR.13 These oil imports have increased steadily for the last 30 years and are generally predicted to continue to do so for the foreseeable future, though the traffic patterns are changing.14 A recent phenomenon concerns Russia and the States of the former Soviet Union. There has been an increasing use of pipelines to export terminals in those countries and dramatic annual increases in flows to Europe, for example, a 35% jump in 2003 by comparison with 2002. 6 As a consequence, very high density of tanker traffic currently occurs in the Atlantic approaches, the English Channel, the Mediterranean and the entrance to the Baltic Sea between Sweden on the one hand and Denmark and Germany on the other. Some of these are in Particularly Sensitive Sea Areas (so-called PSSAs), designated by the International Maritime Organisation (IMO) as meriting special protection measures.15 Increased volumes are anticipated in all these areas, and also through the Black Sea and Bosphorus into the Mediterranean and in the far North Atlantic from North West Russia using an Arctic tanker route from Murmansk and even beyond.16 The longer term, with global warming, opens the prospect of a more general opening of the Northeast passage route to and from the Northern Pacific which could be very attractive by reason of its shorter distance, but also extremely sensitive from an environmental point of view.17 7 Particular risk factors affect different routes. These include especially bad weather in the Western and Northern Atlantic, as the historical record of the last 30 to 40 years has shown: Ice in the Baltic and Northern Atlantic; confined wa-

12 13 14 15

See further infra section B. 5. d). See, e.g., the Annual Report 2013 of Inland Navigation Europe (INE), p. 7. UNCTAD Review of Maritime Transport 2013, pp. 15. See further on the history and concept of PSSAs: Dux, Specially Protected Marine Areas in the Exclusive Economic Zone (2011), pp. 276; Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 457. 16 Only in April 2014, a Russian tanker carried the first “Arctic oil” from an Arctic drilling rig to Rotterdam. 17 See e.g. Skaridov, Northern Sea Route: Legal Issues and Current Transportation Practice, pp. 283, in: Nordquist/Moore/Heidar (eds.), Changes in the Arctic Environment and the Law of the Sea (2010); see generally: Østreng et al., Shipping in Arctic Waters: A Comparison of the Northeast, Northwest and Trans Polar Passages (2013); Weidemann, International Governance of the Arctic Marine Environment (2014).

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ters in the Channel, the Bosphorus and the entrance to the Baltic; the enclosed and sometimes shallow character of some of the seas, again notably the Baltic; and the characteristics of some of the cargoes, notably the sharply increasing shipments of crude and heavy oils from the terminals in Russia. Waterborne freight transport, especially maritime transport, has thus proved to be a vital instrument for the development of the EU’s trade whether national, intra-EU or external. There is every possibility that this long term trend will continue into the future, not least since the constraints on the development of other modes are increasingly felt whether as regards new infrastructure or environmental impacts. At the same time, in a concise, crude risk assessment: The EU’s reliance on maritime transport means that it is as surrounded and penetrated by the risk of pollution from shipping, both chronic and catastrophic, as it is by the sea itself. 2. The EU Treaty Framework

The present EU Treaty and the Lisbon Treaty both reflect the geographical 8 and economic importance of waterborne transport for trade and its role in the process of liberalisation and economic and social integration which lies at the heart of the EU project. The development of a common transport policy constitutes an essential component in the legal and policy framework for a genuine single market based on the four fundamental freedoms:18 Free movement of goods, of persons, of services and capital.19 It can be considered doubly essential because transport is itself a very important service sector, representing between 7% and 10% of the EU’s gross domestic product – depending on how broadly the sector is defined – while at the same time it plays a vital role in the practical realisation of the free movement of goods and persons in general. a) Political Objectives

However, it is worth noting that in the early days of European political inte- 9 gration, the approach to developing a common transport policy was much more equivocal. While the development of a common transport policy was clearly established as an objective by Article 90 TFEU (ex 70) since the Treaty of Rome, Article 58 TFEU (ex 51) specified that freedom to provide services in this field should be governed by the provisions of the specific title on transport. Under those provisions, the Council of Ministers was initially obliged by Article 91 TFEU (ex 71) and Article 100 TFEU (ex 80) to take legislative measures only in the case of inland transport, that is, road, rail and inland waterways. The Council was empowered by Article 100 TFEU (ex 80), but not obliged, to adopt 18 See further e.g. Power, EC Shipping Law (2nd ed., 1998), pp. 94; Chalmers/Davies/Monti, European Union Law, p. 12; Knauff, in: Ruffert (ed.), Europäisches Sektorales Wirtschaftsrecht (EnzEur Vol. 5, 2013), § 6, pp. 310. 19 General academic literature on the EU’s four fundamental freedoms is vast, see e.g. Craig/de Búrca, EU Law, pp. 611; Chalmers/Davies/Monti, European Union Law, pp. 744.

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provisions for sea and air transport when it unanimously thought fit.20 The reason for this distinction was no doubt that, among the original six Member States, sea and air transport were regarded primarily as instruments of external trade rather than trade within the common market which were perceived as relying much more upon road, rail and – to some extent – on inland waterways. 10 There was a deeper political ambiguity about the whole exercise. While the political architects of the original Treaty saw a common transport policy as one of the essential foundations of the EU, many ministries of transport were distinctly less enthusiastic, no doubt anticipating and fearing the impact of liberalisation on their highly regulated and protected client industries as well as a reduction in their own powers to act autonomously. They dragged out the negotiations, introduced a number of limitations and qualifications and only when the Treaty’s political architects threatened to settle the chapter themselves at the highest level, did they finalise the text. 11 Even when the Treaty of Rome came into force, these ministries continued to resist its implementation in the transport sector, making it extremely difficult for the European Commission to secure the adoption of a coherent set of measures on the elimination of obstacles to cross-frontier operations; market access; the financial and operational autonomy of transport enterprises and their clients; harmonised conditions for transport operations, including social and safety requirements; investments; infrastructure, etc.21 12 Measures adopted were limited and piecemeal until the mid-1980s when resistance began to crumble due to a combination of factors. These factors included the fact that the common market in goods and services had by then developed very substantially and the enterprises seeking to exploit the internal market were increasingly dissatisfied with the fragmentation, inefficiency and high cost of the transport system. Also the accession of the United Kingdom, Ireland and Denmark in 1973 increased the proportion of Member States with a positive interest in a liberalised, more integrated transport system due both to their peripheral geographical position and relatively important and competitive transport operators. Indeed, more broadly, the accession of these countries increased the constituency favouring the completion of a genuinely single and liberalised market thereby contributing to the emergence of the 1992 single market programme, the EU’s strategic political objective of the late ’80s and early ’90s.22

20 The Lisbon Treaty makes the adoption of provisions for sea and air transport subject to the ordinary legislative procedure involving co-decision of the Council and European Parliament and qualified majority voting in Council. The completion of an internal market in these sectors by 31 December 1992 became an obligation under the Single European Act of 1986. 21 Commission “Memorandum sur l’orientation à donner à la politique commune des transports” concerning the orientations of a common transport policy, COM(61) 50 final of 10 April 1961. 22 For further reading see e.g. Craig/de Búrca, EU Law, pp. 581; Chalmers/Davies/Monti, European Union Law, pp. 674; Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 339 et seq.)

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b) The Vital Role of the Court of Justice of the European Union

The judicial institution which is now officially called Court of Justice of the 13 European Union (CJEU, often formerly “ECJ”) played a major role in contributing to the EU’s maritime policy. In its early 1974 decision on French nationality requirements for seafarers on French vessels, it ruled that Article 58 TFEU (ex 51) and 100 (ex 80) of the Treaty did not prevent the general provisions of the Treaty from applying in the maritime sector.23 Accordingly, French nationality requirements could not be opposed to citizens from other Member States seeking employment on French flagged vessels, given the interdiction on all discrimination on grounds of nationality in Article 18 TFEU (ex 16D).24 The EJC further developed this line of thinking in relation to the Treaty’s pro- 14 visions on State aids and anti-competitive behaviour.25 In 1978, it ruled that transport was subject to the general Treaty regime on State aids, the specific provision in Article 93 TFEU (ex 73) on aids for the coordination of transport and to reimburse public service being simply an entirely compatible complement to Article 107 (2) and (3) TFEU (ex 87) on aids compatible with the common market.26 And in 1986, it confirmed that the competition rules in Article 101 TFEU (ex 81) to 106 TFEU (ex 86) were indeed applicable.27 The 1978 ruling virtually coincided with the finalisation of the UNCTAD code of conduct on liner conferences which had been negotiated by the Member States on the assumption that the competition rules did not apply.28 This ruling necessitated a rapid response from the Council to reconcile the provisions of the Code with those of Community law before the Code entered into force. This response was Regulation 954/7929 which finally allowed the Code to enter into force, though subject to important EU reservations designed to make its application compatible with the principle of equal treatment of EU carriers and limiting its application to trade with developing countries. 23 Commission v. French Republic, Case 167/73, ECR 1974, p. 359; Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 321 et seq.). 24 The Court has more recently confirmed that the interdiction applies even to the master and first officer unless they exercise the functions of a public authority regularly and to substantial degree in accordance with Article 39(4) TFEU. This is normally not the case, see Colegio de Oficiales de la Marina Mercante Espanola, Case 405/1, ECR 2003, I-10391 and Anker e.a., Case 47/2, ECR 2003, I-10447; see also Commission v. French Republic, Case 89/07, ECR 2008, ECR I-1. 25 See generally Craig/de Búrca, EU Law, pp. 1072. 26 Commission v. Belgium, Case 156/77, ECR 1978, p. 1881. 27 Asjes, Grey and others v. Public Minister (Nouvelles Frontieres), Cases 209-213//84, ECR 1986, 1425; see also Ahmed Sayeed Flugreisen and others, Case 66/86, ECR 1989, 803; generally Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 500, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 28 Power, EC Shipping Law (2nd ed., 1998), p. 259; for further reading – including literature references in English – see Brinkmann, Der UNCTAD-Verhaltenskodex für Linienkonferenzen (1993). 29 Regulation 954/79, OJ L121/1 of 17 May 1979, repealed by Regulation 1490/2007, OJ L332/1 of 18 December 2007.

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The CJEU’s final contribution to the development of the common transport policy, and perhaps its most radical, was its ruling in 1985 in a case brought by the European Parliament that the Council had failed in its duty to realise the Treaty objective of the free provision of services in the transport field by the deadline specified and, in particular, had failed to act on sixteen Commission proposals to this effect.30 The CJEU raised the prospect of a continued failure leading to the freedom to provide services being given direct effect. All of this, coupled with the growing political pressure to realise a genuine single market, including transport, finally broke the log jam and in relatively short order a series of new and liberalising legislative measures were successfully adopted in the period up to and shortly after the 1992 deadline for the single market programme. c) Legal Instruments

The TFEU itself specifies not only the fundamental objectives of a common transport policy. It also specifies in detail, a series of instruments to realise those objectives. In the important area of the internal market it introduced a timetable. The Treaty of Lisbon did not change these fundamentals. The instruments made available to the EU to implement the common transport policy include legally binding legislation as specified by the Treaty. Such legislation may take the form of Regulations which have a direct effect on operators, and Directives, binding as to the result to be achieved and addressed to Member States which the latter must implement by bringing their laws into conformity with the Community rules.31 17 The Regulation is used when uniformity of treatment of operators is required and to avoid difficulties with divergent or delayed implementation.32 They have been regularly used in developing the maritime legislative framework. A number of the most important “maritime” Regulations are part of this commentary. The Directive gives greater flexibility to Member States to realise Community objectives within their different legal and regulatory traditions, but the degree of flexibility depends on how tightly a specific text is drafted.33 In some cases, it may in practice leave no more flexibility than some Regulations, but of course the legal mechanism for giving effect to the Community rule remains different, a national implementing act being necessary to implement necessary changes in the legal position of operators, except for the rare situations in which the CJEU has held that even Directives have a direct effect.34 This occurs where a Member 16

30 Parliament v. Commission, Case 13/83, ECR 1985, 1513. 31 For a good general overview on the instruments available to the EU see, e.g., Widdershoven, European Administrative Law, pp. 256, in: Seerden (ed.), Administrative Law of the European Union, its Member States and the United States (2012). 32 See e.g. Craig/de Búrca, EU Law, pp. 105; Chalmers/Davies/Monti, European Union Law, pp. 98. 33 Craig/de Búrca, EU Law, pp. 106. 34 Id., pp. 191.

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State tries to avoid the consequences of a clear rule which it itself has failed to implement. Directives have also been used frequently in the maritime sector and, again, the most important of those “maritime” Directives are part of this commentary. Formal Council decisions are a third form of binding legislative instrument, used less frequently, for such purposes as coordinating action by the Member States in relation to international negotiations or agreements or concerning technical or other systems managed by public administrations themselves.35 They have been used for these purposes in the maritime field and some of them are addressed in the commentary as well. EU legislative instruments such as Regulations or Directives may themselves 18 create a legal basis for further delegated rule and decision making, normally by the European Commission, after the consultation of the Member States in some committee and with information to the European Parliament, in accordance with a Council Decision laying down the procedures for the exercise of implementing powers conferred on the Commission.36 This technique is also being used in the maritime sector, especially as regards safety related matters such as port State control and the recognition of classification societies.37 In 2002, a Regulation on the Committee on Safe Seas and Prevention of Pollution (COSS) was adopted to create a single consultative committee in the safety area to replace a number of existing ones and to constitute in the future the sole forum for consulting the Member States on draft delegated decisions in the field of maritime safety.38 The TFEU itself also gives the Commission its own powers in certain areas 19 such as State aids and anti-competitive behaviour. In the maritime sector, the Commission has used these powers to adopt Regulations and decisions and nonbinding but in practice effective guidelines, for example, those on State aids to maritime transport.39 In addition to the regulatory instruments discussed above, the EU also disposes of other tools for developing the common transport policy. These include the financing of research and development, the adoption of guidelines for the trans-European transport networks (the so-called “TEN-T”) and financing of investments in transport infrastructure and innovative technical sys-

35 Id., p. 106. 36 Council Decision 1999/468, OJ L184/23 of 17 July 1999, amended by Council Decision 2006/512/EC, OJ L200/11 of 22 July 2006. 37 In relation to port state control see Molenaar, The EC Directive on Port State Control in Context, International Journal of Marine and Coastal Law 1996, pp. 241 as well as Salvarani, The EC Directive on Port State Control: A Policy Statement, International Journal of Marine and Coastal Law 1996, pp. 225; for the early EU legislation on classification societies see Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487. 38 COSS was created by Article 3 of Regulation (EC) No 2099/2002 of the European Parliament and of the Council, OJ L324/1 of 29 November 2002; maritime security matters are considered in a different committee. 39 OJ C 205 of 05 July 1997 and C 13/3 of 17 January 2004; see generally Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 521, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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tems.40 Also policy making in other areas impacts on the maritime transport sector, in particular, those concerning the internal market in relevant industrial goods and the protection of the environment. Recently, considerable emphasis in these areas has been placed on atmospheric pollution and climate change. The functioning of the different procedures for adopting instruments on maritime policy will be considered further in the context of a discussion of EU decision making and governance. 3. EU Decision-Making and Governance

Attention also needs to be paid to the key processes by which EU policy has been made up to now and is likely to be made in the future. There is often misunderstanding about this and sometimes even deliberate disinformation for political and other purposes. First, the European Commission undoubtedly plays a central role in the development and application of EU maritime policy: – It has the formal right of initiative as to legislative initiatives under the common transport and environment policies; – it has significant powers to adopt secondary legislation and other delegated decisions; – as the “Guardian of the EU Treaty”, the Commission has a duty to ensure that the Treaty provisions are respected; – it has been given important responsibilities for enforcing Community laws; – it manages the implementation of the framework research programmes; – it decides on the allocation of funds to projects on the trans-European transport networks and under other programmes like Marco Polo; and – it coordinates action by the Member States in international organisations and other external relations and on occasion, and increasingly frequently, acts and speaks for the entire EU. 21 However, that list of functions can and is often misinterpreted as meaning that the European Commission is an all-powerful governing bureaucracy, even that it is in practice the EU itself. The reality is different. First, at the highest political level, the Commission’s President and Members have for many years been appointed by the Member States’ democratically elected governments in Council, the individual Members of the Commission being proposed by individual Member States and the whole Commission being subject to a vote of approval by the European Parliament. Under Article 17 TFEU as modified by the Lisbon Treaty, the role of the Parliament is further increased as it will elect the President of the Commission on a proposal from the European Council which must take into account the result of the elections to the Parliament. 22 The whole Commission, having been nominated by common accord of the President and the Council, will in a second phase be subject to a separate vote of consent by the Parliament. The governments of the Member States are all consti20

40 See further Johnson/Turner, Strategy and Policy for Trans-European Networks (2007), pp. 48.

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tuted by democratic procedures and the Parliament is directly elected every five years. The Parliament, acting by at least a two-thirds majority, can also oblige the Commission to resign by means of a vote of censure. Moreover, the EU budget is adopted annually by the Council and the Parliament acting in close cooperation. In other words, the Commission is institutionally dependent on a democratically constituted Council and Parliament. The Commission must, continuously and generally, act with their support. This fundamental political accountability conditions the exercise of all Commission powers, including its right of legislative initiative. It must take into account the expectations of its institutional partners or risk political consequences. The democratic subordination of the Commission is reinforced by many other 23 safeguards in the Treaty itself and in EU legislation. A number of key processes are laid down to ensure that decisions are made through transparent, participative procedures and that those taking them are accountable. For example, legislation on the basis of the Treaty to develop the common transport policy or the trans-European networks (“TEN-T”) has been adopted by co-decision of the Council and Parliament since the Amsterdam Treaty of 1999. Under Article 251 TFEU this procedure is known as the ordinary legislative 24 procedure. It obliges the Commission to frame its proposals and, if appropriate, amend them during the legislative procedure to secure the necessary majorities in the two institutions as well as a sufficient degree of convergence between the positions of all three institutions. This introduces considerable complexity into the legislative process, but it also ensures that it is open to scrutiny and to influence by those affected, and indeed by political and social forces in general. Interest groups have over the years organised themselves to intervene in the process at different levels of government and in relation to the different institutional players.41 Likewise, when powers have been conferred on the Commission for delegat- 25 ed rule making,42 a more detailed examination of the processes involved normally reveals a distribution of powers which substantially qualifies the Commission’s autonomy. For example, in the fields of safety and pollution prevention, the Commission has been given a considerable number of powers to adopt implementing measures having binding legal force, for example, concerning class societies and seafarer training institutions. However, when it does so, it must act in accordance with general rules, known as “comitology”, adopted by the Council.43 These have required it to consult the Member States about a draft proposal and inform the European Parliament, which in recent years has been steadily in-

41 See in particular, including a list of 37 interest groups: Pallis, Maritime Interests in the EU Policy-making, WMU Journal of Maritime Affairs 2007, pp. 3 (at 7). 42 Delegated non-legislative acts of general application and implementing acts under Article 290 and 291. 43 See generally on the EU’s “comitology” procedures, Chalmers/Davies/Monti, European Union Law, pp. 117.

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creasing its opportunities to influence the process.44 The Lisbon Treaty has reformed the comitology regime, introducing a distinction between implementing and delegated acts via Article 290 and 291 TFEU.45 26 Moreover, under the so-called regulatory procedure normally applicable, the Commission must in practice obtain a qualified majority in the relevant committee, in this case the COSS, if it is itself to adopt the provisions immediately. If it does not do so, the proposal passes to the Council which then has a limited time to act. If the Council decides by qualified majority to oppose the proposal’s adoption, the Commission has to re-examine it and decide whether to submit an amended proposal to the Council or re-submit its original proposal or propose legislation on the basis of the Treaty, or possibly not to proceed at all. If, on the other hand, by the end of the limited time, the Council by qualified majority has not indicated its opposition nor adopted the proposal, the Commission may only then adopt the proposed act itself. 27 The procedural requirements for co-decision and delegated rule making by the Commission not only have important effects on what happens to a proposal once it has been put on the table, but also up-stream during a proposal’s early preparation. The Commission is inevitably led to consult interested parties as thoroughly as is necessary to maximise the chances of a proposal’s rapid and trouble-free adoption. Political life being what it is, this is not always easy or possible, but the Commission normally invests heavily in the preparatory process to prepare the ground as much as possible in the time available. In recent years, in the context of its work on better governance, this preparatory work has become increasingly sophisticated with, for example, the adoption of minimum standards of consultation of interested parties and self-imposed requirements for impact and evaluation studies prior to proposals being made. Even in areas where the Commission exercises its own decision making powers, like competition and State aids, it has long-standing practices of prior consultation and is subject to the judicial control of the CJEU. 28 While, taken as a whole, the system is still uneven across sectors and capable of further improvement, it already provides substantial guarantees that proposed measures are subject to critical scrutiny and are sustained by broad political support before are they finalised. In brief, the caricature according to which an allpowerful, autonomous Commission decides everything in a corner and then imposes it on everyone else without even asking their opinion far from the truth. This is also true for the EU’s maritime policy. On the other hand, if the Commis44 See e.g. Council Decision 1999/468/EC, OJ L184/23 of 17 July 1999 as amended and Regulation (EC) 2009/2002, OJ L324/1 of 29 November 2002 (COSS). 45 The Council and Parliament have adopted a new framework regulation, Regulation (EU) 182/2011, OJ L55/13 of 28 February 2011. The new system contains many of the features of the previous system while generalising the power of the Parliament and Council to intervene when they consider powers granted by co-decided legislative acts are being exceeded. The old Regulation continues to apply to existing committees like the COSS until such time as the legislation under which they operate is amended or supplemented.

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sion seeks to implement a certain policy objective it has now established several formal and informal ways to continuously put the relevant topic on the political agenda with the Member States. Sometimes it will take years or even decades for the Commission to achieve its objectives but in a majority of cases there will be eventually some results paving the way for further European integrated steps and decisions. B. The Core Areas of EU Maritime Law and Policy 29 The maritime policy of the EU can be broken down into six core areas: 1. Market access and conditions for offering maritime transport services, including rules on State aids and anti-competitive behaviour; 2. safety and pollution control; 3. security; 4. infrastructure, system development and integration, including port policy; 5. seafarers’ recruitment, training and working conditions; and 6. external relations. All of these areas are discussed “in a nutshell” in the following sections of 30 this introduction.46 More detailed discussions also form part of the next sections and are included in further commentary sections.

1. Market Access and Conditions for Offering Maritime Transport Services

The regime for market access and the other economic aspects of shipping 31 was put in place as an important part of the single market programme completed in the period up to and shortly after 1992. The big breakthrough came in 1986, against the legal and political background referred to above, with the adoption of four important Regulations.47 These Regulations have now lost their initial political importance; nevertheless, they have to be mentioned to understand the legal evolution of the EU’s policy in this area. The first, Regulation 4055/86,48 gave Member State nationals the right to carry passengers or goods by sea between any port of a Member State and any port or offshore installation of another Member State or of a non-Community country. Existing national restrictions in the form of cargo reservations to nationals were to be phased out as indeed they have been. Cargo sharing arrangements in bilateral agreements were also to be 46 For further reading see also Jenisch, EU Maritime Transport – Maritime Policy, Legislation and Administration, WMU Journal of Maritime Affairs 2004, pp. 67. 47 For the most extensive discussion of these four regulations see Power, EC Shipping Law (2nd ed., 1998), pp. 259; Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 334 et seq.); see generally the collection of different publications on the topic in: Antapasēs/Athanassiou/Røsæg (eds.), Competition and Regulation in Shipping and Shipping Related Industries (2009). 48 Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries (OJ L378, 31 December 1986).

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phased out or adapted, this process proving more time consuming and difficult in some cases than others. It also had to respect the outcome of the UNCTAD Liner Code with regard to trade with developing countries. But it was finally completed successfully. Until today, Regulation 4055/86 continues to generate important case law.49 32 Second, Regulation 4056/8650 – which is not in force anymore since 200651 and has been replaced by Regulation 1/2003 (the “block exemption Regulation”)52 – gave effect to the rulings of the CJEU on the applicability of the competition rules to the maritime sector.53 It provided a legal regime the main feature of which was to provide a block exemption for cargo liner conferences provided that they complied with certain conditions designed to ensure that they brought benefits to shippers and were not abused. Tramping and cabotage were excluded from the Regulation altogether and were thus still to be treated directly under the Treaty, while passenger services did not fall within the scope of the block exemption itself. The future of the competition regime was reviewed by the Commission and at the end of 2005 was the subject of measures which came into force in October 2008. These included a proposal to abolish the block exemption and are considered further in the specific chapter on the regulatory framework for the shipping market. 33 The two remaining 1986 Regulations, 4057/8654 and 4058/86,55 addressed problems of unfair trading arising from anti-competitive practices of third countries and third country operators, namely, unfair pricing and restrictions on access to cargoes except those in conformity with the UNCTAD Liner Code as ratified by the EU.56 While limited use has been made of these instruments in the sense of the adoption of formal measures, they appear to have served as a rela-

49 This is, e.g., confirmed by a recent ECJ judgment of 8 July 2014 in the case of the “Sava Star”, C-83/13 (Fonnship A/S gegen Svenska Transportarbetareförbundet and Facket för Service och Kommunikation (SEKO) and Svenska Transportarbetareförbundet v Fonnship A/S). 50 Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of Article 85 and 86 of the Treaty to maritime transport (OJ L378, 31 December 1986); see generally Chuah, Liner Conferences in the EU and the Proposed Review of EC Regulation 4056/86, LMCLQ 2005, pp. 207; Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 501, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 51 On the repeal, see See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 502, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 52 Council Regulation No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Article 81 and 82 of the Treaty (OJ L001, 04 January 2003); see further Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 353 et seq.). 53 For a detailed discussion see Power, EC Shipping Law (2nd ed., 1998), pp. 315. 54 Council Regulation (EEC) No 4057/86 of 22 December 1986 on unfair pricing practices in maritime transport, OJ L378, 31 December 1986 (p. 14–20). 55 Council Regulation (EEC) No 4058/86 of 22 December 1986 concerning coordinated action to safeguard free access to cargoes in ocean trades, OJ L378, 31 December 1986 (p. 21–23). 56 Power, EC Shipping Law (2nd ed., 1998), pp. 371 (on Regulation 4057/86) and pp. 393 (on Regulation 4058/86).

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tively effective fleet in being which has served to deter those who might be tempted to indulge in unfair trading.57 The 1986 package of Regulations did not include a liberalisation of cabotage 34 within the EU since it proved impossible to secure agreement in the Council at that time. The fundamental reason was concern about the impact on some existing national regimes of ships operating under less strict operating conditions. In the same year, however, the heads of State and government were adopting the Single European Act which would modify the EU Treaty in fundamental ways, in particular, by fixing the end of 1992 as a binding deadline for the completion of the internal market in all sectors, including maritime transport.58 The CJEU had already condemned the Council for its failure to act on Commission proposals to open markets in inland transport within the time fixed by the original Treaty, and implied that continued failure could lead to it giving direct effect to the freedom to provide inland transport services. At the time, the Member States faced a similar prospect as regards maritime cabotage, a threat that became more of a reality when in 1991 the CJEU also ruled that, in the fishing sector, Member States could not limit the grant of the national flag to fishing vessels to their own nationals or residents. The right of establishment arising directly under the general rules of the Treaty entitled nationals and residents of other Member States to be treated similarly.59 Accordingly, in 1992, the Council finally agreed to a phased liberalisation of cabotage with the bulk of cabotage to be liberalised by 1999, the final transitional periods in favour of certain Greek island trades expiring in 2004.60 Since that date, the EU has had a complete framework for market access for all Community operators which. It has so far not given rise to major problems in its application though there were a few problems at the beginning of the transition. State aids, from the early days of the liberalisation process, have been a ma- 35 jor pre-occupation.61 On the one hand, the Commission was concerned that Member States would be tempted to support national operators, directly or indirectly, as they were increasingly exposed to competition from operators from other Member States. On the other, all EU operators were also facing increasing competition from third country operators, particularly from those using so-called “flags of convenience”, allowing them to operate with lower cost and tax bases. A first attempt to address this double problem was made by the Commission in 1989 when it adopted a first set of guidelines on the examination of State aids to

57 For a formal decision imposing a countervailing duty on Hyundai Merchant Marine Company Ltd, see Regulation 15/89, OJ L4 of 06 January 1989. 58 Power, EC Shipping Law (2nd ed., 1998), p. 65. 59 The Queen v. Secretary of State for Transport, ex parte Factortame, Case 221/89, ECR 1991, 3905; Commission v. United Kingdom (quota hopping), Case 246/89, ECR 1991, p. 4585. 60 Regulation 3577/92, OJ L364/1 of 12 December 1992. 61 See Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 354).

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Chapter 1, I.

Community maritime operators.62 While these guidelines produced some valuable experience in the field, they did not prove sufficient to redress the continued erosion in the competitiveness of EU operators and the associated decline in maritime employment. A new set of guidelines was accordingly published in 1996 which sought to generalise the most successful forms of aid regime that had been tried by some Member States, notably, the flat rate tonnage tax, while at the same time not encouraging unacceptable distortions of competition among EU operators. In the Commission’s communication of January 2004 (valid until 2011),63 in which it revised the guidelines again, this approach was maintained. The Commission was able to show that the structural decline of both EU registers and the EU controlled fleet appeared to have been halted, though employment of EU seafarers had continued to decline due to a number of factors in addition to relative costs of EU and third-country seafarers. 36 Finally, in 2008, the Commission proposed to extend the market regime to include specific rules on consumer protection as regards passenger rights,64 in addition to those already proposed on liability for death and injury, along lines similar to those first enacted in 1991 and up-dated in 2004 for the aviation sector. The relevant Regulation 1177/2010 is discussed in depth in a specific chapter of this commentary.65 2. Seafarers’ Recruitment, Training and Working Conditions 37

The EU’s maritime policy also addresses the human dimension of maritime transport. The process of market liberalisation – started in the 1980s against a background of structural decline in the European shipping industry – inevitably had a considerable impact on employment, actual and potential, in the sector. Many of the safety initiatives also have important implications for those working at sea and in associated activities on shore. Relevant labour and employer organisations have thus always been involved in policy developments in these areas.66 In addition, the EU has sought to ensure the application of certain standards as to the living and working conditions of seafarers, as it does in other sec62 Guidelines for the examination of State aids in favour of Community shipping companies, SEC(89)921 final, 04 September 1989. 63 Community guidelines for State aids to maritime transport (2004) 43, OJ C 13/03 of 17 January 2004; see further Christodolou-Varotsi, A Maritime Competition Reading of Regulation 1408/71/EC, pp. 219, in: Antapasēs/Athanassiou/Røsæg (eds.), Competition and Regulation in Shipping and Shipping Related Industries (2009). 64 Proposal for a Regulation concerning the rights of passengers when travelling by sea and inland waterways and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, COM(2008) 816 final, 04 December 2008. 65 See Chapter 3, VI. on Regulation (EU) No 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004, OJ L334/1 of 17 December 2010; see also Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 357). 66 Power, EC Shipping Law (2nd ed., 1998), pp. 539.

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tors, basing itself in this case largely on the activities of the International Labour Organisation (ILO) and participating actively in its work. A number of international standards have already been incorporated into EU legislation and recent efforts concentrated on successfully finalising the consolidation of updated standards into the new Maritime Labour Convention agreed in Geneva in 2006 (MLC 2006).67 This convention entered into force in August 2013 after it had been globally ratified by 30 States representing 35% of world tonnage. Early endorsement by EU Member States had a considerable effect on the speed of its entry into force. Already in June 2006, the Council had adopted a Decision authorising ratifi- 38 cation of the Convention by the Member States and inviting them to do so by 31 December 2010. Consultations and negotiations between the European Community Shipowners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) were held as foreseen in the labour relations field by Article 154 TFEU (ex 138) and 155 TFEU (ex 139). Agreement was reached in May 2008 on the changes needed to up-date EU law by incorporating certain elements of the Convention more favourable to seafarers. In July 2008 the Commission adopted a proposal for a Directive to give binding legal effect to the agreement which was adopted relatively quickly in December 2008.68 Similarly, IMO standards on training, certification and watchkeeping for seafarers (consolidated by the STWC Convention) have already been incorporated into EU law as an integral part of the maritime safety policy. The main political focus lately shifted to developing responses to the long- 39 standing problem of the shortage of qualified European seafarers, especially officers. A range of initiatives is being taken both by the EU institutions and the Member States to improve the attractiveness of maritime careers in close cooperation with employer and labour organisations. The overall objective is to restore and then retain a qualified work force sufficient to man EU owned vessels and to provide seafaring expertise to its maritime industries on shore. Key components include the development of attractive educational programmes and focussed awareness campaigns. 3. Maritime Safety and Pollution Control

If the foundation for EU maritime policy is the regulatory framework for mar- 40 ket access to maritime transport services, it has rapidly been followed by the adoption of a highly developed regime designed to ensure the safety of mar-

67 See Lorenzon, Safety and Compliance, pp. 356, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 68 Council Directive 2009/13/EC implementing the Agreement concluded by the European Community Shipowners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) on the Maritime Labour Convention 2006 and amending Directive 1999/63/EC, OJ L124/30 of 20 May 2009. The 1999 Directive implemented an earlier agreement on working time.

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Chapter 1, I.

itime operations.69 Among the reasons behind this development is the fact that – even before the liberalisation process was under way, and by reason of its geography and need to import large quantities of oil – Europe was and remains exposed to a high risk of catastrophic environmental damage. Unfortunately, on several occasions, starting with the grounding of the Amoco Cadiz in 1978, this safety risk has turned into a disastrous reality with important impacts in both the natural and political worlds. It led to the Council rapidly adopting an action programme on the control and reduction of oil pollution at sea as part of the EU’s environmental policy. 41 The most important concrete result of this programme was the establishment of an EU information system on hydrocarbons discharged at sea permitting among other things a coordinated response to major incidents. This system has been developed over the years and continues to function in an effective manner.70 Also the EU Members, individually and collectively in the IMO71 and also – since 1982 – through the Paris Memorandum of Understanding on Port State Control (Paris MoU)72 sought to respond to the challenge.73 But the sequence of major accidents continued, and once the EU became responsible for the legal regime guaranteeing access for all EU ship operators to trades in all European waters, inevitably the EU itself had to assume its share of responsibility for ensuring maritime safety in those waters. 42 The first major step was taken in 1993 with the adoption by the Commission of a first programme of action to improve maritime safety in its communication on a common policy on safe seas.74 The programme was rapidly approved in principle by the Council and the European Parliament and included early legislation reflecting international standards on a broad range of subjects including, among others:75 – Dangerous or polluting goods bound for or leaving Community ports;76 – common rules and standards on classification societies;77 69 See Power, EC Shipping Law (2nd ed., 1998), p. 8 and pp. 449; generally: Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, German Yearbook of International Law (48) 2005, pp. 223. 70 See Council Decision 2007/779/EC, OJ L314/9 of 01 December 2007. 71 On the IMO’s general relevance to the international regulation of shipping see Serdy, Public International Law Aspects of Shipping Regulation, pp. 324, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 72 Power, EC Shipping Law (2nd ed., 1998), pp. 460 and 565; see the Internet presence at https:/ /www.parismou.org/. 73 See König, Port State Control: An Assessment of European Practice, pp. 37, in: Ehlers et al. (eds.), Marine Issues: From a Scientific, Political and Legal Perspective (2002); Molenaar, The EC Directive on Port State Control in Context, International Journal of Marine and Coastal Law 1996, pp. 241. 74 COM(93)66 final of 24 February 1993. 75 On the steps of the 1990s, see Power, EC Shipping Law (2nd ed., 1998), pp. 550; for a comprehensive list see Christodoulou-Varotsi, Maritime Safety Law and Policies of the European Union and the United States of America (2008), p. 33. 76 Directive 93/75/EC of 13 September 1993, OJ 1993 L247/19, as amended. 77 Directive 94/57/EC of 22 November 1994, OJ 1994 L319/20, as amended.

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General Introduction

safety management of roll-on/roll-off passenger ships;78 safety standards for all passenger ships;79 enforcement of seafarers’ working hours;80 and marine equipment.81 By 1998, all in all, the EU had adopted three Regulations, 35 Directives and 43 three Council decisions in the maritime policy field.82 But while this development was still under way, further major accidents involving the disastrous casualties of the “Erika” in 1999 and the “Prestige” in 2002 led to the programme’s acceleration, strengthening and amplification via the so-called “Erika Packages I to III”.83 The relevant measures are discussed in more detail in various specific chapters of this Brussels Commentary and have included, among others: – Reinforcement of the rules on port State control;84 – reinforcement of the rules on classification societies in their capacity as “recognised organisations” (ROs);85 – accelerated phasing out of single hull tankers;86 – improvements in vessel traffic monitoring;87 – the creation of a European Maritime Safety Agency (EMSA);88 and – stricter rules on compensation and liability, including criminal responsibility.89 In May 2004, the Commission launched a broad consultation on the need to 44 adopt the latest package of legislative measures (i.e. the “Erika III Package”), which it proposed in November 2005, to complete the maritime safety frame– – – –

78 79 80 81 82 83

84 85 86 87 88

89

Regulation 3051/95/EC of 8 December 1995, OJ 1995 L320/14, as amended. Directive 98/18/EC of 17 March 1998, OJ 1998 L144/1, as amended. Directive 1999/95/EC of 13 December 1999, OJ L014/29, as amended. Directive 96/98/EC of 20 December 1996, OJ 1998 L241/27, as amended. See Ehlers/Lagoni (eds.), Preface (p. VI), in: Maritime Policy of the European Union and Law of the Sea (2008). See, e.g., Chuah, The Third Maritime Safety Package – Objectives and Challenges, Journal of International Maritime Law 2009, p. 271; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), pp. 29; Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 49; Vatankhah, The Contribution of the EC to Maritime Safety in View of the “Third Maritime Safety Packageʺ of the European Commission, pp. 41, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Christodoulou-Varotsi, Maritime Safety Law and Policies of the European Union and the United States of America (2008), pp. 34. See Chapter 4, VIII. of this Brussels Commentary. See Chapter 4, VII. of this Brussels Commentary. See Chapter 4, XIII. of this Brussels Commentary. See Chapter 4, IX. of this Brussels Commentary. Although the EMSA is subject to a specific legal founding act (Regulation (EC) 1406/2002 of 27 June 2002 establishing a European Maritime Safety Agency, OJ L 208/1 of 5 August 2002), the intra-EU framework for its establishment and financial organisation are not subject to a specific commentary section. Rather and due to its manifold functions, the EMSA is addressed in various specific chapters, see further: Introduction to Chapter 4 on ”EU Maritime Safety and Pollution Control“. See Chapter 4, VI. and specifically König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements, pp. 767, in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes (2007).

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Chapter 1, I.

work, including most significantly the responsibilities of flag States. These were adopted, though subject to numerous amendments, in 2009 and are discussed in depth in various chapters in this commentary. 45 Furthermore, the maritime sector has also been affected by broader EU environmental policies. For example, action has been taken, based on standards contained in: – The IMO’s MARPOL Convention, Annex VI, to limit the sulphur in marine diesel;90 – to address the disposal of hazardous waste which can include ship breaking;91 and – to phase out the use of certain marine paints containing biocides.92 46 Also, in 2005, the Commission proposed the adoption of a Directive to implement a broad “thematic” strategy, i.e. the “Marine Strategy Framework”, to address marine pollution through a long term programme of diagnosis and action carried out by competent authorities in the Member States and under the European regional seas conventions. The relevant Directive was agreed late in 2007 and formally adopted in 2008.93 While the Marine Strategy Directive does not address specifically the environmental impacts of maritime transport, it creates governance mechanisms which over time are likely to generate new actions having direct implications for the sector. 47 Recently the emphasis has been primarily on the problem of reducing emissions of greenhouse gases (GHG), notably carbon dioxide, not least in the context of the United Nations Framework Convention on Climate Change (UNFCCC).94 In December 2008, the Council and the Parliament agreed a global, legally binding target of a 10% reduction in emissions from 2013 levels to be realised by 2020 for all sectors not included in the EU’s emissions trading system. Shipping was thus included.95 The EU’s negotiating position for the UN’s Copenhagen Conference in December 2009 included an offer to reduce ship-

90 See Chapter 4, II. of this Brussels Commentary. 91 See Chapter 4, III. of this Brussels Commentary. 92 See Chapter 4, V. of this Brussels Commentary. Ship breaking (or rather ship recycling) has been made subject to a special legal act in 2013 (Regulation (EU) 1257/2013) which is, however, not commented on specifically in this Brussels Commentary 93 Directive 2008/56/EC establishing a framework for community action in the field of marine environmental policy, OJ L164/19 of 25 June 2008; see generally on the framework Markus/ Schlacke, Die Meeresstrategie-Rahmenrichtlinie der Europäischen Gemeinschaft, Zeitschrift für Umweltrecht 2009, pp. 464. 94 See generally Vladu/Hackmann, International maritime transport under the UNFCCC process, pp. 61, in: Asariotis/Benamara (eds.), Maritime Transport and the Climate Change Challenge (2012); Tsimplis, Marine Pollution from Shipping Activities, pp. 426, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 95 Decision 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to reduce their green house gas emissions to meet the Community’s green house gas reduction commitments up to 2020, OJ L140/136 of 5 June 2009.

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General Introduction

ping’s emissions from 2005 levels by 20% by 2020.96 The means for achieving these goals have been left open for a long time but the EU has finally acted unilaterally in 2015 by passing a new Regulation on the monitoring, reporting and verification of carbon dioxide emissions from shipping. This new legal act is addressed in the final section of the Commentary chapter on marine safety and pollution control.97,98 4. Vessel- and Port-Related Maritime Security

Following the events of 11 September 2001 and subsequent terrorist activity, 48 the security aspects of maritime transport inevitably assumed greater importance with a series of new initiatives being taken at EU and international level. These are: – Effective implementation of the International Ship and Port Facility Security Code (ISPS Code);99 – action on advanced cargo declaration; and – cooperation with the authorities of third countries, especially the United States. The dramatic development of acts of piracy off the coast of east Africa from 49 2008 onwards has stimulated high profile military action to help deter, prevent and repress them. This operation, the EU’s first naval operation, is being conducted within the framework created by the European Security and Defence Policy which has its own specific decision making procedures distinct from those applying to longer established EU responsibilities like the internal market, environmental protection and external commercial relations.100 The military operation “EU NAVFOR SOMALIA-Operation ATALANTA” 50 began in December 2008101 and has had some success, especially if seen in conjunction with other military operations. Its first aim is to protect vessels of the World Food Programme delivering food aid to displaced persons in Somalia and then, more generally, to protect vulnerable vessels in the Gulf and off the Somali coast. The operation was initially scheduled for an initial period of 12 months 96 Council Conclusions on EU position for the Copenhagen Climate Conference (7-18 December 2009), 21 October 2009. 97 See Chapter 4, XIV. of this Brussels Commentary. 98 Hinchcliffe, International shipping and climate change, pp. 209, in: Asariotis/Benamara (eds.), Maritime Transport and the Climate Change Challenge (2012); Chrysostomou/ Vågslid, Climate change: A challenge for IMO too, pp. 75, in: Asariotis/Benamara (eds.), Maritime Transport and the Climate Change Challenge (2012). 99 See further: Introduction to Chapter 5 on the Security of Maritime Transport and EU Port Infrastructure. 100 See Engberg, The EU and Military Operations: A comparative analysis (2013). 101 Council Joint Action 2008/851/CFSP, OJ L301/33 of 12 November 2008; see Tonelli, The EU Fight Against Piracy in the Horn of Africa: The External Action at Stake, pp. 53, in: Andreone/Bevilacqua/Cataldi/Cinelli (eds.), Insecurity at Sea: Piracy and Other Risks to Navigation (2013); Cinelli, The EU Military Land-Based Action Against Somali Piracy – Critical Remarks, pp. 75, in: Andreone/Bevilacqua/Cataldi/Cinelli (eds.), Insecurity at Sea: Piracy and Other Risks to Navigation (2013).

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Chapter 1, I.

but has since been extended several times.102 The geographical coverage of the operation has also increased as pirates have begun to operate deeper into the Indian Ocean. It has been accompanied by other complementary measures such as cooperation agreements with States in the region, notably agreements with Kenya and the Seychelles to allow captured pirates to be prosecuted there. 5. In Particular: Maritime Infrastructure, System Development and Integration

Infrastructure, system development and integration constitute another important domain in which the EU seeks to derive full advantage from a modern maritime industry properly integrated into a multimodal transport system serving the EU as a whole and its external trade. It has at its disposal a number of instruments in addition to legislation in the classical form of Regulations and Directives, though these also have a role to play. Among these instruments have been research and development projects under the framework programmes including long-term technological development and integration of traffic monitoring and management systems. The latter projects have been used in synergy with network development under the guidelines for the development of the trans-European transport networks, adopted under Article 171 TFEU (ex 155). They are supported by financial investment, including from the cohesion funds in Member States that can benefit from them. Among important realisations in this area are the revised network guidelines, agreed in 2004,103 and the decision to fund a satellite navigation system (the “Galileo” project). 52 A key project in this context is the so-called “Motorways of the Sea”.104 It is designed to concentrate freight flows on logistical routes so as to improve existing maritime links or to establish new viable ones, thereby reducing road congestion or improving access to peripheral and island regions and States. Fuller use is to be made of complementary rail and inland waterway links as part of integrated multimodal chains and indeed certain waterways and canals providing important links for the sea motorways form part of the network itself.105 Four corridors have been designated: – The Baltic Sea; – Western Europe, along the Atlantic Arc to the North and Irish Seas; – South East Europe, connecting the Adriatic to the Ionian Sea and the Eastern Mediterranean; and – South West Europe connecting Spain, France and Italy and through Malta joining with the South Eastern corridor and links to the Black Sea. 51

102 See generally http://eunavfor.eu/. 103 Decision 884/2004/EC, OJ L201/1 of 7 June 2004. 104 See more specifically infra, section B. 5. c) in this introductory Chapter;generally: Aperte/ Baird, Motorways of the Sea Policy in Europe, Maritime Policy and Management 2013, pp. 10. 105 In particular, the Saaima Canal in Finland; the Kiel Canal; and, most importantly, the RhineMeuse-Danube system.

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Complementing measures to develop infrastructure and the multimodal sys- 53 tem have been a broad range of measures to promote short sea shipping;106 the Marco Polo programmes to encourage through financial assistance new services shifting freight from road to other modes. A final point is the controversial – and continuously unsuccessful – attempt to improve the efficiency and lower the cost of port services through the introduction of more competition as regards pilotage, towing, mooring, passenger reception and cargo handling. Modern maritime transport increasingly functions within the context of rela- 54 tively sophisticated infrastructure including: – Ports and terminals, some of them specialised; – telecommunications; – navigation aids; – traffic monitoring and management systems; and – integrated multimodal transport systems. The EU has taken action concerning aspects all of these in its attempt to inte- 55 grate maritime transport into an effective, efficient and sustainable multimodal transport system serving its internal market and external trade. a) Legal Bases

In addition to the Treaty provisions on a common transport policy and the in- 56 ternal market in goods and services, the EU has been able to rely in this context on other bases for action including those on trans-European networks (Article 170 to 172 TFEU), economic, social and territorial cohesion (Article 174 to 178 TFEU) and research and technological development and space (Article 179 to 189 TFEU). Research and development projects under the framework programmes have addressed the long-term technological development of the transport system including its integration, not least through systems for traffic and cargo information, monitoring and management. Some of these have been used in synergy with the large scale deployment of the new technologies under safety Regulations or the guidelines for the development of the trans-European transport networks (“TEN-T”). These have also been supported by financial investment from the EU budget, including from the cohesion funds in Member States that are entitled to benefit from them. The different legal bases and associated procedures have their own character- 57 istics which may have significant consequences for the content of measures and the manner in which they are adopted. For example, Treaty provisions having as their objective the coordination or provision of financing for research or infrastructure development will necessarily have a different character from Regulations imposing obligations on operators. They provide the framework and means for action having certain defined objectives without imposing obligations to realise particular results. More specifically, as regards adoption procedures, while 106 See further, infra, section B. 5. d) in this introductory Chapter.

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Chapter 1, I.

trans-European network guidelines and projects are decided by co-decision with qualified majority decision-making in Council just like regulatory measures under the common transport policy, they also require the approval of the individual Member States to whose territories they relate.107 b) Ports and Port Facilities

The most obvious, indeed historic, type of infrastructure on which maritime transport relies is to be found in sea ports, their approaches and hinterlands. The EU has more than a thousand “bigger” sea ports which are commercially relevant, i.e., handling more than one million freight tonnes per year. Given their long histories, diverse geographical positions and major differences in the way they are economically and legally organised, those sea ports have proved difficult for the EU to address in developing maritime policy and regulation.108 59 The provisions on trans-European transport networks were introduced by the Treaty of Maastricht in 1992 as one of the innovations designed to allow the EU to further develop and complement the liberalised internal market achieved through the abolition of regulatory barriers to cross frontier economic activities under the single market programme.109 They would allow the development of positive measures to support the adaptation, extension and modernisation of the EU’s transport infrastructure both to meet the needs of operators in the single market and to reduce disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas. Such measures would aim at promoting the interconnection and interoperability of national networks as well as access to them. They would also take particular account of the need to link islands, landlocked and peripheral regions with the central regions of the EU. 60 The inclusion of such provisions had been supported by many influential economic actors, some them from within the transport sector itself.110 61 The European sea ports themselves were less than enthusiastic. Many of them feared that regulatory interventions at the EU level would distort the conditions of competition among ports or even lead to “dirigiste” attempts to allocate traffic flows. They initially resisted their inclusion in the network guidelines being developed by the Commission. However, given that the different transport networks would necessarily have some terminals and nodes where ports were located, their implicit inclusion was unavoidable. As a result, when the network guidelines were first adopted in 1996, seaports were included but in a summary way with no attempt to identify priority problems or particular development op58

107 Article 172 (2) TFEU. 108 See the introduction to Chapter 3 on “A Liberalised and Competitive Market for EU Maritime Transport”. 109 Article 154 to 156 TFEU. 110 See the reports of the European Round Table of industrialists (ERT) on Missing Links (1984) and Missing Networks (1991).

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portunities.111 The Commission found this outcome unsatisfactory, not least because of the importance of seaports, as well as inland ports and multimodal terminals, for the development of the transport networks taken as a whole as a progressively integrating multimodal network.112 Accordingly, in 1998, it proposed a relatively rapid modification of the net- 62 work guidelines to identify seaports according to objective criteria, including size and geographical position, and to specify the conditions to be met by projects for them to qualify as projects of common interest meriting support. The modification was adopted in 2001 leading to the identification of some 300 sea ports, the largest of which were to be shown on indicative maps like most other networks.113 Subsequently this list increased to include some 400 ports as a result of the EU’s enlargement. The treatment of ports in the guidelines, in addition to continuing suspicion 63 from the sector itself, led unsurprisingly to very little in the way of specific port projects as other more interested actors pushed for priority to be given to projects in their areas. Some of these may well have coincidentally assisted port development such as certain priority corridor projects serving particular ports like the “Betuwe Line” connecting Rotterdam with Germany. The same applies to certain multimodal actions like those on Motorways of the Sea and intelligent traffic systems. Financing under the structural and cohesion funds was committed to a number of investments in ports in the period after 2000 but these projects do not appear either to have had strategic effects as regards the interconnection or integration of the EU’s transport infrastructure and a significant proportion of them in the period 2000 to 2006 encountered significant implementation problems limiting their beneficial impact.114 But in the initial phases of implementing the network guidelines, their sea port provisions did not contribute to significant infrastructure development in ports themselves. In 2009, the Commission began a consultative process as part of a fundamen- 64 tal review of policy on the transport network.115 It emphasised the potential benefits of moving to a dual layer structure with both a comprehensive network 111 Decision 1692/96/EC on Community guidelines for the development of the trans-European transport networks, OJ L228/1 of 9 September 1996. See also Council Regulation 2236/95 laying down general rules for the granting of Community financial aid in the field of transEuropean networks, OJ L228/1 of 23 September 1995. 112 Commission Green Paper on Seaports and Maritime Infrastructure, COM (1997)678 final of 10 December 1997 and the Commission Communication on Reinforcing Quality Service in Sea Ports: A Key for European Transport, COM/2001/35 final of 1 February 2001. 113 Decision 1346/2001/EC amending Decision 1692/92/EC as regards seaports, inland ports and intermodal terminals as well as project No. 8 in Annex III, OJ L185/1 of 6 July 2001. The guidelines were subsequently amended again in 2004 by Decision 884/2004/EC, OJ L167/1 of 30 April 2004. 114 European Court of Auditors, Special Report No. 4/2012, Using structural and cohesion funds to co-finance transport infrastructure in seaports: an effective investment? 115 Green Paper on the TEN-T: A policy review (Towards a better integrated Trans-European transport network at the service of the common transport policy), COM(2009)44 final of 4 February 2009.

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and a core priority network, the latter to allow more systematic incorporation of nodes, ports and airports as the network’s entry points and the main inter-modal connections that underpin strong network integration. This approach received a positive reception from many sources including the European Parliament116 and the sea ports themselves.117 Accordingly, it was followed in the 2011 Commission proposal to modify the transport network guidelines118 as one component of the “Connecting Europe” package119 – finally cast in a EU Regulation in 2013120 – designed to fund 50 billion euros of investment in the EU’s transport, energy and telecommunications networks. The transport component amounts to just under 32 billion. More importantly, a greater emphasis in funding priorities is continuously placed on projects in or closely related to sea ports and relating to inland waterway transport.121 In some funding decisions announced by the Commission in October 2009 as part of its response to the economic crisis, this increased emphasis is already evident with major sea port projects in three Member States.122 c) “Motorways of the Sea” 65

In its Transport White Paper of 2001,123 the Commission indicated its intention to propose legislation on a new concept to develop intermodal maritime based transport chains in Europe in particular to reduce road congestion: “Motorways of the Sea”.124 The 2004 amendment of the trans-European network (“TEN-T”) guidelines included new provisions to implement the concept. The objectives of the motorways of the sea were defined as the concentration of freight flows on “sea-based logistical routes in such a way as to improve exist116 European Parliament Resolution on the Green Paper on the future TEN-T policy of 27 April 2009. 117 European Sea Ports Organisation, European Commission Green Paper ‘ TEN-T: A policy review’, May 2009. 118 Proposal for a Regulation on Union guidelines for the development of the trans-European transport network, COM/2011/0650/final 2, of 19 October 2011. 119 Proposal for a Regulation establishing the Connecting Europe Facility, COM/2011/0665/ final 3 of 19 October 2011; see also Commission Communication “A growth package for integrated European infrastructure”, COM/2011/0676 final of 19 October 2011. 120 Regulation (EU) No 1316/2013 of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010. 121 Initially, in 2000, the relevant share was about 1.5% with the EU ʺaiming at“ 20% in the period between 2014-2020, see, e.g., the Annual Report 2013 of Inland Navigation Europe (INE), p. 7. 122 In Italy, implementation of nautical accessibility in the port of Venice-Marghera through operational and remedial dredging in the west and south ship canals; in Sweden, port infrastructure facilities in the Malmo northern harbour; and in the UK, Thames Estuary dredging and reclamation works to support the integrated multi-modal London Gateway port and logistics development. 123 European transport policy for 2001: time to decide, COM(2001)370 final of 12 September 2001, p. 42. 124 See generally Aperte/Baird, Motorways of the Sea Policy in Europe, Maritime Policy and Management 2013, pp. 10.

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ing links or to establish new viable, regular and frequent maritime links for the transport of goods between Member States so as to reduce road congestion and/or improve access to peripheral and island regions and States”.125 Transport of persons together with goods is not excluded provided freight transport is predominant. Four corridors were designated for the motorways: – The Baltic Sea; – along the coast of western Europe; – the eastern Mediterranean to the Black Sea; and – the western Mediterranean, with the initial objective of completing relevant projects of common interest by 2010. The definition of the motorways, and hence of the projects of common interest to realise them, is complex embracing the different components needed to realise sea-based multimodal systems. These include: – Port facilities; – electronic logistics management systems; – safety, security, administrative and customs procedures; and – infrastructure for direct land and sea access, including facilities for dredging and icebreaking. Major inland waterways and canals are to be included where they con- 66 tribute to the motorways’ effectiveness and efficiency.126 Projects are to be proposed by at least two Member States, shall be geared to actual needs and in general involve both the private and public sectors. They are to be organised through public calls for tender either to establish new links originating in particular major ports on the corridor or targeting consortia bringing together at least shipping companies and ports located there. Start-up aid in support of duly justified capital costs can be included for up to two years. Support for motorways of the sea under the network guidelines can be com- 67 bined with support under the Marco Polo programme to improve the environmental performance of the freight transport system which focuses on actions to contribute to measurable and sustainable modal shift in favour of short sea shipping, rail or inland waterway transport or a combination of modes of transport in which road journeys are as short possible.127 This financial assistance is not limited to preparatory actions or the provision of infrastructure but general financial support to the launch of a new service.

125 See Article 12a and Annex III of project 21, revised TEN-T guidelines as cited, e.g., by van Hooydonk, The Impact of EU Environmental Law on Ports and Waterways (2006), p. 73. 126 Particularly relevant are the Saaima Canal in Finland; the Kiel Canal; and the Rhine-MeuseDanube systems. 127 Regulation (EC) 1692/2006 establishing the second “Marco Polo” programme for the granting of Community financial assistance to improve the environmental performance of the freight transport system (Marco Polo II) and repealing Regulation (EC) 1382/2003, OJ L328/1 of 24 November 2006; see also Regulation (EC) 1382/2003, OJ L196/1 of 2 August 2003.

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The ambition of the motorways of the sea concept has proved difficult to realise in practice, no doubt due to the complexities, technical and commercial, that new sea-based intermodal connections entail. Problems of market analysis and trade distortion in introducing new competitive services to an already flexible and highly competitive shipping market compound the difficulties. While a substantial amount of preparatory work has been undertaken on nineteen different projects, six TEN and two Marco Polo projects have commenced or improved commercial regular Ro-Ro services between Member States. Lately, emphasis has been given to developing harmonised approaches to LNG bunkering in the Baltic, the Mediterranean, the Atlantic approaches and the Black Sea.128 Despite the difficulties, the European Commission remains committed to the concept and considers that it deserves greater attention in the context of the revision of the network guidelines.129 d) Political Promotion of Short Sea Shipping

69

The motorways of the sea are being developed within the broader context of programmes to encourage the use of shipping as an alternative to congested road transport, notably the action plan to promote short sea shipping and the establishment of a European maritime transport space without barriers.130 The programmes include the adoption of systems to facilitate the cross-frontier movement of goods and persons while ensuring a high level of security and compliance with relevant Regulations. A first step was taken in 2002 with the adoption of an early Directive on reporting formalities for ships arriving in and/or departing from ports of the Member States by standardising requirements concerning the ship itself, its crew’s effects, its crew list and passenger lists for small vessels.131 The basis for the standardisation is the set of model reports in the IMO’s 1965 Convention on Facilitation of International Maritime Travel and Transport as amended (FAL Convention). In 2009, the Commission proposed to update the legislation in order

128 Information obtained from the Commission in October 2012. 129 Green Paper of 2009 and Article 25 of the proposal to amend the Regulation on the guidelines, cited above. 130 See Koliousis/Koliousis/Papadimitriou, Estimating the Impact of Road Transport Deregulation in Short Sea Shipping: Experience from Deregulation in the European Union, International Journal of Shipping and Transport Logistics 2013, pp. 500; Ng/Sauri/Turro, Short Sea Shipping in Europe: Issues, Policies and Challenges, pp. 196, in: Finger/Holvad (eds.), Regulating Transport in Europe (2013); Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 343). 131 Directive 2002/6/EC, OJ L67/31 of 9 March 2002. Larger passenger vessels were already covered by more detailed requirements under Directive 98/41/EC. The cargo declaration was excluded because procedures are based on cargo manifests.

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– –

to achieve greater consistency with other legislation; to create single competent authorities at national level which should also be those responsible for implementing the “SafeSeaNet” network and also interoperable with customs single windows;132 – to ensure the use of electronic transmission through development of “SafeSeaNet”, as quickly as possible and by 2013 at the latest; and – to exempt most movements of goods presumed to have Community status between Community ports in accordance with applicable customs law.133 In continuation of the first steps dating back to 2002 this legislation was 70 adopted as Directive 2010/65/EU and came into force in May 2012.134 The final deadline for the introduction of the single national windows and the use of electronic transmission has been postponed to 1 June 2015 but after that it could be realised. In particular, the simplification and modernisation of customs procedures, particularly through the use of electronic communications, has been under way for some time. The new computerised transit system (NCTS) has been operational since 2003. In 2008, the Council and Parliament adopted Decision 70/2008/EC on a paperless environment for customs and trade which set the objective of 2013 for the implementation of paperless administrative customs procedures. Additional measures have been adopted to further reduce the burden of customs formalities for authorised regular shipping services between ports of the Member States.135 Following discussions in the IMO about developing e-Navigation, the Com- 71 mission has announced its intention to take further initiatives to promote the use of compatible, integrated electronic systems to improve the efficiency of maritime transport in Europe. Known as e-Maritime, the programme began with a broad web-based consultation of interested parties completed in 2010. The next step would normally be a Communication setting out the measures needed to extend the use of electronic systems, included automated procedures for shipping within the EU and possibilities to exclude this traffic from other customs and other administrative controls. In October 2012 the Commission adopted a communication “Together for Growth” on the preparation of a “Single Market II Act”.136 This initiative will include a “Blue Belt” package of legislative and non-legislative measures to reduce the administrative burden for intra-EU mar-

132 See, e.g., the information provided by EMSA on this topic available at http://emsa.europa.eu /nsw.html. 133 COM(2009)11 final of 21 January 2009. 134 Directive 2010/65/EU of 20 October 2010 on reporting formalities for ships arriving in and/or departing from ports of the Member States and repealing Directive 2002/2/EC Text with EEA relevance, OJ L283/1 of 29 October 2010. 135 Amendments to Commission Regulation 2454/93 laying down provisions for the implementation of Council Regulation (EEC) 2913/92 establishing the Community Customs Code. 136 COM(2012)573 final of 3 October 2012.

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itime transport that is comparable to that of other transport modes.137 These will be supported by up to date information and communications technologies which permit the reliable tracking of both ships and cargos with a sufficient level of certainty to exclude shipping within the Single Market from traditional customs and other administrative controls. e) Ship Information, Navigation, Management and Surveillance Systems

Over the years many coastal Member States, in accordance with relevant rules adopted in the IMO, had developed mandatory ship reporting regimes, vessel traffic services and routeing systems, particularly in congested and hazardous areas like the Dover Straits between England and France.138 These were often part of their response to major accidents as was the EU’s first legislation on mandatory reporting for larger oil, gas and chemical tankers entering or leaving the ports of the Member States following the wreck of the Amoco Cadiz in 1978.139 The relevant Directive also required the competent authorities of a Member State to pass on information to others likely to be affected by a hazard of which it had been informed. 73 With the positive response of both Council and Parliament to the Commission’s 1993 communication on a common policy on safe seas, a new impulse was given to policy making in this area. One of the first measures adopted introduced a broader regime for all vessels bound for or leaving Community ports carrying dangerous or polluting goods.140 In 2002 this regime was replaced by an even broader vessel traffic monitoring and information system applying to nearly all ships of 300 gross tonnage or more which was itself up-dated in 2009.141 74 The monitoring and information system – “SafeSeaNet” – is based upon obligations to be respected by operators and obligations to be fulfilled by the Member States themselves and by the Commission. Operators are required to ensure that ships calling at EU ports carry equipment permitting their automatic identification at short range through regular very high frequency (VHF) radio transmissions (AIS); voyage data recorders (VDR) to permit the investigation of the 72

137 See the Commission Communication on Blue Growth opportunities for marine and maritime sustainable growth, COM(2012)494 of 13 September 2012 and the Commission Press Release IP/13/652 “Blue Belt: Commission eases customs formalities for ships” of 8 July 2013. 138 This traffic separation regime introduced in 1971 was the world’s first mandatory scheme sanctioned by the IMO. 139 Council Directive 79/116/EEC concerning minimum requirements for certain tankers entering or leaving Community ports, OJ L33/33 of 8 February 1979. 140 Council Directive 93/75/EEC concerning minimum requirements for vessels bound for or leaving Community reports and carrying dangerous or polluting goods, OJ L247/19 of 5 October 1993. 141 Directive 2002/59/EC establishing a Community vessel traffic monitoring and information system and repealing Council Directive 93/75/EEC, OJ L208/10 of 5 August 2002 amended by Directive 2009/17/EC, OJ L131/101 of 28 May 2009 and Commission directive 2014/100/EU, OJ L308/82 of 29 October 2014.

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causes of accidents and learn lessons for their avoidance; and, more recently, a system for vessels’ long range identification and tracking (LRIT) through data collected by flag States and exchanged among LRIT data centres worldwide. Operators must continue to report to competent authorities the carriage of dangerous or polluting goods when entering or leaving EU ports and report hazards encountered in coastal waters. Provision is also made concerning prohibitions on entering or leaving port imposed by competent authorities under extreme weather or sea conditions, including ice formation, creating a serious threat for the safety of human life or pollution and for the consequences of their not accepting recommendations of the same kind in the event of possible risks to safety and of pollution. The Member States and the Commission have a general duty to cooperate in 75 making optimum use of notified information, notably by developing appropriate telematics links among and between coastal stations and port authorities and by extending the cover of and updating the vessel traffic monitoring and information system. This is to include the submission to IMO, as necessary, of mandatory systems for ship reporting, vessel traffic services and routeing. More specifically, Member States shall also install the infrastructure necessary for ship reporting, routeing and vessel traffic systems, including properly equipped and staffed coastal stations. They must establish computerised maritime information systems compatible with the “SafeSeaNet” system for maritime information exchange originally developed by the Commission in cooperation with the Member States. The Commission for its part is to ensure the processing, use and dissemination to authorities designated by Member States of reported information and the operation of the exchange system on a 24 hour a day basis. The Commission is also to contribute to the development and operation of systems for collecting and disseminating data related to the maritime safety, in particular, through the “Equasis” ship data base or any other equivalent public system. Since 2004, the responsibilities for managing and developing “SafeSeaNet” 76 have been handed over to EMSA. Acting in consultation with officials of the Member States and the Commission, it has further developed the functions performed by the system and in practice performed the technical work necessary for the Commission to discharge its responsibilities. The regulatory regime also includes provisions on the treatment of ships in 77 distress, in particular, their accommodation in places of refuge. Member States have to establish plans for the accommodation of ships in need of assistance and designate competent authorities having the required expertise and power to take independent decisions on their own initiative in relation to such operations. The issue of financial compensation for potential economic loss suffered in the context of such operations is the subject of further examination by the Commission.

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Chapter 1, I.

From 2011, under the re-cast Directive on port State control of 2009,142 the Member States have to provide through “SafeSeaNet” information on the actual time of arrival and departure as well as pre-arrival information on ships calling at any EU port or anchorage. The Commission has turned to EMSA for technical support in the fulfilment of many of its obligations. Under its founding Regulation, the EMSA has a duty to facilitate cooperation between Member States and the Commission in the field of vessel traffic monitoring and information, including the development and operation of any information system necessary for that purpose.143 On this basis EMSA assumed responsibility for operating “SafeSeaNet” and is hosting the “Equasis” data base. It has also established an LRIT European Data Centre responsible for processing and communicating long-range identification and tracking information on behalf of the Member States.144 Acting under Article 10 (2) of Directive 2005/35/EC on ship source pollution,145 EMSA has also developed and established the “CleanSeaNet” service, a satellite based monitoring system for marine oil spill detection and surveillance in European waters. The service provides a range of information to Member States including oil spill alerts, rapid delivery of available satellite images and the positions of oil slicks. This service allows Member States’ authorities to act quickly to mobilise their enforcement and pollution response systems. Where appropriate, EMSA’s oil pollution response vessels, chartered to be on stand-by ready for rapid deployment with appropriate equipment, can be mobilised to assist. 79 EMSA has developed the information system needed by the EU and the States of the Paris MoU for the modernised port State control system to function properly through “SafeSeaNet”. It is known as “THETIS”146 and was ready by early 2011 when the new inspection port State control regime (NIR) became effective under the Paris MoU. Each day more than 3 000 arrivals at any port in the region are recorded in the system. Moreover, 18 000 inspections per year are recorded in the “THETIS” system by 600 authorised users from 27 connected countries. While the different monitoring and information systems have been developed separately for specific purposes, their use in combination adds considerable value to their operation in practice. For example, a combination of satellite images of polluting vessels combined with AIS or LRIT data contributes to more effective enforcement action. Data correlation and fusion will greatly increase the utility of the systems in future. The technical integration of relevant systems greatly facilitates the task. At EMSA, such integration is under way and 78

142 Directive 2009/16/EC of 23 April 2009 on port State control (Recast), OJ L131/57 of 28 May 2009. 143 Regulation 1406/2002/EC, Article 2(d). 144 This centre is also currently hosting the international LRIT data centre on behalf of the IMO. 145 Directive 2005/35/EC of 7 September 2005 on ship-source pollution and on the introduction of penalties for infringements, OJ L255/11 of 30 September 2005; see generally Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), pp. 54. 146 See https://portal.emsa.europa.eu/web/thetis; the system is also used by the EU to “name and shame” shipping companies with poor safety records publicly.

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will be developed further in future. In addition, EMSA is developing with the European Space Agency (ESA) a European-AIS capability. Capturing AIS by satellite will complement the LRIT and shore-based “SafeSeaNet” providing ship-positioning information worldwide. Scope exists for even broader integration of systems for maritime surveillance 80 linking a broad range of users at EU and national level and this objective is being actively pursued by the Commission as part of its integrated maritime policy.147 The Council has marked its approval of the programme.148 Finally, though not intended exclusively to assist maritime transport, mention need to be made of the Galileo geographical positioning system.149 This EU operated satellite constellation, complementing existing systems like GPS and GLONASS, will provide the Member States with independent satellite navigation technology, at the same time enhancing the accuracy and reliability of the services available to both public and private users. 6. In Particular: The External Dimension of the EU’s Maritime Policy

From the outset, the external dimension of maritime policy has been a con- 81 stant concern of those involved.150 For the original six EU Members maritime transport was primarily an external affair. Moreover, until recently, the structural decline of the European shipping industry in the face of low cost competition from third country flags was a major preoccupation, while the Member States had long standing and sometimes close bilateral arrangements with third countries, especially former colonies, and a preference for trying to settle many matters at world level in the ILO and the IMO. The development of an integrated market-based economy by the EU, includ- 82 ing maritime transport, to be regulated within a broader common transport policy and complemented by a common commercial policy of the Union, was bound to prove unsettling for all concerned.151 It is likely to continue to do so as the extent and complexity of the EU’s involvement in maritime affairs inevitably produces pressures for the EU to assert its presence in international fora and bilateral relations.

147 See: Towards the integration of maritime surveillance: A common information sharing environment for the EU maritime domain, COM(2009)583 final of 15 October 2009. Commission Communication on a Draft Roadmap towards establishing the Common Information Environment for the surveillance of the EU maritime domain, COM(2010)584 final of 20 October 2010. 148 Council conclusions on integration of Maritime Surveillance, 3092nd General Affairs Council, 23 May 2011. 149 Regulation(EC)683/2008 on the further implementation of the European satellite navigation programmes (EGNOS and Galileo), OJ L196/1 of 24 July 2008. 150 Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313 (at 344). 151 For further reading see Power, EC Shipping Law (2nd ed., 1998), pp. 515; Jenisch, EU Maritime Transport – Maritime Policy, Legislation and Administration, WMU Journal of Maritime Affairs 2004, pp. 67.

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While the 1986 liberalisation of the internal market in maritime transport provided a clear basis for coherent action to secure open markets elsewhere, this has not required the EU to take a large number of initiatives, though an agreement has been concluded with China and talks to this end held with a number of countries and within the World Trade Organisation (WTO). However, EU action in multilateral organisations has often proved somewhat problematic,152 particularly within the IMO. Much remains to be done to adapt international organisations and procedures to the EU’s continuously developing responsibilities for maritime issues. 84 The external dimension of the EU’s maritime policy was important from the outset.153 Given Europe’s geographical position and the importance of maritime transport to its external trade, it could hardly be otherwise. The exposure of European flagged or manned fleets to lower cost competition from many third countries was a constant concern and while the structural decline of the fleets has been halted in recent years, the employment problem remains of concern to many. Moreover, the competitive pressure has not disappeared and indeed has increased as result of the declines in economic activity since 2008. It will continue to influence the actions of both industry actors and policymakers. 85 More fundamentally, the development of an integrated common transport policy based on liberalised access to markets, accompanied by a common commercial policy, would necessarily require the adaptation of pre-existing arrangements, bilateral and multilateral. On the one hand, the Member States had long standing bilateral arrangements with third countries, especially former colonies, under which the shipping companies of the parties were given privileged access to trade between themselves. On the other, given the international nature of the industry, there is a natural tendency to favour finding solutions to important problems at the international level, in the ILO, which had existed since the end of the first World War, and in the Intergovernmental Maritime Coordination Committee (IMCO), which started to function in 1957, the same year as the adoption of the Treaty of Rome, changing its name to the IMO in 1982. The development of EU policies would necessarily be unsettling for all concerned, both inside and outside. 86 As the EU’s involvement in maritime affairs has developed in extent and complexity, it has necessarily produced pressures for the EU to assert its presence in multilateral fora and bilateral relations, and this process is still continuing. It is a lengthy, step by step process which is likely to take many years to resolve satisfactorily. 83

152 See generally Chalmers/Davies/Monti, European Union Law, pp. 630; Craig/de Búrca, EU Law, pp. 302. 153 See Power, EC Shipping Law (2nd ed., 1998), pp. 515.

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a) Regional Organisations in International Maritime Law

First, attention should be paid to the broader context of public international 87 law within which regional organisations like the EU, and indeed other international organisations of States, operate. The EU itself tends to take its status under international law as a given and focus on internal issues like the scope of EU competence as distinct from those retained by the Member States or the procedures by which EU competence is exercised. That is understandable given that the organisation has functioned internationally for over fifty years. But when the EU is viewed from outside, questions do arise from time to time about its international status, not least when it starts to exercise its competence for the first time in a given context. Who is this newcomer purporting to exercise 28 votes or initial a new agreement in place of the States which have always acted on their own behalf in the past? And is this acceptable? These are legitimate questions which merit a response. International organisations, including regional ones, are legal persons and 88 subjects of international law. They are accordingly bound by obligations arising under the general rules of international law, their own constitutions and international agreements to which they are a party.154 Their powers are derived directly from their constituent instruments as an expression of the intentions of the sovereign States which found or join them. There is a paradox here: If States are sovereign, they can agree to delegate aspects of their powers to another entity which is to be recognised by other States and exercise those powers on their behalf. But if they are sovereign States, some intriguing questions can be imagined, which are gladly and normally theoretical, such as what happens if a Member State wishes to recover its sovereignty, on a specific issue or in general. Or, if the totality, or even a considerable proportion, of a group of States’ powers is ceded to another organisation, do they still qualify as States? Such questions may be of interest to legal theorists, but it is more important to 89 go back to the beginning of the story and note that associated with the “concert” system initiated by the Congress of Vienna of 1815, certain European governments saw the necessity of creating instruments for co-operation in the administrative sphere which would have a permanent character as a supplement to periodic diplomatic conferences and bilateral relations conducted between governments and through embassies and consulates. Through the nineteenth century and subsequently, these organisations became increasingly common, dealing with a variety of matters from navigation on great trans-continental rivers, crossfrontier railway operations, telecommunications and postal services, public health and others. They also broadened their membership to include States from other continents.

154 ICJ Advisory Opinion, Interpretation of the Agreement of 25 March 1951 between WHO and Egypt, 1980, ICJ Reps 73, 89-90.

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Probably the earliest of these organisations was in many ways one of the most radical and it merits a short description, not least since it concerns waterborne transport, though fluvial not maritime. The Congress of Vienna itself, in 1815, created the Central Commission for Navigation on the Rhine. It was subsequently invested with increasingly extensive powers, including standard setting for vessels and operations, and a judicial function as the court of appeal from the local courts in each of the riparian States concerning implementation of the Rhine Convention and its “reglements”. Each riparian State had one vote within the Commission but while equality and unanimity were normally required, for certain administrative matters, voting power was based on the length of the river bank of each Member State. The Commission functions to this day and has yet to be fully integrated into the EU’s regulatory system.155 A similar body is responsible for the Danube. 91 The international community of nations and public international law have thus accepted for nearly two centuries the creation of organisations of States endowed with certain powers and subject to certain obligations. Their acceptance and development have been continuous: For example, under the League of Nations, which had an essentially theoretical role of “direction” of all “international bureaux established by general treaties if the parties to such treaties consent” (Article 24 of the Covenant of the League of Nations); then came the creation of the United Nations system, including its own regional arrangements and agencies and the acceptance for registration by its secretariat of treaties between States and international organisations under Article 102 of the UN Charter; and more recently throughout the latter part of the twentieth century, came the creation and development of regional economic integration organisations like the EU, including many in continents other than Europe and some with a specific transport vocation like the Maritime Organisation of West and Central Africa (MOWCA), founded under the Charter of Abidjan in 1975. 92 Formal confirmation of this acceptance is clearly found in the Vienna Conventions of 1969 and 1986 which fully recognise the status of international organisations. Their provisions expressly apply to any treaty which is the constituent instrument of an international organisation and to any treaty adopted within an international organisation. This is expressly without prejudice to any relevant rules of the organisation. The primacy of each organisation’s own rules is thus recognised, but in the absence of such rules, the Vienna Conventions’ provisions, which are generally considered to reflect customary law, apply to such matters as the conclusion of the constituent treaty, reservations, interpretation, withdrawal and termination. Moreover, as the number and range of activities of regional organisations have grown, so has their participation in international proceedings, organisations and relations in general, though often this is on an informal basis, especially at the beginning. These informal relations in some cases 90

155 See, for further details, the following Chapter 1, II. on the EU’s regulation of inland waterway transport.

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mature through devices like cooperation agreements, memoranda of understanding and the grant of observer and diplomatic status. In some cases, this has led to regional organisations becoming full members of another international organisation as the EU has in the case of the WTO and the FAO. More recently, constituent instruments have begun to include a specific clause 93 expressly foreseeing the possibility of the future adhesion of a regional economic integration organisation with relevant powers and responsibilities without the need to amend the instrument itself (REIO clause). Similarly, the EU has become a party to important international instruments and a member of their implementing bodies for matters falling within its powers. For example, in 1999, having participated for many years in the preparation of the Law of the Sea Convention (UNCLOS), the EU acceded to the Convention.156 The EU also became a participant in the International Seabed Authority (ISA), notably unlike the United States which has not yet ratified UNCLOS.157 The EU’s responsibility for the common fisheries policy, apart from any other matter, was a convincing basis for this development. Of course, this tale of legal evolution should not be taken to imply that all 94 problems of the role of regional organisations have been solved. They have not. Particularly at the political level, the assertion by an organisation like the EU of its desire to further develop its status in a particular context, even on the basis of well-established precedent, often provokes controversy, in the international community and within the EU itself. And at the more technical and procedural level, complex problems, such as the delimitation of the powers and responsibilities of the regional entity as distinct from those still retained by its individual Member States, often take time to resolve. This will be explored further subsequently. b) The EU Treaty Framework for Its External Maritime Relations

It is necessary at this point to recall the EU Treaty framework for external ac- 95 tion on maritime transport. The common transport chapter of the original Treaty was not limited to transport within the Community but addressed international transport to or from a Member State or passing across the territory of one or more Member States. The EU was thus empowered from the outset to take measures concerning shipping involving third countries in accordance with the conditions and procedures prescribed by the Treaty at any given moment. In the case of both maritime and air transport, these conditions were more restrictive than for inland transport until in 1986 the Single European Act established 1992 as the mandatory deadline for completing the internal market in all sectors, including maritime transport both between Member States and between Member 156 See Treves, Law of the Sea in the European Union and in the Mediterranean, pp. 313, in: Scheiber/Paik (eds.), Regions, Institutions, and Law of the Sea: Studies in Ocean Governance (2013); Power, EC Shipping Law (2nd ed., 1998), pp. 536. 157 See the internet website of the International Seabed Authority: http://www.isa.org.jm/en/ho me.

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States and third countries. However, the EU had not waited for that change but had begun to develop an external maritime policy on the basis of the common transport chapter as early as the late 1970s.158 96 For many years, the European Commission and some other organisations and commentators considered that the common transport chapter might not be the only Treaty provisions on which external action might be based. Given the commercial character of many international maritime agreements, especially those dealing with market access, action might also be based on the Treaty provisions on its common commercial policy, in particular, Article 207 TFEU (ex 133). Indeed, given the evolutions in international trade and relevant international regimes, especially the former GATT, the Commission argued that trade in services, including maritime transport, had become an exclusive competence of the EU. Neither the Council nor the Parliament, which would have no right of prior consultation under the Art 207 TFEU (ex 133) agreed, leading to the CJEU being seized in the context of the conclusion of the General Agreement on Trade in Services (GATS) at the end of the Uruguay Round.159 97 In its Opinion 1/94,160 the CJEU did not support the Commission’s position. It agreed that given the evolutive character of international trade, trade in services should not be considered to fall completely outside the scope of Article 207 TFEU (ex 133). But it observed that services, analysed in the light of the structure of the Treaty, could not be treated as a single, homogeneous category. The cross-frontier provision of services not requiring the presence of anyone in the State where the service is rendered is to be contrasted with three other categories: services provided to a customer travelling to the State of the service provider, those rendered through a commercial presence in another State or through the presence there of natural persons. The first category could indeed be assimilated to trade in goods as it has similar characteristics, but the Treaty has specific provisions dealing with the free movement of persons, natural and physical. Accordingly, those matters could not fall within the scope of Article 207 TFEU (ex 133). They have to be dealt with under the specific Treaty provisions dealing with them. Transport, including maritime transport, having a specific chapter dedicated to the development of a common policy, including operations involving third countries, it could not thus be addressed on the basis of Article 207 TFEU (ex 133). 98 The CJEU also addressed the scope of the EU’s external competence based on the common transport policy, in the light of the doctrine that it first pro-

158 Power, EC Shipping Law (2nd ed., 1998), pp. 525. 159 Following the Lisbon Treaty, Parliament has acquired the right to co-decide with Council measures under the common commercial policy. 160 Rec. 1994, p.I-1.

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nounced in the AETR decision in 1971.161 It has further clarified the doctrine in subsequent judgements, most recently in a judgement concerning the continuing problem of the replacement of the Member States’ bilateral agreements on aviation services by measures compatible with the functioning of a single aviation market.162 In brief, the CJEU has held that the EU has an implicit external power to negotiate and conclude international agreements in the fields for which it has an internal regulatory competence. This power exists when, in order to achieve a specific EU objective, the negotiation of an international agreement is necessary. The power becomes exclusive whenever the EU has actually exercised its internal powers in relation to any international negotiation or agreement “affecting” the EU rules adopted on the basis of those powers. Accordingly, as the EU develops its internal policies, its external exclusive 99 competence automatically increases and the power of the Member States to act unilaterally shrinks. Moreover, the CJEU has emphasised that where the EU and the Member States both have powers in relation to a negotiation or agreement, for example, when they relate to an area in which the EU has adopted only minimum standards and some Member States have exceeded them, then the Member States and the EU have an obligation to cooperate in their approaches to the international arrangement in question. The AETR doctrine, given its dynamic, evolutive character, has played a very important role in expanding the external powers of the EU in the field of maritime transport and seems very likely to do so into the future. c) Early Success: Market Access to Maritime Services

However, to begin the story of the actual exercise of EU competence in the 100 maritime field at the beginning, one has to go back several decades in history. In sharp contrast to the other transport sectors, the basic EU policy on access to markets was settled relatively early, in part due to the decisions of the CJEU on the application of the general rules of the Treaty to transport and the Council’s duty to complete the internal market in transport services. The evolution begins in 1979 with Council Regulation 1954/79, allowing the UNCTAD Liner Code to enter into force in a manner compatible with EU competition law. This was notably done by excluding liner trades between developed countries altogether, assimilating companies established in any Member States to those formed under the laws of the others and providing for equitable sharing of cargoes between all EU companies engaged in a particular trade.

161 See further: Introduction to Chapter 4 ”EU Maritime Safety and Pollution Control “;; Commission v. Council, Rec. 1971, p. 263; see also Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 65; Craig/de Búrca, EU Law, pp. 309; Chalmers/Davies/ Monti, European Union Law, pp. 632. 162 Commission v. the United Kingdom, Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany; see for example Case 467/98, ECR 2002, I-9519.

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More fundamentally and generally, in 1986, Regulation 4055/86 established the directly applicable general rule that there should be in the future no restrictions on access to maritime transport services to and from both Member States and third countries.163 102 Existing restrictions, other than those compatible with the UNCTAD Code and certain narrow exceptions, were to be abolished within certain periods of time, the final deadline for complete liberalisation being 1 January 1993. The process of suppressing incompatible restrictions was not without its difficulties, particularly as regards those based on bilateral agreements with particular third countries, often former colonies. But it appears to have been successfully completed with no reports of complaints about substantial continuing barriers or discrimination. 103 The adoption and implementation of Regulation 4055/86 has meant that the EU has not encountered the difficulties that have arisen in other transport sectors, notably aviation, in maintaining a coherent and liberal trade policy in relation to third countries. It has also served as a solid basis for initiatives within the WTO and, more recently, as regards bilateral agreements to facilitate maritime transport and associated activities. For example, the agreement reached with China in 2002 covers freedom to provide services, access to ports and auxiliary services and co-operation with regard to the use of inland waterways.164 101

d) Again: Maritime Security Issues 104

The need to respond to increased security threats after 11 September 2001 has also provided the political momentum for the EU to address common concerns with interested third countries. Working groups have been set up to exchange information and better coordinate action with the United States, Japan, South Korea, China and Russia. Much of this work is necessarily not in the public domain. Additionally, the increasing number of acts of piracy and armed robbery at sea has led to the development of understandings of different kinds with coastal States in the regions concerned such as Somalia, Kenya and the Seychelles.165 However, the overall and longstanding success on market access and recent developments on security have not been accompanied by a similar success as regards all aspects of international maritime policy, especially EU action within international organisations, in particular, on maritime safety in the IMO.

163 See supra, section B.1. 164 A second negotiation was begun with India but has proved more difficult and was put on hold in 2011. Some have speculated that one factor has been issues concerning the free movement of seamen which have become particularly sensitive following the regulatory response to the events of 11 September 2001. 165 See further: Introduction to the Chapter on ”Security of Maritime Transport and Port Infrastructure Within the EU“, Chapter 5, I, and generally: Gathii, The Use of Force, Freedom of Commerce, and Double Standards in Prosecuting Pirates in Kenya, American University Law Review (59) 2010, pp. 130.

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e) Action and Inertia Within International Organisations

Over the last fifteen years and often spurred by tragic accidents in waters 105 close to European shores, the EU has adopted an increasing number of legally binding measures on maritime safety. The Commission catalogued around twenty such maritime safety measures, in force or close to adoption, in its 2002 Recommendation to the Council on the accession of the EU to both the International Civil Aviation Organisation (ICAO) and the IMO.166 Moreover, the EU has recently completed the maritime safety legal framework with a new series of measures, including one on flag State responsibility. Within the EU’s legal and political order, there has thus been a huge shift in power and responsibility over recent years from the individual Member States to the EU itself. But this shift has not been reflected by a commensurate change in the relevant arrangements and procedures in force at the international level, in particular, the Geneva Convention of 1948 creating the IMCO (since 1982IMO) or in that organisation’s rules of procedure, though some limited changes have made it somewhat easier for the EU to pursue its objectives through largely informal cooperation with the Member States. In 1974, the European Commission, as distinct from the EU (then: Communi- 106 ties) itself, became an observer within the IMO and since 1994 it has been receiving all the documents on the agenda of the IMO’s deliberative bodies, in particular its main committees: the Maritime Safety Committee, the Marine Environment Protection Committee, the Technical Cooperation Committee and the Legal Committee. On this basis, since 1994, the Commission has sought to coordinate action by the EU Member States on matters relevant to the EU, especially those affecting EU rules or the realisation of EU objectives concerning safety, the protection of the environment and the functioning of the internal market. It does so by discussing in advance with the Member States, especially the Member State currently holding the Presidency of the Council, the issues to be addressed in IMO meetings, their implications for EU rules and objectives and the positions consequently to be taken by the Member States’ and the Commission’s representatives in the IMO deliberations, formal and informal. Much of this activity is low key, behind the scenes and at working level, including meetings in Brussels as well as in London. The positions taken by EU delegations thus frequently reflect the results of this internal coordination process without any reference being made to the EU’s responsibility for issues falling within its exclusive competence. But this system, functioning primarily at official level, has its limits. Internal- 107 ly, it has significant weaknesses which can lead to some Member States expressing views and even taking positions in the IMO which do not correspond to the position which the EU should have taken as a whole if its internal decision making rules had been respected. In 2009, the CJEU (at the demand of the Commis166 SEC(2002)381 final, 9 April 2002.

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sion) condemned the Greek government for failing to respect its Treaty obligations by submitting a national position in an area falling within the exclusive competence of the EU under the AETR doctrine following the adoption of Regulation (EC) 725/2004 on the security requirements of SOLAS and the ISPS Code.167 Sometimes when such problems threaten to arise, particularly at a late stage, it can lead to last minute, and therefore rarely satisfying, discussions at higher levels within the Council, notably in the Committee of Permanent Representatives but even occasionally in the Council itself, to ensure that EU positions prevail or are at least preserved for the time being pending further consideration. 108 But on occasions such emergency procedures cannot be launched or completed in time or in any event simply fail to produce the desired result. In this regard, it is important to note that national administrations are not always tightly integrated or managed. The distribution of political and administrative power, unresolved divergence of views or simply poor communication can lead to incoherent positions being taken by different actors or levels of government. Largely informal coordination mechanisms at EU level are inherently unlikely to identify and address such problems on a consistent basis. As a result, EU action within the IMO is less effective than it might be and the EU does not always exercise the influence that it should on international discussions. It is also more open than it need be to “divide and rule” tactics from interlocutors seeking to exploit divergence of views and interests among its Member States. 109 The question of the proper role of regional regulators in the international rule making system for maritime affairs also merits comment in this connection. The proposition that, by reason of its global scale, maritime transport requires relatively uniform rules established at international level has been raised in many quarters to the level of a philosophical absolute. Indeed the EU, including the European Commission itself, pay repeated and not just verbal respect to the principle. On the other hand, from the outset, as described elsewhere, it has been obvious how important maritime transport is to the economy of the EU and to the realisation of its objectives. It has also been evident how important EU flagged or controlled vessels are as a percentage of the world’s fleet. 110 Finally, in recent years, the EU has been repeatedly exposed to the consequences of major accidents at sea. Some of those accidents were, at least in part, due to weaknesses in the design and functioning of the international regulatory system. In these circumstances, the shift in regulatory power from the individual Member States to the EU has sooner or later to be followed by an adaptation of the international rule making system. The capacity of the global regulatory system to deliver world-wide rules of sufficient uniformity depends to a significant 167 Commission v. Hellenic Republic, 45/07, ECR 2009 ECR I-00701; see Chapter 5, II. of this Brussels Commentary and generally Anyanova, The EC and Enhancing Ship and Port Facility Security, pp. 101, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008).

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degree on it being able to accommodate the objectives and concerns of the EU. If it does not do so, the chances are the greater that regional political pressures will produce regional solutions, as has been seen in the past with regard to both the United States and the EU. The coherence and completeness of the international framework depends in the longer run on adapting its structures and rules of procedure to accommodate the emergence of regional regulators with responsibility for maritime law and policy. f) International Organisations: Possible Next Steps

Already in 2002, the Commission proposed that the EU, given the extent of its legislation concerning maritime safety, should authorise the Commission to open and conduct negotiations with the IMO on the conditions and arrangements for EU accession, this requiring an amendment of the Geneva Convention. Unsurprisingly, this initiative has provoked some negative reactions within and outside the EU. Previous initiatives similar in kind in relation to other organisations have frequently been received initially in a similar way. The objections typically do not challenge the requirement under EU law that the Member States must not seek to act on matters falling within the EU’s exclusive powers, but must allow the EU to act on its own behalf. Given the extent and clarity of the decisions of the CJEU, they could hardly do so. The arguments instead focus on alleged practical and political disadvantages of the EU speaking with one voice, and especially through a single delegation, namely, the Commission. “Acting as a block”, it is said, will provoke similar behaviour by others and is incompatible with the technical character of the IMO’s work. Such arguments ignore the fact that States already often act as groups, formally and informally. This is especially true for world trade law where nations, including developing countries, have done so for decades. Also, there is considerable experience from other contexts of techniques to minimise possibly negative reactions, for example, coordinated interventions by Member States accompanied by low profile interventions by the Commission or the Member State holding the EU presidency. Initial disquiet tends to disappear as participants become accustomed to the new situation. As to the technical character of the proceedings, experience from elsewhere, for example, in the WTO and the FAO, also shows that EU participation is quite compatible with such proceedings provided the Commission is careful to equip itself with the appropriate expertise and is ready to mobilise the expertise of the Member States. The arrival on the scene of EMSA provides an excellent vehicle for the development and mobilisation of such maritime expertise at EU level. These arguments in fact mask other, less honourable, considerations. The Member States’ ministers and officials are often reluctant to give up their historical roles in favour of others. This is not only a question of function and associated prestige, though this should not be underestimated. A classical intergovernRobert Coleman/Henning Jessen

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mental environment, without clearly established rules and procedures for the exercise of EU competence, does give national delegations more room for manoeuvre to pursue particular national interests distinct from the common EU interest. This may seem particularly attractive if the outcome of the international proceedings will in practice determine or condition subsequent regulatory activity by the EU’s legislative institutions, including the Parliament. This risk of subversion of the EU’s institutional and political order is precisely one of the main considerations underlying the CJEU’s AETR doctrine. For the shipping industry, or important parts of it, which are still in a close relationship with their national maritime administrations, this kind of consideration can also be very important. The single market, including access to international trades, and a level playing field for competition has been largely achieved. The EU, and in particular the Commission, are often perceived essentially as a powerful regulator, possibly overly powerful. Accordingly, it makes a certain kind of sense to resist a further concentration of power in its hands at the international level. 115 The Commission’s formal proposal of 2002 marks the beginning of a political process which is unlikely in the short term to lead to a mandate for the Commission to negotiate the EU’s accession to the IMO. But experience in other contexts suggests that it will lead to changes in the way that the EU and its Member States handle matters within the IMO, especially in cases in which the EU has exclusive competence for relevant matters under the AETR doctrine. 116 Among the changes that are quite likely is recognition by the Council, possibly in the first place at the level of the Committee of Permanent Representatives rather than Ministers, of the extent of the EU’s competence and of the need for appropriate procedures to permit its effective exercise. This is likely to lead to changes in the way the EU’s Member States and its institutions conduct themselves within the IMO, though within the constraints of the Geneva Convention in its present form. One possibility, recently suggested by the Commission, is that the EU itself, rather than the Commission, would become a formal observer in the IMO, the Commission or the Member State holding the EU Presidency speaking on its behalf depending on the subject of discussion. This formula has been used successfully used in other contexts as a transitional device and would not require amendment of the Geneva Convention. 117 Developments in the IMO may well be influenced by events in other international organisations, not least the United Nations Forum on Climate Change (UNFCCC).168 Given the economic importance and highly political character of such discussions, the EU has already a fairly long history of developing and presenting common positions on the measures needed to reduce greenhouse gas emissions (GHG). Some of these have concerned the transport sector, including 168 See supra, section B. 5. and generally: Vladu/Hackmann, International maritime transport under the UNFCCC process, pp. 61, in: Asariotis/Benamara (eds.), Maritime Transport and the Climate Change Challenge (2012); Tsimplis, Marine Pollution from Shipping Activities, pp. 426, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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maritime transport. In the future more specific international initiatives may well be contemplated. In this connection, the EU has actively supported the development of an IMO monitoring, record keeping and verification regime (MRV) on GHG. However, via Regulation (EU) 757/2015,169 the EU has now unilaterally passed its own regional regime because the relevant global negotiations did not proceed as expeditiously as expected and whished by Brussels. g) Bilateral and Multilateral Relations: Future Steps in Transport

In 2009, the Commission announced that it intended to develop an action plan 118 to reinforce and develop Europe’s transport links with Africa.170 In early 2011, the Commission’s White Paper on a Single European Transport Area also indicated that the Commission intended to continue strategic and sectoral dialogues with major partners like the United States, Russia, China, Japan, Canada and Australia and extend them to Brazil, India and South Africa.171 It has also sought to renew its cooperation on transport with the few remaining neighbouring non-EU countries in Eastern Europe and within the context of the EU for the Mediterranean.172 Such contacts frequently permit legal convergence to be sought on current maritime issues like environmental protection and also to resolve conflicts and avoid misunderstandings. At the present time, however, they do not appear likely to produce major new developments.

169 See more details in Chapter 4, XIV. of this Brussels Commentary. 170 Commission Communication on Partnership between the European Union and Africa. Connecting Africa and Europe: working towards strengthening transport cooperation, COM(2009) 301 final of 24 June 2009. 171 COM/2011/144 final of 28 March 2011. 172 COM/2011/415 final of 7 July 2011; see also Treves, Law of the Sea in the European Union and in the Mediterranean, pp. 313 (at 315), in: Scheiber/Paik (eds.), Regions, Institutions, and Law of the Sea: Studies in Ocean Governance (2013).

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Jessen

Henning

II. EU Law and Inland Waterway Transportation A. The General Significance of Inland Waterway Transport . . . . . . . . . . . . . . . . B. The Pros and Cons of Inland Waterway Transport – A European Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Major Technical Parameters of Inland Waterway Transport . . . 2. The Realities of Inland Waterway Transport – Unbalanced EU Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. The Legal Framework of Inland Waterway Transport in Europe . . . . . . . . 1. Classifying the Network of European Inland Waterways. . . . . . . . . . . . 2. The European Vessel Identification Number (ENI) . . . . . . . . . . . . . . . . . . 3. The Codification of Rules for Inland Waterway Navigation and Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D. Traditional Regulatory Activities of Non-EU Bodies – The Central Commission for the Navigation of the Rhine (CCNR) . . . . . . . . . . . . . . . . . . . 1. Regulating the Transport of Dangerous Goods on Inland Waterways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Regulating the Safety of Navigation on Inland Waterways . . . . . . . . . a) The “Rules of the Road” (Police Regulations for Navigation) . . b) The River Information System (RIS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Technical Rules (Safety and Equipment) . . . . . . . . . . . . . . . . . . . . . . . . . . d) Rules for navigational personnel (RPN). . . . . . . . . . . . . . . . . . . . . . . . . . .

1 8 9 11 16 22 25 27 28 32 34 35 37 39 42

E. The Limitations of the Civil Liability Regime Applicable to European Inland Waterway Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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F. EU Regulatory Activity – The General Legal Framework . . . . . . . . . . . . . . .

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G. EU Policy Activity to Promote Inland Waterway Transport – “NAIADES I and II” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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H. Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Literature: Bieber/Maiani, Europäisches Verkehrsrecht (2015); Calvert, Inland Waterways of Europe (1975); European Commission, Guidance Document on Inland Waterway Transport and Natura 2000 – Sustainable Inland Waterway Development and Management in the Context of the EU Birds and Habitats Directives (2012); Donovan, Intermodal Transportation in Historical Perspective. Transport Law Journal 2000, pp. 317; EFIN, A new institutional framework for the European inland navigation (2004); European Commission, Guidance Document on Inland Waterway Transport and Natura 2000 (2012); ,European Commission, Towards quality waterway transport, Memo 13/771 (2013); Haulk, Waterways as Vital National Infrastructure (1998); Hilling, Transport and Developing Countries (1996); Hoeks, Multimodal Transport Law (2010); Klein, Die Kompetenz der Europäischen Union in Anbetracht der Schiffahrt auf Rhein und Donau (2004), KombiConsult GmbH/Intermodality Ltd./PLANCO GmbH/Gruppo CLAS S.p.A., Contract No. FV355/2012/MOVE/D1/ETU/SI2.659386: Analysis of the EU Combined Transport (2015); OECD, Inland Waterways and Environmental Protection (2006); Orlovius, 155 Jahre internationale Vorschriften der Zentralkommission für die Rheinschiffahrt, Binnenschiffahrt 1993, pp. 10; PINE (Promotion of Inland Waterway Transport), Prospects for Inland Navigation Within the Enlarged Europe (2004); Planco GmbH Verkehrswirtschaftlicher und ökologischer Vergleich der Verkehrsträger Straße, Schiene und Wasserstraße (2007); PLATINA, European Good Practices Report for Inland Waterway Transport (2011); Platz/Ruijgrok, Inland Waterways, pp. 160, in: Finger/Holvad (eds.), Regulating Transport in Europe (2013); Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313; Power, EC Shipping Law (2nd ed., 1998); Regner, Das Binnenschiffsverkehrsrecht der EG (2008); Riedel, Mannheimer Ak48

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EU Law and Inland Waterway Transportation te, Belgrader Akte und Europäische Union – Rechtsregimes im Wandel, in: Riedel/Wiese (eds.), Probleme des Binnenschiffahrtsrechts X – Vorträge der X. Mannheimer Tagung für Binnenschiffahrtsrecht. (2004); Scheele, Transport and Inland Navigation Policy of the European Union, Transportrecht 2009, pp. 139; Sriraman, Long Term Perspectives on Inland Water Transport in India, RITES Journal (January 2010); UNECE, White Paper on Efficient and Sustainable Inland Water Transport in Europe (2011); Tournaye, The CCNR: A Model of Stability Through Flexibility and a Strong Identity, The Journal of International Maritime Law (JIML) Vol. 21 (2015), Editorial, pp. 165; Vitányi, The International Regime of River Navigation (1979); Vogt, Die Binnenschiffahrt als zukunftweisender Verkehrsträger, in: Riedel (ed.), Multimodaler Transport und Binnenschiffahrt (2001) pp. 16; Woehrling, Chancen und Bedrohungen für die Rheinschifffahrt im heutigen Verkehrssystem und Rolle der Zentralkommission für die Rheinschifffahrt, Transportrecht 2009, pp. 141.

A. The General Significance of Inland Waterway Transport

Transporting goods and people on inland waterways by using motor vessels, 1 barges (i.e. flat-bottom displacement ships) and other floating craft is probably the oldest transportation mode man has ever utilised.1 In global terms, inland waterway transport has been characterised as “the natural mode” of transportation.2 Inland waterway transport is an alternative to other transport modes because it needs less energy and produces fewer emissions. Thus, this mode of transport is generally characterised by high capacities and a low environmental impact. However, and even though more than a 100 billion tonne kilometres are transported annually via EU inland waterways,3 it is remarkable that the overall potential of inland waterway transport is still significantly underutilised both within and outside Europe. For general cargo and container shipments arriving at sea ports, inland water- 2 way crafts offer great potential for a sustainable and environmentally-friendly switching of modes of transport. A well-functioning axis represented by the high-capacity Rhine waterway corridor in the hinterland of the so-called “ZARA sea ports” (Zeebrugge, Antwerp, Rotterdam, Amsterdam) with its dense network of inland waterway terminals accounts for more than 70% of the related interconnected container transshipments within the EU. In other EU regions, however, it is remarkable that this mode of transport is yet far from unlocking its full potential in modern supply chains. For example, less than 2% of all containers handled in the major German port of Hamburg are currently transshipped to

1 See generally Donovan, Intermodal Transportation in Historical Perspective. Transport Law Journal 2000, pp. 317 2 Hilling, Transport and Developing Countries, p. 38. 3 The European Commission refers to about 140 billion tonne-km per year, see: European Commission. Towards quality waterway transport. Memo 13/771 of 13 September 2013. Other recent data refers to 109 billion tonne-km per year in 2011, see: KombiConsult GmbH, Frankfurt am Main (Lead Partner), Intermodality Ltd, Lewes, PLANCO Consulting GmbH, Essen, Gruppo CLAS S.p.A., Milano, 2015. Contract No. FV355/2012/MOVE/D1/ETU/SI2.659386: “Analysis of the EU Combined Transport”, p. 82; hereinafter: „2014 Analysis of the EU Combined Transport“.

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inland waterway vessels for the transport to their final destinations (mostly in Eastern Europe) via the river Elbe. This underutilization results mainly, but not exclusively, from technical limitations of the inland waterway network which also has a negative impact on other potential hinterland services offered between other European sea ports (such as the port of Constanta) and along European inland waterways (e.g. the Danube). However, it is generally agreed that multimodal inland waterway terminals could offer immense opportunities for a sustainable and environmentally-friendly development of efficient interfaces between different modes within the transport chain. Thus, since 2006, the EU has initiated the “NAIADES” policy packages I and II („Navigation and Inland Waterway Action and Development in Europe”, discussed further below) to enhance the conditions for EU inland waterway transport “to become a quality mode of transport”. This sub-chapter of the Commentary analyses some general challenges faced by this EU initiative. Specifically, it takes into account the technical and commercial requirements to utilise this mode of transport in a more efficient way. Above all, the sub-chapter intends to highlight the multitude of both non-EU and EU legislation relevant for inland waterway transport. 3 More than 70% of the EU Members have inland waterways (both rivers and canals). A majority of the EU member states’ geographies include navigable rivers. In total, the arterial system of European waterways extends over almost 30,000 km. Two thirds of those are of international importance and about half of the system is (at least in theory) suitable for container transport.4 The five biggest EU sea ports in the EU are all connected to major inland waterways.5 4 Especially for the five land-locked EU members (e.g. Austria, the Czech Republic, Hungary, Luxembourg and Slovakia) the major European waterways such as the Rhine, the Danube and the Elbe rivers are the only direct access to the sea and/or to sea ports in neighboring states.6 Consequently, the commercial use of inland waterways can and, in fact, should be a vital part of these EU members’ transportation systems. This is also true for countries with major rivers and direct access to the sea, like the founding EU members Germany, France or the Netherlands. It is also a reason why inland waterway transport has already been subject to early EU legislation, mainly concentrating, however, on the functioning of the internal market.7

4 This was even true already in the 1970s,see Calvert, Inland Waterways of Europe (1975), p. 23. 5 European Commission. Towards quality waterway transport. Memo 13/771 of 13 September 2013. 6 For example, a bilateral treaty between Germany and the Czech Republic of 1929 (and concluded for a duration of 100 years, thus, until 2028) grants the Czech Republic the exclusive right (via a lease contract) to use an area of 30.000 m² within the port of Hamburg (the so-called “Vltava berth”). 7 See Power, EC Shipping Law (1998), pp. 126; Regner, Das Binnenschiffsverkehrsrecht der EG. p. 303.

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From a holistic point of view on transport policy, the biggest economic bene- 5 fits can be generated by integrated maritime transport and by diversifying the possible usage of different modes of transports in a multimodal setting. Consequently, it is now a strategic policy goal for the EU to reduce its dependence from segmented, unimodal transport – most prominently road transport – and to integrate the different modes of transports better, e.g., by implementing technical measures and regulatory steps within the internal market. On a global scale, a lot of different countries address this challenge in their domestic transportation policies as well, for example the United States8 or India.9 Ultimately, an integrated transportation strategy must include inland waterway and river transportation because this mode is the most economic, fuel efficient, environmentally-friendly and – in comparison with other modes – low cost transport mode. It is striking that the total external costs of inland waterway navigation (in terms of accidents, congestion, noise emissions, air pollution and other environmental impacts) are seven times lower than those of road transport.10 From a comparative point of view, the advantages of an environmentally- 6 sound and sustainable use of domestic inland waterways are quite impressive: – lower capital costs (about 5% to 10% of the cost of developing an equivalent 4-lane highway or railway); – lower maintenance costs (estimated to be about 20% of that of roads); and – lower fuel costs (inland water transport is a highly fuel-efficient mode of transport as it is estimated that one liter of fuel can move 105 tons / km as compared to 24 tons / km of freight by road and a more sustainable 85 tons / km by rail).11 This sub-chapter highlights the most important legal issues addressed by the 7 EU since 2006 to create and improve a modern inland waterway regime in Europe. Above all, this relates to the EU’s “NAIADES I and II” policy packages.12 8 See, for example, the proposed bill“Section 407: Reinvesting In Vital Economic Rivers and Waterways Act of 2013” as assigned to a congressional committee in 2013, i.e., not yet enacted in the US. 9 Sriraman, Long Term Perspectives on Inland Water Transport in India, RITES Journal (January 2010), at 18.4, see http://www.rites.com/rites-journal-2010/PDF/sriraman.pdf [lall stated internet links in this sub-chapter were last visited on 9 September 2015 unless otherwise indicated]. 10 See, e.g., the website of the European Commission, Mobility and Transport, Inland Waterways – What do we want to achieve?, available online at www.ec.europa.eu/transport/modes/ inland/index_en.htm; for comparative US data on the statistics of commercial use of inland waterways, see Haulk, Waterways as Vital National Infrastructure (1998), pp. 24. 11 For all data see Sriraman, Long Term Perspectives on Inland Water Transport in India, RITES Journal (January 2010), at 18.4; see also European Commission, Towards quality waterway transport, Memo 13/771 of 13 September 2013, referring to the fact that the CO2 emissions and fuel consumption of a large inland waterway vessel is only a third of those of comparable road transports. 12 See Communication from the Commission the promotion of inland waterway transport – “NAIADES” – An Integrated European Action Programme for Inland Waterway Transport, COM(2006)6, see: http://www.naiades.info/ and http://ec.europa.eu/transport/modes/inland/ promotion/naiades_en.htm.

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These EU policy packages apply to an interdisciplinary context of infrastructure policy, legal regulation and commercial realities. Complementary activities financed from NAIADES funds also contribute to identifying the overall legal framework in a more coherent way because this framework is intertwined with long-standing technical and policy challenges. Ultimately, there is still a legal fragmentation of inland waterway laws in Europe – this legal fragmentation has also been described as a “multilayered institutional landscape”.13 It is still true that inland waterway regulation is partly dominated by specific legal regimes for individual rivers, most prominently relating to the navigation of the Rhine, as discussed further below.14 Some technical baselines have to be drawn and some legal foundations must set the scene here. B. The Pros and Cons of Inland Waterway Transport – A European Assessment 8

The major European waterways can serve as general examples for some advantages and disadvantages of utilising inland waterway transport. The European Rhine corridor is probably the best example for the technical challenges and requirements of a modern inland waterway regime. The Rhine is responsible for over 50% of all inland waterway freight transport in the whole of the EU, in the area of combined transport it is even more than 70%.15 At the same time, for 200 years, the Rhine is traditionally subject to an intricate specialized legal regime. 1. The Major Technical Parameters of Inland Waterway Transport

In Europe, and possibly even globally, the Rhine basin is the most developed, maintained and utilised system for inland water transportation purposes. This has been confirmed by a recent independent analysis (financed by EU funds), identifying once more „the high-capacity Rhine waterway corridor in the hinterland of the sea ports of Zeebrugge, Antwerp, Rotterdam and Amsterdam (ZARA sea ports) [as being] the dominant transport route“.16 Additionally, the Rhine river areas are characterised by high population centers and major waterway density.17 Waterway transportation is mainly characterised here by the frequent use of high-technology push-tow systems. On the other hand, “industrial” inland waterways have been influenced heavily for decades by human activities including intensive navigation as well as habitat 13 UNECE. White Paper on Efficient and Sustainable Inland Water Transport in Europe. Geneva 2011, p. 37, available online at http://www.unece.org/transport/resources/publications/inlandwater-transport-publications.html. 14 See infra, sub-section D. 15 See: „2014 Analysis of the EU Combined Transport ” (note 3), p. 79. 16 See the „2014 Analysis of the EU Combined Transport ” (note 3), p. 74. 17 UNECE Doc. ECE/TRANS/SC.3/189 (“White paper on Efficient and Sustainable Inland Water Transport in Europe”), p. 23, available at: http://www.unece.org/fileadmin/DAM/trans/ doc/ finaldocs/sc3/ECE-TRANS-SC3-189e.pdf.

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modification by hydraulic engineering. The natural structure on many stretches of the Rhine and other big European rivers has been modified significantly, including: – depth and width of the rivers; – flow regimes; – natural sediment transport; – fish migration routes; – construction of dams and reservoirs; and – construction of dykes and irrigation networks.18 As a result, more than 80% of the arterial system of the European “commer- 9 cial waterways” are technically regulated and often altered – in length, depth and width – for various purposes (e.g. for flood protection and hydropower generation). Nevertheless, the general environmental appraisal of inland water transport is also broadly confirmed by an EU guidance document on this mode of transport, an earlier extensive OECD study in that particular policy area19 and other independent studies.20 However, in general terms, there still remain some disadvantages affecting the efficient use of rivers and navigable waterways. In cases where transportation of goods via the use of domestic inland waterways cannot be complemented by large capital-intensive investments in infrastructure, severe problems might generally created by technical and navigational challenges such as: – (still) insufficient depths throughout a stretch of (possibly connected) navigable waters and variability of capacity and range for inland waterway transport; – dependency on rainfall and its effects on river flow and water level;21 – excessive siltation in major rivers from erosion of uplands and deforestation; – reduced draft and navigation being relegated as a lower priority for human use (compared to other uses of rivers as a natural supply for drinking water, irrigation, and generating power); – lack of low draft high technology vessels; – lack of adequate navigational aids resulting in possible restricted manoeuvrability over longer periods of time;

18 See European Commission, Guidance Document on Inland Waterway Transport and Natura 2000, p. 25. 19 European Commission (2012), Guidance document on Inland waterway transport and Natura 2000, p. 6; OECD (2006), Inland Waterways and Environmental Protection, p. 92. 20 See generally Planco. Verkehrswirtschaftlicher und ökologischer Vergleich der Verkehrsträger Straße, Schiene und Wasserstraße. 21 This is even true for well-developed (industrial) rivers like the Rhine as prolonged drought, or floods from the melting Alpine snow have the capacity to cause interruptions to Rhine traffic. For a recent US example describing an imminent shutdown of commercial inland waterway shipping on the Mississippi river, see Lloyd’s List of 8 January 2013, p. 5 (“US pledges to keep the Mississippi River open”).

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–

lack of permanent terminal installations with adequate infrastructure for loading/unloading, storage etc. – lack of bulk commodities along the water front; – lack of return cargo on inland waterway routes.22 10 One parameter is of key technical importance: The least available depth of water in all navigable areas of rivers is the critical factor for navigation and craft size.23. The fundamental importance of the river depth is also evidenced by the link to maritime transport as some rivers, such as the German Elbe or Weser rivers serve as access areas to the major seaports of Hamburg and Bremen. However, the largest ocean-going vessels are only able to navigate to the berths of those seaports if the riverbeds are constantly altered by further deepening them. Apart from the river depth, other critical parameters (“bottlenecks”) for navigation and commercial use of rivers are the width of channels (possibly differing in different regional areas, including minimum width in narrow sections and possible width restrictions by wharves and bridge piers); river flow velocity; minimum bend radius; the ratio of the wetted cross-section to the mid-ship section of ships; and navigational restrictions (e.g. by lock gates, bridges which are relevant for the so-called “air draught”, underwater power cables or pipelines) sometimes caused by major accidents.24 In fact, a large inland waterway casualty – such as the “TMS Waldhof” accident on the Rhine in early 2011 – occuring at the wrong time and at a difficult position can cause massive disruption to commercial navigation.25 2. The Realities of Inland Waterway Transport – Unbalanced EU Statistics 11

States intending to utilize their domestic inland rivers and channels in a more coherent and integrated way have to be aware of all technical challenges as described above, in particular the constant costs involved with maintaining a modern inland waterway infrastructure. On the one hand, the overall costs may be lower as compared to maintaining all highways of a national economy, on the other hand still massive public investments are still needed. In sum, the existing technical, navigational and commercial challenges represent both positive and negative aspects of inland waterway shipping at the same time. Utilizing this mode of transport in a more efficient and coherent way definitely raises funding challenges, however, as part of “wise” infrastructure policies and investments 22 See explicitly for these technical impediments esp. Hilling, Transport and Developing Countries (1996), pp. 41-66. 23 See the „2014 Analysis of the EU Combined Transport ” (note 3), p. 160. 24 Ibid., p. 161. 25 The “TMS Waldhof” accident is a good example for the “achilles heel” of inland waterway shipping. The accident and the difficult location of the capsized vessel caused a temporary shutdown of commercial shipping on the Rhine. All in all, more than 400 inland waterway vessels were affected by three weeks of delays and congestion as a result of the casualty. On the regulatory impact of the accident see also a presentation available at http://www.ccr-zkr.or g/files/documents/eventdiscours/ 20110119_pauli_en.pdf; on the commercial impact see the „2014 Analysis of the EU Combined Transport” (note 3), p. 74.

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these challenges may also generate considerable return for national transportation systems. Generally, a lot of European rivers meet most of the criteria as described 12 above quite well as these riverways have been developed and maintained already for decades. Nevertheless, there are numerous local problems and it is quite striking that the sobering overall European transport statistics on inland waterway transport obviously document those problems.26 Inland waterway transport within the EU concentrates on a relatively small number of regional corridors and countries. Moreover, recent Eurostat statistics (collected under the auspices of Regulation EC/1365/2006)27 evidence that 12 out of 28 EU members do not even have a share of inland waterway transport in their “modal split”.28 The absence of this mode of transport may be a result of the unique geogra- 13 phy of some countries. For example, a small island country like Malta simply does not have commercially relevant inland waterways. But geographic constraints are not the sole explanation for all of those countries not having a domestic share of inland waterway transport. Five other countries (the Czech Republic, Italy, Poland, Finland29 and the UK30) have a rather minuscule share of inland waterway transport ranging below 1% of all domestic transports. Obviously, the mode could generally be utilized better but its potential is not being retrieved, especially taking into account heavy competition from road transport and railway services providers. On the contrary, the Netherlands (46.5%) and, notably, Bulgaria (30.5%) and Romania (29.3%) have the highest shares of inland waterway transport in their “modal split”.31 The highest freight numbers 26 Nevertheless, the „2014 Analysis of the EU Combined Transport ” (note 3), p. 81, refers to a “tremendous growth [of combined inland waterway/road volumes related to the development of Western sea ports] over the last 20 years“. 27 Regulation (EC) No 1365/2006 of 6 September 2006 on statistics of goods transport by inland waterways and repealing Council Directive 80/1119/EEC, OJ L/246/1 of 25 September 2006. 28 Eurostat. Modal Split of inland freight transport, 2012 (% of total tonne-kilometers), see http:/ /epp.eurostat.ec.europa.eu/statistics_explained/index.php/Freight_transport_statistics_-_modal _split. 29 The low digit for Finland, e.g., is rather surprising as this country has an existing network of almost 8.000 km of navigable waterways and two major inland waterway canals of international importance (the Saimaa Canal and the Saimaa Deepwater Channels); see: PLATINA (funded by the EU (DG-MOVE). European Good Practices Report for Inland Waterway Transport 2011, pp. 69, available at: http://naiades.info/downloads/. 30 Despite the low share of inland waterway examples in the UK, there are practical examples for the commercial use of this mode of transport, see, e.g., Lloyd’s List of 16 April 2013, p. 2 (“Kellogg switches cereal boxes fromroad to Manchester Ship Canal“); Lloyd’s List of 19 June 2012, p. 6 (“Making the Thames earn its keep”). 31 Eurostat. Modal Split of inland freight transport, 2012 (% of total tonne-kilometers), see http:/ /epp.eurostat.ec.europa.eu/statistics_explained/index.php/Freight_transport_statistics_-_modal _split. The numbers for Bulgaria and Romania can be explained by a good utilization of the river Danube. However, still in 1999, the Danube was characterized as ”the most underutilized transport artery of Central Europe“, see: Commission of the European Community – 4th Framework, Programme for RTD (1999). European Danube Transport Research (EUDET): Evaluation of the Danube Waterway as a Key European Transport Resource, Final Report,

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are being transported in total on the Dutch and the German sections of the Rhine. Especially, the Netherlands seeks to constantly improve the quality of its inland waterway transport sector by supporting innovative programs aiming to take off containers from the road to be transported by barges on “smart waterways” instead.32 14 Nevertheless, though some of the biggest EU ports – above all Rotterdam and Antwerp – have a rate of up to 30% transshipments from ocean-going vessels to inland waterway barges, the average of this sea/inland waterway transport transshipment rate is considerably lower. For example, in the major sea port of Hamburg, less than 2% of all imported containers are transshipped on the river Elbe. The river itself (i.e., its natural depth and width) would generally be suitable for commercial inland waterway transport and it is, in fact, used for shipments of commodities in bulk. However, the under-utilization of container transshipments adds significantly to notoriously congested roads in the affected regions. Some of the man-made deficits – mentioned generally before – have been identified throughout the European non-Rhine inland waterway network hampering the development of combined transport services.33 For instance, along the German canal network adjacent to the “high-performance Rhine”, low bridge clearances allow containers to be stacked only two-high. However, three-high stacking is regarded as the minimum for achieving competitive inland waterway container transport.34 15 All in all, the general transport rate of goods in EU-based inland waterways is only close to 7%.35 About 80% of all European goods are being transported via trucks on the roads and the rest of the overall share is being transported via railways. It can be inferred from these numbers that the environmentally-friendly and cost-efficient transport via inland waterways still has a lack of appreciation and needs more political promotion. With further investments in infrastructure and the use of more modern motor vessels and barges the overall transport capacity on Europe’s major waterways could possibly be increased by 50% (esti-

32 33 34

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Europäisches Entwicklungszentrum für die Binnenschiffahrt e.V. – Duisburg, Impetus Consultants Ltd. – Athens, Österreichisches Institut für Raumplanung, Vienna. For more information please refer to the information on the Dutch Ministry of Infrastructure and the Environment: http://www.rijkswaterstaat.nl/zakelijk/verkeersmanagement/idvv/. See generally: NEA/Panteia, PLANCO, via Donau, CE Delft, MDS Transmodal, Medium and Long Term Perspectives of Inland Waterway Transport in the European Union, 2012. See in particular: „2014 Analysis of the EU Combined Transport ” (note 3), p. 161: “As a result, bridge clearances need to be increased, a time-consuming and costly process, as experience from Germany shows. A clearance programme has been launched for the canal network, but it will take a long time to be completed. Again, waterway upgrades are difficult due to the limitation of public budgets and environmental concerns, as dredging to increase navigation depth is regarded to have a particularly adverse impact on the environment.“ Eurostat. Modal Split of inland freight transport, 2012 (% of total tonne-kilometers), see http:/ /epp.eurostat.ec.europa.eu/statistics_explained/index.php/Freight_transport_statistics_-_modal _split.

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mates for the Rhine) and even up to 80% (estimates for the Danube)36 but other rivers – such as the Elbe – should be part of the commercial growth strategy as well.37 However, within the EU, the instruments of transport policy and the overall legal framework have to contribute to achieving this growth objective. C. The Legal Framework of Inland Waterway Transport in Europe

The intricacies of the overlapping and sometimes even competing legal 16 regimes on inland waterway transport have already been described as a general drawback of this policy area.38 This may be true at least for the strategic ambitions of the European Commission. In 2004, a multinational expert group (the “European Framework for Inland Navigation”) stated in a report on the legal framework on inland waterway transport in Europe: “… this framework is neither strong enough to attract sufficient attention the political level to the problems of inland navigation nor to mobilise all the resources necessary to develop this sector. Moreover, the Group has noted the diverse, even dispersed, nature of structures, procedures and responsibilities which, despite existing coordination mechanisms, does not guarantee the implementation of regulatory instruments under the best conditions. The present state of integration of river transport consequently speaks out in favour of adapting structures with a view to greater unity.”39

17

By referring to a “diverse, even dispersed, nature of structures, procedures 18 and responsibilities” the expert group pointed to the six different and independent regulators of inland waterway shipping in Europe:40 One major source of law for European inland waterway transport regulation are the Resolutions and Publications of the Working Party on Inland Water Transport of the United Nations Economic Commission for Europe (UNECE). The UNECE’s strong role has primarily historic reasons stemming from the 19 era of the “cold war” and the separation of Europe into more liberal marketbased economies in the west and socialism-oriented countries in the East. In particular, the UNECE has already undertaken significant steps to harmonize technical, professional, safety-based and infrastructure-related matters of inland navigation in the whole of Europe.41 An earlier UNECE White Paper stated already in 1996 that there was no single inland navigation market in Europe (i.e. not re-

36 See UNECE Press Release of 11 October 2012 (“UNECE calls for increased use of the environment-friendly inland waterways“). 37 Estimates refer to general reserve capacities ranging between 5 and 300%, see Vogt, Die Binnenschiffahrt als zukunftweisender Verkehrsträger, in: Riedel (ed.), Multimodaler Transport und Binnenschiffahrt, p. 16. 38 See infra, the reference to the respective “multilayered institutional landscape” in Europe (at note 13). 39 EFIN. A new institutional framework for the European inland navigation, p. 9, available at http://www.ccr-zkr.org/13020200-en.html. 40 There are not less than four individual River Commissions in Europe (though with varying legislative powers), plus the UNECE and the EU itself. 41 See Platz/Ruijgrok, Inland Waterways, p. 177, in: Finger/Holvad (eds.), Regulating Transport in Europe.

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ferring to the (then) EC at the time).42 Instead this market and the legal framework for this mode of transport is – until today – composed of partly coordinated fragments based on different river basins and connecting canals. The rules governing the access to the market are equally fragmented and diverse. 20 The UNECE as well as the highly specialized river commissions for the Rhine and the Danube are powerful and traditional regulators for European inland water legislation. In particular, the legal regime for the river Rhine represents a second most important source of law for European inland waterway transport regulation. It is impossible for the EU to disregard the wide range of the pan-European work of the UNECE and the traditional “technical” influence of the river commissions on the regulation of inland waterway transport. 21 In fact, the “governance-relationship” and the cooperation between regulatory activity of the EU and these older specialized institutions is one of the key political questions for the future of EU legislation on inland waterway transport.43 Specifically, the question is whether cooperation and coordination of overlapping legal regimes could entail more than merely concluding intra-organisational administrative agreements.44 1. Classifying the Network of European Inland Waterways

For the purposes of this chapter and because of the possible application of different legal regimes, e.g. of transport law and environmental law, it is important to first draw a line between the commercial use of rivers and their other functions, e.g. as recreational spaces for the general public. For statistical purposes in Europe, the OECD understands “navigable inland waterways” to be waterways on which vessels with a carrying capacity of not less than 50 tons can navigate when normally loaded.45 In the US, a civil court took an even wider view characterizing “navigable waters” as those that are “capable of supporting commercial activity”, including even “potential commercial activity”.46 23 Though the background of the legal discussion in the US is largely a procedural one, it still evidences that only waterways which can be categorised in a commercial context are relevant for generic transport policy purposes in any legal order. Necessarily, states will have to tie this kind of categorization (or classification) into their domestic transport and finance priorities. In Europe (not on22

42 UNECE. White Paper on Trends in and Development of Inland Navigation and Its Infrastructure. Geneva 1996, Doc. TRANS/SC.3/138, para. 92. 43 See Riedel, Mannheimer Akte, Belgrader Akte und Europäische Union – Rechtsregimes im Wandel, in: Riedel/Wiese (eds.), Probleme des Binnenschiffahrtsrechts X – Vorträge der X. Mannheimer Tagung für Binnenschiffahrtsrecht. 44 The European Commission has concluded such an administrative agreement with the Central Commission for the Navigation of the Rhine (CCNR) providing for a systematic exchange of information, regular meetings to coordinate activities and according mutual observer status, see http://www.ccr-zkr.org/11040200-en.html. 45 OECD, Eurostat, Glossary for Transport Statistics, http://epp.eurostat.ec.europa.eu/statistics_e xplained/index.php/Glossary:Navigable_inland_waterway. 46 Aqua Log v. Lost & Abandoned Pre-Cut Logs & Rafts, 709 F. 3d 1055 (11th Cir. 2013).

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ly within the EU) this challenge is addressed in a wide sense – under the auspices of the UNECE – via the “AGN Agreement of 1996”.47 This agreement has identified and classified a network of European inland waterways and ports of international importance (“E waterways and ports”). The UNECE also publishes a regularly updated “Blue Book” to offer a tech- 24 nical inventory of existing and envisaged standards and parameters of E-waterways and ports in Europe.48 The “Blue Book” depicts the current inland navigation infrastructure parameters as compared to the minimum standards and parameters prescribed in the AGN Agreement of 1996. Moreover, and critically important form an integrated perspective, the UNECE’s “Blue Book” also identifies bottlenecks and missing links in the existing “E waterway network”. 2. The European Vessel Identification Number (ENI)

The first step of work on a general framework for inland waterway vessel reg- 25 istration was the “Convention on the Registration of Inland Navigation Vessels from 1965”.49 This Convention only came into force in 1982 and only six European countries have ratified it. It aimed at regulating the terms for the registration for inland vessels, for the transfer from one register to another and for the cancellation of a registration. In comparison to other rules, e.g., as codified by the general rules for the registration of ocean-going sea vessels in Art. 91 and 94 of the United Nations Convention on the Law of the Sea (UNCLOS), one of the early weaknesses of the 1965 Convention was the lack of legal rules for inland waterways vessel’s nationalities. This weakness and particularly the low number of ratifications is also a reason why the UNECE – as one of the key regulators of inland waterway transport – has, inter alia, negotiated and launched a unique European Vessel Identification Number (ENI).50 Since 1 April 2007 every vessel operating on European inland waterways 26 needs an ENI number. The ENI regime introduced an eight-digit number system (the first three digits represent a national authority and the following five digits stand for a serial) which is to be placed on the hull of the vessel. The ENI system is comparable with the IMO’s ship identification number referring to seagoing vessels above 100 gt (gross tonnes).51 It applies to all vessels which are more than 20 meters long and have more than 100 cubic meters in volume.

47 European Agreement on Main Inland Waterways of International Importance, UNECE Doc. ECE/TRANS/120/Rev. 3 of 19 January 1996. 48 The UNECE Inventory of Main Standards and Parameters of the Waterway Network, UNECE Doc. ECE/TRANS/SC.3/144/Rev. 2 (2nd ed., 2012), available online at http://www.unece.org/t ransport/resources/publications/inland-water-transport-publications/ 2012/blue-book/blue-boo k.html. 49 See for the text: United Nations Treaty Series (U.N.T.S.) 1982 (vol. 1281), pp. 111. 50 See UNEC Doc. ECE/TRANS/SC.3/172E, Res. 61, Recommendations on Harmonized Europe-Wide Technical Requirements for Inland Navigation Vessels (2006). 51 UNECE, Work of the Working Party of the Standardization of Technical and Safety Requirements in Inland Navigation (2006), pp. 2.

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3. The Codification of Rules for Inland Waterway Navigation and Competence 27

To give a third example of UNECE achievements, like road transport, also inland waterway transport needs some general accord on “the rules of the road” sincethe major European waterways expand over a number of different countries with different languages. While not every rule must be identical over the whole stretch of a waterway there have to be some common harmonised traffic rules. This is why the UNECE, in 1985, developed the European Code for Inland Waterways (CEVNI).52 CEVNI is based on the national regulations of the member countries and not only harmonised the different navigation rules but also the signs and signals on inland waterways (SIGNI).53 Every captain navigating a barge on European inland waterways must have passed a CEVNI test and needs an International Certificate of Competence (ICC) which is valid for five years. D. Traditional Regulatory Activities of Non-EU Bodies – The Central Commission for the Navigation of the Rhine (CCNR)

28

From a historic point of view, the single two most important acts regulating the European inland waterways are the Revised Mannheim Act of 1868 on Navigation of the Rhine54 and the Belgrade Act of 1948 on the Navigation of the Danube.55 The Rhine is Europe’s most important shipping “artery” since it is navigable from the North Sea to Switzerland and it has also been connected to the wider European continental river and canal network.56 As a result, the Rhine has been recognized as an integral part of Europe’s transport system.57 The following analysis will not address three other important European legal regimes, i.e. the local rules for navigation of the rivers Danube, the Moselle and the Sava River Basin.58 Nevertheless, regional rules for local regimes add to the legal complexity of European inland water transportation.

52 UNECE Resolution No. 24 on 15 November 1985; for more information see http://www.unec e.org/trans/main/sc3/sc3/sc3_ig/group_cevni.html. 53 UNECE Doc. ECE/TRANS/SC.3/108/Rev. 2. 54 Available online at http://www.ccr-zkr.org/files/conventions/convrev_e.pdf. 55 Available online at http://www.danubecommission.org/uploads/doc/convention-en.pdf. 56 The overall length of the Rhine extends over more than 1.200 km, accommodating eighteen waterway ports in four EU countries; see World Port Source (2005-2012), Rhine River Port Map, available at www.worldportsource.com/waterways/Rhine_River_215.php. 57 See Woehrling, Chancen und Bedrohungen für die Rheinschifffahrt im heutigen Verkehrssystem und Rolle der Zentralkommission für die Rheinschifffahrt, Transportrecht 2009, p. 141; BIMCO Seascapes: Does the Rhine River make a Difference?, available online at https://www .bimco.org/Education/Seascapes/Questions_of_shipping/2014_02_04_Does_the_Rhine_River _make_a_difference.aspx. 58 For more information on the other three regimes see, e.g., UNECE, White Paper on Efficient and Sustainable Inland Water Transport in Europe (2011), p. 38, available online at http://ww w.unece.org/transport/resources/publications/inland-water-transport-publications.html.

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Concentrating on the Rhine regime, the historic Revised Mannheim Act of 29 1868 represented already a very early but progressive concept for the navigation of the Rhine. Its updated versions still contain parts of the original rules.59 The key areas of the Revised Mannheim Act are: – freedom of navigation; – immunity from taxes; – equal treatment; – support for improvement of navigable waterways; – basic rules for the navigation of the Rhine.60 Three different organizations now regulate the navigational use and other ac- 30 tivities of the Rhine, specializing in navigation and safety provisions, environmental protection and other legal questions: Based on the Revised and Updated Mannheim Act,61 one of Europe’s oldest regulatory bodies – the Central Commission for the Navigation of the Rhine (CCNR, situated in Strasbourg) – regulates inland waterway transport on the Rhine for two centuries, celebrating its “bicentenary” in 2015.62 The CCNR traditionally guarantees a high level of safety for navigation of the river and its environment. The other two bodies are the International Commission for Hydrology of the Rhine Basin (CHR)63 and the International Commission for the Protection of the Rhine (ICPR).64 The following analysis will focus on the regulatory activity of the CCNR. In 31 contrast, e.g., to the regulatory regime for inland navigation of the Danube, the decisions of the CCNR are binding for the members of the legal regime (Belgium, Germany, France, Switzerland and The Netherlands). The member states also designated domestic courts as Rhine navigation tribunals with specialised jurisdiction over civil and criminal matters. There is also an option of appealing to the CCNR (or to the designated appellate court of the country where the initial judgment was handed down). 1. Regulating the Transport of Dangerous Goods on Inland Waterways

A good example for original regulatory activity of the CCNR – and subse- 32 quent interaction with other organisations – is the Regulation for the Carriage of Dangerous Substances on the Rhine. Already in 1838, the CCNR created its first rules for the transport of dangerous goods on the Rhine. These rules contained

59 For the text of the Revised Convention for Rhine Naviagtion see: http://www.ccr-zkr.org/files /conventions/convrev_e.pdf; the signatory states are Germany, Belgium, France, The Netherlands and Switzerland. 60 See: www.ccr-zkr.org/11020100-en.html. 61 The last major update to the Revised Mannheim Act of 1868 occurred in late 1963, for the consolidated text see: http://www.ccr-zkr.org/files/conventions/convrev_e.pdf. 62 See http://www.200years-ccnr.org/. Remarkably, the creation of the CCNR dates back to 5 August 1816, see further resources on the history and development of the CCNR at http://ww w.ccr-zkr.org/11010200-de.html. 63 For more information on the work of the CHR see http://www.chr-khr.org/. 64 For more information on the work of the ICPR see http://www.iksr.org/.

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general and standard provisions for the transport of substances like cannon powder and explosive materials on the Rhine. In 1971, the CCNR developed updated regulations for the transportation of dangerous goods, known as the ADNR.65 Later the ADNR was aligned to the respective regimes for road (ADR) and rail (RID) transport. At the CCNR, there is even a visible coordination with regulatory steps taken at the level of the International Maritime Organization (IMO).66 33 Aiming at common international regulations for the transport of dangerous goods on all European inland waterways, the UNECE joined forces with the CCNR and developed a new agreement on the carriage of dangerous goods on inland waterways (ADN) which entered into force in 2008.67 In 2011, the CCNR finally accepted the supersession of the ADNR by the ADN. Completing the regulatory picture, the EU had earlier launched Directive 2008/68/EC68 demanding from every EU member with inland waterways of international relevance to transpose the ADN requirements into national law by June 2011.69 As a result, the multi-layered legal framework has been aligned in this area but the EU had (only) a supporting role. In fact, the applicable rules for the river Rhine and its ancient but constantly updated regime are the legal foundation of EU inland waterway legislation.70 2. Regulating the Safety of Navigation on Inland Waterways 34

Of course, traditional regulatory areas for the CCNR were not only the carriage of dangerous substances but also traffic rules, a regime for river inspection and regulations for crew and staff. Some fundamentals of these technical rules are summarised in the next sections to give a first impression of the multitude of non-EU based regulatory activity in this area. Reference is also made to some complementary EU actions which mostly followed after the decisions of the UNECE and the CCNR.

65 The ADNR 1971 was based on the 1957 road-based Agreement on Dangerous Goods Regulations (ADR). It was a 600 pages detailed legal instrument containing requirements like a certificate of approval for every vessel that transports dangerous goods and also a certificate proving that one crew member has specialized knowledge of the regulations. 66 For example, in 2007 the CCNR introduced a phase-out scheme for single-hull inland waterway vessels able to transport toxic substances, the IMO had agreed on a comparable phase-out scheme for ocean-going oil tankers already some years before. 67 The convention was signed by Austria, Belgium, Bulgaria, Croatia, the Czech Republic, France, Germany, Hungary, Italy, The Netherlands, Poland, Romania, the Russian Federation, Slovakia and Switzerland, see www.unece.org/trans/danger/publi/adn/adn_history/ historical_info.html. 68 Directive 2008/68/EC of 24 September 2008 on the inland transport of dangerous goods, OJ L260/13 of 30 September 2008. 69 See www.ccr-zkr.org/12020400-en.html#02. 70 Woehrling, Chancen und Bedrohungen für die Rheinschifffahrt im heutigen Verkehrssystem und Rolle der Zentralkommission für die Rheinschifffahrt, in: Transportrecht 2009, p. 141.

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a) The “Rules of the Road” (Police Regulations for Navigation)

The origins of regulatory work on traffic rules applicable on the Rhine date 35 back to 1830. Common police regulations for navigation of the Rhine were adopted by the CCNR in 1850.71 This framework is now commonly known as the RPNR, i.e., the Police Regulations for the Navigation of the Rhine.72 It has also been a legal role model for later regulations, such as the UNECE’s CEVNI code. The general structure of the RPNR is separated into three parts, followed by additional Annexes with visualizations and examples for the “rules of the road”:73 – Part 1 (Chapter 1 to 8) covers general provisions and applicable rules for the whole Rhine. It handles the berthing, general “rules of the road” like crossing situations or sound signals on vessels, visual signs, marks, draught scales, tonnage sise and other provisions. – Part 2 (Chapter 9 to 14) provides special rules for particular sections of the Rhine and gives instructions to the navigating and berthing, maximum dimensions of vessels, the use of canal péniches on the upper Rhine and information about high water and low water issues. – Part 3 (Chapter 15) represents a rule on the protection of the river environment and rules for waste disposal. Over the years, the RPNR were amended on numerous occasions and have 36 been adjusted several times. b) The River Information System (RIS)

One major development was the establishment of a legal regime for informa- 37 tion on the use of the river (including the necessary equipment).74 The origins of this River Information System (RIS) date back to the 1990s. Its main objective is the establishment of a common transboundary river information system to enhance the safety and commercial attractiveness of inland waterway navigation as well as an improvement of the efforts to protect the river environmental, e.g. via traffic information about waste disposal points.75 The EU has played a more active supporting role in this context as it adopted 38 a specialised RIS Directive (2005/44/EC) utilizing also European research pro-

71 Orlovius, 155 Jahre internationale Vorschriften der Zentralkommission für die Rheinschiffahrt, Binnenschiffahrt 1993, p. 10. 72 See http://www.ccr-zkr.org/12020100-en.html. 73 The rules apply primarily to the masters as the ones having the responsibility to ensure that RPNR are observed. In this context, the master is under the supervision of the national water police authorities. 74 See Articles 4.05-4.07 and article 12.01 of the RPNR. 75 See www.ccr-zkr.org/12040200-en.html#04.

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grams.76 The implementation of the RIS directive now provides the technical requirements for the exchange of river information in the EU.77 c) Technical Rules (Safety and Equipment)

At a very early stage of the regulatory history, Articles 1 and 22 of the Revised Mannheim Act mandated the CCNR to establish technical rules relating to the safety and equipment of inland navigating vessels. The first regulatory framework came into existence here in 1905. Reacting to technological improvements these rules have been updated constantly until today. Accompanying Rhine Vessel Inspection Regulations (RVIR) have also been adopted. The RVIR set up technical requirements for inland waterway vessels, such as their stability and manoeuvrability as well as provisions on environmental protection and rules relating to safety of work.78 Each vessel navigating on the Rhine has to have a license from an inspection commission which confirms the technical requirements of the RVIR.79 The Rhine navigation license is accepted as a document of compliance in all other European waterway regions because it conforms to the highest technical standards. 40 In 2006, as another example of a follow-up and supporting act, the EU significantly updated an already existing Directive on technical requirements for vessels on inland waterways splitting up the European waterways in four different regions with different technical needs.80 This initiated a harmonisation of technical requirements for vessels on the Rhine and was accepted by the CCNR through an additional protocol in 2007 (Protocol 2007-II-21).81 41 To enhance the safety of navigation even further, in 2008, the CCNR amended Art. 7.06 RVIR, thus introducing basic technical requirements for AIS equipment (Automatic Identification System). This is another practical example for the correlation of safety concepts in maritime law and inland waterway legislation: Four years before, the AIS System had been introduced by the IMO to avoid collisions (see SOLAS Chapter V). The AIS provides the constant ex39

76 Directive 2005/44/EC of 7 September 2005 on harmonised river information services (RIS) on inland waterways in the Community, OJ L/255/152 of 30 September 2005; see also the Implementing Commission Regulations (EC) No 414/2007, 415/2007, and 416/2007; and RIS Portal, available at www.ris.eu/background/what_is_ris_/description. 77 See further: Panteia. Evaluation of RIS Implementation for the period 2006-2011 – Main Report and Country Reports, available at http://ec.europa.eu/transport/modes/inland/studies/inlan d_waterways_en.htm. 78 See, e.g., Art. 9.1 of the RVIR establishing a need for a special attestation for the usage of radar to demonstrate the professional knowledge of boat masters; see SPIN – TN, The Integration of European Waterways, Vers.1 (2004), p. 42. 79 See www.ccr-zkr.org/12020200-en.html. 80 Directive 2006/87/EC of 12 December 2006 laying down technical requirements for inland waterway vessels and repealing Council Directive 82/714/EEC, OJ L389/1 of 30 December 2006, later amended by Directive 2006/137/EC; see further Implementing Commission Directives: 2008/59/EC; 2008/68/EC, 2008/87/EC; 2008/126/EC; 2009/46/EC; 2012/48/EC; 2012/49/EC; 2012/64/EC; 2013/49/EU; and also Implementing Commission Decisions 2012/64; 2012/65; 2012/66/EU. 81 See http://www.ccr-zkr.org/12020200-en.html.

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change of information between vessels about their identity, current position, course, speed and other additional messages such as the type of cargo. It also has a commercial impact as it improves the use of infrastructure and the efficiency of terminals.82 d) Rules for navigational personnel (RPN)

The CCNR’s first step to regulate the competencies of the navigational per- 42 sonnel of inland waterway vessels was carried out in 1922 via the Rhine Patent Regulations. These Rhine Patent Regulations required a master’s certificate, medical fitness, a minimal age and the professional knowledge for the navigation of the Rhine.83 The certificate could be issued by any identified authority of the CCNR Member States and exist in four different types (relating to different navigational purposes on the river). In 2004, the CCNR established regulations for navigational personnel on in- 43 land waterway passenger vessels. However, overlapping regulatory areas with the RVIR and another applicable technical regulation (Point 23, “equipment of vessels with regard to manning”) triggered a new Resolution to streamline all elements in 2010. These new regulations for navigational personnel of the Rhine (RPN) have been in force since July 2011.84 The RPN is separated in three parts and different Annexes (A-D) covering 44 safety requirements for the personnel on board, manning requirements and working hours of crews and also the need of qualifications and licenses like the masters certificate. The CCNR has also harmonised the use of another masters certificate for the navigation of the Rhine (e.g. EU documents) if those are equivalent to the Rhine Patent.85 Notably, the EU had enacted a very early Directive in this regulatory field enabling the reciprocal recognition of navigability licenses for inland waterway vessels.86 E. The Limitations of the Civil Liability Regime Applicable to European Inland Waterway Transport

All of the topics mentioned above relate to a complex multitude of public law 45 aspects of inland waterway navigation. In fact, the complexity results to a large 82 See http://www.ris.eu/background/what_is_ris_/ais. 83 The Regulations applied to all commercial vessels with a minimum length of 20m, see: Single Market Inland Waterways, Complementary Actions in the Internal Waterways Market, p. 95, available at http://www.pikle.co.uk/eci/TransportPolicies.Ch7.pdf. 84 See http://www.ccr-zkr.org/12020300-en.html. 85 For background information see: Europe Economics Chancery House. Proposal for a Legal Instrument on the harmonisation of boatmasters certificates in Inland Waterway Transport, London 2009, p. 5; available at http://ec.europa.eu/transport/modes/inland/studies/doc/ 2009_harmonisation_of_boatmasters_certificates.pdf. 86 Council Directive (EEC) No 76/135 on reciprocal recognition of navigability licenses for inland waterway vessels, amended by Council Directive 78/1016/EEC modifying Council Directive 76/135/EEC.

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extent from international legislative activities of different regulators. Unfortunately, these activities are not all subject to reciprocity which is rather a decision made „topic by topic“. It has to be admitted that the above discussion is far from being complete when it comes to the legislative specifics of technical regulations for inland waterway traffic. However, to complete the picture of the general legal framework some private law aspects of European inland waterway transport have to be added as well not just because the creators of the private law framework are mostly identical with the initiators of the public law regulations. 46 The objective to also harmonise the private law rules for the carriage of goods by inland waterway dates back to 1959. At the time, the UNECE developed an early standardised contract for cross-border carriage of goods on inland waterways. However, this attempt did not attract enough attention and it failed. The establishment and modernization of further European waterways, most prominently the connection between the Rhine and the Danube (via the Main-Danube Canal) contributed to the creation of a new approach from 1993, initiated first by the Technical Committee for Inland Navigation Law of the Association for European Inland Navigation Waterways (VBW).87 47 A draft for a new convention was later submitted to the CCNR proposing to set up a conference in Budapest consisting of a group of experts of the UNECE, the Danube Commission and the CCNR. Ultimately, in 2000, these efforts led to the adoption of the Budapest Convention on the Contract for the Carriage of Goods by Inland Waterway (CMNI).88 This convention has now been ratified by 15 countries and entered into force on 1 April 2005. The European Economic and Social Committee had urged all EU members to ratify and implement the CMNI.89 As a result, the ratifying countries now include almost all riparian states. However, apart from the non-ratifications of the CMNI by Poland and Ukraine, a very notable exception is still Austria as it has not even signed the CMNI. Taking into account the importance of the river Danube for integrated multimodal transport in Austria this absence is surprising.90

87 See the internet presence of the VBW and the committee at http://www.vbw-ev.de/en/technical-committees/technical-committ/tc-water-transport-law.html. 88 The current ratification status of the CMNI and its text is, e.g., available at http:// www.unece.org/trans/main/sc3/sc3_legalinst.html; on the creation of the CMNI see also Hoeks, Multimodal Transport Law,, p. 226. 89 See para 7.4 of the Opinion of the European Economic and Social Committee “Towards a pan-European system of inland waterway transport”, OJ C 010 of 14 January 2004, pp. 49. 90 There is obviously some (informal) degree of pressure exerted by the European Commission on Austria not to ratify the CMNI, however, this cannot be confirmed officially and it also seems to be illogical. In a recent statement, the former EU Transport Commissioner Siim Kallas took a completely neutral position on the CMNI describing it as: “[..] an intergovernmental convention in which the EU is not involved. The Commission doesn't have the intention to propose legislative measures in these fields nor to take steps aiming the adherance of the EU to the Convention.”, see: Written questions by Members of the European Parliament and their answers given by a European Union institution, OJ CE 19/1 of 22 January 2014.

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It is also worth mentioning that – complementing the CMNI – there are also 48 two other agreements on civil liability for inland waterway carriers aiming to harmonise the pan-European legal framework for inland navigation: First, the Strasbourg Convention on the Limitation of Liability in Inland Navigation (CLNI) and, second, the private-based “Bratislava Agreement” of 1955/1968 covering general terms and conditions of international carriage of goods on the Danube (freight policies, general average, mutual assistance at accidents, harbour agency relations, transport of large containers, repairs). Since the CMNI entered into force in 2005, it is currently unclear whether an updated “Bratislava Agreement” will continue to have a noteworthy practical relevance for inland waterway shipping in the future. In contrast, and as a “CCNR-driven” instrument the CLNI will probably have 49 such a role in the future. Already in 1988, the CCNR had negotiated this instrument taking the London Convention on the Limitation of Liability for Maritime Claims (LLMC) as a legal role model.91 This is yet another example for a legal correlation between conceptual approaches in maritime law and inland waterway law. The original scope of application of the CLNI 1988 was limited to states which are connected to the Rhine and the Moselle. However, the CLNI has been revised in 2012 inter alia to update the liability limits limitation of liability reflecting an adequate compensation92 and to extend its scope of application to all European waterways.93 After the ratification of the CLNI by Serbia (2013) and Luxembourg (2014) the new instrument still needs two further ratifications to enter into force and to extinguish the “old” CLNI 1988. Turning back to the CMNI, only one of its unique legal elements can by anal- 50 ysed in more detail in the context of thissub-chapter, i.e., its scope of application. The requirements for the application of the CMNI is a cross border contract for the carriage of goods on inland waterways. More specifically, pursuant to Art. 2 (1) CMNI it covers “any contract of carriage according to which the port of loading or the place of taking over of the goods and the port of discharge or the place of delivery of the goods are located in two different States, of which at least one is party to the Convention.” In the case of a transport by sea transport, maritime law is only applicable if a maritime bill of lading has been issued or if the longer transportation distance has been covered by a sea going vessel (Art. 2 (2) CMNI). These terms are applicable independently of the home port, nationality, register place or classification of the vessel (Art. 2 (3) CMNI). 91 See http://www.ccr-zkr.org/12050400-en.html. 92 The limits of liability were doubled to a minimum of 400.000 SDR for personal injury and death claims and to a minimum of 200.000 SDR for other claims, see Art. 6 (1) d) of the CLNI 2012. The liability for injuries of persons of passenger vessels is 100.000 SDR (multiplied by the number of passengers) with no less than 200.000 SDR, see Art. 8 CLNI 2012. The CLNI 2012 also covers additional liability limits for claims involving the carriage of dangerous goods resulting in deaths or injuries with a minimum compensation amount of 10 million SDR, see Art. 7 (1) CLNI 2012. 93 Apart from the websites of the CCNR the text of the new CLNI 2012 is also available at http:/ /www.unece.org/fileadmin/DAM/trans/doc/2012/sc3wp3/ECE-TRANS-SC3-2012-inf04e.pdf.

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Thus, the CMNI only requires one of the mentioned places to be in a Member State. At first sight, Art. 2 CMNI seems to indicate an extensive scope of the instrument. The provision is clearly derived from the older conceptual approach to European road transport, i.e. from the CMR. However, the term “contract of carriage” in itself restricts the geographic scope mechanism: Art. 1 CMNI defines “contract of carriage” as “any contract, of any kind, whereby a carrier undertakes against payment of freight to carry goods by inland waterway.” The wording and the intention of the instrument strongly suggest that this has to be construed as a purely unimodal contract of carriage on inland waterways. Moreover, the CMNI’s creators are institutions solely concentrating on regulatory activities in the area of European inland waterway transport and navigation. It cannot be assumed that the UNECE, the Danube Commission and the CCNR did intend to interfere in the multimodal context. 52 Consequently, the CMNI is legally inapplicable to commercially-based intraEuropean inland navigation based on multimodal contracts (and performed technically by different sub-carriers).94 If an inland waterway carriage is performed on the basis of a single contract of carriage and this contract is also performed by other modes of transport it cannot by categorised as a “contract of carriage” under the CMNI regime. This is unfortunate. In fact, the CMNI is a modern and appropriate legal regime for cargo claims and other disputes involving inland waterway transport both from a perspective of establishing legal clarity in this area and from the perspective of inland waterway carriers.95 Ten years after the CMNI entered into force, national jurisprudence on the CMNI is now slowly evolving.96 However, in the overall framework of inland waterway legislation it is a conceptual weakness of the CMNI to adhere to a strict “all or nothing approach” as this concept hampers the effective legal integration of carriage by goods on inland waterways into existing contractual solutions available to multimodal transports. 51

94 See for further references: Hoeks, Multimodal Transport Law,, p. 226. 95 For example, Art. 16 (1) CMNI refers to a “diligent carrier” (having the opportunity to show that a loss was due to circumstances which could not have prevented and the consequences of which he could not have averted). Some national legal orders might be a little bit stricter on this. For example, § 426 of the German Commercial Code (HGB) relieves the carrier of liability only “if the loss, damage or delay in delivery was caused by circumstances which the carrier could not avoid even by exercising the utmost diligence and the consequences of which he was unable to prevent”. This seems to be the standard for an ideal inland waterway carrier and not just a diligent inland waterway carrier. 96 As evidenced, e.g., by two recent German appellate judgments, see Higher Regional of Düsseldorf, judgment of 26 February 2014 (file nos. I-18 U 27/12, 18 U 27/12); Higher Regional Court of Hamburg, judgment of 5 December 2013 (file nos. 6 U 194/10) this case has been reported and discussed in Issue 6 of 2014 of the German Journal “Recht der Transportwirtschaft”, pp. 239.

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F. EU Regulatory Activity – The General Legal Framework

So far the focus of the analysis has been set on the traditional legislative activities of non-EU bodies in the area of inland waterway legislation, the most prominent regulators being the CCNR and the UNECE. Their long-standing history of sector-specific regulation evidences that the EU (i.e. formerly the “Community”) often encountered already existing regional and compelling acts in the area of inland waterway legislation. In many cases, it made sense for the EU to confirm, support and stress the existing regulatory activities of the previous specialized legislative acts of the CCNR as well as of the UNECE as part of its own common transport policy (now Articles 90 to 100 TFEU).97 Consequently, the EU has not been ignorant to the regulatory activities – relating to this particular mode of transport – initiated outside of its realm. But obviously the focus of the EU’s common transport policy – especially until 1985 – has not been as intense in the area of inland waterway legislation as compared to other transport modes.98 Admittedly, the EU also faced difficult political challenges. However, from 1985 to 2000 an “internal market phase” was initiated which also covered more and more regulatory activity in EU inland waterway transport.99 In fact, the complete liberalisation of the EU inland waterway transport market was accomplished faster (in 1996) as compared to, e.g., the railway regime.100 All in all, in inland waterway transport regulation, the EU has adopted a constantly growing number of binding Regulations and Directives. The bulk of those legal acts have addressed the functioning and liberalization of the EU’s internal market. The EU did not interfere much with the River Commissions or the UNECE in this field because their regulatory activity has a larger impact in other areas. One of the most important historic acts was Council Regulation EC/ 718/99 on a Community fleet capacity policy to promote inland waterway transport, thus establishing an EU-fleet capacity policy.101 All in all, the most relevant EU acts on the liberalisation of the internal market are (in chronological order):

97 See a good overview of the aspects relating to inland waterway transport Bieber/Maiani, Europäisches Verkehrsrecht, pp. 135. 98 See Regner, Richard. Das Binnenschiffsverkehrsrecht der EG, p. 303, has identified this phase as a period of “stagnation”. 99 Ibid. 100 See Scheele, Transport and inland navigation policy of the European Union, Transportrecht 2009, p. 139. 101 Council Regulation EC/718/1999 of 29 March 1999 on a Community-fleet capacity policy to promote inland waterway transport , OJ L090/1 of 2 April 1999.

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Council Directive 96/75/EC on the systems of chartering and pricing in national and international inland waterway transport in the Community102 (as amended by Regulation EC/1882/2003);103 Council Regulation EEC/3912/92 on controls carried out in the field of (inter alia) inland waterway transport in respect of means of transport registered or put into circulation in a third country;104 Council Regulation EC/1356/96 on common rules applicable to the transport of goods or passengers by inland waterway between Member States with a view to establishing freedom to provide such transport services;105 Council Regulation EC/718/99 on a Community fleet capacity policy to promote inland waterway transport;106 as amended by Regulation EC/411/2003 (amending Regulation EC/805/1999)107 and as further amended by Regulation EU/546/2014;108 Council Regulation EC/169/2009 applying rules of competition to transport by rail, road and inland waterway.109 57 It could be included in the list of market-based measures that Regulation EU/ 1177/2010, a binding act to protecting the rights of passengers when travelling by sea also covers the rights of passengers when travelling by inland waterways (including even non-EU rivers).110 However, a real correlation of EU legislative action with the work of the CCNR and/or the UNECE is more evident in other areas. For example, on access to the profession the EU has over time adopted different Directives establishing the reciprocal recognition of national boat

102 Council Directive 96/75/EC of 19 November 1996 on the systems of chartering and pricing in national and international inland waterway transport in the Community, OJ L 304/12 of 27 November 1996. 103 Regulation EC/1882/2003 of 29 September 2003 adapting to Council Decision 1999/468/EC the provisions relating to committees which assist the Commission in the exercise of its implementing powers laid down in instruments subject to the procedure referred to in Article 251 of the EC Treaty, OJ L 284/1 of 31 October 2003. 104 Council Regulation EEC/3912/92 of 17 December 1992 on controls carried out within the Community in the field of road and inland waterway transport in respect of means of transport registered or put into circulation in a third country, OJ L 395/6 of 31 December 1992. 105 OJ L 175/7 of 13 July 1996. 106 As quoted above. 107 Commission Regulation (EC) No 411/2003 of 5 March 2003 amending Regulation (EC) No 805/1999 laying down certain measures for implementing Council Regulation (EC) No 718/1999 on a Community-fleet capacity policy to promote inland waterway transport OJ L 62/18 of 6 March 2003. Also relevant here was Commission Regulation EC/181/2008: Pursuant to the "old for new" rule, this Regulation established the special contribution rates for various types of vessels and laid down the parameters to be used for the calculations concerning the operation of the Community fleet capacity policy. 108 Regulation EU/546/2014 of 15 May 2014 amending Council Regulation EC/718/1999 on a Community-fleet capacity policy to promote inland waterway transport, OJ L 163/15 of 29 May 2014. 109 OJ L 61/1, 5 March 2009. 110 Regulation EU/1177/2010 of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004, OJ L 334/1 of 17 December 2010.

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masters’ certificates and harmonizing the conditions for obtaining national boat masters’ certificates: Council Directive 87/540/EEC on access to the occupation of carrier of goods by waterway in national and international transport and on the mutual recognition of diplomas, certificates and other evidence of formal qualifications for this occupation;111 Council Directive 91/672/EEC on the reciprocal recognition of national boat masters’ certificates for the carriage of goods and passengers by inland waterways;112 Council Directive 96/50/EC on the harmonisation of the conditions for obtaining national boat masters’ certificates for the carriage of goods and passengers by inland waterway in the Community.113 It has already been stressed that the EU has also reacted to the various safety 58 and technical requirements and the river information system (RIS) – as established earlier by the CCNR and the UNECE – with some follow-up Directives (and a number of updated implementing Commission Directives:114 Council Directive 76/135/EEC on reciprocal recognition of navigability licenses for inland waterway vessels,115 amended by Council Directive 78/1016/ EEC;116 Directive 2005/44/EC on harmonised river information services (RIS) on inland waterways in the Community117 (as amended by Regulation EC/ 219/2009);118

111 Council Directive 87/540/EEC of 9 November 1987 on access to the occupation of carrier of goods by waterway in national and international transport and on the mutual recognition of diplomas, certificates and other evidence of formal qualifications for this occupation, OJ L 322/20 of 12 November 1987. 112 Council Directive 91/672/EEC of 16 December 1991 on the reciprocal recognition of national boatmasters' certificates for the carriage of goods and passengers by inland waterway, OJ L 373/29 of 31 December 1991. 113 Council Directive 96/50/EC of 23 July 1996 on harmonizing the conditions for obtaining national boatmasters' certificates for the carriage of goods and passengers by inland waterway within the Community, OJ L 235 of 17 September 1996, as amended by Regulation EC/ 1882/2003 of 29 September 2003 adapting to Council Decision 1999/468/EC the provisions relating to committees which assist the Commission in the exercise of its implementing powers laid down in instruments subject to the procedure referred to in Article 251 of the EC Treaty, OJ L 284/1 of 31 October 2003. 114 In the following, specific sources for the Legal Acts of the European Commission are ommitted. 115 Council Directive 76/135/EEC of 20 January 1976 on reciprocal recognition of navigability licences for inland waterway vessels, OJ L 21/10 of 29 January 1976. 116 Directive 2009/100/EC of 16 September 2009 on reciprocal recognition of navigability licences for inland waterway vessels, OJ L 259/8 of 2 October 2009. 117 Directive 2005/44/EC of 7 September 2005 on harmonised river information services (RIS) on inland waterways in the Community, OJ L 255/152 of 30 September 2005; for further information see also http://www.ris.eu/background/parties_involved/eu_organisations. 118 Regulation EC/219/2009 of 11 March 2009 adapting a number of instruments subject to the procedure referred to in Article 251 of the Treaty to Council Decision 1999/468/EC with regard to the regulatory procedure with scrutiny, OJ L 87/109 of 31 March 2009.

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Directive 2006/87/EC119 laying down technical requirements for inland waterway vessels (amended by six other Directives between 2006 and 2009 and last supplemented by Commission Directives 2012/48/EU and 2012/49/EU); Directive 2008/68/EC on the inland transport of dangerous goods.120 59 In a wider context, the EU has also adopted two directives linking environmental standards to inland waterway shipping: Directive 2004/26/EC on the approximation of the laws of the Member States relating to measures against the emission of gaseous and particulate pollutants from internal combustion engines to be installed in non-road mobile machinery;121 Directive 2009/30/EC as regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas emissions;122 Council Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora.123 60 Notwithstanding the multitude of these EU legal acts, from a holistic regulatory point of view, a genuine EU policy in this area is still evolving. Rather, the summary of acts appears more like a legal patchwork fitting into the agenda of EU policy goals and often overlapping with the respective regimes of the CCNR and the UNECE.124 Moreover, there are still only some intra-organisational administrative agreements concluded between the EU and the River Commissions. In 2013, the European Commission has concluded such an administrative agreement with CCNR providing for a systematic exchange of information, regular meetings to coordinate activities and according mutual observer status.125 How119 Directive 2006/87/EC of 12 December 2006 laying down technical requirements for inland waterway vessels and repealing Council Directive 82/714/EEC, OJ L 389/1 of 30 December 2006. 120 Directive 2008/68/EC of 24 September 2008 on the inland transport of dangerous goods, OJ L 260/13 of 30 September 2008. 121 Directive 2004/26/EC amending Directive 97/68/EC on the approximation of the laws of the Member States relating to measures against the emission of gaseous and particulate pollutants from internal combustion engines to be installed in non-road mobile machinery, OJ L/ 146/1 of 30 April 2004; and Directive 2009/30/EC amending Directive 98/70/EC as regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specifications of fuel used by inland waterway vessels, OJ L/140/88 of 5 June 2009. 122 Directive 2009/30/EC of 23 April 2009 amending Directive 98/70/EC as regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specification of fuel used by inland waterway vessels and repealing Directive 93/12/EEC, OJ L 163/15 of 29 May 2014. 123 Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (as amended), OJ L 206/7 of 22 July 1992. for further information of this massive legal act see http://ec.europa.eu/environment/nature/legislation/habitatsdirective/index_en.htm. 124 See supra, introductory remarks to section C., in particular the gap analysis of the 2004 the “European Framework for Inland Navigation”. 125 See http://www.ccr-zkr.org/11040200-en.html.

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ever, there is still no binding treaty clarifying the relationship and competencies between the EU, third States and the River Commissions (as once envisioned but never realized in the early 1990s).126 However, in June 2015, a significant development was initiated since the CC- 61 NR adopted a resolution creating a “European committee for the elaboration of common standards for European inland waterway transport” (the “CESNI”).127 This reflects a further political and legal convergence of the work of the CCNR and the EU. G. EU Policy Activity to Promote Inland Waterway Transport – “NAIADES I and II”

As indicated above, the complete liberalization of inland waterway shipping 62 within the EU’s internal market has been achieved already for about twenty years. As a result of the EU’s enlargement after 2004, the largest parts of the Rhine, the Danube and the other major interconnected river corridors are now covered geographically by EU Members. At least in the opinion of the European Commission, it now seems outdated to still maintain different institutions and separated laws regulating effectively the same commercial activity.128 There is some merit to this view, at least the current situation results in a constant conservation of a legal status of fragmentation and it also means squandering scarce administrative and political resources. Instead of confirming existing acts the most recent EU decisions in inland waterway legislation tend to be more dynamic and supportive for the commercial providers of this mode of transport. Above all, the latest EU actions in the field of inland waterway transport are 126 See Bieber/Maiani, Europäisches Verkehrsrecht, pp. 156; even more extensively Klein, Die Kompetenz der Europäischen Union in Anbetracht der Schiffahrt auf Rhein und Donau, pp. 183. 127 CCNR Resolution 2015-I-3 of 3 June 2015, see also Tournaye, The CCNR: A Model of Stability Through Flexibility and a Strong Identity, The Journal of International Maritime Law (JIML) 21 (2015), Editorial, pp. 165. 128 See Commission Staff Working Document of 10 January 2008. Report on the impact assessment of proposals aiming to modernise and reinforce the organisational framework for inland waterway transport in Europe, SEC(2008)23, p. 13 (para. 2.4): “While the objectives (e.g. harmonised legislation) may still be achieved in the current framework, this will come at higher aggregate costs and within longer time spans than might be possible otherwise. Combining the efforts and resources of the different actors in a more institutionalised way might lead to a situation in which a more effective output can be achieved with the same amount of resources. Without major efforts to modernise of the framework, regulatory harmonisation between the different legal systems would continue to progress at a slow pace. Rather than on common rules, the regulatory environment would be based on mutual recognition of standards or legislation adopted under the respective legal framework and according to the relevant working methods of each individual organisation. The legal situation for navigation on the Danube would remain fragmented. The recognition of Community certificates for navigation on the river Rhine would continue to depend on four EU Member States and Switzerland. Consequently, market barriers would dissolve more slowly and the potential of the Internal Market in inland waterway transport would not be used to its full economic potential. [...]”.

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more tied into the general financial framework for establishing a Single European Transport Area.129 Since 2006, the focus of political attention within the EU has shifted to the (financial) promotion of inland water transport as being unique, indispensable and able to contribute significantly to the sustainability of the European transport system, as it represents the most environmentally-friendly mode of transport. For this purpose, the EU’s “NAIADES I” Action programme listed over 30 specific actions to promote inland navigation within the EU.130 63 In fact, via “NAIADES I”, the EU’s policy objectives for inland waterway transport were clearly set out in a comprehensive and coherent medium term action programme for the first time.131 In order to improve the competitiveness and attractiveness of inland navigation, “NAIADES I” tackled five major strategic areas, i.e.: – the improvement of market conditions (in particular, extending inland waterway transport services to new growth markets by improving access to capital by means of fiscal incentives); – the modernization of the fleet urging for more technical innovation in the sector; – the development of the “human capital”, (in particular, improving working and social conditions and guaranteeing mutual recognition of qualifications throughout the EU) – the strengthening of the image of the industry;132 and – infrastructure (in particular, eliminating bottlenecks at the rivers). 64 “NAIADES I” addressed not only the specialised agencies and organisations but all stakeholders, in particular the industry itself. This has definitely been one of the new elements of the EU’s strategic attitude in this policy area. According to the EU Commission many of the objectives of “NAIADES I” have now been finalised and the programme needed a follow-up to refocus the policy on the key issues of improving the economic and environmental performance of the sector. Thus, in its follow-up staff working document on “NAIADES II” of May

129 See the relevant White Paper of the EU Commission. Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system. Brussels, 28 March 2011, COM(2011) 144 final, see, e.g., a policy goal as stated in para. 35: “[…] stimulate the integration of inland waterways into the transport system and promote eco-innovation in freight transport”. 130 Communication from the Commission the promotion of inland waterway transport – “NAIADES” – An Integrated European Action Programme for Inland Waterway Transport, COM(2006)6, see: http://www.naiades.info/ and http://ec.europa.eu/transport/modes/inland/ promotion/naiades_en.htm [last access on: April 2015]. 131 Scheele, Transport and inland navigation policy of the European Union.Transportrecht 2009, p. 139. 132 One of the major innovations in the “image area” has been the establishment of the excellent information platform “PLATINA”, see extensive information at http://naiades.info/.

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2012,133 the EU Commission inter alia emphasised the need to strengthen institutional cooperation and international coordination in the field of inland navigation. This will mean further deepening the exchange with existing CCNR and UNECE expertise in a number of areas and the streamlining of regulatory frameworks. In sum, via “NAIADES II” the EU will raise the quality of EU inland waterway transport by: – further strengthening intra-organizational governance; – further harmonizing safety standards and education; – further increasing environmental standards; – further integrating inland waterway transport with other modes of transport; and – further harmonizing and modernizing professional qualifications. Some EU secondary legislation on inland waterways has already been updat- 65 ed accompanying the introduction of “NAIADES II”. The programme’s policy goals are now also tied into the wider institutional framework of the EU’s funding instruments such as the transport element of the EU’s Trans-European network framework (“TEN-T“)134 and other instruments, in particular the Connecting Europe Facility.135 To sum it up, more money is on the table for inland waterway transport. However, only time will tell whether the finance element will be the decisive factor in making both “NAIADES I and II” a success story of EU transport policy. H. Concluding Remarks

It remains doubtful, whether the EU will manage to overcome the diverse 66 (“dispersed”) nature of inland waterway regulation. Ultimately, it is highly unlikely that the Member States of the CCNR – including the non-EU Member State Switzerland – will agree on transfers of the traditional regulatory power of this River Commission to the EU, as such a step would restrain a tradition of more than 200 years of unlimited regulatory sovereignty of the CCNR. It is also unlikely that inland waterway transport will integrate better into multimodal transport chains and contracts in the future as long as the EU seems to ignore the existence of the CMNI and as long as the other stakeholder organisations do not think of a conceptual approach to multimodality (together with the EU). However, concentrating on its own institutional machinery, with “NAIADES 67 I and II” the EU has now truly initiated a comprehensive and coherent long-term 133 European Commission. Towards quality inland waterway transport – NAIADES II. Brussels, 10 September 2013, COM(2013) 623 final. The complete text is available online at http://ec.europa.eu/transport/modes/inland/promotion/doc/naiades2/com(2013)623_en.pdf. 134 See Decision No 1692/96/EC of 23 July 1996 on Community guidelines for the development of the trans-European transport network, OJ L/228 of 9 September 1996, p. 1. 135 Regulation EU/1316/2013 of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation EU/913/2010 and repealing Regulations EC/680/2007 and EC/ 67/2010, OJ L348/129 of 20 December 2013).

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action programme for the period of 2006 to 2020. This programme will also survive various changes in the staff composition of the European Commission. Thus, policy continuity has been secured and it is unlikely that the level of political attention will decrease significantly until 2020. 68 It could be criticised that the whole “NAIADES” framework is still kind of “blurry” and, all in all, it sets rather unambiguous targets to reach results. For example, the Commission has stated after “NAIADES I” that many of its objectives had been finalised. But this is difficult to evaluate specifically and a lot of physical and legal “bottlenecks” still remain. But definitely and as a first successful step, there has been significant improvement in changing the image of the inland waterway sector and informing the general public about its relevance. It is also most positive that the EU has now – via “NAIADES II” – interwoven inland waterway policy even more with other complex EU action levels, especially in the field of integrated infrastructure policy. With an overall budget of about 26 billion Euros available for the Trans-European transport networks, the integration of major EU inland waterways into this network will definitely create even more opportunities to remove existing bottlenecks and to achieve a status of high-quality and interconnected waterways. In fact, this is the overarching goal of the EU: Despite all environmental advantages of transporting goods and people via rivers, inland waterway transport within the EU is not yet a true quality mode of transport, relieving the roads noticeable from the problem of traffic congestion. However, all in all, European inland waterway transport is definitely on track to emerge as a “congestion beater” and to become such a quality mode in the future.

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Chapter 2: Fundamentals and Cross-Cutting Topics of Maritime Law and EU Regulation

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I. The EU and the Carriage of Goods by Sea under Private Law and EU Regulation A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The current Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Need for Reform?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Goods carried by multimodal Transport involving a Sea Leg . . . c) Transport Documents covering Goods carried partly by Sea. . . . d) Where next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Reform Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Preliminary Steps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The European Dilemma: to ratify or not to ratify? . . . . . . . . . . . . . . .

1 4 7 11 15 17 21 25 27 29 29 33 36

B. Interpretation of the Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Vienna Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Division between Civil Law and Common Law: Real or Illusory?

40 41 42

C. Scope of Application of the Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Geographical Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Choosing between different Versions of the Hague Rules . . . bb) The Nature of the Hague Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The “Internationality” Element under the Hague Rules . . . . dd) The Vita Food Gap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) International Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Contracting State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The Place of Issue of Bills of Lading: Trigger (a). . . . . . . . . . . . dd) Carriage from a Contracting State: Trigger (b). . . . . . . . . . . . . . ee) Clause Paramount: Trigger (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) The Requirement as to International Carriage . . . . . . . . . . . . . . . bb) Application of the Rotterdam Rules to Contracts covering the Carriage of Goods partly by Sea . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Conflict of Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Final Remarks on the geographical Scope of the Conventions . . 2. Exclusion of specific Types of Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Contractual and Documentary Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Volume Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Electronic Transport Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49 50 51 52 53 56 58 60 61 64 66 67 70 78 83 87

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88 91 101 104 104 109 111 112 113 120 125 130 135

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Chapter 2, I. D. The Legal Functions of Transport Documents in Sea Carriage Conventions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Obligation of Carriers to produce a Transport Document . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) The Type and Content of the Transport Document to be issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Representations and Reservations in Relation to the Goods b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) The Type and Content of the Transport Document to be issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Representations and Reservations in Relation to the Goods c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) The Type and Content of the Transport Document to be issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Representations and reservations in relation to the goods . . 2. Evidentiary Effects of Transport Documents . . . . . . . . . . . . . . . . . . . . . . . . . a) Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Provisions as to freight and demurrage . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Rights to Control and Delivery of the Goods under Contracts of Carriage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Delivery of the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Rights of the Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Transfer of Rights and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E. Carrier’s Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Definition of Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Actual Carriers and other Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Scope of Carriers’ Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Carriers’ Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Carriers’ Obligations as Regards the Ship . . . . . . . . . . . . . . . . . . . . . . . . aa) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) The Hamburg Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Carriers’ Obligations as regards the Goods . . . . . . . . . . . . . . . . . . . . . . aa) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) The Hamburg Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Carriage of Cargo on Deck. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Carriage of Live Animals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Non-Ordinary Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Basis of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Excepted Perils. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Deviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Contracting Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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137 139 142 142 146 158 158 162 164 164 166 168 168 172 175 176 187 196 201 202 204 213 213 214 216 220 221 221 225 228 230 230 234 235 238 242 245 246 247 247 248 250 252 257 258 265 266 268 269 273 274 276 277

The EU and the Carriage of Goods by Sea under Private Law and EU Regulation b) The Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Breaking the Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Global Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Notice of Claims and Time for Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. Time Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. Action for Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

278 279 281 284 287 288 293 294 299 300 302

F. Shipper’s Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Hague and Hague-Visby Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The Hamburg Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Other Duties of the Shipper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

303 304 307 308 312

G. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

Literature: Aikens et al, Bills of Lading (2006); Baatz et al., The Rotterdam Rules: A Practical Annotation (2009); Baughen, Shipping Law (5th edn, 2009); Beare, Liability regimes: where we are, how we got there and where are we going, Lloyd’s Maritime and Comercial Law Quarterly 2002, pp 306; Berlingieri, Revisiting the Rotterdam Rules, Lloyd’s Maritime and Commercial Law Quarterly 2010, pp 583; Berlingieri, The Hague-Visby Rules and actions in tort, Law Quarterly Review 1991, pp 18; Bridge, Benjamin’s Sale of Goods (8th edn, 2010); Chuah, Impact of the Rotterdam Rules on the Himalaya Clause: The port terminal operators’ case, in R. Thomas, Carriage of Goods under the Rotterdam Rules (2010); Clarke, Aspects of the Hague Rules, (1976); Cooke et al., Voyage Charters (4th edn, 2014); Czerwenka, The Proposal for a Reform of German Maritime Law, Hamburg Lectures on Maritime Affairs (2010); Debattista, Carriage conventions and their interpretations in English courts, Journal of Business Law 1997, pp 137; Debattista Delivery of the Goods, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation (2009); Debattista, Receipts Unknown – Retla clauses on the way out?, Shipping & Transport International, 2003, Vol.9, number 3, pp 4; De Wit, Minimal Music: Multimodal Transport Including a Maritime Leg under the Rotterdam Rules, in R. Thomas, Carriage of Goods under the Rotterdam Rules (2010); De Wit, Multimodal Transport: Carrier liability and documentation (1995); Diamond, The Hague-Visby Rules, Lloyd’s Maritime and Commercial Law Quarterly, 1978, pp. 225; Diamond, The Rotterdam Rules, Lloyd’s Maritime and Commercial Law Quarterly 2009, pp 445; Eder et al., Scrutton on Charterparties and Bills of Lading (22nd edn, 2011); E. Eftestøl-Wilhelmsson, The Rotterdam Rules in a European Multimodal Context, Journal of International Maritime Law 2010, 16, pp 276; Force et al., Admiralty and Maritime Law, Vol. 1 (2007); Frederick, Political Participation and Legal Reform in the International Maritime Rulemaking Process: From the Hague Rules to the Hamburg Rules, Journal of Maritime Law and Commerce 1991, 22, pp 82; Fujita, Report on UNCITRAL Convention on Contracts for the International Carriage of Goods wholly or partly by sea, CMI Yearbook 2007–2008, p. 277; Haak, The Netherlands, Transport Law, in M. Huybrechts Supplement 31 (February 2012); Hoeks, Multimodal Transport Law (2009); Honka, The legislative future of carriage of goods by sea: could it not be the UNCITRAL draft?, Scandinavian Studies in Law 2004, pp 106; Huybrechts et al., Belgium, Transport Law, in M.A Huybrechts (1994); Huybrechts, “Package limitation in modern maritime transport treaties: a critical analysis” Journal of Maritime Law and Commerce 2011, vol 17, pp 90; Katsivela, International Carriage of Goods: Ocean Carrier Liability and the European Union, European Transport Law (ETL) 2008, 43, pp 8; Legros, France, Transport Law, in M. Huybrechts, (Supplement 34, July 2012); Legros, Relations Between the Rotterdam

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Chapter 2, I. Rules and the Convention on the Carriage of Goods by Road, Tulane Maritime Law Journal 2011–2012, 36, pp 732; Lorenzon, Transport Documents and Electronic Transport Records, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation (2009); Mankabady, Comments on the Hamburg Rules, in S. Mankabady, ed., The Hamburg Rules on the Carriage of Goods by Sea (1978); Margetson, Liability of the carrier under the Hague (Visby) Rules for cargo damage caused by unseaworthiness of its containers, Journal of International Maritime Law 2008, 14, pp 153; Margetson, “Some remarks on the allocation of the burden of proof under the Rotterdam Rules as compared to the Hague (Visby) Rules”, in R. Thomas, Carriage of Goods under the Rotterdam Rules (2010); Mbiah, CMI Yearbook 2001, Part II – The Work of the CMI, pp 289; Mollmann, International Recent Developments: Denmark, Tulane Maritime Law Journal 2014, 38, pp 613; Moore, The Hamburg Rules, Journal of Maritime Law and Commerce 1978–79, pp 2; Mukherjee and O. Bokareva, Multimodal maritime plus: some European perspectives on law and policy, Journal of Maritime Law and Commerce 2010, 16, pp 221; Myburg, Uniformity or Unilateralism in the Law of Carriage of Goods by Sea? Victoria University of Wellington Law Review 2000, 31, pp 355; O’Hare, Cargo Dispute Resolution and the Hamburg Rules, International Comparative Law Quarterly 1980, 29, pp 219; Ozdel, Bills of Lading Incorporating Charterparties, (2015); Ozdel, Incorporation of Charterparty Clauses into Bills of Lading: Peculiar to Maritime Law? in M.A. Clarke, Maritime Law Evolving, (2013); Ozdel, Multimodal Transport Documents in International Sale of Goods, International Company and Commercial Law Review 2012, p 238; Ozdel, Presumptions on the law governing the forum selection clauses: Should the putative applicable law lead the way? Journal of Business Law (JBL) 2012, pp 357; Ramming, German Transport Law and its Effects on Maritime Law, International Business Lawyer 1999, July/August, pp 323; Reynolds, The Hague, the Hague Visby and the Hamburg Rules, Maritime Law Association of Australia and New Zealand Journal 1990, pp 16; Reynolds, Transport Documents under International Conventions, in R. Thomas, Carriage of Goods under the Rotterdam Rules (2010); Reynolds and Treitel, Carver on Bills of Lading (3rd edn. 2011); Rosaeg, Conflicts of Conventions in the Rotterdam Rules, Journal of International Maritime Law 2009, 15, 3, pp 238; Shaw and Tsimplis, The Liabilities of the Vessel, in Y. Baatz, Maritime Law (2nd edn, 2011); Staniland, Scope of Application, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation (2009); Sturley, The Legislative History of the Carriage of Goods by Sea Act and the Travaux Préparatoires of the Hague Rules (1990); Sturley et al., The Rotterdam Rules (2010); Sweeney, Uncitral Draft Convention on Carriage of Goods by Sea (Part I), Journal of Maritime Law and Commerce 1975–76, pp 64; Tetley, Marine Cargo Claims (3rd edn, 1988); Tetley, The Hamburg Rules – A Commentary, Lloyd’s Maritime and Commercial Law Quartely 1979, pp 1; Tiberg and Schelin, Transport Law – Sweden, in M. Huybrechts (Supplement 31, February 2012); Tsimplis, Limits of Liability, in Y. Baatz et al., The Rotterdam Rules (2009); Tsimplis, Obligation of the Carrier, in Y. Baatz, et al., The Rotterdam Rules: A Practical Annotation (2009); Werth, The Hamburg Rules Revisited – A Look at US Options, Journal of Maritime Law and Commerce 1991, pp 63; Wilson, Carriage of Goods by Sea (7th edn, 2010); Van Der Ziel, Multimodal Aspects of the Rotterdam Rules, CMI Yearbook 2009, pp 306; Von Ziegler et al., The Rotterdam Rules (2008).

A. Overview 1

The carriage of goods by sea has been the backbone of international trade since ancient times. This age-old yet sophisticated commercial activity remains to this day of importance to traders selling and purchasing goods across territorial borders for profit, as well as to governments seeking to increase their volume of international trade. Over the centuries, a great number of disputes between 80

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carriers and cargo interests have arisen. Depending on how the risks of sea carriage are allocated between the parties, it has been either carriers or cargo interests that have found themselves on the losing side of litigation or arbitration. Given that carriage of goods by sea is a “commercial” activity, non-shipping 2 lawyers might be forgiven for assuming that allocation of the risks of sea carriage is based on freedom of contract. Astonishingly for non-shipping lawyers, this specialist area of commercial law is largely regulated by a patchwork of different sets of mandatory rules contained in various international conventions and national legislation.1 Apart from those contracts where the parties are deemed to stand on an equal 3 footing, such as charterparties and similar contracts, contract provisions have little or no weight when determining the thorny “allocation” issue in the international carriage of goods by sea. In this chapter, the liability regimes within the European Union (EU) and European Free Trade Association (EFTA) member states will be discussed by reference to a number of practical issues, namely interpretation of the rules, the scope of application of the sea carriage conventions, the legal functions of transport documents, carriers’ liability, shippers’ liability, notice of claims and time for suit. For the purposes of addressing these issues, our main focus will be on the existing sea carriage conventions, namely the Hague, Hague-Visby and the Hamburg Rules, as well as the Rotterdam Rules,2 which may enter into force in the coming years. Prior to that, the historical background to the Conventions and current position within the EU and EFTA states will be addressed. The historical background will provide insight into the issues that influenced the manner in which the risks of sea carriage are now allocated between the cargo interests and carriers under the liability regimes. The discussions regarding the current position within the EU and EFTA states will explore the legislative framework, arguments for reform and the recent attempts at harmonisation. 1. The Historical Background

In the early years of international carriage of goods by sea, English 4 shipowners were dominant in international transport, and they had thus more bargaining power than shippers when entering into a contract of carriage.3 It was due to this inequality that English shipowners habitually started to insert exclusion clauses into their contracts of carriage to relieve themselves of all liabilities

1 Hereinafter these sets of rules will be collectively referred to as the “liability regimes”. 2 Hereinafter these sea carriage conventions will be collectively referred to as “the Conventions”. 3 F. Reynolds, The Hague, the Hague Visby and the Hamburg Rules, Maritime Law Association of Australia and New Zealand Journal (MLAANZ Journal) 1990, 7, p. 16.

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whatsoever.4 These exclusion clauses were valid under English law, and English courts upheld the carriers’ exclusion clauses in cargo disputes.5 5 Among the countries where international trade activities were mainly reliant on vessels furnished by English shipowners, the United States of America was the first to make a serious attempt at curtailing the carriers’ imposition of exclusion clauses. There, an attempt was made at a national level through the enactment of the Harter Act 1893.6 Under this Act, carriers were prohibited from excluding their liabilities where loss or damage to cargo was caused by the carrier’s failure to exercise due diligence in making the vessel seaworthy or in taking care of the cargo.7 To this end, exclusion clauses purporting to strip carriers of liabilities were rendered invalid. Following the Harter Act 1893, similar national enactments for the protection of cargo interests were introduced in many other countries, notably in Australia, Canada and New Zealand.8 6 These events brought about a polarisation of national laws governing international carriage of goods by sea. Problems became even more acute when carriers started to introduce forum selection clauses into their contracts of carriage to achieve resolution of disputes in the forum that they believed to be the most beneficial and convenient.9 In countries where cargo interests prevailed, carriers’ forum selection clauses were struck down due to public policy considerations.10 There were thus different national policies around the world. This

4 Ibid. 5 C.W. O’Hare, Cargo Dispute Resolution and the Hamburg Rules, International Comparative Law Quarterly (ICLQ) 1980, 29, pp. 219–220. Under the English common law of carriage of goods by sea, the “default regime” is strict liability, and carriers’ liability is subject to few exceptions. See G. Treitel and F.M.B. Reynolds, Carver on Bills of Lading, 3rd edn. 2011, pp. 593–595. In almost all cases, this default regime is displaced either by contract provisions or by the mandatory application of the Carriage of Goods by Sea Act 1971 (COGSA 1971), to which the Hague-Visby Rules are scheduled. 6 46 U.S.C. 190, et seq. In fact, the first legislation in the United States relating to this topic was the Fire Statute 1851, which was designed to give common carriers a restricted right to exclude their liability for losses arising from fire, J.C. Moore, The Hamburg Rules, Journal of Maritime Law and Commerce (JMLC) 1978–79, 10, 1, p. 2. 7 See 46 U.S.C § 190–191. The Harter Act 1893 remains in force and is still applicable where the US Carriage of Goods by Sea Act 1924 (COGSA 1924) does not apply to bills of lading. The former act applies to contracts for the carriage of goods between US ports and to the period when the goods are in the custody of a carrier before loading and after discharge of the cargo, 46 U.S.C. § 1312 and § 1307. See R. Force et al., Admiralty and Maritime Law, Vol. 1, 2007, p. 20. 8 See Carriage of Goods Act 1904 (Australia), Shipping and Seaman Act 2003 (New Zealand) and Water Carriage of Goods Act 1910 (Canada). 9 For more discussions on this topic, see M. Ozdel, Presumptions on the law governing the forum selection clauses: Should the putative applicable law lead the way? Journal of Business Law (JBL) 2012, p. 357. 10 Ibid. A good illustration of this is the legal position under US law prior to the U.S. Supreme Court decision in Vimar Seguros y Reaseguros v. M/V Sky Reefer, 1995 AMC 1817 (U.S. 1995).

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was obviously not in the interests of carriers: they were faced with different sea carriage rules in every country where they did business.11 a) The Hague and Hague-Visby Rules

Since this fragmented cargo liability was to the detriment of both carriers 7 and cargo interests, there was a pressing need to have an international sea carriage convention for the smooth running of international trade.12 In search of a global solution for the reconciliation of conflicting interests of carriers and cargo interests, lengthy negotiations took place under the auspices of the International Law Association and the Comité Maritime International.13 Eventually, the International Convention for the Unification of the Rules Relating to Bills of Lading, commonly referred to as the Hague Rules, was promulgated in 1924.14 The Hague Rules were the first international convention relating to the standardisation of the laws governing international carriage of goods by sea, and they were widely accepted.15 The rules can be considered as a great success.16 They provided a minimum and mandatory protection for cargo interests17 and struck a balance between the conflicting interests of carriers and cargo interests.18 However, a number of shortcomings in the rules were observed over the 8 years. The particular problems were in respect of the package and unit limitation, the legal position of carriers’ servants and agents towards cargo interests, the evidentiary functions of bills of lading and the scope of the application of the rules.19 The rules were revised by the Visby Protocol in 1968, and following

11 P. Myburg, Uniformity or Unilateralism in the Law of Carriage of Goods by Sea? Victoria University of Wellington Law Review (VUWLR) 2000, 31, pp. 355, 359. 12 O’Hare (fn. 5), pp. 221, 222. 13 For the discussions during the drafting of the Hague Rules, see M. Sturley, The Legislative History of the Carriage of Goods by Sea Act and the Travaux Préparatoires of the Hague Rules, 1990. 14 Although the Hague Rules officially entered into force in 1931, they came into effect in the United Kingdom through the enactment of the Carriage of Goods by Sea Act 1924. See Treitel and Reynolds (fn. 5), pp. 625–626. 15 At the time of their promulgation, the rules were highly criticised, most notably in the UK and the USA. See ibid, pp. 120, 624. See also M. Sturley, Changing Liability Rules and Marine Insurance: Conflicting Empirical Arguments About Hague, Visby and Hamburg in a Vacuum of Empirical Evidence, JMLC 1993, 24, p. 120. 16 See R. Aikens et al., Bills of Lading, 2006, Ch. 10, para. 10.8; A. Diamond, The Hague-Visby Rules, Lloyd’s Maritime and Commercial Law Quarterly (LMCLQ) 1978, pp. 225, 226. 17 By virtue of Article I(b) of the Hague Rules, the mandatory application of the rules are confined to “bills of lading or any similar document of title”. 18 The US Harter Act 1893 had a great impact on the allocation of liability in the Hague Rules, Diamond (fn. 16), pp. 225, 226. 19 Reynolds (fn. 3), pp.16, 19–22; Diamond (fn. 16), pp. 225, 228–231.

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this revision, became the Hague-Visby Rules.20 The Visby Protocol was adopted by many of the EU and EFTA member states.21 9 This attempt to address the flaws in the Hague Rules through the adoption of a protocol for alterations was perhaps a far better option than re-opening the discussions over the compromises on which the Hague Rules were founded.22 A radical change in the carriage rules was undesirable for many jurisdictions, particularly since the courts of the Hague states had, over the years, already clarified many questions on the interpretation of the Hague Rules.23 10 Although important, the changes brought about by the Visby Protocol were limited: a number of crucial issues, including the liability of actual carriers and independent contractors towards cargo interests,24 non-contractual claims of cargo interests and through carriage were again not covered.25 Some countries were dissatisfied with this simplistic approach, and the Hague-Visby Rules attracted criticism for being unsatisfactory in accommodating the needs of modern trade.26 b) The Hamburg Rules

The negative responses to the Hague-Visby Rules largely came from developing countries, where the rules were believed to tip the balance in favour of carriers.27 This prompted a search for a convention giving more protection to cargo interests.28 Shortly afterwards, steps were taken under the auspices of the United Nations Commission on International Trade Law (UNCITRAL) for a new carriage convention. After the drafting process, which arguably lacked the necessary discussions over the empirical analysis of shipping and trade practice,29 the Hamburg Rules were adopted in 1978. 12 The Hamburg Rules contain more comprehensive rules, allocating the risk of loss of or damage to cargo between cargo interests and carriers, as well as set11

20 The limitation amount provided under the package and unit limitation provision of the HagueVisby Rules was later replaced by the Protocol signed in Brussels in 1979 (the SDR Protocol). Under this protocol, the limitation was to be calculated on the basis of Special Drawing Rights, determined by the International Monetary Fund. Within the EU and EFTA states, parties to the SDR Protocol are Belgium, Denmark, Finland, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom. 21 For more details, see fn. 42. 22 Diamond (fn. 16), pp. 225, 228. 23 Ibid, p. 264. 24 See Article IVbis (2), which enables the carrier’s servants and agents (not being an independent contractor) to avail themselves of the defences and limits of liability which the carrier is entitled to invoke under the rules. 25 Diamond (fn. 16), p. 264. 26 J.C. Sweeney, Uncitral Draft Convention on Carriage of Goods by Sea (Part I), JMLC 1975– 76, pp. 69, 74. 27 Reynolds (fn. 3), pp. 16, 27–29. 28 D.A. Werth, The Hamburg Rules Revisited – A Look at US Options, JMLC 1991, 22, pp. 63, 64. 29 W. Tetley, The Hamburg Rules – A Commentary, LMCLQ 1979, pp. 1, 4.

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ting out a liability regime based on presumed carrier fault or negligence.30 The Hamburg Rules appear to be favourable to cargo interests,31 although some provisions in the rules are to the carriers’ advantage.32 A brief look at the Hamburg Rules suggests an improvement over the Hague and the Hague-Visby Rules in some respects.33 This can perhaps be best illustrated by reference to one of the main shortcomings of the Hague and the Hague-Visby Rules: the well-known actual carrier problem. The Hamburg Rules provide that all the provisions governing the responsibility of contractual carriers would also apply to actual carriers for the parts of the voyage that they actually performed.34 One of the other important advances of the Hamburg Rules was the express provision on through transport. The Hague and Hague-Visby Rules had no provisions on the effect of transhipment clauses seeking to relieve carriers of liability after transhipment. Such transhipment clauses would be invalid under the Hamburg Rules if the name of the on-carrier was not recorded in the transport document.35 As with the Hague and Hague-Visby Rules, the Hamburg Rules were not 13 free from controversy: the latter rules received even more criticism, especially from the major shipping and trading nations, thereby failing to provide a widely accepted replacement for the Hague and the Hague-Visby Rules. A variety of reasons lurked behind the objections: the rules were believed to tip the balance too much in favour of cargo interests, leaving carriers with more risks36 and

30 The Hamburg Rules, Annex (“principle of presumed fault or neglect”). 31 The key provisions favourable to cargo interests are, inter alia, those relating to the abolition of error in navigation (Art. 5.1), damages for delay (Arts 5.2 and 6.1.b), extended time bar (Art. 20.1), limitation of the carriers’ rights to enforce their forum selection clauses against cargo interests (Arts 21 and 22), extension of the carriers’ scope of liability to cover live animals (Art. 1.5) and all types of transport documents excluding charterparties (Arts 1.6, 2.1 and 18), and making the carrier’s obligation as to seaworthiness a continuous duty (Art. 5.1). 32 Some of the key provisions favourable to carriers are, inter alia, those relating to the extension of the scope of the rules to cover the non-contractual claims against carriers and their servants and agents (Art. 7.1 and 7.2), the almost unbreakable limitation of liability in favour of carriers and their servants (Art. 8.1 and 8.2) and the imposition of the burden of proof on cargo claimants in case of fire claims (Art. 5.4). 33 See fn. 31. 34 See Articles 1.2 and 10 of the Hamburg Rules. As with the Hague and Hague-Visby Rules, the Hamburg Rules are silent on the issue of independent contractors. Nonetheless, a brief reading of Article 7(2) of the rules suggests that independent contractors are left outside the protective sphere of the Hamburg Rules. The provision enables the servants and agents of carriers to rely on limitations and defences in the rules, provided they prove that they acted within the scope of their “employment”. 35 Article 11 of the Hamburg Rules. 36 As an example, see the wording under Article 5.1 of the Hamburg Rules, which would appear to provide a regime close to strict liability despite the express mention of the rule of presumed carrier fault or negligence; see fn. 30. See also Reynolds (fn. 3), p. 31. In contrast, some commentators took the view that adoption of the Hamburg Rules would have the effect of decreasing the carriers’ liability. See Tetley (fn. 29), p. 17.

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higher carriers’ insurance37 premiums.38 Also, the changes were significant, and they thus required not just an overhaul of carriers’ liability by the national courts, but also the painstaking process of adapting trade, shipping and insurance practices to the new circumstances.39 Another point of criticism was that the Hamburg Rules envisaged a severe limitation to carriers’ rights to enforce their forum selection clauses under transport documents on cargo interests. In many jurisdictions where parties were traditionally allowed to designate the forum for resolution of their disputes,40 this limitation was also highly objectionable. Finally, the Hamburg Rules were intensely criticised for not reflecting true commercial interests and for being driven by political motives.41 14 It would be difficult to argue that the entry into force of the Hamburg Rules was a step towards the promotion of harmonisation and certainty. The Rules failed to replace the pre-existing Conventions, namely the Hague and the HagueVisby Rules,42 and therefore brought about even more fragmentation to the international carriage of goods by sea. 2. The current Situation 15

A quick snapshot of the liability regimes within the EU and EFTA states suggests a relatively muddled picture: most states have either ratified the HagueVisby Rules43 or incorporated some44 or all45 parts of the Hague-Visby into their national legislation. Some of the states that ratified the Hague-Visby Rules also 37 If carriers are also shipowners, they normally obtain indemnity cover through a Protection and Indemnity (P&I) Club in order to protect themselves against cargo liabilities arising from carriage of goods on their vessels. 38 This so-called “insurance argument” does not actually provide a solid base for choosing the preferable set of rules from the carriers’ and cargo interests’ perspectives. This is particularly because freight rates are likely to increase as the carriers pay higher insurance premiums. For a thorough analysis of the impact of changing liability rules on insurance, see Sturley (fn. 15), p. 119 et seq. See also Reynolds (fn. 3), p. 32. 39 Reynolds (fn. 3), p. 32. 40 This is the case under English law; see The El Amria (CA) [1981] 2 Lloyd’s Rep. 119, where it was held that English courts would enforce the foreign jurisdiction clauses unless there are strong reasons for not doing so. See also The Eleftheria [1969] 1 Lloyd’s Rep. 237 and Donohue v. Armco [2002] 1 Lloyd’s Rep. 425. 41 D.C. Frederick, Political Participation and Legal Reform in the International Maritime Rulemaking Process: From the Hague Rules to the Hamburg Rules, JMLC 1991, 22, p. 82. 42 As of today, only 34 countries are signatories to the Hamburg Rules, five of which are EU member states, namely the Czech Republic, Hungary, Austria, Romania and Slovakia. 43 Belgium, Denmark, Finland, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Spain, Sweden, Switzerland and the United Kingdom are party to the Visby Protocol, see M. Katsivela, International Carriage of Goods: Ocean Carrier Liability and the European Union, European Transport Law (ETL) 2008, 43, pp. 8–9. 44 Although parties to the Hague Rules, Bulgaria, Portugal and Slovenia incorporated some of the Visby amendments into their national legislation. Estonia, a Hague state, applies SDR Protocol, see ibid. 45 Germany ratified the Hague Rules, but later fully incorporated the Visby amendments into its national transport law; K. Ramming, German Transport Law and its Effects on Maritime Law, International Business Lawyer 1999, July/August, pp. 323, 326. On 20 April 2013, Germany enacted a new Maritime Code.

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incorporated parts of the Hamburg Rules into their national legislation insofar as the Hague-Visby Rules permit.46 There are also a few states that are party to the Hague Rules47 and the Hamburg Rules.48 This diversity in the liability rules within the EU and EFTA states truly 16 reflects the position worldwide: the divergence between the international conventions and national laws on international carriage of goods. It is too soon to tell whether these disparate liability regimes will finally give way to a uniform liability regime within the EU and EFTA states, although it is rather unlikely that a worldwide standardisation will ever be reached. Nonetheless, the good news is that most states around the world have adopted either the Hague or the Hague-Visby Rules. Despite the differences in their application by the states, the Hague or the Hague-Visby Rules thus govern most of the bills of lading in practice, and this brings harmony to some extent to the international carriage of goods by sea. a) Need for Reform?

Undoubtedly, the current Conventions have lagged far behind economic de- 17 velopments and the major changes in shipping and trade practice. With the rise of container transport, traditional order bills of lading and carriage contracts for port-to-port shipments no longer dominate practice. In the wake of containerisation, not only freight forwarders and Non-Vessel 18 Operating Common Carriers (NVOCCs) but also shipowners sometimes extend their responsibility as a carrier to door-to-door carriage, i.e. to inland carriage at one or both ends of the sea leg. Commercial practice accommodates this type of multimodal carriage in two important respects. First, shipowners can obtain insurance cover from their Protection and Indemnity (P&I) Club, provided that they contract on terms no less favourable than the applicable compulsory national law or international unimodal conventions.49 Secondly, some standard form bills of lading are produced in hybrid form, enabling shipowners to assume liability either for the traditional port-to-port carriage or for multimodal carriage involving a sea leg.50

46 As in Norway, Sweden, Denmark and Finland, where the Nordic Maritime Codes apply. These states have implemented the Hamburg Rules into their systems to regulate domestic carriage and international shipments between each other insofar as this is permissible under the Hague-Visby Rules. See H. Honka, The legislative future of carriage of goods by sea: could it not be the UNCITRAL draft?, Scandinavian Studies in Law 2004, pp. 106–107. See also Chapter 13 of the Nordic Maritime Codes. 47 The Hague states within the EU and EFTA states are Bulgaria, Cyprus, Estonia, Malta, Portugal and Slovenia, with only Cyprus and Malta applying the Hague Rules in their entirety; see M. Katsivela, (fn. 43), p. 8. 48 Ibid. 49 See the report of the International Sub-Committee (ISC) of the Comité Maritime International (CMI), Issues of Transport Law, Yearbook 2001, p. 309. 50 See, for instance, Conlinebill 2000.

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The possibility of obtaining a contract of carriage for door-to-door carriage also brought diversity to the types of sale contract. The most recent version of the Incoterms rules, Incoterms 2010, contains various Incoterms rules regulating sale contracts whereby the point of delivery or the point of final destination or both are agreed to be an inland point.51 Insurance practice has also kept pace with these changes, as cargo interests can obtain cargo insurance covering the duration of multimodal carriage.52 The same is also true of banking practice under the Uniform Customs and Practice for Commercial Documentary Credits 600 (UCP 600): unless otherwise stated in the credit, the bank shall pay against multimodal transport documents if issued by or on behalf of a person assuming the responsibility of a carrier.53 Thus, unless the credit expressly provides otherwise, a multimodal transport document issued by or on behalf of a freight forwarder or other non-vessel owner as a carrier is acceptable.54 20 The existing Conventions on carriage of goods by sea fall short of responding to these changes. This is best illustrated when the geographical and documentary scope of the rules are considered. 19

b) Goods carried by multimodal Transport involving a Sea Leg

In terms of their geographical scope, the Conventions do not regulate contracts that, in addition to sea carriage, involve a different mode of carriage prior and/or subsequent to sea carriage.55 Whilst the mandatory application of the Hague and Hague-Visby Rules are confined to the well-known “tackle-to-tackle” period, the Hamburg Rules only slightly extend the carriers’ period of responsibility: beyond tackle-to-tackle, their responsibility merely extends to the periods during which they are in charge of the goods at the ports of loading and discharge.56 This being the case, the Hamburg Rules do not accommodate doorto-door carriage, where the goods are taken in charge outside the ports. 22 At this juncture, it is important to recall that multimodal carriage is not in a complete legal vacuum, although there is no uniform law on multimodal carriage. Hence, contracts for carriage of goods by more than one mode of transport are under the regulation of international or national mandatory instruments. In some European jurisdictions, cargo claims are determined by the network liability principle: on the basis of the applicable national law or the international uni21

51 See CIP, CPT and FCA terms in Incoterms 2010. 52 See Institute Cargo Clauses A, B and C, Article 8, the so-called “warehouse-to-warehouse clause”. Institute Cargo Clause A is an “all risks” policy, and therefore it covers all risks that are of fortuitous nature. See the English case of Noten BV v. Harding [1990] 2 Lloyd’s Rep. 283 (CA). Under CIF and CIP terms, it is sufficient for the seller to obtain insurance for cargo on the terms of Institute Cargo Clause C. 53 See Article 19 of the UCP 600. For the UCP 600 to apply, it must be expressly incorporated into letters of credit. 54 Ibid. See also M. Ozdel, Multimodal Transport Documents in International Sale of Goods, International Company and Commercial Law Review (ICCLR), p. 238 et seq. 55 See section C, note 49, below. 56 Article 4 of the Hamburg Rules.

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modal convention relevant to the mode of transport during which the loss or damage has occurred.57 In other jurisdictions, an international unimodal convention may only apply to the sub-contract made between the multimodal carrier and sub-carrier in relation to a particular leg of the multimodal carriage.58 At present, there is a proliferation of the law of multimodal carriage. Al- 23 though the courts tend to adhere to the network liability principle, be that a “pure”59 or a “modified” 60 network liability principle, this does not bring the desired harmonisation to the law of multimodal carriage. Just as with the position under the international carriage of goods by sea, the main hurdles are the divergence between the interpretations of the international unimodal Conventions by the contracting states61 and a proliferation of national legislation on EU transport law. In multimodal transport law, an additional layer of fragmentation is added by the differences in the way national courts determine the demarcation points between the Conventions.62 Despite the efforts of the international shipping associations to harmonise the 24 rules by promulgating standard form contracts for transport documents,63 the liability rules for multimodal carriage still remain fragmented. Many of the widely used standard form multimodal transport documents incorporate United Nations Conference on Trade and Development/International Chamber of Commerce (UNCTAD/ICC) Rules for Multimodal Transport Documents to create a uniform law for multimodal carriage.64 However, this only helps to a limited ex57 See M. Hoeks, Multimodal Transport Law, 2009, pp. 22–23. Under English law, this was endorsed by the English Court of Appeal decision in Quantum Corporation Inc. and Others v. Plane Trucking Ltd and Another [2001] 2 Lloyd’s Rep. 133. Among other European jurisdictions, a similar approach is adopted under Dutch law, see Article 8:14 of the Dutch Civil Code, Burgerluk Wetboek [BW]. 58 This was the case under the repealed German Maritime Code. See the decision of the German Supreme Court BGH 17 July 2009, I ZR 181/05 quoted in G. Van Der Ziel, Multimodal Aspects of the Rotterdam Rules, CMI Yearbook 2009, p. 306. The Dutch Court of Appeal also took a similar line in a decision dated 2 November 2004, S&S 2006, 117, quoted in Van Der Ziel, above. 59 See R. De Wit, Multimodal Transport: Carrier liability and documentation, 1995, pp. 138–142; Hoeks (fn. 57), p. 16. The pure network system is criticised for failing to provide a solution in cases where the cause of loss of or damage to cargo or delay in delivery cannot be attributed to one stage of the whole journey. As a solution, “the modified network system” provides for a uniform liability system to be applied to such cases. See E. Eftestøl-Wilhelmsson, The Rotterdam Rules in a European Multimodal Context, Journal of International Maritime Law (JIML) 2010, 16, p. 276. 60 See E. Eftestøl-Wilhelmsson, above. 61 For a good illustration of the significant differences between the interpretations of the member states, cf. the Quantum case (fn. 57) and BGH 17 July 2008, discussed in Hoeks (fn. 57), pp. 127–141. 62 Hoeks (fn. 57). 63 See especially the Negotiable Fiata Multimodal Transport Bill of Lading form and the Multidoc 95 form. Both these forms expressly incorporate UNCTAD/ICCRules for Multimodal Transport Documents (ICC Publication 481). Multimodal carriage is governed by these or similar contract terms, except in cases where an international Convention on carriage of goods mandatorily takes over. 64 These rules would appear to provide a “modified network” liability system; see Rule 6 of the UNCTAD/ICC Rules for Multimodal Transport Documents.

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tent: just as with any provision having merely contractual force, the provisions in the UNCTAD/ICC Rules give way to mandatory rules under the international unimodal Conventions and national laws on unimodal and multimodal carriage of goods. c) Transport Documents covering Goods carried partly by Sea

Leaving aside the Hamburg Rules,65 the Hague and Hague-Visby Rules only regulate contracts covered by transport documents described as “bills of lading or any similar documents of title”.66 Consequently, cargo interests holding a transport document that is not described as such have no protection under the latter rules, even in cases where they have no means of entering into the contract of carriage with the carrier on an equal footing. Given the wide acceptance of the Hague and Hague-Visby Rules worldwide, this limited scope has a significant impact: in practice various other types of transport document are used. 26 Although commercial practice has accommodated the use of multimodal transport documents in international trade, one question still begs an answer: can the multimodal transport documents be treated as bills of lading or any similar document of title? Many of the multimodal transport documents call themselves “bills of lading”, and it may be tempting to call a document a bill of lading when it simply says so in its heading. At present, suffice it to say that, in the absence of any guidance under the Conventions, the decision is left to the national courts of the contracting states.67 In the face of these uncertainties, use of standard form multimodal transport documents establishing a network system provides a safety net to cargo interests and carriers to some extent. 25

d) Where next?

Although commercial practice keeps pace with change, it does not prevent uncertainty arising from the complexity and proliferation of the law of multimodal carriage. Uniform rules for multimodal carriage would without doubt reduce the “friction costs” arising from claims settlements and judicial procedures,68 and this would render the European transport system more efficient.69 28 Whilst there is a need for uniform rules on multimodal carriage involving a sea leg, it must not be forgotten that this is also true of international carriage of goods involving sea carriage only. Carriage of goods wholly by sea still plays a vital role in international trade, especially in commodity trade, in which parties traditionally enter into contracts of sale on shipment terms. Thus, there is equally a need for harmonisation in the rules governing sea carriage. The Hague and Hague-Visby Rules, which receive the widest acceptance around the world, fail 27

65 66 67 68 69

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See Article 1 of the Hamburg Rules, under which the “contract of carriage” is defined. Article 1(b) of the Hague and the Hague-Visby Rules. See section A 2. b), note 21, above. See Hoeks (fn. 57), p. 13. Eftestøl-Wilhelmsson (fn. 59), p. 277.

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to address many issues, including the legal position of actual carriers and other maritime performing parties, as well as the proliferation of transport documents used in shipping, trade and banking practice. Given the complexities and challenges in attaining a uniform law on maritime-plus carriage, it would appear sensible for states to try first to reach a consensus to bring the mandatory rules governing sea carriage up to date. 3. Reform Efforts a) Preliminary Steps

After experiencing the failings of the Hamburg Rules, the CMI initiated steps 29 for a new legislative instrument on the international carriage of goods by sea. A sub-committee consisting of many experts was established within the CMI for the preparation of a draft instrument.70 The draft instrument was then prepared and discussed in February 2001.71 With some alterations, the draft was then presented to UNCITRAL, where a working group on transport law was established for the drafting of a new convention based on the draft instrument. It is worthy of note that the draft instrument went beyond the basic liability issues, regulating various other areas that were not governed by the Hague, Hague-Visby and Hamburg Rules. In particular, it took a bold step by addressing the vexed issues of delivery of the goods, rights of control and transfer of rights.72 As regards contracts for carriage of goods partly by sea,73 the draft instru- 30 ment introduced a “maritime-plus” solution based on “limited network liability”:74 it provided that, in the case of a contract for the carriage of goods partly by sea, the inland parts of the voyage would also be governed by the liability rules under the draft instrument.75 As an exception to this rule, where a unimodal Convention mandatorily governs the inland carriage, the liability rules in the draft instrument were not to apply to those parts of the voyage.76 Another significant feature of the draft instrument was the suggestion that 31 contracts similar to charterparties, such as slot charterparties and volume contracts, should receive different treatment than bills of lading. One suggestion was to give these types of contract the same treatment as charterparties and therefore to exclude these contracts from mandatory application of the rules. An70 For more details regarding the drafting process within the CMI see, K. Mbiah, CMI Yearbook 2001, Part II – The Work of the CMI, p. 289 and S. Beare, Liability regimes: where we are, how we got there and where are we going, LMCLQ 2002, p. 306 et seq. 71 See the CMI Draft Instrument on Transport Law, CMI Yearbook 2001. 72 Beare (fn. 70), p. 309. These issues are regulated under chapters 9, 10, 11, 12 and 14 of the draft instrument, see CMI Yearbook 2001, p. 532 et seq. The CMI draft instrument also contained provisions, inter alia, on electronic transport records and freight. 73 See Article 1.5 of the Draft Instrument, under which the contract of carriage was defined, CMI Yearbook 2001, p.536. 74 This was also described as the “minimal network liability” system. See Beare (fn. 70), p. 310. 75 See, in particular, Articles 4.2.1 and 4.2.2 of the draft instrument, CMI Yearbook 2001, pp. 547–548. 76 Ibid.

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other suggestion was to make such contracts subject to the rules as a default position and to give parties the liberty to derogate from the rules.77 Although opinion was divided, the draft instrument made it clear that some form of expansion of freedom of contract was necessary due to the changes in shipping practice: unlike the situation in the 1920s, sophisticated shippers with equal bargaining power were making arrangements with carriers other than in the form of charterparties. This suggested expansion of freedom of contract marked a drastic change in the attitude to harmonisation of the law governing contracts of carriage: the central concern of protecting the weak, which was the rationale behind the Hague and Hague-Visby Rules, shifted to the objective of striking a “fair” or “right” balance of risk between carriers and cargo interests.78 32 After receiving the draft instrument, the UNCITRAL working group on transport law had to make a number of important decisions: should the new convention be a unimodal or a maritime-plus convention? Should it be as comprehensive as the draft instrument, or should it regulate only the basic liability issues, just as with the Hague and Hague-Visby Rules? Given the rising concerns on striking the right balance, how was risk to be allocated between the parties? b) The Rotterdam Rules

Discussions on these and various other sensitive issues took almost a decade: on 11 December 2008, the United Nations General Assembly finally adopted a resolution relating to the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (The Rotterdam Rules), and on 23 September 2009, the rules were formally opened for signature. For the rules to enter into force, they would need to be ratified by at least 20 states. At the time of writing, the Rotterdam Rules have been signed by 24 states, only two of which have so far ratified them.79 34 As with the draft instrument, the Rotterdam Rules cover a wide range of topics: they go beyond regulating carriers’ liability, addressing notably the obligations of the shipper,80 delivery of goods,81 rights of the controlling party82 and transfer of rights.83 Furthermore, in line with suggestions raised in the draft instrument, the rules stretch the scope of carriers’ responsibility beyond tackle-totackle and port limits for the purposes of accommodating door-to-door carriage. 33

77 See the explanations under Article 3.2.1 of the draft instrument, CMI Yearbook 2001, pp. 544–545. 78 T. Fujita, Report on UNCITRAL Convention on Contracts for the International Carriage of Goods wholly or partly by sea, CMI Yearbook 2007–2008, p. 277. 79 Spain and Togo. 80 See Chapter 7 of the Rotterdam Rules. It must be noted that the existing liability regimes do contain express provisions on the liability of shippers but only in respect of dangerous goods. See Article IV/6 of the Hague and Hague-Visby Rules and Article 13 of the Hamburg Rules. 81 Chapter 9 of the Rotterdam Rules. 82 Chapter 10 of the Rotterdam Rules. 83 Chapter 11 of the Rotterdam Rules.

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Although their main ambit is sea carriage, the rules introduce the modified network solution in respect of carriage of goods prior and/or subsequent to sea carriage.84 Again following the suggestions in the draft instrument, the rules also expand freedom of contract in international sea carriage by introducing the volume contract exception. Parties to volume contracts are allowed to derogate from the rules to a certain extent,85 and these contracts are made subject to the rules as a default position.86 Finally, the rules contain provisions to facilitate the use of electronic transport records,87 adhering to the objectives originally raised in the draft instrument.88 Although based on the Draft Instrument, the Rotterdam Rules did not fol- 35 low all its suggestions. For example, unlike the Draft Instrument, the issues of freight89 and right to suit90 are not covered in the rules. The rules also have a different pattern than the Draft Instrument in that, with a set of 96 articles, they are even more comprehensive and ambitious than the Draft Instrument. c) The European Dilemma: to ratify or not to ratify?

Since the Rotterdam Rules have been opened for signature, they have been 36 much debated both in academic91 and industry circles. The rules have received firm support especially from the shipowners’ associations,92 whilst the shippers and freight forwarders’ associations have expressed strong opposition.93 The main points of criticisms have been the complexity of the rules, the volume con-

84 See Articles 26 and 82 of the Rotterdam Rules. 85 Parties are not allowed to derogate from “super mandatory” rules in the Rotterdam Rules, and their right to derogate is subject to a number of formal requirements, see Article 80 of the Rotterdam Rules. 86 Article 80 of the Rotterdam Rules. 87 Chapters 3 and 8 of the Rotterdam Rules. 88 Chapter 2 of the draft instrument. 89 Chapter 9 of the draft instrument. 90 Chapter 13 of the draft instrument. 91 Most notably, see Y. Baatz et al., The Rotterdam Rules: A Practical Annotation, 2009; A. von Ziegler et al., The Rotterdam Rules, 2008; M.F. Sturley et al., The Rotterdam Rules, 2010; A. Diamond, The Rotterdam Rules, LMCLQ 2009, p. 445 et seq. 92 This includes the European Community Shipowners’ Association (ECSA), the International Chamber of Shipping (ICS), the Baltic and International Maritime Council (BIMCO) and the World Shipping Council. These associations made a joint declaration in support of the Rotterdam Rules, available at https://www.bimco.org/en/News/2010/05/17_Press_Release.aspx (last accessed 11 May 2013). Also see the declaration of the National Industrial Transportation League at http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/NITL_ResponsePaper.pdf (last accessed 14 March 2014). 93 Most notably, see the position papers of the International Federation of Freight Forwarders Association (FIATA), the European Association for Forwarding Transport Logistics and Customs Services (CLECAT) and the European Shippers’ Council. The position papers are available at http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/FIATApaper.pdf, http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/CLECATpaper.pdf and http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/ESC_PositionPaper_Marc h2009.pdf (last accessed 11 September 2015).

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tract exception, the maritime-plus solution and finally the provisions on delivery of the goods, rights of control and transfer of rights.94 37 Despite the mixed reactions to the Rotterdam Rules, the European Parliament issued a resolution on 5 May 2010, urging member states to ratify the Rotterdam Rules.95 One might ask why such an active step was taken at the EU level, given that regulation of the international carriage of goods by sea has traditionally been left to the national laws of the member states. Probably, the answer is the EU’s increasingly active role in developing a common transport policy. By and large, these steps date back to the EU Commission’s first white paper on the future development of a common framework for sustainable mobility.96 Published in 1995, the white paper stressed the need for harmonisation of transport regulations and a common transport policy.97 This was followed in 2011 by the European Commission’s white paper on transport, which sets out the objectives for a single transport area.98 38 Time will tell whether the European objectives on harmonisation of the regulations on maritime and maritime-plus carriage will ever be reached and whether this will be done through the ratification of the Rotterdam Rules.99 Following the recommendation, the EU and EFTA states are now left to decide whether they should ratify the Rotterdam Rules. The crucial point here is that a number of factors, including the possible implications of the Rotterdam Rules on the state’s shipping, international trade, banking and insurance markets, come into play in the states’ decision-making process. To these factors, the likely impact of the Rotterdam Rules on the state’s overall legal system must also be added given the sweeping regulation of the maritime and maritime-plus carriage proposed by the rules. 39 With the passage of more than five years already since the Rotterdam Rules were opened for signature, it is doubtful whether the Rotterdam Rules will ever enter into force. Even more doubtful is whether the rules could replace the existing liability regimes, even if they did enter into force. The current position sug94 Ibid. 95 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:081E:FULL:EN:PDF (last accessed 11 May 2013). 96 White Paper “The Future Development of the Common Transport Policy – A Global Approach to the Construction of a Community Framework for Sustainable Mobility”, COM(92) 494 final. 97 Following the white paper, a number of different groups of legal experts worked on a solution for achieving the objectives, and they presented their proposals to the Commission. There are three main proposals submitted to the Commission, the 1999, 2005 and 2009 proposals. For more details, see Eftestøl-Wilhelmsson (fn. 59), pp. 278–280. 98 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52011DC0144:EN:NO T. 99 Noteworthy in this regard is the fact that the Rotterdam Rules enable the regional economic integration organisations, such as the EU, to ratify the Rotterdam Rules (see Art. 93). The question of whether the EU can ratify them boils down to the issue of EU competency, which must be resolved within the framework of EU law. For further discussions on this topic, see P.K. Mukherjee and O. Bokareva, Multimodal maritime plus: some European perspectives on law and policy (JIML) 2010, 16, p. 221 et seq.

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gests that, despite the European objectives, the liability rules for sea carriage may in the coming years be even more fragmented within the EU and EFTA states. Like Germany, which has recently opted for a national solution to bring their liability regime up to date,100 other member states may also choose to reform their national laws on carriage of goods by sea through national legislation. In Denmark, the Rotterdam Rules have recently been implemented by Amendment Act No. 618, which will come into effect if and when the Rotterdam Rules enter into force.101 Waves of reform at a national level would be highly undesirable, as they would bring back the same chaotic liability environment prior to the promulgation of the Hague Rules. B. Interpretation of the Rules

Ideally, after states have ratified a convention, courts of all the contracting 40 states would be expected to adopt a consistent and uniform method of interpretation of the convention. This expectation – as will be seen below – can never be met in the real world, but is understandable given the rationale for international conventions: to reach international uniformity of approach in a certain field. 1. The Vienna Convention

The desire for harmonisation in the interpretation of international conventions 41 led to the promulgation of the Vienna Convention on the Law of Treaties in 1969 – a convention which has to date a large number of signatories around the world and which entered into force in 1980. Under Article 4, the convention is stated to be applicable only to treaties102 concluded by states after the entry into force of the Vienna Convention. This does not, however, create a division between the interpretations adopted prior to and after 1980, for the principles of interpretation provided in the convention are generally viewed as part of the preexisting customary international law.103

100 See the Fourth Chapter of the Fifth Book of the new German Commercial Code. For an overview, see B. Czerwenka, The Proposal for a Reform of German Maritime Law, Hamburg Lectures on Maritime Affairs 2010, p. 55 et seq. 101 See A. Mollmann, “International Recent Developments: Denmark” Tulane Maritime Law Journal (TMLJ) 2014, 38, pp 613 et seq. 102 The Vienna Convention uses the word “treaty” throughout the text. Under Article 2(1)(a), “treaty” is defined as “an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation”. The provision suggests that carriage conventions clearly come under the “treaty” as defined therein. 103 Fothergill v. Monarch Airlines [1981] AC 251 at 282 (HL), per Lord Diplock.

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2. Division between Civil Law and Common Law: Real or Illusory?

The Vienna Convention reflects the aids to construction, which are already acknowledged and applied both in the common law and civil law world.104 If there are common aids to construction, could there be a division between civil law and common law interpretations? As the observations below will show, there is indeed a clear division. 43 In relation to the interpretation of international conventions under English law, Burton J in The Limnos said: 42

… what the court is seeking to do is to deduce the ordinary meaning of the words used … by reference broad and generally acceptable principles of construction rather than a rigid domestic approach and without English law preconceptions … and consistently with the evident object and purpose of the Convention …105

44

The rationale for avoiding rigid domestic approaches was echoed in the much-cited speech of Lord Wright in Stag Line v. Foscolo Mango.106 There, on the interpretation of the words “reasonable deviation” under Article IV/4 of the Hague Rules, his Lordship said: It is important to remember that the Act of 1924 [The Hague Rules] was the outcome of an International Conference and that the rules in the Schedule have an international currency. As these rules must come under the consideration of foreign Courts, it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation.107

45

In light of these observations, it is true to say that the English common-law method of interpretation of conventions is literal and purposive.108 Noteworthy in this regard is the fact that English courts have repeatedly taken a purposive approach whilst interpreting international conventions relevant to carriage of goods.109 They have done so especially in cases where adoption of a literal interpretation would lead to the “evasion of the evident (emphasis added) purpose of the convention”.110 When ascertaining the evident purpose, the courts

104 105 106 107

See the decision of Fothergill v. Monarch Airlines, above. See also Hoeks (fn. 57), p. 109. The Limnos [2008] 2 Lloyd’s Rep. 166 (QBD), p. 168. [1932] AC 328 (HL). Ibid, p. 350. For a similar line of thinking, see the obiter view of Longmore LJ in The Kapitan Petro Voivoda [2003] 451 (CA), para 14. 108 C. Debattista, Carriage conventions and their interpretations in English courts, JBL, 1997, p. 137. 109 Ibid. See also the decisions in Pyrene v. Scindia [1954] 2 QB 402 (QBD) and in Renton & Co. Ltd. v. Palmyra Trading Corp. of Panama [1957] AC 149 (HL), both of which are also based on purposive interpretation. The obvious risk in adhering to the purposive interpretation is that it may in some cases go so far as to undermine entirely the literal meaning of the provision, as was the case in The Jordan II [2005] 1 Lloyd’s Rep. 57 (HL). 110 The Morviken [1983] 1 AC 565 (HL), per Lord Wilberforce, pp. 572–573.

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have frequently spoken of the historical background to the Conventions,111 although this has not always proved a useful guide.112 The crucial point here is that, in ascertaining the evident purpose, English 46 courts have acknowledged, albeit rather cautiously,113 the use of other means of interpretation: travaux préparatoires114 and foreign texts where the convention is authenticated in two or more languages,115 as well as foreign judgments116 and views of foreign commentators117 that support the subsequent practices in the application of the convention provisions by other contracting states.118 Despite the avowed principle of “general acceptation”, these aids to construction are not frequently used in the common law world, nor are they seen as the main determinants of interpretation. In this context, astonishingly for continental shipping lawyers, the pre-existing common-law rules on sea carriage still survive the Hague-Visby Rules, unless the rules contain a provision that alters the pre-existing position.119 For this reason, some commentators have rightly taken the view that international conventions enacted into the national law are treated no differently than domestic instruments.120 111 See, for instance, Lord Bingham of Cornhill’s speech in The Rafaela S [2005] 1 Lloyd’s Rep. 347 (HL), p. 351 and that of Lord Viscount Simonds in The Muncaster Castle [1961] 1 Lloyd’s Rep.57 (HL), p. 67. 112 The Limnos [2008] 2 Lloyd’s Rep. 166 (QBD), 171, and The Giannis NK [1998] 1 Lloyd’s Rep. 337 (HL), p. 347. 113 See, for instance, the speech of Lord Steyn in The Giannis NK, above. In relation to the use of travaux préparatoires, his Lordship said: “only a bull’s eye counts” (p. 348). 114 The usefulness of the travaux préparatoires was doubted in The Rafaela S (fn. 111), where Lord Bingham said: “It must be remembered that in a protracted negotiation such as culminated in adoption of the Hague Rules there are many participants, with differing and often competing objects, interests and concerns. It is potentially misleading to attach weight to points made in the course of discussion, even if they appear at the time to be accepted.”. 115 Lord Wilberforce in the decision of Fothergill v. Monarch Airlines (fn. 103), held that it would be obligatory to resort to the foreign text of a convention which was agreed to in that foreign language, although the convention was translated and enacted into the domestic law, see p. 298. Regarding the rules on the use of foreign texts, see Buchanan & Co. Ltd. v. Babco Forwarding and Shipping Ltd. [1978] 1 Lloyd’s Rep. 119 (HL). This point is of great significance in relation to the sea carriage conventions, since the authoritative language of the Hague Rules was French, whilst both English and French versions of the Hague-Visby rules were treated as of equal weight. See also Article 33 of the Vienna Convention, which sets out the general principles in relation to the interpretation of treaties authenticated in two or more languages. 116 In relation to the use of foreign judgments, English courts exercise even greater caution, see The Jordan II (fn. 109), where the counsel for cargo interests sought to rely on the decision of the U.S. Court of Appeal for the Second Circuit in The Arktis Sky, 1993 AMC 509 (2nd Cir. 1992). 117 In the decision of Fothergill v. Monarch Airlines (fn. 103), where Lord Fraser said at p. 306: “The persuasive effect of learned commentaries, like the arguments of Counsel in an English Court, will depend upon the cogency of their reasoning.”. 118 As is also acknowledged in Article 31(3)(b) of the Vienna Convention. 119 As happened in the case of Stag Line v. Foscolo Mango (fn. 106); see also Debattista (fn. 108), pp. 131–132. Some commentators justify this approach, relying on the significant role of the common law in the development of the law of international carriage of goods by sea, Treitel and Reynolds (fn. 5), para 9-097. 120 See Debattista (fn. 108), p. 131.

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The dividing lines between common law and civil law interpretations are clearly visible when the observations above are viewed against the “liberal and reasoned” 121 civil law of interpretation.122 The civil law approach to interpretation of conventions involves giving much greater significance to travaux préparatoires, as well as keeping a close eye on the approaches of the other contracting states.123 48 There is thus no uniformity in interpretation of conventions. The practical consequence of this is obvious: much turns on the applicable law of the contract of carriage, since that legal system will decide how the governing sea carriage convention is to be interpreted.124 47

C. Scope of Application of the Rules 49

Charterparties are traditionally left outside the mandatory application of the sea carriage conventions. Where a cargo dispute is not governed by a charterparty, shipping lawyers traditionally raise two interlinked questions while deciding whether any mandatory liability regime is applicable: first, with which country is the carriage of goods sufficiently connected? The answer to this lies in the liability regimes adopted, since all the liability regimes contain provisions in relation to their geographical scope of application. After determining the sufficiently connected country according to its liability regime,125 the second question is concerned with the contractual scope of application of the liability regime: is the transaction underlying the carriage of goods contained in or evidenced by the right kind of document which triggers application of the liability regime? Answers to these questions will be given below according to the sea carriage conventions. 1. Geographical Scope

50

The main thrust of the sea carriage conventions is to regulate international carriage of goods by sea. For this reason, it is logical to assume that an international carriage sufficiently connected to a state which adopted a carriage convention would in any case trigger application of that convention. But, what constitutes a “sufficient connection” and “international carriage”? How are they defined under the Conventions?

121 Ibid., p. 136. 122 The accepted methods are generally categorised as grammatical, theological, historical and systematic. See Hoeks (fn. 57), p. 107. 123 Ibid, p. 115. 124 Vita Food Products, Inc. v. Unus Shipping Company, Ltd. [1939] 32 Ll. L. Rep. 21 (HL), p. 28. 125 It must be noted that in some cases there may be more than one country which is sufficiently connected to the carriage of goods. It is therefore possible for a cargo dispute to be governed by two different mandatory liability regimes. How such possible clashes between the liability regimes are resolved will be discussed in detail below.

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a) The Hague Rules

Article X of the Hague Rules provides only one trigger for the application of 51 the rules: the bill of lading126 must be issued in a “Contracting State”. Despite its deceptively simple wording, this provision caused considerable difficulties worldwide, particularly in three respects.127 First, when faced with a bill of lading issued in another contracting state, should the courts of a contracting state apply their own domestic version of the rules, or should they apply the rules as adopted in the contracting state where the bill of lading was issued? Secondly, should a contracting state apply the Hague Rules to a bill of lading issued in any of the contracting states, even in cases where the applicable law of a contract covered by a bill of lading is the laws of a non-contracting state? Thirdly, should the Hague Rules also be applied to domestic carriage given the absence of any provision in Article X suggesting the contrary? aa) Choosing between different Versions of the Hague Rules

In relation to the first question, the dominant view was that the courts of con- 52 tracting states should apply their own domestic version of the rules.128 This was the most rational option, especially for those contracting states that appropriately incorporated the rules into their domestic laws, including the reference in Article X to “any of the Contracting States”.129 Above all, contracting states would naturally be expected to give priority to their own mandatory public policies contained in their domestic laws over those of other states.130 bb) The Nature of the Hague Rules

With respect to the second question, imagine a bill of lading issued in a con- 53 tracting state “A”. Also assume that, applying their conflict of laws rules, the courts of another contracting state “B” that seised the dispute held that the bill of lading was governed by the laws of state “C”. If C is not a contracting state, should the courts of state B apply the Hague Rules regardless of the laws of state C? Some commentators doubted whether the rules could mandatorily apply as the public policy of the forum state irrespective of the applicable law of the con-

126 This provision must be read together with Article 1(b) of the Hague Rules, and it must be taken to refer to “bills of lading or any similar document of title”. 127 See Treitel and Reynolds (fn. 5), para. 9-073. 128 M.A. Clarke, Aspects of the Hague Rules, 1976, p. 15. 129 Ibid. 130 It must, however, be noted that it is possible for a state to apply another state’s mandatory rules where the proper law of the contract is the law of the latter state, provided that this does not offend its own mandatory public policy, see Article 7.1 of the Rome Convention and Article 9 of the Rome I. See also Treitel and Reynolds (fn. 5), para. 9-075. Under English law, COGSA 1971 has the force of law and is applicable irrespective of the proper law of the contract covered by a bill of lading or any similar document of title.

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tract. The reason for this doubt was that Article X did not expressly state that the rules were to apply mandatorily.131 54 In the United Kingdom, similar discussions took place within the framework of COGSA 1924, which was enacted to incorporate the Hague Rules with some alterations. The act replaced Article X with a different formula, but there was also no express provision in the Act to clarify whether the amended Hague Rules were to be treated as an overriding mandatory public policy.132 Under English law, this issue was finally put to rest with the enactment of COGSA 1971, which implemented the Hague-Visby Rules with some minor alterations: s. 1(3) of the latter Act provided specifically that the amended rules would have the force of law, and their mandatory effect was later confirmed by the House of Lords decision in The Morviken.133 55 Steps were also taken to resolve this issue at international level. In 1959, the CMI met in Rijeka, and the delegates accepted a proposal to secure the application of the Hague Rules between the contracting states. Notably, the proposal added two more triggers for the application of the rules, which are discussed below, and it further provided that the rules applied “whatever may be the law governing such bill of lading”.134 cc) The “Internationality” Element under the Hague Rules 56

Regarding the third question, namely whether the Hague Rules should be applied to both domestic and international carriages, opinion was again divided. In France, the courts drew a line between the contracts for the international carriage of goods and those for domestic carriage.135 While determining whether carriage is domestic or not, French courts considered various factors such as the places of loading and discharge, the nationality of the carrier and cargo interest,136 as well as the place the contract was made.137 At the CMI conference in Rijeka, this issue was also discussed. To secure consistent operation of the rules between the contracting states, the delegates accepted the following proposal:138 The provisions of this Convention shall apply to every bill of lading for carriage of goods from one State to another, under which bill of lading, the port of loading, the port of discharge or one of the optional ports of discharge is situated in a Contracting State, whatever may be the law governing such bill of lading and whatever may be the nationality of the ship, the carrier, the shipper, the consignee or any other interested person.

131 For general discussions on this issue, see M.A. Clarke (fn. 128), chapter 1. See also, Treitel and Reynolds (fn. 5), para. 9-073. 132 See fn 130. 133 [1982] 1 Lloyd’s Rep. 325. 134 Ibid., p. 331. 135 M.A. Clarke (fn. 128) p. 29. 136 The reference to the cargo interest’s nationality would bring considerable uncertainty given that it would not in most cases be possible to know at the outset who the ultimate cargo interest would be, see ibid., p. 81, where the French cases rejecting this approach were discussed. 137 Ibid., pp. 96–97. 138 Ibid., p. 106.

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This proposal had a significant impact on the formulation of what is now Ar- 57 ticle X of the Hague-Visby Rules. As will be seen below, the idea of treating the port of discharge as a trigger was later abandoned in the Hague-Visby Rules, but some states such as Belgium apply the Hague-Visby Rules both to inward and outward shipments.139 dd) The Vita Food Gap

On replacing Article X of the Hague Rules, COGSA 1924 envisaged a nar- 58 rower scope of application. The Act confined its application to coastal carriages between the domestic ports and to outward shipments from the United Kingdom.140 It also required that all bills of lading and similar documents of title issued in the United Kingdom contained a “paramount clause” expressly incorporating the amended rules therein.141 The requirement for a paramount clause was introduced as this was believed to facilitate application of the amended rules by foreign courts. This requirement, coupled with the highlighted geographical limitation, created a loophole in the operation of the Hague Rules. The facts in the Privy Council decision in Vita Food Products Inc. v. Unus Shipping Co. Ltd. well illustrated the loophole, hence the name “Vita Food Gap”.142 In brief, three main shortcomings were observed: First, COGSA 1924 fell 59 short of giving the Hague Rules an international effect, as it fell short of covering carriages from other contracting states.143 Secondly, the requirement for a paramount clause created the risk of rendering the rules ineffective where the clause was omitted from a bill of lading.144 Thirdly, the parties could avoid the rules by choosing a legal system where the rules were not adopted or where the rules did not govern such carriage.145 With this decision, it was established that parties were free to choose the legal system governing their contracts without

139 See Article 91 of the Belgian Maritime Code, quoted in M. Huybrechts et al., Belgium, Transport Law, in M.A Huybrechts, 1994, p. 98. 140 See s. 1, COGSA 1924. 141 See s. 3, COGSA 1924. 142 [1939] 63 Ll.L. Rep. 21 (HL). 143 This gap is closed with s. 1(2) and 1(3) of English COGSA1971. Subsection 2 provides that the Hague-Visby Rules, including Article X of the rules, which is discussed below, shall have the force of law. When stating that the rules shall have effect in relation to outward shipments from the United Kingdom, as well as coastal carriages within the UK ports, subsection 3 also provides that these provisions shall apply “without prejudice to subsection 2, above”. This means that references in Article X to “any contracting state” and “between different states” are given effect within the framework of the Act. 144 See Reynolds (fn. 3), p. 20. This gap is closed by Article X(c) of the Hague Visby Rules, whereby the incorporation of paramount clauses into bills of lading is drafted as a separate trigger for application. For further discussions, see below. 145 Ibid.

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having to prove any connection with that legal system.146 To prevent parties from avoiding the rules through choice-of-law clauses, the rules had to be treated as an overriding mandatory public policy. However, there was nothing in the Act to create that effect.147 b) The Hague-Visby Rules 60

In the context of their geographical scope of application, the Hague-Visby Rules are clearly an improvement over the Hague Rules. Article X of the Hague-Visby Rules provides that: The provisions of these rules apply to every bill of lading148 relating to the carriage of goods between ports in two different States if: a) the bill of lading is issued in a Contracting State; or b) the carriage is from a port in a Contracting State; or c) the contract contained in or evidenced by the bill of lading provides that these Rules or the legislation of any state giving effect to them are to govern the contract Irrespective of the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person.

aa) International Carriage

Two points emerge regarding the meaning of “international carriage” under the rules. First, shipments need not take place between the ports of two different contracting states. It is enough for the shipment to take place between two different states, provided either that a bill of lading is issued in a contracting state,149 or that the port of shipment is in a contracting state. Secondly, where a bill of lading incorporates either the rules or a piece of domestic legislation giving effect to the rules, it would still be necessary for the shipment to take place between two different states, which obviously need not be contracting states. 62 Problems arise where a vessel returns to the port of loading or to another port in the same country after shipment despite the contemplated international carriage. Can such a carriage be treated as international for the purposes of Article X? This question would be of no practical significance where application of the rules is extended to coastal trade in the country of shipment.150 Assuming this is 61

146 [1939] 63 Ll.L. Rep. 21, pp. 27–28. This principle was accepted throughout Europe under the Convention 80/934/EEC on the law applicable to contractual obligations (the Rome Convention). This was later followed by Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). 147 As will be recalled, this was resolved through s.1 of the English COGSA 1971, which provides that the rules shall have the force of law, see fn. 143. 148 This must again be taken to include also “any other similar documents of title”, see Article I(b) of the Hague-Visby Rules. 149 In such cases neither the port of shipment nor the port of discharge needs to be in a contracting state. The bill of lading can be issued in a place other than the port of shipment. In practice, bills of lading may be issued in places which have no connection with the voyage. Possibly due to this reason, the place of issue of the transport document is not stated as a trigger in the Hamburg Rules, see Treitel and Reynolds (fn. 5), paras. 9-079 and 9-080. 150 Such as in the UK, see s. 1(3) of the English COGSA 1971.

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not the case, is it the actual or the contemplated carriage under the bill of lading that matters? The prevailing view is to treat the contemplated carriage as decisive.151 This approach has much to commend it. Banks make payments under letters of credit in reliance on the contemplated voyage provided in the bill of lading, and so do the buyers in cash against documents sales. Thus, to say that what actually happens during the voyage is decisive would greatly undermine the integrity of the bills of lading in international trade and banking practice. Finally, the express statement in Article X that the triggers (a), (b) and (c) ap- 63 ply irrespective of the ship, the carrier, the shipper, the consignee, or any other interested person, is readily explicable. As will be recalled, the French courts applied the Hague Rules only to international carriage, which was determined under French law through evaluation of all these factors. For the sake of certainty, Article X of the Hague Rules now makes it clear that these factors are no longer relevant when deciding the application of the rules. bb) Contracting State

One further crucial point on the application of Article X is the interpretation 64 of the wording “Contracting State” under triggers (a) and (b) of the article: does it mean a state that has formally ratified the Hague-Visby Rules, or would it be enough if the state has only enacted the rules into its national law? It would seem proper to follow the literal meaning of the words “Contracting State” given the mandatory and direct effects of the Hague-Visby Rules. Thus, no state other than those having formally ratified the Hague-Visby Rules should be treated as a “Contracting State” for the purposes of the article. The practical significance of this interpretation can be seen in the English case of The MSC Amsterdam,152 which was concerned with the question of whether the Hague-Visby Rules governed a cargo dispute. The cargo was shipped from Durban, South Africa, for carriage to Shanghai, and it was covered by a bill of lading which contained the following paramount clause: For all trades, except for goods shipped to or from the United States of America, this B/L shall be subject to the 1924 Hague Rules … or if compulsorily [emphasis added] applicable subject to the 1968 Protocol (Hague-Visby) …

The crux of the matter was that South Africa enacted the Hague-Visby Rules 65 into their domestic law, although it had never signed the Visby Protocol. Applying COGSA 1971, to which the Hague-Visby Rules are scheduled, the Court of Appeal held that South Africa was not a contracting state within the meaning of Article X. As a result of this, the Hague-Visby Rules were not compulsorily applicable to the cargo dispute, and therefore the Hague Rules, not the Hague-Vis-

151 See Treitel and Reynolds (fn. 5, para. 9-079; Sturley et al. (fn. 92), para. 2-037 and Aikens et al. (fn. 16) para. 10.26. 152 [2007] 2 Lloyd’s Rep. 622 (CA).

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by Rules, were held to govern the cargo dispute pursuant to the paramount clause.153 cc) The Place of Issue of Bills of Lading: Trigger (a) 66

In order for the rules to apply under this trigger, the place of issue154 of the bill of lading must be in a contracting state, and carriage must be between two different states.155 The place of shipment need not be in a contracting state. The same is also true of the place where the contract of carriage is entered into: where a contract of carriage has been concluded under a booking note prior to the issue of the bill of lading, the state in which the contract is concluded can be a non-contracting state.156 Although the place where the contract is made can seem a more appropriate trigger than the place of issue of bills of lading, to introduce it as a trigger would have caused significant difficulties. When issued, a bill of lading does not always start life as evidence of contract of carriage. Where a bill of lading is issued and surrendered to a shipper who is a charterer of the vessel, it starts to operate as a contract of carriage not in the hands of the shipper157 but when it is transferred to the consignee.158 For predictability and certainty, the place of issue of the bill of lading, which is readily provided on its face, is a more reliable trigger than the place of contract conclusion, which cannot be ascertained by the terms of the bill of lading. Above all, it widens the operation of the rules internationally, since the place of shipment is accepted as a separate trigger.159 dd) Carriage from a Contracting State: Trigger (b)

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Regarding the operation of this provision, it is important to consider cases where a carrier contracts for the carriage of goods between two different states with an option to subcontract parts of the carriage. Do the rules apply to the entire voyage where the goods are originally shipped from a contracting state but then transhipped to another vessel in a non-contracting state? It is also possible that the shipment may take place in a non-contracting state, but the goods

153 Ibid. 154 This must be taken to refer to the place where the bill of lading is signed by the carrier or his agent. For a similar view, see Aikens et al. (fn. 16), para. 10.25. 155 As will be recalled, these states need not be contracting states. 156 Diamond (fn. 16) pp. 225, 258. 157 In the hands of such a shipper, it only functions as a receipt. For English law, see Rodocanachi, Sons & Co. v. Milburn Bros (1887) L.R. 18 Q.B.D. 67 (CA). For Danish law, see ss. 229 and 325 of the Danish Merchant Shipping Act (“MSA”), quoted in A. Hedetoft et al. (fn. 102), p. 88. 158 For English law, see Rodocanachi, Sons & Co. v. Milburn Bros, above at 75, per Lord Esher. For Belgian Law, see Hedetoft et al. (fn. 102), p. 89. 159 These days, it is difficult to argue that carriers can use this trigger to evade the rules by issuing bills of lading in a non-contracting state. It would appear to be in the carriers’ interests to have bills of lading governed by the Hague-Visby Rules, especially for insurance purposes.

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may then be transhipped in a contracting state. In such cases, do the Hague-Visby Rules apply to the second leg of the voyage? So far as English law is concerned, the decisive issue is what the carrier has 68 contracted to do. Where the carrier contracts for the carriage of goods from state A to state B with a bare option to tranship the goods, the rules apply throughout the entire voyage as per trigger (b), if state A is a contracting state.160 However, if A is not a contracting state, then no part of the voyage is covered by the rules. Therefore, as long as the contract is for the carriage of goods by sea from a contracting state, the rules apply. It is submitted that the rules apply to such sea carriage, even if it is preceded by the carriage of goods from an inland point.161 Different considerations arise where a carrier agrees to carry the goods from 69 state A to state B and then undertakes to arrange the on-carriage from state B to state C, as an agent.162 Here, the carriage from state B and C is treated as a separate voyage, especially for the purposes of trigger (b).163 Hence, where the first leg of such carriage is between two ports that are within the same contracting state, the rules will not apply, unless the relevant contracting state has extended the application of the rules to coastal carriage by national legislation.164 ee) Clause Paramount: Trigger (c)

In order for the rules to have statutory force and an overriding effect in bills 70 of lading, this last trigger calls for three requirements. First, there must be a contract contained in or evidenced by a bill of lading. Secondly, the contract must contain a “paramount clause”, which provides that the rules or the legislation of a state165 giving effect to them shall govern the contract.166 Thirdly, the carriage 160 See Mayhew Foods v. Overseas Containers Ltd. [1984] 1 Lloyd’s Rep. 317 (QBD). See also the Hong Kong High Court decision in The Anders Maersk [1986] 1 Lloyd’s Rep. 483, quoted in The Rafaela S [2003] 2 Lloyd’s Rep. 113 (CA), per Rix L.J., p. 119. 161 See Ozdel (fn. 54), pp. 249–250. See also Mayhew Foods above where the entire sea leg of a carriage from a depot in the United Kingdom to Jeddag via Le Havre was held to be governed by the Hague-Visby Rules. 162 Although in such cases state C may be shown in the bill of lading as the ultimate destination, the bill of lading will only represent the contract of carriage between states A and B. See Stafford Allen & Sons Ltd. v. Pacific Steam Navigation Co. [1956] 1 Lloyd’s Rep. 104 (CA), quoted in The Rafaela S [2003] 2 Lloyd’s Rep. 113 (CA), per Rix L.J., p. 119. 163 Ibid. 164 Under English law, the Hague-Visby Rules also apply mandatorily to coastal carriage, s. 1(3) of the English COGSA 1971. 165 Since Article X(c) talks of “any state”, incorporation of the legislation of a state which is not a contracting state would suffice provided that the legislation gives effect to the whole or a substantial part of the rules, see Diamond (fn. 16), p. 259. 166 That being so, conditional paramount clauses, such as those stating that the rules shall apply when they are compulsorily applicable, are not of themselves sufficient to trigger Article X(c). In order for the rules to apply, the condition of compulsory application must be satisfied through the use of other gateways under Article X. For the satisfaction of the condition, it is also essential that the documentary requirements under Article I(b) are also met. See The Happy Ranger [2002] 2 Lloyd’s Rep. 357 (CA), The Marinor [1996] 1 Lloyd’s Rep 301 (QBD) and Diamond (fn. 16), p. 259. See also J. Cooke et al., Voyage Charters, 3rd edn, 2007, para. 85.66, cited with approval in BBC Greenland [2012] 1 Lloyd’s Rep. 238,

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must be between two different states, which, as will be recalled, need not be contracting states. 71 The reference to a contract “contained in or evidenced by a bill of lading” has the effect that a paramount clause in a booking note167 or in an oral contract made prior to the issue of the bill of lading may also trigger application of the rules.168 However, it is suggested that such situations should arise only between the shipper and carrier:169 when the bill of lading is transferred to a third party,170 no terms other than those expressly provided in or incorporated into the bill of lading should be binding upon these parties.171 72 It is also important to consider the wording of the paramount clause: the clause should either expressly refer to the Hague-Visby Rules or to any domestic legislation giving effect to them, such as COGSA 1971. Using the right language triggers application of the Hague-Visby Rules, and this has the effect of overriding all the terms in the bill of lading that offend the mandatory provisions in the rules.172 How, then, must the clause be worded for the Hague-Visby rules to be “paramount” in the bill of lading context?173 So far as English law is concerned, a mere reference to “British Law” in the bill of lading is insufficient to satisfy Article X(c) of the rules, as it does not refer to the national legislation giving effect to the rules.174 73 Where a clause in a bill of lading incorporates a piece of domestic legislation which partially gives effect to the Hague-Visby Rules, such as the Nordic Maritime Codes, would that satisfy Article X(c)? Under English law, as long as the referred foreign legislation gives “substantial effect” to the rules, this should be sufficient.175 When this is the case, the Hague-Visby Rules as enacted by COGSA 1971 will have statutory force by virtue of s. 1(2) of that Act.176 Conse-

167 168 169 170 171

172 173 174 175 176

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para. 27. When interpreting paramount clauses, English courts rely on the proper law of the contract, unless the clause paramount itself requires the laws of the country of shipment or elsewhere to be relied on. See The Happy Ranger [2002] 2 Lloyd’s Rep. 357 (CA). See also Aikens et al. (fn. 16) paras. 10.36 and 10.38 and Section C 1. e). See, for instance, Conlinebooking 2000 form. As is also raised in Treitel and. Reynolds (fn. 5), para. 9-083. For English law, see The Ardennes [1951] 1 K.B. 55. Similarly, for Dutch law, see Article 8:410 BW, quoted in K.F. Haak, The Netherlands, Transport Law, in M. Huybrechts Supplement 31 (February 2012), p. 87. See ss. 2(1) and 5(2) of the English COGSA 1992. For English law, see Leduc v. Ward (1888) LR 20 QBD 475 (CA). A similar view is taken under Dutch Law, see Article 8:414 BW, whereby the terms in the bill of lading are conclusive only where third parties rely on those terms in good faith. See K.F. Haak, (fn. 183) p. 86. In general terms, the applicable law (and sometimes the putative applicable law) of the contract of carriage will determine the contract terms. See Article 10(1) of Rome I Regulation and Ozdel (fn. 9), p. 357 et seq. Under English law, this effect is underpinned by s. 1(2) and 1(3) of COGSA 1971, see fn. 143. This issue needs to be decided pursuant to the applicable law of the contract contained in or evidenced by the bill of lading, see The Komninos S [1991] 1 Lloyd’s Rep. 370 (CA). Ibid. See also Diamond (fn. 16), p. 259. Ibid.

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quently, provisions in the bill of lading, including the referred foreign legislation, will be applicable to the extent that they do not offend the mandatory provisions in the Act.177 However, incorporation clauses seeking to bring in only part of the Hague-Visby Rules, whether substantial or not, fall short of creating such an overriding statutory effect. As a final remark, by virtue of s. 1(6) and 1(7) of COGSA 1971, the 74 paramount clauses can also be used to extend the mandatory application of the Hague-Visby Rules to the types of carriage excluded in the rules: deck carriage, carriage of live animals and carriages covered by non-negotiable receipts. The relevant sections provide as follows: Section 1(6) Without prejudice to Article X(c) of the Rules, the Rules shall have the force of law in relation to – (a) any bill of lading if the contract contained in or evidenced by it expressly provides that the rules shall govern the contract, and (b) any receipt which is a non-negotiable document marked as such178 if the contract contained in or evidenced by it is a contract for the carriage of goods by sea which expressly provides that the Rules are to govern the contract as if the receipt were a bill of lading. but subject, where paragraph (b) applies, to any necessary modification and in particular with the omission in Article III of the Rules of the second sentence of paragraph 4 and of paragraph 7.

Section 1(6)(a) seeks to cover carriages that do not fall either under s 1(3) of 75 COGSA 1971, which talks of coastal carriage within the UK, or under Article X, which requires international carriage for the Hague-Visby Rules to apply mandatorily. Hence, this provision, in essence, applies to cases where there is a coastal carriage within a state and where this is covered by a bill of lading or any similar document of title that expressly provides that the Rules shall govern the contract.179 Hence, unlike Article X(c) of the Rules, it is essential that the reference be made to the Hague-Visby Rules as opposed to any legislation giving effect to the rules. In order to trigger mandatory application of the rules pursuant to s. 1(6)(b), 76 equal caution must be exercised in choosing the words of incorporation in nonnegotiable documents marked as such. In The European Enterprise,180 the Hague-Visby Rules were incorporated into a consignment note, along with a limitation of liability provision. Steyn J. (as he then was) held that the words of incorporation did not satisfy the formal requirements laid down under s. 1(6)(b). Thus, the incorporated Hague-Visby Rules only had a contractual effect, with the result that the limitation provision remained valid and applicable. On the question of what words of incorporation qualify for the purposes of s. 1(6)(b), 177 Ibid. See also Aikens et al. (fn. 16), para. 10.37. 178 See Article VI of the Hague-Visby Rules, which excludes carriages covered by such documents. 179 Where the carriage is from a non-contracting state to another state, an incorporation clause in a bill of lading referring to the Hague-Visby Rules or to a piece of legislation giving effect to the rules would trigger the rules pursuant to Article X(c) of the rules. Also discussed in Treitel and Reynolds (fn. 5), para. 9-084. 180 [1989] 2 Lloyd’s Rep. 185 (QBD).

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Steyn J. took the view that two formal requirements had to be met.181 First, the consignment note was to expressly provide that “the Rules are to govern the contract as if the receipt were a bill of lading” or alternatively it had to contain a similar wording. Secondly, the consignment note had to be marked as non-negotiable. In so holding, Steyn J. did not follow the line of reasoning taken by Lloyd J. (as he then was) in The Vechscroon, where an unqualified reference to the Hague-Visby Rules was held sufficient to create the statutory effect by virtue of s. 1(6)(b).182 Of these two conflicting approaches, Steyn J.’s view is generally preferred.183 77 A further extension is made under s. 1(7) of COGSA 1971 to include contracts of carriage covered by a bill of lading, in case of carriage of deck cargo184 as defined by s. 1(7), and live animals:185 Section 1(7) If and so far as the contract contained in or evidenced by a bill of lading or receipt within paragraph (a) or (b) of subsection (6) above applies to deck cargo or live animals, the Rules are given the force of law by that subsection shall have effect as if it did not exclude deck cargo and live animals. In this subsection “deck cargo” means cargo which by the contract of carriage is stated as being carried on deck and is so carried.

c) The Hamburg Rules 78

Article 2(1) of the Hamburg Rules provides that the provisions of this Convention are applicable to all contracts of carriage by sea between two different states, if: (a) (b) (c) (d) (e)

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the port of loading as provided for in the contract of carriage by sea is located in a Contracting State, or the port of discharge as provided for in the contract of carriage by sea is located in a Contracting State, or one of the optional ports of discharge provided for in the contract of carriage by sea is the actual port of discharge and such port is located in a Contracting State, or the bill of lading or other document evidencing the contract of carriage by sea is issued in a Contracting State, or the bill of lading or other document evidencing the contract of carriage by sea provides that the provisions of this Convention or the legislation of any State giving effect to them are to govern the contract.

Article 1(2) states that: the provisions of this Convention are applicable without regard to the nationality of the ship, the carrier, the actual carrier, the shipper, the consignee or any other interested person.

181 Ibid., at 189. 182 [1982] 1 Lloyd’s Rep. 302 (QBD). 183 See J. Cooke et al., Voyage Charters, 4th edn, 2014, para. 85.44. See also Genwaybill 1995 form, where the Hague-Visby Rules are incorporated in its simplest form, without expressly stating that the rules apply “as if this [receipt] were a bill of lading”. Given that the relevant clause (clause 2) expressly states that “this is not a bill of lading”, it would appear that the Rules only have a contractual effect in this context. 184 See Section C 2. 185 Ibid.

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The Hamburg Rules widen the geographical scope of application of the 80 Hague and Hague-Visby Rules: they apply to inbound shipments either under trigger (b) or under trigger (c) provided therein. The rules apply by virtue of trigger (b), where only one discharge port is provided in a contract of carriage186 and where it is in a contracting state. In a global context, the operation of these provisions is far from satisfactory, as it exacerbates conflicts between the sea carriage conventions, leading to forum shopping. Imagine a bill of lading which covers a shipment from a Hague-Visby state to a Hamburg state. When faced with such a bill of lading, courts of a Hamburg state are expected to apply the Hamburg Rules, as the overriding mandatory policy of the forum state. The courts of a Hague-Visby state are equally expected to apply the Hague-Visby Rules for the same reasons.187 Such conflicts would have been significantly reduced, had the Hamburg Rules not spelled out the port of discharge as a trigger. Application of trigger (c) brings with it an additional layer of uncertainty: 81 the Hamburg Rules apply where the goods are actually discharged at one of the optional ports of discharge provided in the contract of carriage and where the actual port of discharge is in a contracting state. Reference to actual carriage is in stark contrast with the purely contractual approach taken by the Hague and Hague-Visby Rules. It also creates the main difficulty with this trigger: when a bill of lading that provides for optional discharge ports is issued on shipment, the question whether it is governed by the Hamburg Rules cannot be determined from the start: the actual port of discharge, which can sometimes be a purely accidental matter, is decisive in such circumstances. It also follows that the question of whether the Hamburg Rules are applicable cannot be ascertained from the transport document.188 This situation does not sit comfortably with the workings of international trade: buyers, sellers and bankers seek to secure their interests in goods in transit through reliance on the terms and representations contained in transport documents. The remaining triggers contain provisions similar to those in Article X of the 82 Hague and Hague-Visby Rules. That being so, the observations above in rela-

186 As will be discussed further below, documentary application of the Hamburg Rules is not confined to bills of lading or any similar documents of title. 187 As long as this does not offend the overriding mandatory policies of the forum, the courts of a Hague-Visby state may apply the Hamburg Rules when they are faced with a bill of lading incorporating the Hamburg Rules. This is the position under French Law, see C. Legros, France, Transport Law, in M. Huybrechts, (Supplement 34, July 2012), p. 82. Under English law, when the Hamburg Rules are incorporated, they will only have contractual force. 188 The question of whether the Hague-Visby Rules apply cannot also be ascertained from the bill of lading where it contains a statement that the goods will be or are carried on deck: the Rules do not apply to such bills of lading in cases where the goods are actually carried on deck. See Article I(c) of the Hague and Hague-Visby Rules. Nonetheless, this type of statement in the bill of lading does at least alert buyers and banks in respect of the likelihood that such bills of lading are not governed by the Rules. Given the likely possibility of deck carriage in such cases, bills of lading that indicate that the goods will be or are carried on deck are not acceptable under Article 26 of the UCP 600.

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tion to Article X are also relevant in understanding how these triggers operate for the Hamburg Rules. d) The Rotterdam Rules 83

Unlike the Hague, Hague-Visby and Hamburg Rules, application of the Rotterdam Rules is not confined to contracts of carriage of goods exclusively by sea. The rules apply to contracts that may, in addition to sea carriage, provide for other mode or modes of transport. Thus, Article 1(1) of the Rotterdam Rules provides that: “Contract of carriage” means a contract in which a carrier, against the payment of freight, undertakes to carry goods from one place to another. The contract shall provide for carriage by sea and may provide for carriage by other modes of transport in addition to the sea carriage.

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For the purposes of determining the geographical scope of these Rules, this provision needs to be considered together with Article 5(1), which reads: Subject to article 6, this Convention applies to contracts of carriage in which the place of receipt and the place of delivery are in different States, and the port of loading of a sea carriage and the port of discharge of the same sea carriage are in different States, if, according to the contract of carriage, any one of the following places is located in a Contracting State: (a) The place of receipt; (b) The port of loading; (c) The place of delivery; or (d) The port of discharge.

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Whilst Article 5(1) sets out the triggers for application of the rules, Article 5(2) goes on to say, in the conventional way, that all other factors not stated in Article 5(1) must be left out of the equation. As Article 5(2) has put it: This convention applies without regard to the nationality of the vessel, the carrier, the performing parties, the shipper, the consignee, or any other interested parties.

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As is clear from the provisions, application of the Rotterdam Rules depends whether any one of the places or ports listed in Article 5(1) is a contracting state. Given the multimodal aspect of the rules, the places of receipt and delivery are also treated as sufficient to trigger the rules. Unlike the Hague-Visby Rules, the port of discharge is also added to the list. In terms of the operation of the Rules, Article 5(1) raises different issues from those relevant under the pre-existing conventions. These issues can be condensed under three headings: requirements in relation to international carriage, application of the rules to contracts covering the carriage of goods partly by sea and conflicts between the Rotterdam Rules and other unimodal conventions. aa) The Requirement as to International Carriage

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Just as with the pre-existing sea carriage conventions, the Rotterdam Rules also aim at regulating contracts for the international carriage of goods. In this context, the chapeau of Article 5 of the Rules sets out two requirements. First, the place of receipt and delivery must be in different states, which can be non110

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contracting states. Secondly, the port of loading and port of discharge must also be located in different states, both of which again can be non-contacting states. Therefore, if these two separate requirements of internationality are satisfied, the rules apply provided that at least one of the listed places or ports is in a contracting state.189 As an example, the convention would apply to a carriage from Barcelona via the port of Rotterdam to Paris, but it would not apply to a carriage from Barcelona via the port of Valencia to Munich. bb) Application of the Rotterdam Rules to Contracts covering the Carriage of Goods partly by Sea

Article 1(1) of the Rules provides that, in order for the Rules to apply to a 88 contract of carriage, the contract shall provide for carriage by sea. The contract may, in addition to sea carriage, provide for carriage by other modes of transport. This provision makes it clear that a contract for the carriage of goods from state A to state B will come under the rules, if, according to Article 5(1), one of the ports is in a contracting state. This will also be the case where after sailing from state A, the vessel returns to state A.190 For the operation of the Rules, the decisive factor is not the actual carriage, but what the parties have contemplated under the contract of carriage. In this context, the contract must provide for sea carriage, while it is not essential that it also provide for other modes of transport. Given that the essential ingredient is sea carriage, it is important to highlight the possibilities where the contract of carriage merely gives carriers an option to carry goods by sea and where it is silent as to the mode of carriage. Where a contract of carriage provides the carrier with an option to choose be- 89 tween different modes of transport, including sea carriage, do the Rotterdam Rules apply? During the drafting of the Rotterdam Rules, it was proposed that the Rules should apply to this type of contract of carriage if the goods are actually carried by sea.191 This proposal was not accepted, since doing so would dilute the contractual approach which formed the basis of the Rules.192 Article 1(1) of the Rules now talks of contracts “which will provide for sea carriage”. This may lead the courts to hold that a contract providing for a mere optional sea carriage is not a contract of carriage within the meaning of Article 1(1).193 Following the historical method of interpretation, courts in the civil law systems can even more readily take that view. Nonetheless, it is also possible that, in order for the Rules to have a wider op- 90 eration internationally, courts may loosely interpret the Article.194 In so doing, 189 It is likely that the phrase “Contracting State” will be interpreted in the same way as is interpreted in the context of the Hague-Visby and Hamburg Rules. 190 As is also pointed out in H. Staniland, Scope of Application, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation (2009), para. 5-02. 191 Sturley et al. (fn. 91), para. 2.029. 192 Ibid., para 2.030. 193 For a similar view, see Staniland (fn. 190), para. 5-02. 194 See Diamond (fn. 91), p. 452.

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they may hold that such contracts come under the definition when the goods are actually carried by sea.195 As has already been submitted,196 accepting the actual performance as a trigger for the application of an international convention is undesirable.197 Above all, it is rather unlikely that actual performance will have any role to play in cases where the contract leaves the means of transport open entirely. cc) Conflict of Conventions 91

In container transport, it is common for carriers to extend their responsibility as a carrier to inland carriage at one or both ends of the sea leg. Article 26 of the Rotterdam Rules is concerned with the regulation of multimodal contracts covering this type of carriage. The Article, which is entitled “Carriage preceding or subsequent to sea carriage”, reads: When loss of or damage to goods, or an event or circumstances causing a delay in their delivery, occurs during the carrier’s period of responsibility but solely before their loading onto the ship or solely after their discharge from the ship, the provisions of this Convention do not prevail over those provisions of another international instrument that, at the time of such loss, damage or event or circumstance causing delay: (a) Pursuant to the provisions of such international instrument would have applied to all or any of the carrier’s activities if the shipper had made a separate and direct contact with the carrier in respect of the particular stage of carriage where the loss of, or damage to goods, or an event or circumstance causing delay in their delivery occurred; (b) Specifically provide for the carrier’s liability, limitation of liability, or time for suit; and (c) Cannot be departed from by contract either at all or to the detriment of the shipper under that instrument.

The Article provides for a “limited” network system.198 In most cases, the Rotterdam Rules would govern an entire multimodal transport that involves a sea leg.199 Other unimodal conventions can in limited circumstances prevail over the Rotterdam Rules, principally to govern the inland legs of a multimodal transport. Under Article 26 of the Rotterdam Rules, there are three limitations to the operation of unimodal conventions in relation to other modes of carriage. 93 First, unimodal convention can only cover claims for loss of or damage to goods or an event or circumstance causing delay in their delivery which occur solely before or after the sea leg of the voyage. Thus, the Rotterdam Rules con92

195 Ibid. See also Van Der Ziel (fn. 58), p. 302. 196 See above. 197 For a contrary view, see R. De Wit, Minimal Music: Multimodal Transport Including a Maritime Leg under the Rotterdam Rules, in R. Thomas, Carriage of Goods under the Rotterdam Rules, 2010, para. 5-105. 198 However, see Ibid., para. 5-11, where the Rotterdam Rules were stated to create a “uniform system”. 199 See Articles 1(1), 5 and 26 of the Rotterdam Rules.

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tinue to apply in respect of other claims, such as dangerous cargo.200 The same is also true of loss of or damage to goods or delay that has not solely occurred during the inland carriage. Given the difficulty of proving the moment when a loss, damage or delay has occurred in container transport, the Rotterdam Rules will generally apply throughout the multimodal carriage. Secondly, a unimodal convention can only govern the issues as to carriers’ 94 liability, limitation of liability and time for suit. Thus, the Rotterdam Rules remain applicable to any other issues not related to carriers’ liability, such as documentation, delivery of the goods, shippers’ liability, rights of control, transfer of rights, arbitration and jurisdiction.201 Thirdly, the Rotterdam Rules provide that a unimodal convention can gov- 95 ern the inland leg of a multimodal carriage only in cases where that convention, pursuant to its terms, would have ‘mandatorily’202 applied to all or any of the carrier’s activities if the shipper had made a separate and direct contract with the carrier.203 This third limitation ousts the application of provisions of unimodal conventions that are not of mandatory nature, as well as domestic laws on inland carriage.204 Thus, according to this Article, in a transport by sea from Ravenna, Italy to Hamburg, Germany with a final destination of Munich, the Rotterdam Rules will apply to the entire journey.205 In many respects, Article 26 creates many conflicts between the Rotterdam 96 Rules and other unimodal conventions: imagine a similar transport from Ravenna, Italy to Hamburg, Germany with a final destination of Manchester, UK and with goods loaded on a truck in Hamburg, and the truck being carried on a ferry from Hamburg to Southampton, and thence to Manchester by road with the same truck. Will the Convention on the Contract for the International Carriage of Goods by Road (the CMR Convention), which can govern a roll-on 200 See Articles 15 and 32 of the Rotterdam Rules. These provisions conflict with Article 22 of the Convention on the Contract for the International Carriage of Goods by Road (CMR) Convention on dangerous cargo, which is also of mandatory nature. For further discussions, see C. Legros, Relations Between the Rotterdam Rules and the Convention on the Carriage of Goods by Road, Tulane Maritime Law Journal (TMLJ) 2011–2012, 36, pp. 732 et seq. 201 As is raised in E. Rosaeg, Conflicts of Conventions in the Rotterdam Rules, JIML 2009, 15, 3, pp. 238 et seq. 202 See Article 26(c) of the Rotterdam Rules. 203 The rules are not clear as to whether the actual contract of carriage made between the subcontracting carrier and the main carrier under the Rotterdam Rules should be taken into account when applying this “hypothetical contract” reasoning. For discussions on this, see De Wit (fn. 197), paras. 5.28.–5.39. 204 In line with the reasoning adopted in the English case of The MSC Amsterdam [2007] 2 Lloyd’s Rep. 622 (CA), national legislation giving effect to a unimodal convention will be treated as part of domestic law, unless the state in question has formally ratified the convention. 205 The reason for this is that the domestic road carriage does not trigger the CMR Convention, which applies only to international carriage by road. This result will follow irrespective of the fact that the state may have enacted the CMR Convention into its domestic laws and may have extended the application of the convention to domestic carriage, see Legros, (fn. 200). It is also worthy of note that Article 83 of the Rotterdam Rules preserves application of any convention or national law regulating the global limitation of liability of vessel owners.

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roll-off carriage preceding or subsequent to a road carriage pursuant to Article 2 of the CMR Convention,206 apply to the Hamburg–Manchester leg of the voyage? Or will it be the Rotterdam Rules, which in essence aim at regulating sea carriage? 97 The example represents only one out of many conflicts between the Rotterdam Rules and other unimodal conventions. This is precisely because other unimodal conventions are also intended to apply to non-localised damage, as well as containing provisions on many issues including carriers’ liability.207 For this reason, Article 26 is generally considered as ‘complemented’ by Article 82.208 The latter Article, which is entitled “International Conventions governing the carriage of goods by other modes of transport”, provides that: Nothing in this Convention affects the application of any of the following international conventions in force at the time this Convention enters into force, including any future amendment to such conventions that regulate the liability of the carrier for loss of or damage to the goods: (a) Any Convention governing the carriage of goods by air to the extent that such Convention according to its provisions applies to any part of the contract of carriage; (b) Any Convention governing the carriage of goods by road to the extent that such Convention according to its provisions applies to the carriage of goods that remain loaded on a road cargo vehicle carried on board a ship;209 (c) Any Convention governing the carriage of goods by rail to the extent that such Convention according to its provisions applies to carriage of goods by sea as a supplement to the carriage by rail; (d) Any Convention governing the carriage of goods by inland waterways to the extent that such Convention according to its provisions applies to a carriage of goods without trans-shipment both by inland waterways and sea.

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Falling back on our example in relation to a transport from Ravenna, Italy to Hamburg, Germany with a final destination of Manchester, UK, does Article 82 help us find the applicable convention to this transport? If we take the CMR Convention, including its Article 2, as a basis, assuming that the CMR Convention will be in force at the time of entry into force of the Rotterdam Rules, the carrier’s liability for loss of or damage to goods occurred during the Hamburg– Manchester leg of the voyage will be governed by the CMR Convention.210 This is a safe solution in cases where the transport takes place between the states that are party to the CMR Convention. Where the final destination is in a state which is only party to the Rotterdam Rules, but not to the CMR Convention, 206 See Article 2 of the CMR Convention. 207 For further discussions on the conflicts between the Conventions, see Rosaeg (fn. 201) and De Wit (fn. 197), para. 5.42. 208 See Legros (fn. 200), p. 735. 209 On its reasonable interpretation, subsection (b) should not have the effect of limiting the application of a convention governing the carriage of goods by road to the sea carriage of goods remaining on a road cargo vehicle. 210 The same would also hold good in the case of a contract for the carriage of goods from an inland point in Germany to an inland point in the UK, provided that the carriage has an international roll-on roll-off sea carriage. In respect of the carrier’s liability, the CMR Convention will apply to the entire carriage pursuant to Article 82 of the Rotterdam Rules. However, where the sea carriage concerned is not roll-on roll-off carriage, the Rotterdam Rules should apply throughout the multimodal carriage. See De Wit (fn. 197), paras. 5.60 and 5.71.

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should the courts of that state be expected to apply the CMR Convention? According to its Article 1, the CMR convention applies to carriage of goods between two different states, at least one of which must be a contracting state. Nonetheless, from the perspective of the courts of a non-contracting state, the CMR Convention may not “prevail over” the Rotterdam Rules as per the chapeau of Article 26, nor may it be seen as “mandatory” within the meaning of Article 26(c). For these reasons, it is difficult to suggest that the convention can apply to such cases.211 Article 82 of the Rotterdam Rules is based not on unimodal conventions 99 currently in force, but on those which will be or will remain in force at the time of entry into force of the Rotterdam Rules. It also refers only to conventions, leaving international legislation, such as EU legislation, outside the scope. That being so, ratification of the Rules by the individual EU member states would appear to create a potential risk of conflicts between the Rotterdam Rules and any EU legislation which may be enacted to regulate regional carriage of goods.212 On the operation of Articles 26 and 82 of the Rules, the following overall 100 remarks can be made: it is a better view to take Article 82 as complementary to Article 26, since a contrary approach would render Article 26 redundant. When Article 82 is taken as such, not all conflicts created by Article 26 are resolved, particularly since other unimodal conventions also contain mandatory provisions other than those relevant to carriers’ liability. e) Final Remarks on the geographical Scope of the Conventions

As has been discussed above, the use of paramount clauses in bills of lading 101 can lead to the mandatory application of a sea carriage convention,213 although it may in some cases only bring about a contractual effect. This happens where a dispute is brought before the courts of a member state that is not a party to the sea carriage convention referred to in the paramount clause. The paramount clauses used in practice generally provide for different sets of rules for particular types of voyage. With the use of paramount clauses, it is expected that the courts of non-contracting states before which a cargo dispute has been brought will give effect to the rules, unless doing so is contrary to their own public policy.214 A final remark needs to be made on the overriding effect of the discussed 102 triggers in the sea carriage conventions: for the purposes of rendering effective 211 For a similar view, see Staniland (fn. 190), p. 258. 212 See De Wit (fn. 197), para. 5.50. 213 See Article X(c) of the Hague-Visby Rules and Article 2(1)(e) of the Hamburg Rules. On the interpretation of paramount clauses, see Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum [1957] 1 QB 233 (HL). Where a bill of lading is governed by English Law, the incorporated sea carriage convention, for example the U.S Carriage of Goods by Sea Act 1936, is interpreted by the canons of interpretation under English law, see The Stolt Sydness [1977] 1 Lloyd’s Rep. 273 (QBD). 214 See The Superior Pescadores [2014] EWHC 971 (Comm.).

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the sea carriage convention to which they are a party, contracting states tend to treat the sea carriage convention as part of their mandatory policy. For this reason, the triggers provided in the carriage convention are generally treated applicable ex propio vigore by its contracting state, irrespective of the proper law of the relevant contract of carriage.215 Within the European framework, this is permissible under Article 9(1) of the Rome I Regulation, whereby the courts are allowed to apply the overriding mandatory provisions of their forum, as opposed to the governing law of the contract. 103 Under English law, the courts adhere strictly to the geographical scope of application of the rules, as applied under COGSA 1971,216 even where the contract of carriage is governed by English law.217 Hence, a contract of carriage covered by a bill of lading which is governed by English law will not be subject to the Hague-Visby Rules, unless the carriage falls within the geographical scope of application of the rules.218 However, a carriage falling outside the geographical scope is governed by its applicable law, which may include a carriage convention forming part of that legal system.219 2. Exclusion of specific Types of Carriage a) The Hague and Hague-Visby Rules 104

Under the Hague and Hague-Visby Rules, the excluded types of carriage are provided under Article VI and Article I(c) of both sets of rules. The former Article provides that: Notwithstanding the provisions of the preceding articles, a carrier, master or agent of the carrier and a shipper shall in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect of such goods, or his obligation as to seaworthiness, so far as this stipulation is not contrary to public policy, or the care or diligence of his servants or agents in regard to the loading, handling, stowage, carriage, custody, care and discharge of the goods carried by sea, provided that in this case no bill of lading has been or shall be issued and that the terms agreed shall be embodied in a receipt which shall be a non-negotiable document and shall be marked as such. An agreement so entered into shall have full legal effect. Provided that this article shall not apply to ordinary commercial shipments made in the ordinary course of trade, but only to other shipments where the character or condition of the property to be carried or the circumstances, terms and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement.

215 English courts took this approach even prior to the Rome I Regulation and the Rome Convention (see Article 7 of the Rome Convention); see The Morviken [1983] 1 AC 565 (HL). A similar approach is taken in other jurisdictions, such as Denmark; see A. Hedetoft et al. (fn. 157), p. 96. 216 See s. 1(2), (3) and (6) of COGSA 1971. 217 See The Komninos S [1991] 1 Lloyd’s Rep. 371 (CA). 218 Ibid. Hence, such a carriage will be governed by English common law. 219 Similarly, in a judgment handed down by a Belgian court, the express choice of Belgian law led the court to hold that that the Hamburg Rules, which were compulsorily applicable by the courts at the port of discharge, were not applicable. See decision in The P&O Nedlloyds Zaandan, AR 99/05312, dated 28 June 2001.

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In essence, Article VI caters for contracts relating to “non-ordinary ship- 105 ments” covering “particular goods”. The provision suggests that when covered by a non-negotiable document marked as such, this type of contract can effectively be subject to carriers’ terms without any limitations in the Hague and Hague-Visby Rules. Under English law, this provision is interpreted as a mere illustration of how the rules can be ousted in the case of contracts relating to “non-ordinary shipments” covering “particular goods”.220 Under English law, the provision is not interpreted as prohibiting the use of seawaybills or other non-negotiable receipts in case of ordinary commercial shipments.221 Hence, unless the contract of carriage expressly or by implication provides for the issue of a bill of lading,222 carriers can issue a seawaybill or other non-negotiable receipt even in the case of ordinary shipments. In so doing, they can effectively avoid application of the Hague and Hague-Visby Rules.223 Through description of “goods”, the Hague and Hague-Visby Rules further 106 exclude two types of carriage from their scope of application. Article I(c) provides that: “Goods” includes goods, wares, merchandise and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.

“Goods” are very widely described under the Hague and Hague-Visby Rules 107 in order to cover every conceivable type of cargo, saving the exceptions of live animals and deck cargo. Whilst a mere carriage of live animals is enough to exclude the application of the rules to such carriage, the same is not true for carriage of cargo on deck: the exclusion applies to cargo actually carried on deck, only where the “contract of carriage”224 also states that the cargo in question is so carried.225 That being so, clauses in bills of lading which merely give carriers a liberty to deviate, but which do not record the actual carriage on deck, are in220 See Treitel and Reynolds (fn. 5), para 9-315. 221 See Steyn J. in The European Enterprise [1989] 2 Lloyd’s Rep. 185 (QBD), 188, where he said: “... It follows that shipowners, if they are in a strong enough bargaining position, can escape the application of the rules by issuing a notice to shippers that no bills of lading will be issued by them in a particular trade”. 222 See s. 1(4) of COGSA 1971. This proposition is also supported when the provision in Article II of the Hague and Hague-Visby Rules is interpreted by reference to the definition of the “contract of carriage” spelled out under article I(b) of both sets of rules. For a similar view, see Treitel and Reynolds (fn. 5), para. 9-316, J.F. Wilson, Carriage of Goods by Sea, 7th edn, 2010, p. 177 and S. Baughen, Shipping Law, 5th edn, 2009, p. 100. 223 For a contrary view see W. Tetley, Marine Cargo Claims, 3rd edn, 1988, pp. 11, 944–950, quoted in S. Baughen, above. 224 Despite the definition of contract of carriage in Article I(b) of the rules, which talks of contracts contained in or evidenced by bills of lading or any similar documents of title, the contract of carriage is, for present purposes, interpreted as a “bill of lading or any similar document of title”, see The BBC Greenland [2012] 1 Lloyd’s Rep. 230 (QBD), para. 18, per Andrew Smith J. 225 See the English Court of Appeal decision in The Happy Ranger [2002] 2 Lloyd’s Rep. 357, where the carrier’s liability was held to be subject to the Hague-Visby Rules in relation to goods which were intended to be carried on deck but were damaged during loading.

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sufficient to trigger the exception as to deck cargo.226 In cases where only part of a consignment is actually carried on deck, the record as to deck carriage must also clearly indicate the specific packages that are in fact carried on deck.227 When the rules are effectively ousted through the application of the exception, carriers’ ability to contract on their own terms in respect of the carriage may nevertheless be subject to limitations imposed by the applicable national law.228 108 In the wake of the containerisation, attention must also be drawn to cases where containers are shipped on deck of a vessel which is specifically designed for container carriage on deck. It is suggested that bills of lading issued in relation to containers shipped on such vessels need not and should not contain an on-deck statement. Since the normal shipping space for containers is exclusively on deck in such vessels, it would appear that carriers do not need to seek an express permission from shippers for deck carriage.229 Consequently, there will be no need for an on-deck statement in a bill of lading to establish the shipper’s consent. Once this is accepted, putting an on-deck statement in bills of lading should not be an option for carriers in such circumstances. b) The Hamburg Rules 109

So far as the Hamburg Rules are concerned, the rules do not exclude “particular goods” from application. That being so, carriers would need to rely on the general liability provision under Article 5.1 and prove that “he, his servants or agents took all measures that could reasonably be required to avoid the occurrence and its consequences”. On the carriage of live animals and deck cargo, the rules follow a different path from that taken in the Hague and HagueVisby Rules. The description of goods is as follows: Article 1(5): “Goods” includes live animals; where the goods are consolidated in a container, pallet or similar article of transport or where they are packed, ‘goods’ includes such article of transport or packaging if supplied by the shipper.

226 See, for instance, the English case of Svenska Traktor v. Maritime Agencies [1953] 2 QB 295 (QBD). Under Dutch Law, printed clauses permitting deck carriage are not valid, see K.F. Haak, (fn. 183) p. 100. Under English law, a clause permitting carriage on deck without the carrier incurring responsibility is void in so far as it offends Article III(8) of the HagueVisby Rules when they are mandatorily applicable. Nonetheless, part of such a clause giving the carrier liberty to carry on deck permits the carrier to carry on deck, subject to the obligations under the Hague-Visby Rules, see Svenska Traktor, above. See also Geofizika DD v. MMB International Ltd. [2010] 2 Lloyd’s Rep. 1 (CA), p. 6. 227 Hence, a mere statement as to the proportion of the actual deck carriage in a consignment is insufficient for this purpose, see the decision of the Court of Appeal for British Columbia in The Rhone, dated 21 January 2003. 228 See, for instance, the position in Denmark, Hedetoft et al. (fn. 157), p. 93. Under English law, carriers in such cases would be free to exclude their liabilities arising from the English common law rules, although their exclusion clauses would be subject to the interpretation of contracts for the carriage of goods by sea, see Treitel and Reynolds (fn. 5), para. 9-112. 229 For a similar line of thought, see J. Evans & Sons (Portsmouth) Ltd. v. Andrea Merzario Ltd. [1976] 1 WLR 1078 (CA), 1084, per Roskill L.J. See also Treitel and Reynolds (fn. 5), para. 9-114.

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Under the Hamburg Rules, the definition of goods is much broader than that 110 in the Hague and Hague-Visby Rules, for it includes live animals and deck cargo. As a result of this, unlike the position under the Hague and Hague-Visby Rules, carriers are not provided with a complete freedom of contract for such carriages. Instead, the Hamburg Rules regulate these types of carriage, albeit through special provisions. Unlike its predecessors, the Hamburg Rules also expressly provide that goods include “container, pallet or similar article of transport”, provided that they are supplied by the shipper.230 c) The Rotterdam Rules

The Rotterdam Rules also adopt a definition of “goods” much wider than that 111 in the Hague and Hague-Visby Rules. Just as with the Hamburg Rules, the Rotterdam Rules do not create an outright exception for carriers in case of carriage of deck cargo and live animals, and these types of carriage are made subject to special provisions. 231 Although containers and similar articles are also expressly referred to in the definition, only those not supplied by the carrier or on his behalf are excluded. Under Article 1(24) of the Rotterdam Rules, the definition of goods is as follows: “Goods” means the wares, merchandise, and articles of every kind whatsoever that a carrier undertakes to carry under a contract of carriage and includes the packing and any equipment and container not supplied by or on behalf of the carrier.

3. Contractual and Documentary Scope

As a common pattern, all sea carriage conventions contain a provision defin- 112 ing the types of contract of carriage that come mandatorily within their scope of application. The importance of defining the qualifying contracts can hardly be disputed: from the Hague Rules through to the Rotterdam Rules, the central concern of the draftsmen has always been to protect the cargo interests by providing them with a minimum level of protection which cannot be derogated from by carriers. This concern has always brought with it one pivotal question: What type of cargo interest is in need of such protection against carriers? A quick answer to this question is that those cargo interests who have had less bargaining power than carriers in the formation of the contract of carriage to which they are a party. The Hague, Hague-Visby and Hamburg Rules adopt a contractual approach when identifying the types of cargo interests in need of protection,232 whilst the Rotterdam Rules provide a combination of various approaches: the latter rules require consideration of the types of contract and of trade in which the goods are carried.

230 For comparison, see Article 1(24) of the Rotterdam Rules. 231 For comparison, see Article 1(5) of the Hamburg Rules. 232 Sturley (fn. 91) para. 2.024.

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a) The Hague and Hague-Visby Rules 113

In terms of their contractual scope, the Hague and Hague-Visby Rules come with the narrowest scope. Article I(b) of both sets of rules provides that: “Contract of carriage” applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document of title as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.

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Quite understandably, the Hague and Hague-Visby Rules did not draw a distinction between tramp carriage and liner carriage: given that a cargo interest that holds a bill of lading as its contract of carriage would have little or no bargaining power in either type of trade,233 then why have a distinction based on the type of trade? Whilst strictly following the contractual approach, the rules, under Article V, nonetheless provide that: The provisions of these Rules shall not be applicable to charter parties, but if bills of lading are issued in the case of a ship under a charter party they shall comply with the terms of these Rules.

When these two provisions are taken together, the manner in which the contractual approach is adopted catches the eye. Unlike the Hamburg Rules, under both the Hague and the Hague-Visby Rules, this contractual approach is supplemented by a documentary approach: the contract must be covered by a bill of lading or any similar document of title. An overly literal reading of these two provisions suggests that issuance of a bill of lading or any similar document of title is essential for the rules to apply. This, however, would unduly restrict the application of the rules, leaving many cargo losses and damages arising during loading operations outside the scope to the cargo interests’ detriment. Under English law, the wording is taken to mean that, for the rules to apply, issuance of bills of lading or any similar documents of title must at least have been contemplated by the parties when entering into a contract of carriage.234 116 Commercial parties are innovative, and this has over the years resulted in new types of transport document appearing in practice. For this reason, the definition, which names both the qualified and excluded types of carriage, has proved too rigid to accommodate the ever-changing practice. In many jurisdictions, the courts did not stretch the words “or any similar document of title” to bring sea waybills and ship’s delivery orders within the scope of the rules.235 Therefore, these commonly used types of transport document, among many others, were 115

233 The Ardennes [1951] K.B. 55, 59–60, per Lord Denning. 234 Pyrene v. Scindia [1954] 2 QB 402 (QBD), The Rafaela S. [2005] 2 AC 423 (HL) and The Happy Ranger [2002] 2 All E.R. (Comm.) 24 (CA). This is also reinforced by s. 1(4) of COGSA 1971. 235 See, for instance, Article 91 of the Belgian Maritime Code, which talks of “bills of lading or an equivalent” when setting out the documentary scope of the Hague-Visby Rules. See M. Huybrechts et al. (fn. 139) p. 98.

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left outside the mandatory scope.236 Under English law, straight bills of lading are nevertheless accepted to come under the definition of contract of carriage with the House of Lords decision in The Rafaela S. 237 There, their Lordships did not follow the narrow English concept of document of title, taking into account inter alia the absence of any reference to this English concept in the French text of the convention.238 There are two relatively recent innovations in types of transport document 117 that deserve attention: multimodal transport documents and electronic transport records. Do the Hague and Hague-Visby Rules mandatorily govern contracts of carriage covered by such transport documents? As for multimodal transport documents that involve a sea carriage, the position is far from clear. As will be recalled, Article 1(b) of the Hague and Hague-Visby Rules provide that the Rules apply “only to contracts of carriage covered by a bill of lading or any similar documents of title in so far as such documents relate to the carriage of goods by sea”. Many standard form multimodal bills of lading involving a sea leg resemble 118 an ordinary bill of lading except that they provide an inland point as the place of receipt and/or delivery. Hence, it is suggested that such documents should be governed by the Rules so far as they relate to carriage of goods by sea and provided that the entire carriage covered by the document is not wholly regulated by another international convention.239 At any rate, this type of multimodal bill of lading should be treated as received for shipment bills of lading for the purposes of Article III(7) of the rules, whether they be either in order or non-order form. To do so would enable shippers holding such documents to demand an onboard notation from the sea carrier, facilitating the increasing reliance on these types of transport document in international sales.240 As regards electronic transport records, again a more preferable approach 119 would be to read the definition provision broadly enough to include electronic transport records within the scope of the rules. There is nothing in the Rules suggesting that such records should be ousted from their scope. As long as a particular type of electronic transport record carries the essential characteristics241 of a

236 Note, however, s. 1(6) of COGSA 1971, which allows mandatory application of the rules to a non-negotiable receipt through incorporation of a clause paramount. 237 [2005] 1 Lloyd’s Rep. 347. 238 Ibid., para 44. 239 For a contrary view, see Bhatia Shipping and Agencies PVT Ltd. v. Alcobex Metals Ltd. [2005] 2 Lloyd’s Rep. 336 (QBD), para 21. For further discussions, see Ozdel, (fn. 54), pp. 238 et seq. 240 See Ozdel (fn 54). 241 Ibid.

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bill of lading or any similar document of title, there is thus no reason why such a record should be excluded.242 b) The Hamburg Rules 120

The Hamburg Rules adopt an almost complete contractual approach in that their application is not made conditional upon issuance, or contemplation of issuance, of a particular type of transport document. Hence, Article 1(6) of the Convention provides that: “Contract of carriage by sea” means any contract whereby the carrier undertakes against payment of freight to carry goods by sea from one port to another; however a contract which involves carriage by sea and also carriage by some other means is deemed to be a contract of carriage by sea for the purposes of this Convention only in so far as it relates to the carriage by sea.

On the question of applicability of the Convention to multimodal transport documents, the provision above clarifies what is obscure in the context of the Hague and the Hague-Visby Rules: the contracts of carriage covered by multimodal transport documents are expressly included in the scope, with the effect that a sea leg of a multimodal carriage covered by this type of document is mandatorily governed by the rules. 122 Just as with the Hague and Hague-Visby Rules, charterparties are ousted from the purview of the Hamburg Rules. The Hamburg Rules also kept bills of lading issued under charterparties under the mandatory scope. It is difficult to justify why bills of lading, but not any other types of transport document issued under charterparties, are exclusively covered by this provision. This exclusivity does make sense in the context of the Hague and Hague-Visby Rules, but certainly not under the Hamburg Rules, which provide for a definition of contract of carriage not confined to bills of lading or any similar document of title. Article 2(3) of the Hamburg Rules reads: 121

The provisions of this Convention are not applicable to charterparties. However, where a bill of lading is issued pursuant to a charterparty, the provisions of the Convention apply to such a bill of lading if it governs the relation between the carrier and the holder of the bill of lading, not being the charterer.

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On electronic transport records, the Hamburg Rules make no mention of such records. Nonetheless, in the absence of an express provision suggesting the contrary, these electronic records must be governed by the Rules. By virtue of Article 1(6) of the Rules, application of the Convention is not made conditional upon issuance of a particular type of transport document. This accepted, there is no reason why contracts of carriage covered by electronic transport records

242 For a contrary view, see Aikens et al. (fn. 16) para. 10-025. Given the uncertainties as to the application of the Hague and Hague-Visby Rules to electronic bills of lading, many P & I Clubs do not provide cover for liabilities arising out of the use of electronic bills of lading that do not expressly incorporate the Hague or Hague-Visby Rules. See International Group of P & I Clubs Circular, 26 February 2013, at http://www.skuld.com/topics/circulars/circulars/paperless-trading-electronic-bills-of-lading---ig-faqs-6-august-2013/.

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should be ousted from the mandatory scope of the Convention. When defining their contractual sphere, the Hamburg Rules also talk of “contracts for future carriage of goods in a series of shipments during an agreed period”. On such contracts, Article 2(4) of the Hamburg Rules provides that: If a contract provides for future carriage of goods in a series of shipments during an agreed period, the provisions of this Convention apply to each shipment. However, where a shipment is made under a charter-party, the provisions of paragraph 3 of this article apply.

This provision regulates what is now called in the Rotterdam Rules “vol- 124 ume contracts”. The definitions of volume contracts in both sets of rules are similar. The only key difference between the definitions is that the Rotterdam Rules additionally require that volume contracts must be for carriage of a specified quantity of goods.243 Volume contracts, which are also known as “service contracts” are customary in liner trade. In general terms, these contracts are brought within the mandatory scope of the Hamburg Rules. However, those shipments performed under charterparties are excluded from the scope except in cases where a bill of lading which governs the relation between the carrier and cargo interest is issued under a charterparty. c) The Rotterdam Rules

On the question of what types of contract can come within the mandatory 125 scope, it is first necessary to refer to the definition of contract of carriage in the Rotterdam Rules.244 Article 1(1) of the Rules reads: “Contract of carriage” means a contract in which a carrier, against the payment of freight, undertakes to carry goods from one place to another. The contract shall provide for carriage by sea and may provide for carriage by other modes of transport in addition to sea carriage.

Just as with the Hamburg Rules, the definition in the Rotterdam Rules 126 makes it clear that application of the Rules is not conditional upon issuance, or contemplation of issuance, of a particular type of transport document. However, unlike the Hamburg Rules, which govern multimodal transport documents to the extent that they are related to carriage of goods by sea, the Rotterdam Rules may apply to the entirety of a multimodal carriage. This may happen in cases where the carrier has assumed responsibility for the entire carriage, and where the multimodal carriage involves a sea leg.245 Where a contract falls within the description of contract of carriage, two further considerations arise while deciding whether the contract comes within the scope of the Rotterdam Rules: the type of transportation for which the contract was made and the type of contract of carriage. On the type of transportation, the rules draw a line between liner and non-liner transportations. These are described under Article 1(3) and (4) as follows: 243 See Article 1.2 of the Rotterdam Rules. 244 See Article 5.1 of the Rotterdam Rules. 245 See Section C 3, note 112, above.

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Chapter 2, I. “Liner transportation” means a transportation service that is offered to the public through publication or similar means and includes transportation by ships operating on a regular schedule between specified ports in accordance with publicly available timetables of sailing dates. “Non-liner transportation” means any transportation that is not liner transportation.”

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For a transportation to be treated as liner transportation, it has to have a number of features. Where it does not have all the stated features, it will be treated as non-liner transportation. In borderline cases, it may be difficult to justify why a transportation bearing most, but not all, of the features of liner transportation has to fall under the definition of non-liner transportation. Although unhelpful,246 the definitions of liner and non-liner transportation are important for the purposes of Article 6, which provides that: 1.

2.

This Convention does not apply to the following contracts in liner transportation: (a) Charterparties; and (b) Other contracts for the use of a ship or of any space thereon. This Convention does not apply to contracts of carriage in non-liner transportation except when: (a) There is no charterparty or other contract between the parties for the use of a ship or of any space thereon; and (b) A transport document or an electronic transport record is issued.

The main thrust of this provision is that contracts of carriage in liner trade come within the convention, whilst contracts of carriage in non-liner transport do not.247 As regards liner transportation, which is principally governed by the Rotterdam Rules, charterparties and other similar contracts are expressly excluded from the scope. Since charterparties are not defined in the rules, it is for the national courts to decide what type of contracts fall within the exclusion. A literal reading of Article 6(1) of the rules suggests that all kinds of charterparties, including demise, time, voyage and slot charterparties, must be excluded from the mandatory scope. 129 Moving on to non-liner transportation, it is principally left outside the mandatory scope. Nonetheless, Article 6(2) states that the rules apply to bills of lading or other similar documents, if they govern the relation between the carrier and cargo interest. A good illustration of the use of bills of lading and other similar transport documents in non-liner transportation is “on-demand carriage”, where the route is usually pre-determined but the schedule is not.248 Another example is the use of charterparty bills of lading which may govern the relation between the carrier and cargo interest. For the purposes of clarifying the position of cargo interests that are not original parties to charterparties and other similar contracts, Article 7 further states: 128

Notwithstanding article 6, this Convention applies as between the carrier and the consignee, controlling party or holder that is not an original party to the charterparty or other contract of carriage

246 See Treitel and Reynolds (fn. 5), para. 10-008. 247 Ibid. 248 See the report of the International Union of Marine Insurance published in the CMI Yearbook 2001, p. 416.

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aa) Volume Contracts

In the Rotterdam Rules, the principle of freedom of contract is not just con- 130 fined to charterparties and similar contracts. The rules recognise that sophisticated shippers who enter into a volume contract with a carrier are also in a position to negotiate contract terms with the carrier on the same footing. Volume contract is defined in Article 1.2, which provides that: “Volume contract” means a contract of carriage that provides for the carriage of a specified quantity of goods in a series of shipments during an agreed period of time. The specification of the quantity may include a minimum, a maximum or a certain range.

The major shortcoming in the definition would appear to be a lack of limita- 131 tion in terms of the agreed period of time, number of shipments and quantities to be carried.249 Along with the uncertainty that it brings, this loose description can, as many commentators have pointed out, put smaller shippers at a serious disadvantage, making it easy for carriers to bring many contracts of carriage within the volume contract exception.250 Where a contract falls within the definition, it is governed by the liability regime provided in the rules as a default, although parties are given freedom to contract out of this regime to a great extent. By virtue of Article 80(4) of the rules, what cannot in any case be excluded are those obligations provided in Articles 14, subparagraphs (a) and (b),251 29252 and 32,253 and liabilities arising from Article 61.254 Where a contract of carriage is a volume contract, carriers can derogate from 132 the liability regime in the Rotterdam Rules to the permitted degree provided that they observe a number of formal requirements spelled out in Article 80. In summary, the derogation must be prominently stated in the volume contract;255 the volume contract must be individually negotiated or alternatively it must contain a prominent specification of the sections containing derogations;256 the shipper must be given an opportunity and notice of opportunity to conclude a contract that complies with the Convention without any derogations;257and the derogations must neither be incorporated by reference from another document nor be 249 Diamond (fn. 91), p. 486. 250 Ibid. 251 These provisions are concerned with the carrier’s duty to make and keep the vessel seaworthy and to properly crew, equip and supply her. Hence, carriers can contract out of their obligation to keep the vessel cargo-worthy given that Article 80.4 does not mention Article 14(c) of the rules. 252 This article covers the shipper’s obligation to provide information, instructions and documents. 253 This article deals with the shipper’s duty to inform the carrier as to the dangerous nature of the cargo. 254 The test for breaking the limitation of liability is set out under this Article. 255 Article 80(2)(a). 256 Article 80(2)(b). 257 Article 80(2)(c).

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included in a contract of adhesion which is not subject to negotiation.258 Upon satisfaction of these formal requirements, the permitted derogations become effective as between the carrier and shipper. 133 The derogations can bind a person other than the shipper. This is however subject to two additional requirements: that such person is provided with a prominent statement that the volume contract contains derogations, and that the person has given its express consent to be bound by the derogations.259 In this context, the rules make it clear that the requirement of consent cannot be satisfied if this is merely set forth in a carrier’s public schedule of prices and services, transport document or electronic transport record.260 134 From this long list of formal requirements flow a number of questions keeping the minds of a shipping lawyer busy: how must the derogation be stated in a volume contract to qualify as “prominent”? What constitutes “prominent specification”? To whom must the consent be given? Assuming that a CIF seller has entered into a volume contract with a carrier, can the CIF seller accept the CIF buyer’s consent on the carrier’s behalf?261 When and in what form must the consent be given?262 Somewhat unhelpfully, these questions are left to the decision of national courts. bb) Electronic Transport Records 135

Unlike its predecessors, the Rotterdam Rules explicitly bring into its scope electronic transport records. Defined under Article 17(1) of the Rotterdam Rules, electronic transport records that can facilitate as a contract of carriage and as a receipt of goods are governed by the Rules.263 As for negotiable electronic transport records, Article 19(1) of the Rules sets forth two additional requirements for these records to be governed by the Rules: the record must indicate that the goods are consigned to the order of the shipper or of the consignee, and it must not be expressly stated as being non-negotiable or “not negotiable”.264 From the perspective of a common lawyer, the use of the word “negotiable” in this context is a misnomer, for transport documents are not regarded as “negotiable” in the true sense – as documents capable of conferring on the transferee a better right than that of the transferor. Hence, from the point of view of a common lawyer, negotiability of the document when used in this context is taken to mean transferability.

258 259 260 261 262

Article 80(2)(d). Article 80(5). Article 80(5)(b). This has also been raised in Diamond (fn.91), p. 488. See F. Reynolds, Transport Documents under International Conventions, in R. Thomas, Carriage of Goods under the Rotterdam Rules, 2010, para. 13.41. 263 See Article 1, subsection 18 of the Rotterdam Rules. 264 See Article 20(1) of the Rules, which somewhat unhelpfully defines “non-negotiable electronic transport record” as an electronic record that is not a negotiable electronic transport record.

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After their first appearance in a sea carriage convention, electronic transport 136 records may in the future dominate shipping and trade practice. In jurisdictions where the use of these records has never been the subject of mandatory law before, this may take longer than one can expect. D. The Legal Functions of Transport Documents in Sea Carriage Conventions

Where a cargo shipped aboard a vessel is covered by a transport document, 137 that document will have great significance in a cargo claim. As will be recalled, one of the reasons for this is that the issuance or contemplation of issuance of a particular type of transport document can, as discussed above, trigger some of the sea carriage Conventions.265 Equally importantly, cargo interests in a cargo claim will need to rely on the legal functions conferred upon the transport document by the laws governing that document. In this context, basic legal functions that can naturally be expected of a transport document are threefold: First, the document is expected to confer upon the cargo interest – whether it is a buyer, seller or a bank acting as pledgees of the cargo in question – the right of suit, right to delivery and the power to pass these rights on to third parties whilst the goods are in transit. Secondly, the document is expected to function as a contract of carriage where the relation between the cargo interest and carrier is not already governed by a charterparty or a similar contract. Finally, a cargo interest would wish to have the goods covered by a transport document that acts as a receipt containing inter alia the quantity and apparent condition of the goods at the time of their shipment. In a cargo claim for damaged, short-delivered or lost cargo, specified particulars of goods provided in the bill of lading are thus expected to constitute the cargo interest’s evidence in support of its claim. The Hague, Hague-Visby and the Hamburg Rules leave the issues of the 138 right to delivery, title to sue and the right to have control over goods to national laws. Unlike its predecessors, the Rotterdam Rules do contain comprehensive provisions regulating these issues in three chapters comprising 16 articles in total. For the sake of simplicity, our discussions will be confined to the likely impact of these provisions on international trade and shipping practice, if the Rotterdam Rules were to enter into force. Prior to that, the shipper’s right to demand from the carrier a receipt and the evidentiary effects of the transport documents governed by the rules will be discussed by reference to the sea carriage Conventions. 1. Obligation of Carriers to produce a Transport Document

In international sale contracts on shipment terms, it is normally the seller’s 139 concern to obtain from the carrier a receipt for the goods upon their shipment. For the purposes of receiving payment under a letter of credit or a cash-against265 These are namely the Hague and the Hague-Visby Rules.

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documents sale, the seller would wish to be provided with a receipt that evidences the contractual delivery of complying goods. Depending on the type and/or terms of the sale contract, the seller may be required to tender a document that can also function as a contract of carriage266 providing for “continuous documentary cover”.267 140 At this juncture, it is vital to note that the seller’s ability to compel the carrier to issue a transport document is subject to an overarching limitation: the seller must be party to the contract of carriage with the carrier, i.e. he/she must be the contractual shipper of the goods in question.268 The identification of the contractual shipper is determined by the applicable national law.269 Hence, where the applicable national law points towards the buyer as the contractual shipper, the right – if there is any – to demand a transport document will rest with the buyer. 270 In such circumstances, the seller has, in principle, its remedies against the buyer where it cannot obtain from the carrier the required form of document to tender for payment under the sale contract or letter of credit.271 141 Where the contractual shipper has a charterparty or a similar contract with the carrier, its right to demand a transport document is subject to the terms of 266 This is the default position in the case of sale contracts concluded on CIF and CFR terms. See A3 of CIF and CFR terms in Incoterms 2010. In the case of FOB contracts, this obligation may arise depending on the shipping arrangements made between the seller and buyer. Where the shipping arrangements are made by an FOB buyer, the seller will have no control over the issuance and form of the transport document, see the English case of Glencore v. Lorico [1997] 2 Lloyd’s Rep. 386 (CA). This type of FOB seller is in principle expected to provide the buyer with the usual proof that the goods have been delivered, see Article A8 of the FOB terms in Incoterms 2010. 267 This is the default position in the case of sale contracts on CIF and CFR terms. See Article A8 of CIF and CFR terms in Incoterms 2010. On “continuous documentary cover”, see the English Court of Appeal case in Hansson v. Hamel & Horley, Ltd. [1921] 6 Ll.L.Rep. 432 (HL). 268 Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd. [1954] 2 QB 198 (QBD). There, the shipping arrangements were made by the FOB buyer, who was held to be the contractual shipper. Nonetheless, the seller was held to be party to an implied contract with the carrier. To this end, when the fire tender was dropped and damaged while being loaded by the carrier, the carrier was allowed to limit his liability pursuant to the Hague Rules, which were held to govern the implied contract of carriage. Unlike the CIF sales, identifying the contractual shipper in FOB sales requires consideration of a number of factors: the shipping arrangements made between the buyer and seller, whether the seller has taken the bill of lading in its own name as shipper and whether the seller has any commercial interest in retaining control over the goods, see Scottish & Newcastle International v. Othon Ghalanos Ltd. [2008]1 Lloyd’s Rep. 462 (HL), The Athanasia Comninos [1990] 1 Lloyd’s Rep. 277 (QBD) and Fortis Bank SA v. Indian Overseas Bank [2011] 2 Lloyd’s Rep. 190 (QBD). 269 Given that Article 15 of the Hamburg Rules requires the bill of lading to name the contractual shipper, making the identification of the shipper is easier under these rules. See Reynolds, (fn. 262), para. 13.24. 270 See Article 14 of the Hamburg Rules, Article III(3) of the Hague and Hague-Visby Rules and Article 35 of the Rotterdam Rules. 271 Under English law, such an FOB buyer may be held to have breached its contract of sale by failing to make effective shipping instructions. See the decisions given by the English courts in The New Prosper [1991] 2 Lloyd’s Rep. 93 (QBD) and Agricultores Federados Argentinos Sociedad Cooperative Limitada v. Ampro SA Commerciale Industrielle et Financiere, [1965] 2 Lloyd’s Rep. 157 (QBD). See also Treitel and Reynolds (fn. 5), paras. 4-011–4-031.

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this contract. Under English law, such a shipper/charterer cannot therefore insist on being provided with a bill of lading in compliance with Article III(3) of the Hague-Visby Rules, where its contract with the carrier does not expressly incorporate the rules. Different considerations arise under English law, where the contractual shipper’s contract of carriage with the carrier is not contained in a charterparty or a similar contract. In such cases, provisions in the Hague-Visby Rules on the issuance and content of the bill of lading do not become applicable per se: the rules impose a duty on the carrier to issue a bill of lading on demand of the shipper and “after receiving the goods into his charge”, where contract of carriage expressly or by implication provides for the issue of a bill of lading.272 On the contrary, Article 14 of the Hamburg Rules suggests that the carrier’s obligation to issue a bill of lading arises on the shipper’s demand after shipment of the goods. On the issuance of transport documents, the Rotterdam Rules make no mention of bills of lading. Under the Rotterdam Rules, the carrier has a duty to issue one of the transport documents identified in the Rules273 to the contractual shipper,274 unless there is an agreement between the parties or a custom of the trade not to use one.275 a) The Hague and Hague-Visby Rules aa) The Type and Content of the Transport Document to be issued

Under the Hague-Visby Rules, the relevant provisions are in Article III(3), (5) 142 and (7). Article III(3) reads as follows: After receiving the goods into his charge the carrier or the master or the agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading276 showing among other things: (a) The leading marks necessary for the identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper. (c) The apparent order and condition of the goods. Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity or weight which he has no reasonable ground for suspecting not

272 See section C 3, note 112, above. 273 These are namely: non-negotiable transport documents requiring surrender; non-negotiable transport documents not requiring surrender; negotiable transport documents requiring surrender; negotiable transport documents not requiring surrender; and negotiable and non-negotiable electronic transport records. 274 The Rotterdam Rules also introduce a new type of shipper, the documentary shipper, who, although not a party to the contract of carriage with the carrier, accepts to be named as shipper on the transport document or electronic transport record. Article 35 of the rules provides that upon the contractual shipper’s consent, the documentary shipper will be entitled to obtain from the carrier a transport document following shipment. 275 See Article 35 of the Rotterdam Rules. 276 Given Article I(b) of the Hague-Visby Rules, any reference to a bill of lading in the Rules must be taken to include also “similar documents of title”.

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The Article enables the shipper to demand from the carrier a bill of lading containing the stated particulars. When Article III(3) is available to a shipper, it will be entitled to damages from the carrier who, despite the demand of the shipper, fails to issue a compliant bill of lading.277 The question whether the shipper’s right to claim damages from the carrier under Article III(3) can be transferred to a third party is decided by reference to the applicable national law.278 In practical terms, this question can rarely be of significance to the third party bill of lading holders. Even more importantly, it would appear implausible that a right to damages under Article III(3) could coexist with the evidentiary rights provided under Article III(4) of the rules. 144 In a cargo claim, a third party bill of lading holder will find it necessary to rely on the evidentiary effect of the bill of lading pursuant to Article III(4) of the rules.279 There may, however, be circumstances where these evidentiary rights are of no use to third-party bill of lading holders. An example is where the inaccuracy of the stated particulars have induced this party into accepting the bill of lading, and thereby caused it loss. Under English law, misstatements in bills of lading may give rise to an action in tort against the carrier to recover such losses.280 145 On reading Article III(3) in conjunction with Article III(7), two further points emerge. Firstly, where the goods are handed over to a carrier ashore, the shipper can only obtain from the carrier a received-for-shipment bill of lading. Secondly, it is only upon actual shipment of the goods that the shipper can obtain a bill of lading, provided that the goods have been shipped aboard a named 143

277 The national applicable law provides the legal basis of the shipper’s right to get damages for the carrier’s breach of Article III(3). Under English law, when the contractual shipper transfers the bill of lading to the consignee, his right to get damages under Article III(3) is likely to be extinguished by operation of s. 2(1) of COGSA 1992. For more discussions on the issue, see also Treitel and Reynolds (fn. 5), paras 9-165–9-168. 278 See Treitel and Reynolds (fn. 5). 279 See Section D 1 bb), note 146. 280 Under English law, fraudulent misstatements in the bill of lading are actionable in tort. See the English case of Standard Chartered Bank v. Pakistan Shipping Corp. (Nos. 2 and 4) [2002] UKHL 43 (HL). The issue of whether the carrier may be liable in tort of negligence due to the misstatements in the bill of lading has not yet been judicially explored. Colman J. in The David Agmashenebeli [2003] 1 Lloyd’s Rep. 101 (QBD) took the view that the carrier’s obligation to issue a bill of lading cannot concurrently be based on Article III(3) and on tort. Where the Hague-Visby Rules do not apply, it is likely that English courts will hold the carrier liable in tort of negligence, see Hedley Bryne & Co. Ltd. v. Heller Partners Ltd. [1963] 1 Lloyd’s Rep. 485 (HL), 517, per Lord Devlin. An alternative action against the carrier based on the Misrepresentation Act 1967 is unlikely to succeed given the way the Act operates, see s. 2(1) of the Act. If commercially more viable, the shipper may consider seeking redress against the signatory for breach of warranty of authority. See V/O Rasnoimport v. Gutrie & Co. Ltd. [1966] 1 Lloyd’s Rep. 1 (QBD).

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vessel on a particular date.281 In international sales on shipment terms, a received-for-shipment bill of lading can in many cases be rejected justifiably by buyers under a sale contract282 and by banks under a letter of credit.283 Thus, from the perspective of sellers who are required by their sale contract or by a letter of credit to present a transport document for payment, Article III(7) is of great practical significance. bb) Representations and Reservations in Relation to the Goods

From the perspective of sellers, it is nothing new that obtaining from the car- 146 rier a shipped bill of lading is not of itself sufficient to receive payment. They would also wish to be sure of getting from the carrier a bill of lading showing that contractual goods have been shipped. In international sales on shipment terms, the importance of obtaining a record of the particulars of the goods at the time of their shipment is obvious: the seller is deemed to have delivered the goods when they are placed on board the vessel – i.e. when the risk of loss of or damage to the cargo also normally passes.284 Buyers, who are generally at some distance from the shipment port, part with their money in reliance of the particulars about the cargo specified in the bill of lading. At this juncture, it would appear that Article III(3) of the Hague-Visby 147 Rules caters for the needs of both sellers and buyers. It facilitates the issuance of a bill of lading, stating particulars that are of importance to both parties. The problem, however, is that Article III(3) does not oblige carriers to acknowledge the marks, number, quantity or weight of the goods furnished by the shipper. The provision permits the carrier to make reservations as to these furnished particulars, where he/she has reasonable grounds for suspecting their accuracy or where there is no reasonable opportunity to check the figures. Another layer of protection afforded to the carrier is set out under Article III(5): The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the carrier against all losses, damages and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.

When the particulars provided by the shipper turn out to be inaccurate with 148 the result that the carrier faces liability vis-a-vis the cargo receiver, the carrier will be entitled by virtue of Article III(5) to obtain indemnity from the shipper. Although effective, this indemnity measure is rarely used in practice for two reasons. First, carriers almost always remove the evidentiary effect of bills of lad281 This can be satisfied either with a shipped bill of lading or with a received-for-shipment bill of lading containing an ‘on board notation’, which is deemed to convert a received-for-shipment bill of lading into a shipped bill of lading. See Article III(7) of the Hague and the Hague-Visby Rules. 282 For English law, see Diamond Alkali Export Corporation v. FL Bourgeois [1921] 3 KB 443. 283 See Article 20 of the UCP 600. 284 See Article A5 of the CIF, CFR and FOB terms in Incoterms 2010.

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ing with a pre-printed “weight and quantity unknown” clause or a similar clause in bills of lading. Secondly, carriers seldom face the insistence of shippers on being provided with a clear receipt as to weight and quantity of the goods. This is readily explicable in practical terms: in most cases the shipper, who is normally also the seller of goods under a sale contract, does not generally need to tender for payment a bill of lading containing a clear statement as to the quantity and/or weight of the goods.285 149 Pre-printed in almost all standard form bills of lading, these clauses can seem a blanket “disclaimer of liability” contrary to Article III(8).286 It is settled under English law that these clauses are not struck down by Article III(8).287 This conclusion would appear to be justifiable, since carriers generally – and in cases of container transport in particular – do not have any means of checking the accuracy of the particulars furnished by the shipper. From a legal perspective, the justification is succinctly put by Clarke J (as he then was) in The Mata K, where he said:288 ... even if shippers make a demand within the meaning of Art. III, r.3, if the carriers then introduce a provision such as “weight... unknown” that provision would not be a... “clause, covenant or agreement...” within the meaning of art. III, r.8. The “liability” referred to must in this context be liability arising from breach of the obligations in art. III rr. 1 and 2. The inclusion of the provision “weight... unknown” does not have the effect of relieving the carrier from such a liability or lessening such liability. It merely means... that the provisions of art. III,.r.4 as to prima facie evidence cannot come into effect.

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A further justification is founded on the legal nature of the particulars of goods provided in bills of lading: when viewed from the perspective of English law, these particulars can only give rise to representations of fact,289 not to

285 Unless otherwise stated in the sale contract or in the letter of credit, the tender of bills of lading with such clauses is not a bad tender. As regards the position in letters of credit, see Article 26 of the UCP600. For English law, see also Midland Bank v. Seymour [1955] 2 Lloyd’s Rep. 147 (QBD). For the legal position under English law in relation to cashagainst-documents sales, see The Galatia [1980] 1 WLR 495 (CA). 286 See Treitel and Reynolds (fn. 5), para. 9-169. Under French law, blanket reservations are treated as invalid, see Legros et al., (fn.187) paras. 118 and 119. 287 See The Mata K [1998] 2 Lloyd’s Rep. 614 (QBD), 620, per Clarke J. See also The Atlas [1996] 1 Lloyd’s Rep. 642 (QBD). 288 See Mata K [1998] 2 Lloyd’s Rep. 614, 620. 289 At English common law, these representations amount to prima facie evidence as to the state of the goods at the time of their shipment, see Smith v. Bedouin Navigation Co. [1896] AC 70 (HL). Provided that the elements of common law estoppel are established, these representations may amount to estoppel, where the bill of lading is in the hands of a party who has become party to the bill of lading upon transfer, see Compania Naviera Vasconzada v. Churchill Simm [1906] 1 KB 237. Representations in a bill of lading will not have any evidentiary effect, where in fact no goods have been shipped, see Grant v. Norway (1851) 10 CB 665, where the court took the view that the master had no authority to sign a bill of lading for goods that had not been put on board. This rule was extended also to cases where a bill of lading indicates a larger quantity of goods than the quantity of goods actually shipped, Rasnoimport v. Gutherie & Co. [1966] 1 Lloyd’s Rep. 1 (QBD). This undesirable result arising from the application of Grant v. Norway has been greatly diminished through the enactment of COGSA 1992, under which statutory estoppel is established. Pursuant to

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contractual promises.290 The upshot of this is that Article III(8), which refers to “clause, covenant or agreement”, has no teeth to bite against “weight and quantity unknown” and similar clauses. Designed to remove, or at least to tamper with, the evidentiary effects of bills of lading, these clauses cannot lessen or remove the contractual duties and obligations and are therefore not struck down by Article III(8). The right to indemnity under Article III(5) is vested in the carrier only in re- 151 spect of “marks, number, quantity or weight” provided by the shipper, not of the misrepresentations in the bill of lading as to the apparent condition of the goods. The justification for this is that the former type of particulars originates from the shipper, whilst the carrier is expected to form and state its own view in the bill of lading as to the apparent condition of the goods at the time of their shipment. That being so, there is no legitimate means of redress for the carrier against the shipper where the record as to the apparent condition of the goods is or turns out to be inaccurate.291 Under English law, accuracy in this context is not taken to mean “absolute accuracy” of the record.292 On this matter, Colman J in the English case of The David Agmeshenebeli said:293 ... the law does not cast upon the master the role of an expert surveyor. He need not possess any greater knowledge or experience of the cargo in question than any other reasonably careful master. What he is required to do is to exercise his own judgment on the appearance of the cargo being loaded. If he honestly takes the view that it is not or not all in apparent good order and condition and that is a view that could properly be held by a reasonably observant master, then, even if not all or even most such masters would necessarily agree with him, he is entitled to qualify to that effect the statement in the bill of lading.

With this guidance, due performance of this duty under English law can seem 152 attainable, although not free from challenges. Where a small portion of the goods contains foreign materials, rust, moisture or discoloration, should carriers clause the bill of lading covering such goods? Imagine the surface of a cargo which is contaminated by coal dust dropped from hatch covers, or a cargo of steel which is slightly scratched on its surface. Would such minor defects justify the issue of a claused bill of lading? In The David Agmashenebeli, Colman J took the view that “the presence of a miniscule quantity of contaminants does

290 291

292 293

s. 4 of that Act, representations made in bills of lading are conclusive evidence against the carrier vis-a-vis a lawful holder of the bill of lading. See Treitel and Reynolds (fn. 5), para. 2-001. See the English case of Brown Jenkinson & Co. v. Percy Dalton Ltd. [1957] 2 QB 621 (CA), where the Court of Appeal refused to enforce a letter of indemnity given to the carrier against a clean bill of lading. The position is the same under French law, see Legros et al. (fn. 187), para. 200. Nor are English courts lenient towards the qualifications of the carrier’s representation that the goods are shipped in apparent good order and condition. Depending on the degree of ambiguity of the qualification, the courts can treat the qualification ineffective to prevent estoppel, see Compania Naviera Vasconzasa v. Churchill Simm [1906] 1 KB 237. Where the qualification is unambiguous and is on the face of the bill of lading, the court will treat the bill of lading as unclean: Canada & Dominion Sugar Ltd. v. Canadian National Steamship [1947] AC 46 (PC). See The David Agmashenebeli [2003] 1 Lloyd’s Rep. 92 (QBD),105, per Colman J. Ibid.

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not render the cargo otherwise than in good order and condition”.294 This view has much to commend it, when the drastic consequences flowing from a claused bill of lading are considered: a claused bill of lading is not fit to pass through the hands of traders and is thus not ordinarily accepted as good tender for payment in international trade.295 153 On considering whether or not to clause the bill of lading, the master’s dilemma is obvious: on the one hand to inaccurately clause the bill of lading would give rise to damages arising from the non-compliance of Article III(3).296 On the other hand, not to clause the bill of lading in respect of goods otherwise than in apparent good order and condition would expose the carrier to a considerably high risk of liability vis-a-vis the cargo receiver. It is true that some visible, but minor, contamination, moisture, discoloration or some other imperfections can be expected of some particular types of cargo. However, where the degree of imperfection can vary considerably and where views of masters may honestly differ as to the identification of the correct degree when looking at the goods, how are carriers to protect themselves against the risks of misdescriptions? 154 The practical attempt at avoiding this dilemma has been to introduce “RETLA clauses” into bills of lading. In essence, these clauses are designed to redefine the pre-printed words “shipped in apparent good order and condition”. To this end, RETLA clauses purport not to qualify, but to redefine these words, with a view to keeping the bill of lading fit to pass through the hands of traders.297 With a RETLA clause introduced into a bill of lading, the words “shipped in apparent good order and condition” no longer import the meaning that the goods are free from any of the visible defects listed therein, such as rust, decay and discoloration. From the perspective of a cargo receiver, who is also generally the buyer of goods under a sale contract, this effect of RETLA clauses may raise the eyebrows. The cargo interest places heavy reliance on the words “shipped in apparent good order and condition” when it intends to part with its money only against a clean receipt. When viewed from this perspective, RETLA clauses would appear to render the words “shipped in apparent good order and condition” meaningless to the detriment of the cargo receiver. However, it is 294 Ibid., pg. 115. 295 For letters of credit sales, see UCP 600, Article 27. For cash-against-documents sales, see M.G. Bridge, Benjamin’s Sale of Goods, 8th edn, 2010, para. 19–126. See also The Galatia [1980] 1 Lloyd’s Rep. 453 (QBD), where the court took the view that a bill of lading that contained a notation indicating that the goods had been damaged during loading should be treated as a clean bill of lading and be accepted by the buyer for payment. The damage to which the notation referred was a post-shipment damage which had to be borne by the buyer. The decision cannot find room for application in the case of a letter of credit incorporating UCP 600 by reason of its Article 27. 296 This will be the case where the Hague-Visby Rules are applicable to the contract of carriage. For further discussions, see fn. 280 above. 297 In the meantime, RETLA clauses also typically confer upon shippers a “notional” right to request a substitute bill of lading setting out the defects – a right that is unlikely to be exercised by shippers, who would naturally wish to receive payment under a sale contract or a letter of credit.

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possible for the cargo receiver to avoid this by simply asking the seller under the sale contract to tender a bill of lading without a RETLA clause.298 Leaving this practical solution to one side, the alternative would be a judicial 155 solution, which, if preferred, may lead to two possible routes of judicial approach. The first approach, the “trade approach”, would be to give the RETLA clause full effect, with the result that the carrier would be able to avoid claims arising from pre-shipment damage to goods. If this approach were followed, the cargo receiver would be urged to seek redress against the seller. In the absence of a provision in the sale contract requiring the tender of a bill of lading without a RETLA clause, the cargo receiver would be left with a highly risky option, which it may not wish to take: to reject the bill of lading tendered by the seller on the grounds that the bill of lading contains a RETLA clause. This would possibly trigger an action by the seller for wrongful rejection. In such an action, the cargo receiver would have to navigate in uncharted waters, trying the plea before a court or an arbitral tribunal that such a bill of lading was not clean and was therefore a bad tender. The second approach, the “carriage approach”, would be to give no ef- 156 fect299 or only limited effect to RETLA clauses. To follow this approach would have the effect of putting carriers at risk in relation to claims arising from preshipment damage and thereby giving cargo receivers enough incentive to seek redress against the carrier. Recently, Simon J in The Saga Explorer opted for the “carriage approach” when he said:300 The Retla clause can and should be construed as a legitimate clarification of what was to be understood by the representation as to the appearance of the steel cargo upon shipment. It should not be construed as a contradiction of the representation as to the cargo's good order and condition, but as a qualification that there was an appearance of rust and moisture of a type which may be expected to appear on any cargo of steel: superficial oxidation caused by atmospheric conditions. The exclusion of “visible rust or moisture” from the representation as to the good order and condition is thus directed to superficial appearance of a cargo which is difficult, if not impossible, to avoid.

The combined effect of Colman J’s approach in The David Agmashebeli301 157 and that of Simon J in The Saga Explorer is that RETLA clauses have now been rendered redundant. The net result is that, in the case of any defect which is more than minimal, carriers are now expected to clause the bill of lading, whether or not the bill of lading contains a RETLA clause. When holding that the bill of lading should have been claused in that case, Simon J’s second rea298 Difficulties may arise, however, where a letter of credit is in place and where the RETLA clause appears on the reverse side of the bill of lading. In such circumstances, the bank is likely to accept such a bill of lading contrary to the buyer’s intention, see Article 14 of UCP 600, which provides that the bank will accept documents that appear on their face in compliance with the requirements in the letter of credit. See the English case of The Starsin [2003] 1 Lloyd’s Rep. 571 (HL). 299 Under English law, as with weight and quantity unknown clauses, RETLA clauses should not offend Article III(8), which has no teeth to bite representations made in the bill of lading. For further discussions, see fn. 288. 300 See The Saga Explorer [2013] 1 Lloyd’s Rep. 401, para. 44 (QBD). 301 See fn. 292.

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soning also suggests that the RETLA clauses may now be invalidated by Article III(8). With respect, there is insufficient legal basis for upholding this reasoning, for the reasons explained before.302 If this approach is endorsed by other courts and higher courts, this will surely create the platform for cargo receivers to challenge the well-established validity of the weight and quantity unknown and similar clauses.303 b) The Hamburg Rules aa) The Type and Content of the Transport Document to be issued

The Hamburg Rules require the carrier304 or its agent, who is usually the master, to issue a bill of lading on the shipper’s demand after shipment of the goods.305 Furthermore, just as with the position under the Hague and Hague-Visby Rules, the shipper is given the right to demand a ‘shipped bill of lading’ after the goods have been shipped.306 159 One of the distinctive patterns of the Hamburg Rules is found in Article 15(1), which contains a long list of particulars which “must” be included in bills of lading to be issued. Some of these particulars “must” be contained in all bills of lading, whilst others are required to be included only in appropriate cases. Article 15(1)(a) and (b) requires bills of lading to record the “apparent condition of the goods” and the “number of packages or pieces and (emphasis added) weight of the goods or their quantity”.307 160 In addition to the above, where applicable, the same provision also requires the dangerous nature of a cargo to be recorded in the bill of lading. In a dangerous cargo claim brought against a shipper, the presence or absence of such a record may help parties substantiate their cases. However, an obligatory provision for the inclusion of an express statement as to the dangerous nature of the cargo brings legal complications: since the duty to inform the carrier as to the dangerous nature of the cargo rests with the shipper, who holds the bill of lading only as evidence of contract of carriage, why must this be recorded in bills of lading? What effect would the carrier’s failure to record such information have on a dangerous cargo claim? 158

302 See fn. 288. 303 See C. Debattista, Receipts Unknown – Retla clauses on the way out?, Shipping & Transport International, 2003, Vol.9, number 3, pp. 4–7. 304 See Article 14(1) of the Hamburg Rules, which talks of both the actual carrier and the contractual carrier. The reason for this is that, unlike the Hague and the Hague-Visby Rules, the Hamburg Rules are intended to apply not just to the contractual carriers but also to actual carriers. See the definitions of ‘carrier’ and ‘actual carrier’ under Article 1(1) and (2) of the Hamburg Rules. 305 See Article 14(1) of the Hamburg Rules. 306 See Article 15(2) of the Hamburg Rules. 307 In contrast, see Article III(3)(b) of the Hague and the Hague-Visby Rules, where the carrier is required to include the number of packages or pieces, or the quantity, or weight.

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Included in the list are many more unnecessary, if not problematic,308 particu- 161 lars which, according to the chapeau of Article 15(1), must be included. Notwithstanding this obligatory language, Article 15(3) goes on to state that the absence in the bill of lading of one of more of the listed particulars shall not affect the legal character of the bill of lading, provided that it meets the description of ‘Bill of Lading’ under Article 1(7) of the Rules. Hence, this non-compliance would only give rise to damages if any loss could be proven. bb) Representations and Reservations in Relation to the Goods

Although this issue is regulated under Article 17 of the Rules, it is important 162 to first discuss Article 16(1), which talks of reservations. Perhaps with a view to preventing the use of blanket reservations in bills of lading, namely pre-printed weight and quantity unknown and similar clauses, the provision obliges the carrier to state the grounds for suspicion and/or absence of reasonable means of checking. Where the facts are in dispute between the carrier and shipper, it is most likely that this obligation will significantly delay loading. By the operation of Article 16(2), the carrier’s reservation clauses on the apparent condition of the goods are rendered ineffective: unless the carrier notes the defects on the apparent condition of the goods, it is deemed to have noted that the goods were in good condition at the time of their shipment. Moving on to Article 17(1), the shipper is deemed to have guaranteed the ac- 163 curacy of particulars as regards the nature of the cargo, leading marks,309 number, weight and quantity as furnished by the shipper. Furthermore Article 17(3) provides that a letter of indemnity issued against a bill of lading which does not contain any reservations as to the particulars listed in Article 17(1) is enforceable between the shipper and carrier. Such a letter of indemnity can be rendered void where the reservation in the bill of lading is omitted with an intention to defraud a third party, such as a consignee or a bank, who acts in reliance of the content of the bill of lading. c) The Rotterdam Rules aa) The Type and Content of the Transport Document to be issued

On the issuance of transport documents, the Rotterdam Rules make no men- 164 tion of bills of lading. As will be recalled, there is no absolute obligation on the part of the carrier to issue a transport document on demand of the shipper.310 As regards the content of the transport document to be issued, when it is agreed or is customary, Article 36(1), (2) and (3) of the Rules set out a list of particulars 308 See, for instance, Article 15(1)(f), which only makes reference to ‘carrier’. When the goods are taken over by the actual carrier, could the date of that delivery be inserted into the bill of lading? 309 For comparison see also Article IV(2)(o) of the Hague and Hague-Visby Rules, whereby the carrier is not liable for loss or damage caused by “insufficiency or inadequacy of marks”. 310 See fn. 275.

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to be recorded in the transport document. The list is slightly shorter than that provided under the Hamburg Rules, but just as with the Hamburg Rules, absence of one or more of the listed particulars is not of itself sufficient to invalidate a transport document.311 165 To facilitate the identification of the contractual carrier,312 Article 36 requires that the transport document state the name of the carrier. Article 37 then goes on to provide a set of rules to determine the contractual carrier where the carrier is not stated in the transport document. Pursuant to Article 37(2), where the carrier is identified in the ‘contract particulars’ – defined as “any information relating to the contract of carriage or to the goods (including terms, notations, signatures and endorsements) that is in a transport document or an electronic transport record” – any other information relating to the identity of the carrier inconsistent with the identification shall have no effect. The wide definition of “contract particulars” raises the question of how the contractual carrier can be identified in cases where the contract particulars contain two conflicting statements as to the identity of the carrier. Although the Article is silent on this matter, it at least makes it clear that the demise and identity of carrier clauses,313 which do not usually contain the name of a carrier, will have no role to play in identifying the contractual carrier.314 Furthermore, it raises the presumption that the registered owner is the contractual carrier, in cases where the carrier is not identified by name in the contract particulars.315 bb) Representations and reservations in relation to the goods 166

On this matter, the first provision to be looked at is Article 39(3), which states that in the absence of any statement as to the apparent order and condition of the goods, the contract particulars are deemed to have stated that the goods were in good order and condition at the time they were received by the carrier or a performing party.

311 See Article 39(1) of the Rotterdam Rules. 312 See the definition of carrier under Article 1(5) of the Rotterdam Rules, which talks of “a person that enters into a contract of carriage”. Similarly, see Article 1(1) of the Hamburg Rules. Under the Hague and Hague-Visby Rules, the “carrier” is stated to include the owner or the charterer who enters into a contract of carriage with a shipper. Given the word “include” there is no doubt that freight forwarders or carriage contractors can be carriers within the meaning of the Rules provided that they enter into a contract of carriage as carrier and that the contract is covered by a bill of lading or any similar document of title. 313 Identity of carrier clauses are treated as invalid in many jurisdictions but not under English law, see CMI Yearbook, 2001, Synopsis of the responses to the Consultation Paper, p. 391. 314 See F. Lorenzon, Transport Documents and Electronic Transport Records, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation, 2009, para 37-02. See also the English case of The Starsin [2003] UKHL 12, which was concerned with unequivocal but conflicting identifications in the contract particulars, the one provided on the face pointing to the charterer prevailed over the two identifications pointing to the carrier on the reverse side. 315 See Article 17(2). On how the registered owner or the bareboat charterer may rebut the presumption, see Article 37(2). According to Article 65, an action against the registered owner or the bareboat charterer can be brought after a two-year time bar has elapsed.

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Under Article 40(1), the Rotterdam Rules require the carrier to state that it 167 does not assume any responsibility for the accuracy of the particulars furnished by the shipper, if the carrier knows or has reasonable grounds to believe that they are false or misleading. The carrier may qualify the particulars in the manner and circumstances set out in subsections (3) and (4) of Article 40. In this context, a distinction is drawn between the permitted qualifications in containerised goods and non-containerised goods. 2. Evidentiary Effects of Transport Documents a) Overview

Article III(4) of the Hague Rules provides that a bill of lading is prima facie 168 evidence of receipt by the carrier of the goods in respect of the particulars listed in Article III(3)(a), (b) and (c). In the context of Article III(4) of the Hague-Visby Rules, this evidentiary effect is confined to cases where the bill of lading or any similar document of title is not “transferred”316 to a “third party”317 acting in good faith. Upon such a transfer, the listed particulars become conclusive evidence.318 As with the Hague-Visby Rules, the Hamburg Rules also acknowledge the 169 evidentiary effects of bills of lading in similar terms.319 In this respect, the Hamburg Rules clarify that a transfer of the bill of lading to a third party – following which the particulars become conclusive evidence – includes a transfer of the bill of lading to the consignee.320 The Hamburg Rules also stand differently from the Hague-Visby Rules in that the evidentiary function of the bill of lading has a wider application: it applies to a longer list of particulars of goods that need to be provided in the bill of lading. To afford protection to the cargo receiver in its evidential battle against the 170 carrier in a cargo claim, the Rotterdam Rules do not confine the evidential devices available to the cargo receiver to bills of lading. Article 41(a) sets out the general principle that a transport document, whether it is a bill of lading or a seawaybill, or an electronic transport record, is prima facie evidence of receipt by the carrier of the goods as stated in the contract particulars.321 Subsection (b) of 316 This provision should equally apply to a person named as a consignee in a straight bill of lading, which is, following the decision in The Rafaela S [2005] UKHL 11, governed by the Hague-Visby Rules. Despite the unclear wording in the Hague-Visby Rules, purposive interpretation of the Rules supports this stance. For further discussions on this matter, see Treitel and Reynolds (fn. 5), para. 2-019. 317 This should also include the “consignee” of an order or straight bill of lading, although the bill of lading is not endorsed but only surrendered to the consignee. 318 Under English law, where the Hague-Visby Rules are not applicable, the holder’s reliance on the particulars stated in the bill of lading is nevertheless protected under the doctrine of estoppel. For further discussions, see fn. 289. 319 See Article 16. 320 See Article 16(3)(b). 321 Contract particulars referred to in this provision are defined in Article 1(23) of the Rotterdam Rules.

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the same Article then goes on to say that proof to the contrary by the carrier in respect of any contract particulars in negotiable transport documents or negotiable transport records shall not be admissible against a third-party transferee acting in good faith. In the case of a non-negotiable transport document that requires surrender, all particulars contained therein amount to conclusive evidence, provided that it is in the hands of a consignee acting in good faith.322 Different considerations arise where the transport document does not require surrender: there is a limited list of particulars of which the carrier cannot deny the truth against a consignee acting in good faith.323 171 The rules further provide an overarching limitation to the evidentiary effects of the particulars: transport documents and electronic transport records can be used as an evidential device only in relation to particulars which are not duly qualified or negated by the carrier.324 To determine whether a particular is qualified or negated will require construction of the transport document or the electronic transport record as a whole.325 b) Provisions as to freight and demurrage

The Hamburg Rules stretch the evidentiary effects of bills of lading in relation to the carrier’s right to ask payment of freight and demurrage under bills of lading. From the cargo receiver’s point of view, the Hamburg Rules render bills of lading of great value as an evidential device in their favour. Under these rules, a bill of lading which does not record the incurred freight or demurrage, or which does not indicate that freight or demurrage is payable is prima facie evidence that no freight or demurrage is due.326 In the hands of a third-party transferee, including a consignee acting in good faith, such a bill of lading is conclusive evidence that no freight or demurrage is payable.327 The aim of these rules is to prevent imposition of potential liabilities on to cargo receivers to pay unpredictable sums of freight or demurrage, which may, unbeknown to them, have already been incurred or may later incur beyond their control. 173 A cargo receiver holding bills of lading governed by the Hague and HagueVisby Rules is in a delicate position. For a cargo receiver – who is normally also the buyer under a sale contract – the most effective way to avoid such liability would be to require the seller to tender a bill of lading which has two important notations on it: a “freight prepaid” stamp and an indication that there is no loading port demurrage to collect. Under English law these notations will re172

322 323 324 325

See Article 41(b)(ii). See Article 41(c). See Article 40. A similar view is taken under English law. See, for instance, the decision in The Skarp [1935] P. 134, where it was held that the pre-printed words “shipped in good apparent order and condition” were not qualified by the pre-printed words “condition unknown”. 326 See Article 16(4) of the Hamburg Rules. 327 Ibid.

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lease the cargo receiver from liability for these sums, unless it does not actually know that these sums have not been paid.328 On the effect of “freight prepaid” stamps or statements of a similar na- 174 ture, Article 42 of the Rotterdam Rules proposes a different solution: the solution is based on the question of whether the cargo receiver – who is defined as the “consignee”329 under the Rotterdam Rules – is also the shipper. When the cargo receiver is not also the shipper, the carrier is estopped from claiming freight by reason of the “freight prepaid” stamp in the bill of lading. This leaves open one question: if a cargo receiver who is not also a shipper happens to know that freight has not been paid, would it be possible for this party to shield itself under the “freight prepaid” stamp on the bill of lading? It would be unjust to allow such a cargo receiver to shield itself under this stamp, but the wording of the Rules can hardly be stretched to create the desired result. 3. Rights to Control and Delivery of the Goods under Contracts of Carriage

The Rotterdam Rules address issues that were traditionally left to national 175 laws in the previous sea carriage Conventions – delivery of the goods,330 rights of the controlling party and transfer of rights. It is difficult to overstate the importance of these issues to parties involved in shipping, international trade and banking markets. After shipping the goods, sellers would naturally wish to hold a transport document giving them constructive possession of the goods. Against the risk of non-payment by buyers, they would wish to be able to have control over the goods in transit. Equally naturally, buyers would not wish their respective sellers to be able to exercise any control over the goods that they have paid for. From the perspective of banks financing the sale of goods under a letter of credit, they would also wish to make a payment against a transport document by which a pledge of goods can be created. With all these interests at stake, carriers would be anxious to perform delivery in compliance with the law applicable to their respective contracts of carriage. The Rotterdam Rules have taken a bold attempt at achieving uniformity in this area. If the Rules were to enter into force, they would significantly change the dealings in shipping, international trade, banking and insurance markets. a) Delivery of the Goods

On delivery of the goods, Article 43 of the Rotterdam Rules starts off by im- 176 posing a duty on the consignee that has demanded delivery of the goods: a duty to accept delivery in accordance with the terms of the contract, customs or us328 See The Indian Reliance [1997] 1 Lloyd’s Rep. 52 (QBD), 55. Under English law, these notations will give rise to representations of fact, as a result of which the carrier may be estopped from denying their truth. See fn. 289. 329 See Article 1.11 of the Rules. 330 When setting out the carrier’s period of liability, Article 4 of the Hamburg Rules also provides an answer to the question of when delivery takes place under the rules.

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ages of the trade. The consignee – who is described by Article 1(11) as “a person entitled331 to delivery under a contract of carriage or a transport document or electronic transport record” – is obliged to take delivery, only if it has initially demanded the goods. 177 Under English law, there is no statutory duty on the part of the consignee to accept delivery of the goods. When such a duty is expressly provided in a contract of carriage, it can be imposed on a consignee only if it has taken a step to enforce the contract of carriage as described under s. 3 of the Act.332 Unlike COGSA 1992, application of Article 43 of the Rotterdam Rules is not limited to certain types of transport document.333As long as there is a contract of carriage as described in Article 1(1) of the Rules, Article 43 applies. 178 Under Article 44 of the Rotterdam Rules, further obligations are imposed on to the consignee who has demanded delivery of the goods: on request of the carrier or the performing party, the consignee is required to acknowledge receipt of the goods from the carrier or the performing party in the manner that is customary at the place of delivery. The provision leaves open the question of on what terms the consignee is expected to acknowledge receipt of the goods.334 The provision would appear to leave room for conflict between the parties. 179 The following Articles go on to set out the due process for delivery of the goods where the goods are covered by i) a non-negotiable transport document which does not require surrender335 or a non-negotiable electronic transport record (Article 45), ii) a non-negotiable transport document which requires surrender336 (Article 46), iii) a negotiable transport document that requires surren-

331 This is decided by reference to Articles 45, 46 and 47 of the Rules. 332 See The Berge Sisar [1998] 2 Lloyd’s Rep. 475 (CA), where the request to take routine samples of the cargo from the ship’s tank was held not to amount to take or demand delivery of the goods within the meaning of s. 3 of COGSA 1992. 333 COGSA 1992 applies to bills of lading, seawaybills and ship’s delivery orders, see s. 2(1) of the Act. 334 See C. Debattista Delivery of the Goods, in Y. Baatz et al., The Rotterdam Rules: A Practical Annotation, 2009, para. 44-02. 335 Under Article 1(16) of the Rotterdam Rules, “non-negotiable transport document” is described as a transport document that is not a negotiable transport document. “Negotiable transport document” is described under Article 1(15) as a transport document that indicates by wording such as “to order” or “negotiable” or other appropriate wording recognised as having the same effect by the law applicable to the document that the goods have been consigned “to the order of the shipper”, “to the order of the consignee” or “to bearer” and is not expressly stated to be “non-negotiable” or “not negotiable”. Under English law, straight bills of lading that dispense with the requirement for surrender or seawaybills can be treated as non-negotiable transport documents for the purposes of application of Article 45 of the Rotterdam Rules. 336 On the assumption that the Rotterdam Rules have been given the force of law in the UK, a straight bill of lading that requires surrender would be covered under Article 46. Under English law, a straight bill of lading needs to be surrendered if there is an express or an implied term in the bill of lading to that effect, see Treitel and Reynolds (fn. 5), para. 6-21. Also, see the obiter statements of Lord Bingham and Lord Steyn in The Rafaela S [2005] 1 Lloyd’s Rep. 347 (HL), paras. 20 and 45. In Germany, France and Scandinavia, straight bills of lading need to be presented even in the absence of an implied or express provision in the bill of

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der, such as a transferable bill of lading, or an electronic transport record (Article 47(1)), or iv) a negotiable transport document which does not require surrender (Article 47(2)). In the case of a non-negotiable transport document that does not require sur- 180 render, the carrier, by virtue of Article 45(a),337 may refuse delivery where the person claiming to be the consignee does not “properly”338 identify itself as such on the carrier’s request. Despite the use of the word “may” in the provision, the provision should not be interpreted in a way giving the carrier a real choice as to delivery of the goods to a person who does not properly identify itself.339 Under English law, this provision would not be interpreted as such:340 the carrier who delivered the goods to such a person would be liable to the shipper or the rightful consignee for misdelivery. In the following subsections of Article 45, the controlling party is required 181 to give the details of the consignee, if they have not already been provided in the transport document.341 Also, the carrier may advise the controlling party and request instructions in certain circumstances.342 Where the carrier cannot locate the controlling party for delivery instructions, it may then request instructions from the shipper. If it cannot locate the shipper, it may turn to the documentary shipper for this purpose.343 The carrier “may” follow the same line of inquiry, in the case of other types of transport documents and where they cannot deliver the cargo to the consignee for the prescribed reasons.344 Where the goods are covered by a non-negotiable transport document 182 which requires surrender, under Article 46, the carrier must refuse delivery if the transport document is not surrendered. Although one might expect that surrender of the transport document would be sufficient to justify delivery, the Article goes on to provide the carrier with an additional ground for refusal for delivery: the carrier “may” refuse to deliver the goods to a person who has surrendered the negotiable transport document, but failed to properly identify itself as consignee. The word “may” in the provision raises one question: would the carrier be liable for misdelivery upon delivery of the goods against production of

337 338 339 340

341 342 343 344

lading to that effect, see The Rafaela S [2005] 1 Lloyd’s Rep. 347, 352–353 and Treitel and Reynolds (fn. 5), para. 6-019. Article 45 will apply in cases where the goods are not covered by any transport document or electronic transport record. This will be decided by the law applicable to the contract. See Debattista (fn. 334), para. 45-05. Ibid. See also Glyn Mills v. East and West Dock Co. (1882) 7 App. Cas. 591 (HL), where the carrier was not held liable in conversion due to its delivery of the goods to the consignor who endorsed one of the three original bills of lading to a bank as security for a loan. The justification was made on the grounds that the delivery was made bona fide and without knowledge of such endorsement to the bank. Article 45(b). Article 45(c). Ibid. See Articles 46(b) and 47(2)(a). See also Article 48, which deals with what actions the carrier can take in the case of goods remaining undelivered.

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the transport document where the person with the negotiable transport document failed to properly identify itself as consignee?345 In line with the discussions raised in the context of Article 45, this question would probably be answered in the affirmative under English law.346 183 The Rules are silent as to whether carriers would be faced with liability for misdelivery if they delivered the goods upon surrender of what appeared to be genuine but were in fact forged transport documents.347 With the carrier’s scope of liability extending beyond tackle-to-tackle under the Rotterdam Rules, one might expect that the rules would relieve carriers of liability in the case of delivery against such transport documents. Although the carrier’s liability is faultbased pursuant to Article 17(2) of the Rotterdam Rules, this question should be decided ultimately by the interpretation of the provision pursuant to the law applicable to the contract of carriage.348 184 In the case of a negotiable transport document, Article 47(1) requires the carrier to deliver the goods upon surrender of the document and upon the “holder”349 properly identifying itself as such. In many jurisdictions, surrender of the transport document is, in most cases,350 all a carrier is entitled and bound to require for delivery.351 Thus, the additional requirement as to proper identification creates a significant departure from the conventional approach to delivery.352 The same is not true for delivery of goods covered by a negotiable electronic 345 Where the goods are covered by a negotiable electronic transport record, Article 47(1)(a)(ii) only requires identification. See Debattista (fn. 334), para. 47-08. 346 See fn. 340. 347 Under English law, the carrier would be liable for misdelivery in such circumstances, Motis Exports v. Dampskibsselskabet AF [2000] 1 Lloyd’s Rep. 211 (CA). A contrary view is taken in Belgian law. See the decision of the Belgian court in The CMBT Splendour, dated 12 May 2004, A.R. 00/3479. Under English law the carrier can avoid liability through the application of Article IV(2)(q) of the Hague-Visby Rules. This will be the case where application of the Hague-Visby Rules is extended beyond tackle-to-tackle or where delivery takes place during the discharge of the goods. 348 The scope of Article 17(2), which only talks of the carrier’s liability for loss of or damage to goods or delay in their delivery, is narrower than that of the time-bar provision in Article 62 of the Rotterdam Rules and of the limitation provision in Article 59 of the Rules. Under English law, the wording in Article 17(2) would probably be inapt to encompass a claim on misdelivery. For a similar view expressed in the context of the interpretation of Article III(6) of the Hague-Visby Rules, see B. Eder et al., Scrutton on Charterparties and Bills of Lading, 22nd edn, 2011, p. 429. 349 This is defined under Article 1(10)(a). 350 Under English law, the carrier has a strict obligation to deliver against surrender of an original bill of lading, unless the carrier actually knows or ought to have known that the bill of lading holder is not a lawful holder, see fn. 340. 351 See, for instance, the position under Belgian Law, M. Huybrechts, et al. (fn. 147) para. 155 and under Swedish Law, H. Tiberg and J. Schelin, Transport Law – Sweden, in M. Huybrechts (Supplement 31, February 2012), para. 451. Under English law, carriers who misdelivered the goods may be liable to cargo interests in contract, tort or in bailment. See Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. [1959] 2 Lloyd’s Rep. 114 (PC); The Ines [1995] 2 Lloyd’s Rep. 144 (QBD); East West Corporation v. DKBS 1912 [2002] 2 Lloyd’s Rep. 182 (CA); The Stettin (1889) 14 PD 142. 352 In the case of competing claims, the carrier should obtain and follow the directions of the court as to delivery.

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transport record. Since, by their nature, electronic transport records cannot be surrendered, requiring the use of a different means of identification other than surrender is easy to justify. Where the goods are covered by a negotiable transport document which 185 does not require surrender, Article 47(2)(a) suggests that the carrier should deliver the goods upon the holder properly identifying itself. This raises the question of how a “holder” can properly identify itself as such to the carrier. The combined effect of this provision with the definition of “holder” is: the person claiming delivery must establish that he/she is in possession of the transport document that covers the goods.353 Would not this necessitate presentation of the original transport document?354 If the answer is yes, then the result is somewhat surprising, given the rationale behind this provision: to ease the situation of carriers and cargo receivers in cases where the cargo arrives before the transport documents.355 Article 47(2)(a) talks of circumstances where the carrier is given the option 186 to deliver the goods upon the instruction of the shipper or documentary shipper.356 These circumstances are i) the holder’s failure to claim delivery of the goods at the time and place referred to in Article 43, ii) the holder’s failure to properly identify itself as such and iii) the carrier’s inability to locate the holder despite all its reasonable efforts. Article 47(2)(b) goes on to provide that the carrier’s delivery of the goods pursuant to Article 47(2)(a) releases the carrier from its contractual duty to deliver the goods to the holder. Considering the possibility that the goods may be delivered to a person other than the “ultimate holder”, the provisions in Article 47(2)(d)357 and (e)358 regulate an important issue: when and on what terms a negotiable transport document remains effective to transfer contractual rights after the discharge of the goods.359 Finally, in response to the rights of the ultimate holder under Article 47(2)(e), Article 47(2)(c) gives the carrier the right to an indemnity arising from its compliance with the delivery instructions of the shipper or documentary shipper.

353 354 355 356

See Debattista (fn. 334), para. 47-17. Ibid. Reynolds, (fn. 262), para. 13.34. See Article 47(2)(b). Pursuant to the chapeau of Article 47(2), operation of Article 47(2)(a) is without prejudice to Article 48, which states what further consequences arise from goods remaining undelivered. 357 Similar consequences flow from the operation of s. 2(2) of COGSA 1992. The section sets out the circumstances in which a person can become a lawful bill of lading holder and thereby acquire the contractual rights in the bill of lading upon its transfer after it has already been “spent”. 358 Under English law, a bill of lading will be deemed “spent” when the cargo covered by the bill of lading is delivered to its rightful holder or when delivery becomes impossible due to loss of the cargo. See East West Corporation v. DKBS 1912 [2002] EWHC 83 (Comm.) paras. 35–41, per Thomas J.; Sanders Brothers v. Maclean & Co. (1883) 11 QBD 327 at 341, per Bowen L.J. and The Ythan [2005] EWHC 2399. For more discussions on this issue, see Treitel and Reynolds (fn. 5), paras. 5-059–5-063. 359 See the cases referred to above.

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b) Rights of the Controlling Party

By virtue of Article 50, three limited360 powers can be exercised by a controlling party: without constituting a variation of the contract, the right to give or modify instructions as regards the goods; the right to obtain delivery of the goods at a scheduled port of call; and the right to replace the consignee by any other person including the controlling party. The controlling party can exercise the last two rights even in cases where they may constitute a variation of the contract. In broad terms, the controlling party’s right of control begins when the carrier or a performing party receives the goods for carriage and ends when the goods are delivered.361 188 In order for contract variations to become effective, they need to be recorded in a negotiable transport document or in a non-negotiable transport document that requires surrender, or be incorporated in a negotiable electronic transport record.362 The stated or incorporated variations need to be signed by the carrier as per Article 38. Where the controlling party wishes to bring variations other than those stated in Article 50(1)(b) and (c), in addition to the highlighted formal requirements, the controlling party is required to agree with the carrier as to such variations.363 For these variations to be effective as between the controlling party364 and the carrier, they need not be stated in a non-negotiable transport record or incorporated in a non-negotiable electronic transport record.365 189 Article 51 of the Rotterdam Rules defines the controlling party by reference to four different circumstances: (i) where a negotiable transport document is issued, (ii) where a non-negotiable transport document that requires surrender is issued, (iii) where an electronic transport document is issued, and (iv) where no document or none of the documents stated in (i), (ii) or (iii), such as a seawaybill, is issued. The Article then goes on to state how and the extent to which the defined controlling parties can exercise their rights of control. 190 Article 51(1) sets out the default position, defined in (iv) above, that the shipper is the controlling party. At first sight, this might seem easy to justify. As the original party to the contract of carriage with the carrier, the shipper should retain its right of control, regardless of the issue of a transport document naming another person as the consignee. However, this does not answer question as to whether the person named as a consignee can also have a right of control. It follows from the Article that the consignee does not have such a right, although the shipper may designate it as the controlling party when concluding the contract of carriage.366 As a result of such designation, the consignee will enjoy an exclu187

360 See Article 56, whereby the parties to the contract of carriage are given the right to restrict or exclude transferability of the right of control to a certain extent. 361 See Article 50(2), which makes reference to Article 12. 362 Article 54(2). 363 Ibid. 364 Article 54(1). 365 Article 54(2). 366 See Article 51(1)(a).

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sive right of control. The same result will also follow when the shipper, pursuant to Article 51(1)(b), transfers that right to the consignee after the conclusion of the contract of carriage. The wording of the Article suggests that the shipper can designate or transfer the right of control to a person other than the consignee.367 When exercising the rights of control, the controlling party, whether it is the shipper, consignee or another person, is only required to properly identify itself to the carrier for instructions.368 Where the goods are covered by a non-negotiable transport document that re- 191 quires surrender for delivery of the goods, the shipper’s right of control can only be transferred to the consignee.369 For an effective transfer, it is sufficient for the shipper to transfer the document to the consignee, without the requirement to notify the carrier as to the transfer.370 In order to exercise the right of control, the controlling party, whether it is the shipper or the consignee, would need to produce, but not surrender, the document and to properly identify itself.371Production in this context requires production of all originals to the carrier, if the transport document has more than one original. The Rules explained above differ considerably from English law in many re- 192 spects. First, under English law, the shipper retains any contractual right to instruct the carrier,372 whilst the consignee is also vested in the rights of control in so far as it remains the named consignee in the document.373 Under English law, both the consignee and the shipper can thus exercise the right of control referred to in Article 50(1)(a):374 the right to give or modify instructions in respect of the goods that do not constitute a variation of the contract. The same is also true of the right to en route delivery referred to in Article 50(1)(b), provided that the exercise of this right does not constitute a variation of the contract.375 Secondly, it is somewhat surprising that the shipper under the Rotterdam Rules can vary the contract of carriage when exercising its right of control under Article 50(1)(b). It is clear under s. 2(5) of COGSA 1992 that no such right exists under 367 See Article 51(1)(a) and (b). 368 Article 51(1)(c). 369 See Article 51(2)(a). However, note that the shipper has the right to replace the consignee by any other person. See Article 50(1)(c). 370 See Article 51(2)(a). 371 Article 51(2)(b). 372 See s. 2(5) of COGSA 1992. 373 See ss. 2(1)(b), 1(3)(b) and 5(3) of COGSA 1992. 374 Section 2(1)(b) suggests that a person named as consignee in a seawaybill is vested in “all rights of suit under the contract of carriage as if it had been a party to that contract”. It is suggested that “all rights of suit” can be taken to include the right in Article 50(1)(a) and (b) of the Rotterdam Rules, provided that the instructions do not constitute a variation of the contract. On the consignee’s right to call delivery of the goods, see Moore-Bick LJ, in The Erin Schulte [2015] 1 Lloyd’s Rep 97 (CA), at para 16. See also Debattista (fn. 334), paras. 51-03 and 51-05. 375 See Debattista, above. A similar rule also exists under Dutch Law, whereby the holder has exclusive authority to demand delivery of the goods before their arrival at the contractual port of discharge. In order to exercise this right, the holder is required to present all the originals to the carrier, see Haak (fn. 169), para. 146.

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English law.376 However, the shipper, under English law, is entitled to agree with the carrier to terminate the contract evidenced by a non-negotiable transport document and to substitute a new one with different terms by the issue of a new transport document.377 Thirdly, in the case of a transport document requiring surrender, the procedure for the transfer of the right of control is much stricter under the Rotterdam Rules,378 whereby all the originals must be transferred. The same is also true of the exercise of the right of control in the case of such transport documents: the controlling party must produce all the originals and properly identify itself to the carrier. These rules do not have their counterparts under English law.379 193 Where a negotiable transport document is issued, the holder of all originals, who will initially be the shipper, is the controlling party.380 In relation to the exercise of the right of control and the transfer of that right, the procedure resembles the one that is provided for non-negotiable transport documents requiring surrender. It is thus different from the procedure under English law: for the transfer of the right of control, all originals must be transferred. As regards the exercise of the right of control, both the requirements of production of all originals and of proper identification must be satisfied. 194 Under English law, through the application of s. 2(1)(a) of COGSA 1992, the transferee of an order bill of lading381 is vested in “all rights of suit under the contract of carriage as if it had been a party to that contract”. This might at first seem similar to the position under the Rotterdam Rules. However, the scope of the right of control under English law is in fact narrower than that envisaged under the Rotterdam Rules.382 By virtue of Article 50(1)(b), it is possible for the holder to give particular instructions to the carrier, although these instructions may constitute a variation of the contract of carriage. Under COGSA 1992, the holder of a bill of lading who is vested in all the rights of suit cannot unilaterally change the terms of contract of carriage.383 Hence the holder’s right of control by way of obtaining delivery pursuant to Article 50(1)(b) of the Rotterdam Rules appears to vest in the holder more power than does COGSA 1992.384

376 However, it must be noted that the shipper’s right to rename the consignee under Article 50(1)(c) is in line with the position under English law by virtue of s. 2(5) of COGSA 1992. 377 See AP Moller-Maersk v. Sonaec Villas Cen Sad Fadoul [2010] EWHC 355 (Comm.) paras 37, 39 and 42. 378 See Treitel and Reynolds (fn. 5), para. 1-39. 379 Ibid. 380 See Article 51(3)(a). 381 For the purposes of application of the provision, the bill of lading can be a received-for-shipment or shipped bill of lading in order form, see s. 1(2) of COGSA 1992. 382 Also raised in Debattista (fn. 334), paras. 51-18. 383 See s. 2(1)(a) of COGSA 1992. See also AP Moller-Maersk v. Sonaec Villas Cen Sad Fadoul [2010] EWHC 355 (Comm.) paras 37, 39 and 42. See also Debattista, above. 384 For further discussions, see Debattista, above. As for the right to replace the name of the consignee pursuant to Article 50(1)(c), this is redundant in the case of negotiable transport documents, for they can be transferred pursuant to Article 57 of the Rules.

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Where a negotiable electronic transport record is issued, the procedure 195 provided under Article 9.1 of the Rules must be complied with for the exercise and transfer of the right of control.385 Since no regulations have been made to render COGSA 1992 applicable to electronic transport records, the operation of Article 51(4) does not conflict with the current position under English law. c) Transfer of Rights and Liabilities

The provisions in the Rotterdam Rules relating to the transfer of rights only 196 apply to negotiable transport documents and negotiable electronic transport records.386 The Rotterdam Rules sets out the formalities for an effective transfer of rights, stating that the holder may transfer the rights incorporated in the document, 1) by duly endorsing either to a named person or in blank, if an order document, or 2) by mere transfer and without endorsement, a) if a bearer document or b) if the document is made out to the order of the named person and if it is transferred to the named person.387 On the question of what rights can be transferred through the highlighted pro- 197 cedure, “the rights incorporated in the document” referred to in Article 57 must be taken to include rights of control and rights to delivery.388 The Rotterdam Rules adopt the widely accepted principle that 1) merely being the holder389 does not automatically lead to the assumption of any liability under the contract of carriage, if the holder is also not the shipper390 and that 2) the liability under the contract of carriage is triggered where the holder takes a step to exercise any right under the contract of carriage.391 This is set out under Article 58, which reserves the cases where Article 55 is applicable. The combined effect of Articles 55 and 58 is that, on request of the carrier or a performing party, the controlling party is required to provide information, instructions or documents relating to the goods not yet provided by the shipper. Hence, despite not being the shipper, a holder who is also the controlling party will be subject to these obligations vis-a-vis the carrier, even if it does not seek to enforce the contract of carriage. Article 58(2) provides that a holder who is not the shipper assumes “any lia- 198 bilities imposed on it under the contract of carriage”, upon exercising “any” right under the contract of carriage. In this context, the reference to “any right” is not without qualifications. Article 58(3) sets out two types of right which are excluded from the scope of “any right” and the exercise of which therefore does 385 See Article 51(4). 386 See Articles 57 and 58. As regards the transfer of rights to endorsees of bills of lading, see the recent Court of Appeal decision in The Erin Schulte [2015] 1 Lloyd’s Rep 97 (CA). There, it was held that the bank did not become a lawful holder by merely receiving the bills of lading under the letter of credit. 387 See Article 57. 388 See Debattista (fn. 334), para. 57-05. 389 It is worthy of note that the definition of “holder” in Article 1(10) of the Rules includes the shipper. 390 Article 58(1). 391 Article 58(2).

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not trigger any liabilities: where the holder agrees with the carrier to replace a negotiable transport document by a negotiable electronic transport record or vice versa and where the holder transfers its rights pursuant to Article 57. 199 The imposition of liabilities upon the holder under the Rotterdam Rules is not subject to the same conditions adopted under English law. Under COGSA 1992, contractual liabilities can be imposed against only those ultimate bill of lading holders (i) who have taken or demanded delivery from the carrier of any of the relevant goods or (ii) who has made a claim under the contract of carriage against the carrier in respect of any of those goods.392 Hence, a demand from the carrier to take routine samples from the ship’s tanks is not considered as demanding delivery within the meaning of s. 3(1) of the Act. However, such a step would perhaps trigger liability under the Rotterdam Rules given the reference to exercise of “any right” under Article 58(3) of the Rules. As regards the position of intermediate holders, both COGSA 1992 and the Rotterdam Rules would appear to adopt a similar approach: these persons do not incur any liability under the contract even in cases where they first demanded delivery before transferring their rights under the contract of carriage to the ultimate holder.393 200 On the question of what liabilities can be imposed upon the holder who is not the shipper, the Rotterdam Rules talk of “any liabilities imposed on it under the contract of carriage”. When compared with COGSA 1992, the scope of liabilities stated in Article 58 would appear narrower than that of s. 3(1) of COGSA 1992.394 Where a transport document395 imposes a particular obligation squarely on the shipper, the Rotterdam Rules will not allow that provision to be applicable to a holder who is not the shipper. Conversely, such a holder would be bound by that obligation under COGSA 1992 as if it were the shipper.396 COGSA 1992 makes such a holder subject to the same liabilities provided in the contract “as if he had been a party to that contract”. However, this is subject to the general condition that the provisions giving rise to such obligations must be duly incorporated into the document and be ascertainable from the document.397 Under the Rotterdam Rules, this condition must also be satisfied for the transfer of contractual obligations to the holders.

392 See s. 3(1) of COGSA 1992. See also The Berge Sisar [1998] 2 Lloyd’s Rep. 475 (CA) and The Ythan [2005] EWHC 2399. It is worthy of note that, pursuant to s. 3(3) of the Act, the shipper in any case remains liable towards the carrier under the contract. 393 For English law, see The Berge Sisar, above, paras. 44–45. For the Rotterdam Rules, see the definition of “holder” in Article 1(10). 394 See Debattista (fn. 334), para. 58-09. 395 See, for instance, 31(2) of the Rules. 396 See s. 3(1) of COGSA 1992. 397 See Article 58(2) of the Rules. For English law, see Leduc v. Ward (1888) 20 QBD 475. For the rules of incorporation under English law, see M. Ozdel, Incorporation of Charterparty Clauses into Bills of Lading: Peculiar to Maritime Law? in M.A. Clarke, Maritime Law Evolving, (2013), p. 181. See also, M. Ozdel, Bills of Lading Incorporating Charterparties, 2015.

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E. Carrier’s Liability

As will be recalled, the main purpose of the sea carriage Conventions is to 201 afford minimum and mandatory protections to cargo interests vis-a-vis their respective carriers. Hence, the Conventions do not stop carriers extending their obligations or waiving their rights under the contract of carriage, although this rarely happens in practice. Before discussing duties of the carrier imposed in each sea carriage Convention, it is important first to briefly look at two preliminary issues: the definition of carrier and the carrier’s period of responsibility. 1. The Definition of Carrier

The Hague and Hague-Visby Rules do not define “carrier”, but provide that 202 “carrier includes the owner or the charterer who enters into a contract of carriage with a shipper”.398 Under the Hamburg Rules, “carrier” is crudely defined as “any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper”.399 The latter definition makes clear that non-vessel owning carriers can also be brought within the definition of “carrier”, provided that they enter into a contract as carrier with a shipper to carry goods at least partly by sea.400 In the Rotterdam Rules, “carrier” is similarly defined loosely as “a person that enters into a contract of carriage with a shipper”.401 In light of these observations, it would appear that the sea carriage Conven- 203 tions, in essence, regulate the liability of carriers who have a contractual undertaking vis-a-vis cargo interests to carry goods. To this end, the Conventions principally hold such carriers accountable for the carriage of goods, although they may have delegated the actual performance of some or the entirety of the contract of carriage to a third party.402 2. Actual Carriers and other Third Parties

The Hague and Hague-Visby Rules do not talk of the legal position of actual 204 carriers – those persons who have been entrusted by the carrier to actually perform the entire or part of the carriage. Consequently, they leave the question of whether a cargo interest can alternatively seek remedy against an actual carrier to the applicable national law. The same is not true of the Hamburg Rules, which bring actual carriers into the scope mainly through the definition of “actual carri398 Article I(a) of the Hague and the Hague-Visby Rules. 399 Article 1(1) of the Hamburg Rules. 400 See also Article 1(6) of the Hamburg Rules, whereby the contract of carriage is stated to include contracts of multimodal carriage involving a sea leg. 401 Article 1(5) of the Rotterdam Rules. 402 See Article 10 of the Hamburg Rules and Article 12 of the Rotterdam Rules, both of which talk of the carrier’s overall responsibility for the entire carriage of goods. Although there is no such express provision in the Hague and Hague-Visby Rules, the same principle is applicable to some extent. Under English law, where the contract of carriage contains a FIOST or a similar clause, the carrier is not, in principle, treated as responsible for the relevant loading and discharging operations.

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er” under Article 1(2). In so doing, they define “actual carrier” as any person, other than the carrier, who is entrusted to perform carriage of goods or part of the carriage. The Hamburg Rules further provide that the actual carrier will be responsible for the carriage performed by him/her as if he/she were the carrier under the rules.403 Whilst imposing such responsibilities on the actual carrier, the Hamburg Rules also keep the carrier’s contractual responsibility towards the cargo interest intact.404 As regards the carrier’s special agreements with the shipper, the actual carrier’s responsibility is stated to be subject to these arrangements if and when the actual carrier agrees to them.405 205 Although it is expected that carriers would be contractually responsible for an international carriage of goods by sea in its entirety, it is inconceivable that they could perform all the activities pertaining to the carriage. Sub-contracting is thus inevitable in almost all cases, and so is the involvement of a wide variety of third parties, including but not limited to actual carriers. With an effort to bring this wide variety of third parties into the scope, the Rotterdam Rules introduce the concept of “maritime performing party”, which does not solely comprise actual carriers. Included in this scope are independent third-party contractors who perform or have undertaken to perform any of the carrier’s obligations between the arrival of the goods at the loading port and their departure from the port of discharge.406 Inland carriers that perform or have undertaken to perform services exclusively within the port area are also included.407 Hence, a number of different types of third-party contractor, such as terminal operators, stevedores, shipowners, demise charterers and charterers, are brought within the scope through the introduction of the concept of “maritime performing party”. 206 Against this backdrop, parties falling within the definition of “maritime performing party” are made subject to the obligations and liabilities imposed on the carrier under the Rotterdam Rules.408 For cargo interests to sue a maritime performing party on the same terms as the carrier, Article 19(1) sets out two requirements. Firstly, the maritime performing party must receive the goods for

403 See Article 10(2) of the Hamburg Rules. See also Article 10(1), which provides that a carrier shall in any case remain responsible for the entire carriage pursuant to the provisions in the Convention even where it subcontracts performance of the carriage of part thereof. 404 Article 10(4) of the Hamburg Rules. 405 See Article 10(3) of the Hamburg Rules. It goes without saying that those arrangements which offend the non-derogation provisions of the rules will be invalid. 406 Article 1(7) of the Rotterdam Rules. It is worthy of note that in order for a third-party contractor to be described as a maritime performing party, it needs to undertake to perform services that fall within the scope of the carrier’s period of responsibility – a point that will be discussed in the next section. See also the definition of ‘performing party’ in Article 1(6) of the Rotterdam Rules. The corrected version of the article now includes the obligation of ‘keeping’ the goods, see the depository notification dated 12 October 2012 and found in CN. 563.2012.TREATIES-XI-D-8. 407 Ibid. Since the word “port” is not defined, this issue would be left to the decision of the applicable national law. 408 Article 1(7) of the Rotterdam Rules.

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carriage or deliver them in a contracting state or perform its activities with respect to the goods in a port located in a contracting state. The consequences of the requirement above are, firstly, a maritime perform- 207 ing party can be outside the scope of the rules where it does not have the required link with a contracting state, even though it has undertaken to perform part of a contract of carriage governed by the rules. Secondly, the occurrence that caused the loss, damage or delay must take place during the period between the arrival of the goods at the port of loading and their departure from the port of discharge. Thirdly, the occurrence must take place (a) while the maritime performing party had custody of the goods, or (b) at any other time to the extent that the maritime performing party was participating in the performance of any of the activities contemplated by the contract of carriage.409 The third requirement raises an important question when deciding whether the loss, damage or delay occurred during any one of those specified circumstances: should the focus be placed on actual performance or the contractual undertaking of the maritime performing party? Where, for instance, the goods were lost during the unauthorised performance of a maritime performing party, would this be sufficient to trigger the rules by reason of Article 19(1)(b)(iii)?410 In addition to the imposition of the carrier’s obligations on maritime perform- 208 ing parties, Article 19(1) of the Rotterdam Rules also confers upon these parties the limitations and exclusions available to the carriers under the rules.411 As with the Hamburg Rules, the carrier’s contractual obligations other than those imposed on the carrier under the rules are stated to be binding upon a maritime performing party only if it has expressly agreed to be bound by such obligations.412 In the Hague Rules, there is no provision enabling any type of third party to 209 rely on the limitations and exclusions available to the carrier under the rules when a third party is sued by a cargo interest.413 The Hague-Visby Rules represent an attempt at improving this situation through the adoption of Article IVbis

409 What activities are contemplated by the contract of carriage would be decided by the applicable national law. 410 For more discussions on this, see J. Chuah, “Impact of the Rotterdam Rules on the Himalaya Clause: The port terminal operators’ case”, in R. Thomas, Carriage of Goods under the Rotterdam Rules, 2010, para. 15-29. It is worthy of note that where a case came under Article 19, the maritime performing party would be jointly and severally liable with the carrier vis-a-vis cargo interests under the rules. See Article 20 of the Rotterdam Rules. See also Article 18, which states that the carrier is responsible for the acts or omissions of, inter alia, “any performing party”. The quoted phrase refers to a maritime performing party and a performing party, the latter of which is defined in Article 1(6) of the rules. On the definition of ‘performing party’ see fn 408, above. 411 See J. Chuah, above. 412 See Article 17(2). 413 It is worthy of note that, in all sea carriage conventions, carriers’ liability covers acts or omissions of all parties, whether they are the carriers’ servants or independent contractors, who perform or undertake to perform carriers’ obligations. Their liability is subject to certain exceptions and limitations.

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rule 2. The provision enables the carrier’s agents and servants to avail themselves of the limitations and defences that the carrier is entitled to invoke under the rules. However, the independent third-party contractors were again kept outside the scope,414 and so was the performance of the carrier’s agents and servants before the commencement of loading and after the completion of discharging. 210 Following the judicial guidance on how these shortcomings could be overcome,415 the shipping industry started to introduce a clause that now appears in almost all standard forms of bills of lading: the Himalaya clause.416 By and large, these clauses provide that every exemption, limitation, benefit and right to which the carrier is entitled shall also be available to all the carrier’s agents, servants and independent contractors who took part in the performance of the contract.417 On the question of what provisions could be available to third parties through the operation of the Himalaya clauses, the English cases suggest that the wording of these clauses and the overriding effect of the Hague-Visby Rules have a major role to play.418 211 The Hamburg Rules take further steps to improve the legal position of third parties vis-a-vis cargo interests. Article 7(2) of the rules, which is the counterpart of Article IVbis rule 2 of the Hague-Visby Rules, does not expressly oust “independent contractors” from its scope. This change does not, however, represent an improvement over the Hague-Visby Rules, for the changed wording still remains too narrow to cover all types of independent contractors. By and large, this is the result of the reference in the clause to the carrier’s agents and servants.419 212 In light of the observations above, the Rotterdam Rules appear to represent an improvement over the previous conventions in that they make the carrier’s limitations and defences available to a wide variety of third parties. From the 414 See Article IVbis (2). 415 See the decision of the House of Lords in Scruttons Ltd. v. Midland Silicones Ltd. [1961] UKHL 4. 416 See The Eurymedon [1975] AC 167, where the Privy Council held that the stevedore causing damage to the goods during discharge was entitled to rely on the Himalaya clause in the bill of lading to benefit from the one-year time bar provided in Article III(6) of the Hague Rules. 417 See, for instance, clause 15 of Conlinebill 2007, which also contains an undertaking that the cargo interest shall not pursue a claim against the third parties and that it shall indemnify the carrier for the losses arising from its breach of this undertaking. 418 See, for instance, The Mahkutai [1996] 3 WLR 1 (PC), where an exclusive jurisdiction clause in the charterer’s bill of lading was not available to the shipowner in a cargo claim, despite the Himalaya clause in the bill of lading. The justification for this was the wording of the Himalaya clause, for it particularly talked of “exclusions”, which was held inapt to refer to exclusive jurisdiction clauses. See also The Starsin [2004] 1 AC 715 (HL). There, the Himalaya clause did not confer upon the shipowner the right to rely on the exemption clause in the charterer’s bill of lading, for the clause was struck down by Article III(8) of the Hague-Visby Rules. 419 It may also be argued that the word “employment” in the provision also restricts the qualifying types of third party. For more discussions on this, see Chuah (fn. 410).

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perspective of these so-called “maritime performing parties”, this is a benefit, but may come at a price: the rules also impose on such parties the same obligations that the carrier has. In so doing, they curtail significantly the application of the standard terms of maritime performing parties to cargo claims brought against them.420 3. Scope of Carriers’ Responsibility a) The Hague and Hague-Visby Rules

In the context of the Hague and Hague-Visby Rules, “carriage of goods” is 213 stated to cover the period from the time when the goods are loaded to the time they are discharged from the ship – a period described as “tackle-to-tackle”.421 When precisely the period of application of the rules starts and ends is more convoluted than it might at first sight seem. This is especially the case in jurisdictions where Article III(2) of the Hague and Hague-Visby Rules is interpreted in a way permitting carriers to transfer responsibility for loading and discharge operations that they have not undertaken to perform.422 Outside tackle-to-tackle, the terms of contract of carriage that have been freely negotiated find room for application in so far as it is permissible under the applicable national law.423 Under English law, the carrier’s terms would in any case be subject to the limitations arising from the common law of interpretation of contracts.424 b) The Hamburg Rules

The Hamburg Rules provide for a wider scope of application in that the rules 214 apply to the time “during which the carrier is in charge of the goods at the port of loading, during the carrier and at the port of discharge.425 In this context, Arti420 Ibid. Under English law, where third-party reliance is allowed on the basis of bailment on terms, it would be possible for a sub-bailee to rely on its own standard terms against the bailor, provided that the bailor either expressly or impliedly consented to be bound by them. In this context, a bailor may be deemed to have consented to all the terms of the sub-bailment, other than those terms that are unreasonable or unusual. See The Pioneer Container [1994] 2 AC 324 (PC). 421 See Article I(e) of the Hague and Hague-Visby Rules. See also the English case of Pyrene v. Scindia [1954] 2 QB 402. See also, Treitel and Reynolds (fn. 5), para. 9-131, where it is suggested that “rules may apply as implied terms after receipt of the goods but before loading, and after discharge but before delivery or up to the time of the operation of any separate warehousing arrangements, except in so far as this result has been excluded or modified”. This view was later followed by Longmore LJ in The MSC Amsterdam [2007] 2 Lloyd’s Rep. 622 (CA). 422 As an example, see the English case of The Jordan II [2005] 1 Lloyd’s Rep. 57 (HL). A contrary view is taken in the US law, see The Arktis Sky 1993 AMC 509 (2nd Circuit 1993). 423 See Article VII of the Hague and Hague-Visby Rules. 424 At English common law, clearly drafted exclusion clauses are in principle given effect to and these clauses are not ruled out just because they are unreasonable, see The Irbenskiy Proliv [2005] 1 Lloyd’s Rep. 387 (QBD). The courts may, however, limit the effects of an exclusion clause so as to avoid absurd results, considering the main objectives of the contract of carriage, see Glynn v. Margetson & Co [1983] AC 351 (HL). 425 Article 4.1 of the Hamburg Rules.

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cle 4(2) further states in what particular circumstances carriers are deemed to be in charge of the goods. The Hamburg Rules thus extend the period of carriers’ responsibility, covering port-to-port carriage. 215 On the question of at what point in time the goods are deemed to have been received and/or delivered at the port, Article 4(2) further provides that the goods are deemed to have been received by the carrier (a) “from the time he [the carrier] has taken over the goods from the shipper, or a person acting on his behalf; or (b) from “an authority or other third party to whom, pursuant to law or regulations applicable at the port of loading, the goods must be handed over for shipment”. Pursuant to the same article, the carrier is deemed to have delivered the goods (a) “by handing over the goods to the consignee”; or (b) “in cases where the consignee does not receive the goods from the carrier, by placing them at the disposal of the consignee in accordance with the contract or with the law or with the usage of the particular trade, applicable at the port of discharge”; or (c) “by handing over the goods to an authority or other third party to whom, pursuant to law or regulations applicable at the port of discharge, the goods must be handed over”. c) The Rotterdam Rules

The Rotterdam Rules extend carriers’ period of responsibility even beyond port-to-port. This is set out in Article 12(1) of the Rules.426 There, a carrier’s period of responsibility is stated to begin “when the carrier or a performing party receives the goods for carriage and ends when the goods are delivered”. Two issues emerge from this provision: what constitutes “receipt” and “delivery” for the purposes of Article 12(1), and is it possible for parties to arrange the time and location of the receipt427 and delivery of the goods with a view to determining the carrier’s period of responsibility? 217 The importance of the first issue is obvious when day-to-day port operations are considered. Where the goods are handed over to an authority or a third party pursuant to a national regulation applicable in the place of receipt or delivery, can the carrier be deemed to have received or delivered the goods? Article 12(2) 216

426 See also Articles 1(1), 5(1), 26 and 82. 427 In the context of the Hague and the Hague-Visby Rules, this question is decided by reference to the applicable national law. Under English law, delivery does not necessarily require physical delivery by the carrier, see The Jag Ravi [2012] 1 Lloyd’s Rep. 637 (CA). For delivery, the carrier must “divest itself of all power to compel any physical dealing in the goods” and must surrender possession to the person entitled to obtain possession of the goods under the contract of carriage, see Barclays Bank Ltd. v. Customs and Excise [1963] 1 Lloyd’s Rep 81 (QBD) at page 89, per Lord Diplock. When deciding the point at which the cargo is deemed to be delivered, the terms of contract of carriage have a major role to play. See Article VII of the Hague-Visby Rules. On the validity of delivery clauses, see the decision of the Belgian court in The CMBT Emerald, dated 25 June 2001, 1999/AR787. There the court gave effect to the delivery clause that excluded or limited the carrier’s liability for loss of or damage to the goods occurring prior to the commencement of loading operations or after the completion of discharge operations.

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provides that carriers’ responsibility begins when they collect the goods from the authority or other third party and ends when they hand the goods over to the authority or other third party.428 The answer to the second question is in Article 12(3). Parties are allowed to 218 define carriers’ period of responsibility, although this is not without limitations: a provision is void (i) if it provides that the receipt of the goods shall take place at a time after the commencement of their initial loading under the contract of carriage or (ii) if it provides that the goods shall be deemed to be delivered prior to the completion of their final unloading. In essence, the article purports to establish a minimum and mandatory period of responsibility, during which the carrier is bound to assume responsibility for the goods. In this context, references to “initial loading” and “final unloading” are possibly made to ensure that carriers remain responsible for the goods throughout the voyage, regardless of whether the goods are transhipped at an intermediate port for any reason.429 Although the Article targets the provisions defining delivery and receipt of the goods, this does not completely rule out the carrier’s chances of avoiding responsibility for the goods after their transhipment. This is particularly because it would be a matter of contract construction to determine the place where final unloading is deemed to take place.430 Also, attention needs to be drawn to the references to unloading and loading 219 in Article 12: since no specific means of carriage is referred to in the Article, in multimodal carriage involving a sea leg, a carrier’s period of responsibility starts at the beginning of the loading of the goods on to the initial means of transport until the completion of discharge from the final means of transport.431 Where the contract is for carriage of goods by sea only, this provision must be taken to refer to the tackle-to-tackle period.432 At this point, a question already raised in the context of the Hague and Hague-Visby Rules also becomes relevant here: is it possible for the carrier to transfer responsibility for loading and discharge operations to the cargo interest? In other words, are free in out (FIO) and similar clauses valid under the Rotterdam Rules? The default position is that carriers are to carry out loading, handling, stowing and unloading of the goods. Nonetheless, it is permissible for the shipper and carrier to agree that the shipper, documentary shipper or the consignee433 will be responsible for some or all

428 In this context, “third party” must be taken to refer to parties who do not perform services for and on behalf of carriers. For a similar view see, M. Tsimplis, Obligation of the Carrier, in Y. Baatz, et al., The Rotterdam Rules: A Practical Annotation, 2009, para. 12-02. 429 Ibid., para. 12-07. 430 On the interpretation of transshipment clauses under English law, see fn 160. 431 As was raised in Diamond (fn. 91), p. 466. 432 Ibid. 433 As regards the imposition of this duty upon the consignee, it would also be necessary to determine whether this is transferred to the consignee by virtue of Article 58 of the Rotterdam Rules.

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of these operations.434 However, carriers will be liable for loss, damage or delay arising from loading, handling, stowing or unloading of the goods where they perform the operations under such an agreement on behalf of the shipper, the documentary shipper or a consignee.435 4. Carriers’ Obligations 220

Under the sea carriage Conventions, carriers’ obligations have three main aspects: obligations regarding the goods; the ship; and transport documents. Having already discussed carriers’ obligations regarding transport documents, discussions here will concentrate on their obligations regarding the goods and the ship. a) Carriers’ Obligations as Regards the Ship aa) The Hague and Hague-Visby Rules

Under Article III(1) the Hague and Hague-Visby Rules, the carrier is required to exercise due diligence before and at the beginning of the voyage to make the vessel seaworthy. Carriers’ obligations in this context are to “make the ship seaworthy,436 properly man, equip and supply the ship,437 and to make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation”.438 On the question of when the duty must be exercised, in the Privy Council case of Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine, the phrase “before and at the beginning of the voyage” was interpreted as a period “from at least the beginning of the loading until the vessel starts on her voyage”.439 222 As regards the meaning of due diligence, in another English case, The Eurasian Dream, the phrase was interpreted as “reasonable care and skill”, and lack of due diligence was stated to be equivalent to negligence.440 When determining whether reasonable care and skill has been exercised, the courts are naturally guided by the International Safety Management (ISM) Code. This is particularly the case for countries which are also party to both the Hague or Hague-Visby Rules and the International Convention for the Safety of Life at Sea (SOLAS Convention) 1974, the latter of which made the ISM Code manda221

434 Article 13(2). For this agreement to be effective, it needs to be referred to in the contract particulars. It is not clear whether this requirement is satisfied where a charterparty FIOST clause is incorporated into a bill of lading through general words of incorporation. For further discussions, see Tsimplis (fn. 428), para. 13-02. 435 See Article 17(3)(i). 436 The Muncaster Castle [1961] AC 807 (HL); The Amstelslot [1963] 2 Lloyd’s Rep. 223 (HL). 437 The Eurasian Dream [2002] 1 Lloyd’s Rep. 719 (QBD); The Star Sea [1997] 1 Lloyd’s Rep. 360 (CA). 438 The Good Friend [1984] 2 Lloyd’s Rep. 586 (QBD). 439 [1959] 2 Lloyd’s Rep. 105, 113 (PC). 440 See [2002] 1 Lloyd’s Rep. 719, 744.

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tory. Under English law, compliance or otherwise with the ISM code and similar regulations is not necessarily decisive on the issue of due diligence.441 On the exercise of due diligence, a further question is whether the carrier can 223 discharge this obligation by entrusting the vessel to a competent independent contractor for maintenance and repairs. In the famous English case of The Muncaster Castle, this was held not enough.442 The obligation of seaworthiness was held to be “non-delegable” in that independent contractors’ failure to exercise due diligence was attributed to the carriers. Hence, carriers can only be discharged from this obligation if they can prove that both they and their independent contractors have exercised due diligence.443 For this reason, in The Amstelsot, the due diligence requirement was held to be met where the carrier’s independent contractors exercised due diligence during their inspection of the vessel but could not discover the fatigue crack in the helix tyre of the main gear drum.444 As regards the defects in the building, specification and design of a vessel, a carrier’s seaworthiness obligation attaches when the vessel comes into its “orbit”.445 Therefore, only after taking delivery of the vessel is the carrier required to exercise due diligence to make the vessel seaworthy.446 It is worthy of note that Article III(2) of the Hague and Hague-Visby Rules – 224 and not those obligations in Article III(1) – are expressly made subject to Article IV of the Rules, which provides a list of exceptions to carriers’ liability. This underpins the predominant view adopted under English law that the obligations in Article III(1) are overriding.447 English case law suggests that this overriding effect has the following consequences in particular. Where the effective cause of loss is breach of Article III(1), (a) the carrier is liable and therefore cannot exonerate himself from liability by relying on the catalogue of exceptions under Article IV(2),448 and (b) the carrier is not entitled to rely on Article IV(6) to obtain indemnity in respect of losses caused by the shipper’s failure to inform the carrier as to the dangerous nature of the cargo.449 In the case of multiple causes, it was stated in The Kapitan Sakharov that as long as the breach of Article III(1) is the effective cause, “it is immaterial that there was another cause or as to which

441 See The Kapitan Sakharov [2000] 2 Lloyd’s Rep. 255 (CA), at page 268, per Auld LJ. 442 [1961] 1 Lloyd’s Rep. 57 (HL). 443 This must also mean that lack of due diligence of carriers’ employees is also, a fortiori, attributed to carriers. See Treitel and Reynolds (fn. 5), p. 668. See also Maxine Footwear Co. v. Canadian Merchant Marine Ltd. [1959] 2 Lloyd’s Rep. 105, 113 (PC). 444 [1963] 2 Lloyd’s Rep. 223. 445 See The Muncaster Castle [1961] 1 Lloyd’s Rep. 57 (HL), 85, per Lord Radcliffe. See also The Happy Ranger [2006] 1 Lloyd’s Rep. 656 (QBD), para. 37, where Gloster J. stated “orbit is used co-extensively with ownership or service or control, and I do not consider that it should be construed in any looser sense”. 446 See The Happy Ranger, above. 447 Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine, above, at p. 603. 448 Ibid. See also Treitel and Reynolds (fn. 5), p. 669. 449 The Kapitan Sakharov [2000] 2 Lloyd’s Rep. 255 (CA); The Fiona [1994] 2 Lloyd’s Rep. 506 (CA); The Aconcagua [2011] 1 Lloyd’s Rep. 683 (CA),.

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of them was the dominant cause or their respective timings.”450 Although not free from criticism,451 the seaworthiness obligation is treated as an overriding duty in other European jurisdictions, such as Denmark.452 bb) The Hamburg Rules 225

In the Hamburg Rules, carriers’ obligations are defined in general terms. The main reasons for this would appear to be that carriers’ liability is based on “presumed fault”, and that no catalogue of exceptions for carriers are provided in the Rules. By virtue of Article 5: ... the carrier is liable for loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence which caused the loss, damage, or delay took place while the goods were in his charge as defined in Article 4, unless the carrier proves that he, his servants or agents, took all measures that could reasonably be required to avoid the occurrence and its consequences.

A brief reading of Article 5 of the Hamburg Rules suggests that this general exception has an important shortcoming: without a catalogue of exceptions, it is difficult to delineate in what circumstances the carrier can be deemed to have taken all measures that could reasonably be required. 227 Where the loss is caused by the unseaworthiness of the vessel, the carrier can only escape liability if it can bring itself within the general exception under Article 5 of the Hamburg Rules. The upshot of this is that, despite the absence of the term “seaworthy” the carrier’s obligation as to seaworthiness of the vessel is continuous, although not overriding: on the issue of concurrent causes, which is left to the national law in the context of the Hague and Hague-Visby Rules, Article 5(7) suggests that proportionate liability is adopted. Hence, carriers can avoid liability for the loss to the extent that the loss is attributable to them, their servant or agents. 226

cc) The Rotterdam Rules 228

In the Rotterdam Rules, the seaworthiness obligation is, in some respects, different from that adopted in Article III(1) of the Hague and Hague-Visby Rules: as is clear from the chapeau of Article 14, the obligation is continuous in the Rotterdam Rules. Additionally, duty of seaworthiness is expressly stated to

450 [2000] 2 Lloyd’s Rep. 255, 270, per LJ Auld. 451 F. Berlingieri, Revisiting the Rotterdam Rules, LMCLQ 2010, pp. 583, 616. 452 See Hedetoft et al. (fn. 157), p. 98. A similar line is also taken in the Nordic Maritime Code Chapter 13, whereby the carrier is not entitled to rely on navigational error or fire where the cause of the loss is the carrier’s breach of its duty of seaworthiness, see H. Tiberg and J. Schelin, Transport Law – Sweden, in M. Huybrechts (Supplement 31, February 2012), para. 443.

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cover fitness of containers supplied by the carrier.453 Leaving these differences to one side, the seaworthiness obligation in the Rotterdam Rules has some common features with the previous rules: the obligation still attaches before and at the beginning of the voyage, and it remains to be based on the exercise of due diligence. In terms of these two common features, the judicial decisions given in respect of Article III(1) of the Hague and Hague-Visby Rules would still be relevant under the Rotterdam Rules. Given that the obligation is also continuous in the latter rules, the question arises as to when precisely the obligation ends. Since it begins before and at the beginning of the voyage, the obligation would possibly cease upon the completion of unloading, although there is no express provision in the rules to that effect. Having discussed the overriding nature of the seaworthiness obligation un- 229 der the Hague and Hague-Visby Rules, one has to ask how the obligation applies in the context of the Rotterdam Rules. Article 17(6) suggests that the seaworthiness obligation is not overriding in the Rotterdam Rules: it is possible for the carrier to be liable for breach of the seaworthiness obligation only in proportionate to the contribution of their breach to the loss, damage or delay. To this end, they can partly defeat liability by proving that one of the events or circumstances in the catalogue of exceptions contributed to the loss. b) Carriers’ Obligations as regards the Goods aa) The Hague and Hague-Visby Rules

In the Hague and Hague-Visby Rules, a carrier’s obligation in relation to 230 care of cargo is provided in Article III(2). Unlike the obligation as to seaworthiness, this obligation is continuous, applying from “tackle-to-tackle” as a default. Carriers are required by this provision to “properly and carefully load, handle, stow, carry, keep, care for and discharge the goods delivered”. Under English law, this obligation does not, however, require carriers to undertake to perform all these operations. It only requires them to “properly and carefully” carry out only those operations they have undertaken.454 As has already been discussed above, FIO and similar clauses are accepted to shift the responsibility for some

453 See Article 14(c) of the rules. This aspect of seaworthiness is also recognised in Dutch law, see N.J. Margetson, “Some remarks on the allocation of the burden of proof under the Rotterdam Rules as compared to the Hague (Visby) Rules”, in R. Thomas, Carriage of Goods under the Rotterdam Rules, 2010, para. 10.6. In most cases, this question does not arise due to the wide use of container clauses and the carrier’s obligation to state in the bill of lading the apparent order and condition of the goods at the time of their shipment. See the Australian decision of The TNT Express [1992] 2 Lloyd’s Rep; N.J. Margetson, “Liability of the carrier under the Hague (Visby) Rules for cargo damage caused by unseaworthiness of its containers” Journal of International Maritime Law, (2008) 14, pp. 153 et seq. 454 Pyrene v. Scindia [1954] 2 QB 402 (QBD), pp. 417–418; Renton v. Palmyra [1956] 2 Lloyd’s Rep. 379 (HL), 392.

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or all of the loading and discharge operations to the shipper.455 Depending on the wording of the clause, the responsibility can also be shifted to the ultimate bill of lading holder. 456 As regards the carriers’ obligation to “carry” goods, it brings with it the obligation to carry goods in a proper and careful manner. It does not, however, require the carrier to discharge the goods at the port of discharge named in the contract of carriage, where the contract gives the carrier liberty to discharge elsewhere.457 231 The obligation set out in Article III(2) is not one of due diligence. Carriers are expected to carry out the operations that they have undertaken to perform in a careful and proper manner. On the question of what constitutes proper performance under Article III(2), the court in the English case of Albacora v. Westcott and Laurance Line took the view that the carrier must perform “with a system which was sound in light of all knowledge which carrier had or ought to have had about the nature of goods.”458 232 Given that the obligation to care for cargo under Article III(2) is expressly made subject to Article IV, it is not treated as an overriding obligation under English law. The effect of this is as follows: carriers can avoid liability either if they can bring themselves squarely within one of the exceptions provided in Article IV(2)(a) or (b),459 or if they can prove that one of the remaining exceptions caused460 the loss or damage, or it would have caused the loss or damage even though there had been no breach of Article III(2).461 Where a loss is caused concurrently by breach of Article III(2) and by one of the excepted events listed in Article IV(2), carriers will be liable for the loss in its entirety, unless they prove how much loss was caused by the excepted event.462 455 There is no doubt that the wording of FIO and similar clauses is decisive in determining whether both the risk and the cost of the operations shift to the cargo interest, see The Jordan II [2003] 2 Lloyd’s Rep. 87 (CA). Under English law, FIO and similar clauses are not struck down by Article III(8) of the Hague-Visby Rules, see The Jordan II [2005] 1 Lloyd’s Rep. 57 (HL). However, transfer of responsibility under FIO and similar clauses is not allowed in some jurisdictions such as France, see Legros et al. (fn. 187), para. 217. 456 Ibid. 457 A liberty to deviate clause to that effect will not be struck down by Article III(8) of the Hague and Hague-Visby Rules, see Renton v. Palmyra [1956] 2 Lloyd’s Rep. 379 (HL). 458 See [1966] 2 Lloyd’s Rep. 53, 58. 459 However, it is worthy of note that the exceptions in Article IV(2)(a) and (b) are interpreted very narrowly. See the English case of Gosse Millerd Ltd. v. Canadian Government Merchant Marine Ltd. (1928) 32 Ll. L. Rep. 91 (HL). See also The Aconcagua [2011] 1 Lloyd’s Rep. 683 (CA), where the shipowner was able to bring itself within the exception in Article IV(2)(a). 460 In the case of multiple causes, it is not clear whether it is sufficient for one of these exceptions to be an effective cause of loss or damage, or whether it should be the dominant cause. This problem does not arise so far as the exceptions in Article IV(2)(a) and (b) are concerned, for they are considered to “qualify” a carrier’s obligation under Article III(2). For further discussions, see Treitel and Reynolds (fn. 5), p. 671. See also, Aikens et al. (fn. 16) paras. 10-158–10-161. 461 See Treitel and Reynolds (fn. 5), p. 671. 462 Gosse Millerd Ltd. v. Canadian Government Merchant Marine Ltd. (1928) 32 Ll. L. Rep. 91, 98 (HL).

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Although highly relevant to cargo, carriers’ obligations as to delivery of the 233 goods is not regulated in the Hague and Hague-Visby Rules. Consequently, the question of whether, and if so when, a carrier has discharged its obligation as to delivery is decided by reference to national law.463 Where permissible under the applicable national law, this issue is generally determined by the terms of delivery provided in the contract of carriage. bb) The Hamburg Rules

The Hamburg Rules do not talk of a carrier’s obligation to care for cargo, al- 234 though this obligation can undoubtedly be brought within Article 5(1), which defines carriers’ obligations in very general terms. On the validity of FIO and similar clauses in the context of the Hamburg Rules, there would appear to be nothing in Article 5 to suggest that transfer of some or all of the loading and/or discharge operations would be invalid. Nonetheless, given the carriers’ period of responsibility is “port-to-port”,464 these clauses can be viewed as giving rise to indirect derogation of carriers’ liability. If viewed as such by national courts, these clauses would be invalidated by Article 23.465 On the question of how these carriers’ obligations, which include care for cargo, can operate with exceptions, the answer is in Article 5(7) of the Rules: as will be recalled, it is possible for carriers to be responsible only to the extent that the loss, damage or delay is attributable to them, or their servants or agents. However, the burden to show proportionate liability falls on the carrier. cc) The Rotterdam Rules

In the Rotterdam Rules, the obligation to care for cargo is spelled out in Ar- 235 ticle 13(1), whereby the carrier is required to properly and carefully receive, load, handle, stow, carry, keep, care for, unload and deliver the goods. The obligation provided in Article 13 applies throughout the carrier’s period of responsibility, which is determined by reference to Article 12.466 This is, however, subject to application of Article 26, which enables a unimodal Convention to govern the inland part(s) of a multimodal carriage in certain circumstances. Hence, where a unimodal Convention applies preceding or subsequent to sea carriage by virtue of Article 26, a carrier’s obligation to care for cargo shall be governed by that unimodal Convention. Notwithstanding the above, Article 13(2) provides that the carrier and the 236 shipper can agree that loading, handling, stowing or unloading of the goods is to be performed by the shipper, documentary shipper or the consignee. In order for the responsibility for some or all of these operations to pass to such parties, this agreement needs to be referred to in the contract particulars. In international car463 464 465 466

See fn. 427. See Article 2 of the Hamburg Rules. See section V(12). See section V(3).

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riage of goods by sea, such agreements are common, and they are generally contained in the so-called FIO and similar clauses. Given the clear wording of Article 13(2), these clauses would be effective under the Rotterdam Rules provided that the transfer of responsibility was not wider than that allowed in the provision, and that it is “properly” referred to in the contract particulars. 237 On the question of what constitutes “proper” reference in the contract particulars, there is no clear guidance. Nonetheless, it would appear that the agreement should be expressly stated in the transport document. Hence, this requirement would not possibly be satisfied where a transport document contained general words of incorporation seeking to incorporate charterparty terms including a FIO clause. Where a transport document is in the hands of a consignee, the imposition of these responsibilities is additionally conditional upon the wording of the relevant agreement referred to in the contract particulars: if the agreement holds the shipper exclusively responsible for the operations, the agreement is not applicable to the consignee.467 5. Carriage of Cargo on Deck

Unlike the Hague and Hague-Visby Rules, the Rotterdam Rules provide a set of rules peculiar to deck carriage.468 It is clear from the wording of Article 25(1) that deck carriage is only allowed if (a) it is required by law, (b) the goods are carried in or on containers or vehicles that are fit for deck carriage, and the decks are specifically fitted to carry such containers or vehicles, or (c) the carriage on deck is in accordance with the contract of carriage, or the customs, usages or practices of the trade in question. 239 Where there is damage to, loss of, or delay in delivery of the goods carried on deck, the carriers are liable subject to the provisions in the Rotterdam Rules. Nonetheless, where the goods are carried on deck pursuant to subsections (a) and (c) above, the carrier is not liable for the loss of, damage to, or delay in delivery of the goods exclusively caused by deck carriage. In the case of deck carriage that cannot be brought within Article 25(1), the carrier will not be able to avoid liability for the loss, damage or delay exclusively caused by deck carriage. In particular, the carrier will in such cases have no right to rely on the defences in Article 17.469 240 Consequences of deck carriage contrary to an express agreement between the carrier and the shipper as to carriage under deck would appear even more drastic: in that case, the carrier loses all its rights to benefit from limitations of liability to the extent that the loss, damage, or delay resulted from carriage on 238

467 See Article 58(2) and section IV(3)(c). 468 See Article 25. 469 Under English law, the carrier is entitled to limit its liability pursuant to the Hague-Visby Rules even in cases of unauthorised carriage on deck. See The Kapitan Petro Voivoda [2003] 2 Lloyd’s Rep. 1 (CA); The Antares [1987] 1 Lloyd’s Rep. 424, 430 (CA).

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deck.470 For avoidance of the loss of the right to rely on the defences and limitations, wary carriers would agree with the shipper as to deck carriage and record their agreement in the transport document or in the electronic transport record. Such a record would also enable carriers to invoke the agreement as to deck carriage against the consignees.471 Just as with the Rotterdam Rules, the Hamburg Rules do not oust deck car- 241 riage from the scope. Under Article 9(1) of the latter rules, the carrier is similarly permitted to carry on deck if such carriage is “in accordance with an agreement with the shipper or with the usage of particular trade or is required by statutory rules or regulations.” For the carrier to invoke such an agreement against the shipper, subsection (2) of Article 9 requires that the agreement be recorded in the bill of lading or other document evidencing the contract of carriage. The provision further suggests that an agreement between the carrier and shipper as to deck carriage is binding upon a subsequent holder only if the agreement is recorded in the bill of lading. In the case of a deck carriage which is not permissible under Article 9(1), the carrier loses the right to rely on the general defence under Article 5(1), if the sole cause of the loss is deck carriage.472 Similar to the position in the Rotterdam Rules, where a cargo is carried on deck contrary to an express agreement, the carrier loses the benefit of the limitation of liability provided under Article 6 of the rules.473 6. Carriage of Live Animals

Carriage of live animals is not excluded from the scope of application of the 242 Rotterdam Rules, although contractual exclusion of liability for such carriage is permitted by the rules. Article 81 of the rules permits the contract of carriage to exclude or limit the obligations or liabilities of carriers and maritime performing parties. Such exclusions and limitations are not subject to Article 79, but they are treated as ineffective if they offend the “super-mandatory” provisions spelled out in Article 80.474 Article 81(a) adds a further qualification to this liberty, stating that such con- 243 tractual exemptions and limitations shall not be effective, if the claimant proves that injury to or death of live animals or delay in their delivery resulted either from (i) a reckless act or omission of the carrier or of a person referred to in Article 18,475 done with the knowledge that such injury, loss or delay would 470 For the current position under English law, see the decision in The Kapitan Petko Voivoda, above. 471 See Article 25(4) of the Rotterdam Rules, which provides that the carrier cannot invoke the agreement as to deck carriage against a third party who acquired a negotiable transport document or a negotiable electronic transport document in good faith, unless the contract particulars state that the goods may be carried on deck. 472 It is worthy of note that the carrier may in such circumstances also lose the right to rely on the limitation of liability provided under Article 6 of the rules. See Article 9(2) of the rules. 473 See Article 9(4). 474 See Article 80(4). 475 See fn. 412.

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probably result or (ii) an intentional act or omission on the part of any of the specified persons to cause such loss, injury or delay. The loss of the right to rely on the contractual exemptions and limitations would take such carriers to the backdoor of the Rotterdam Rules. Consequently, they would be able to enjoy the defences and limitations therein, provided that the injury, loss or delay is not attributable to their personal acts or omissions.476 244 In the Hamburg Rules, the carrier’s liability for carriage of live animals is also not left outside the scope.477 The rules provide that, in relation to carriage of live animals, the carriers are not liable for loss, damage or delay that result from any special risks inherent in that kind of carriage.478 The loss, damage or delay in delivery is presumed to have been caused by such special risks, (1) where the carrier proves that it has acted in accordance with any special instructions given by the shipper in relation to such carriage, and (2) where the loss, damage or delay could be attributed to such risks. The cargo claimant can rebut this presumption by proving that all or part of the loss, damage or delay in delivery resulted from fault or neglect of the carrier, his servants or agents. 7. Non-Ordinary Shipments 245

Non-ordinary shipments are dealt with in Article 81 of the Rotterdam Rules.479 As with the carriage of live animals, this type of shipment does not enjoy an outright exclusion from the scope of the Rules. Instead, contracts covering such shipments are permitted to exclude or limit the liability and obligations of carriers and maritime performing parties more than is allowed by Article 79. For the contract of carriage to effectively exclude or limit the obligations and liabilities, three conditions must be satisfied. First, “the character or condition of the goods or the circumstances and terms and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement”. Secondly, the relevant contract of carriage should not be “related to ordinary commercial shipments made in the ordinary course of trade”. Thirdly, no negotiable transport document or negotiable electronic transport record should be issued for the carriage of the goods. On the satisfaction of all these requirements, Article 79 does not apply to the exclusions and limitations in the contract of carriage. However, their effectiveness is limited to the extent that they do not offend the super-mandatory provisions in Article 80.

476 Article 61. A literal reading of Articles 80 and 81 further suggests that a contract clause which seeks to exclude or limit a carrier’s liability for the loss, injury or delay resulting from an intentional or reckless act or omission on the part of the specified persons will be ineffective. 477 See Article 5(5) of the Hamburg Rules. 478 Ibid. 479 For non-ordinary shipments in the context of the Hague and Hague-Visby Rules, see Section C 2., above. The Hamburg Rules do not talk of non-ordinary shipments.

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8. Basis of Liability

Having considered briefly the carrier’s liability in relation to the ship and 246 the goods, it is timely to discuss the carrier’s basis of liability in the sea carriage Conventions. It is perhaps an oddity of the Hague and the Hague-Visby Rules that they do not contain any specific provision regarding the carrier’s liability for delay in delivery of the goods. This might simply be a reflection of the reluctance of the draftsmen of these rules to impose an obligation on the carrier to deliver in time. Although the Hague-Visby Rules are silent on this matter, carriers under English law may be held liable for delay in delivery: an obligation of timely delivery can arise even in the case of a contract of carriage governed by the Hague-Visby Rules, where delivery of the goods within a certain period of time was or is taken to have been in the contemplation of the parties at the time of contract conclusion. 480 Unlike the Hague and the Hague-Visby Rules, it is expressly provided both in the Hamburg and the Rotterdam Rules that the carrier is liable for loss of or damage to goods as well as their delay in delivery.481 On the carrier’s basis of liability, both the Rotterdam Rules and the Hamburg Rules also accept presumed liability of carriers in all cases of loss of, damage to or delay in delivery of the goods.482 9. Burden of Proof a) The Hamburg Rules

In the Hamburg Rules, the carrier, who is presumed to be liable for the loss, 247 has the burden to prove that “he, his servants or agents took all measures that could reasonably be required to avoid the occurrence and its consequences”.483 Carriers in the Hamburg Rules only have a general exception provision requiring them to prove that they have taken all measures that could reasonably be required to avoid the occurrence and its consequences.484 With no catalogue of exceptions being provided, carriers are thus left to work out what facts could help them disprove their fault: this makes the Hamburg Rules even closer to a strict liability regime. In the absence of a catalogue of exceptions in the Hamburg 480 See Hadley v. Baxendale (1854) 9 Exch. 341 and The Heron II [1969] 1 Lloyd’s Rep. 350 (HL). Under the Hague-Visby Rules, the added Article IV(5)(b) raises the suggestion that liability for late delivery is not recoverable. The Article provides: “the total amount of recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been discharged.” However, under English law, the formula provided in the Article is not a decisive tool in determining quantum of damages. For further discussions, see Treitel and Reynolds (fn. 5), p. 733. 481 See Article 17(1) of the Rotterdam Rules and Article 5(1) of the Hamburg Rules. 482 See Article 21 of the Rotterdam Rules, which defines delay. Given that the definition brings with it the requirement that the parties agree a time for delivery, the provision would not appear to create a departure from the position under English law, see fn. 480. 483 See Article 5(1) of the Rules. 484 See Article 4(a) of the Rules.

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Rules, it would also appear that the burden of proof generally remains with the carrier. However, where the loss, damage or delay is caused by fire, the burden of proof is placed on the cargo interest to establish the following: the loss resulted from the fault or neglect of the carrier, its servants or agents in allowing the fire to start or in failing to mitigate its consequences. In practical terms, this would appear too heavy a burden for the cargo interest, who typically will not have access to full material facts especially where the loss, damage or delay is caused by fire. b) The Rotterdam Rules

The allocation of burden of proof is significantly different in the Rotterdam Rules. Following the cargo interest’s proof that the loss, damage or delay occurred during the carrier’s period of responsibility, the burden of proof shifts to the carrier. For the carrier to defeat part or all of its presumed liability, the Rotterdam Rules provide the carrier with two options. By virtue of Article 17(2) of the rules, one option is to prove that cause or one of the causes of the loss, damage or delay is not attributable to its fault or to the fault of any person specified in Article 18. Given that this burden would surely not be a light one for the carrier, the other option, provided in Article 17(3) of the rules, is to prove that one of the events listed in the category of exceptions caused or contributed to the loss, damage or delay. Following the carrier’s discharge of the burden in either way, the cargo interest can either prove that (1) the negligence of the carrier, or any person specified in Article 18, caused or contributed to the loss, (2) an occurrence outside the listed exceptions caused or contributed to the loss or (3) the loss was caused or was probably caused or contributed to by the unseaworthiness of the vessel. 249 When the cargo interest discharges the burden pursuant to option (2), the burden shifts back onto the carrier to prove that the occurrence did not result from its fault or from the fault of those persons specified in Article 18 of the rules. As regards option (3), it would appear difficult to work out where differences lie between proving the cause and proving probable cause, since in most jurisdictions the civil standard of proof is the balance of probabilities. It is submitted that, due to the reference to probable cause in the provision, it would be sufficient for the cargo interest to merely establish a prima facie case that the loss was caused or contributed to by the unseaworthiness of the vessel. On proof of unseaworthines pursuant to option (3), the burden is again placed on the carrier to prove that it acted in compliance with its obligation to exercise due diligence pursuant to Article 14 of the rules. 248

c) The Hague and Hague-Visby Rules 250

In comparison with the Rotterdam Rules, the Hague and Hague-Visby Rules do not provide an exhaustive set of rules on the allocation of burden of proof. The latter rules contain provisions on the allocation of burden of proof that are 168

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applicable only in certain circumstances.485 What is not made clear in the rules is therefore left to national law to determine. Where there is loss of or damage to goods caused by the unseaworthiness of the vessel,486 the burden is expressly placed on carriers to prove their exercise of due diligence before and at the beginning of the voyage to make the vessel seaworthy.487 In a similar vein, it is also expressly stated in Article IV(2)(q) that the burden lies on carriers to show that loss or damage is caused without their actual fault or privity or without the fault or neglect of their agents or servants. Although not expressly stated in the rules, the burden should be on carriers to bring themselves within one of the excepted perils, save in the case of fire: on proof of the carrier that the loss was caused or contributed to by fire, the burden shifts onto the cargo interest to show the actual fault or privity of the carrier.488 Also, for those cargo interests seeking to deprive carriers of limitations provided in the rules, the burden is placed on them to prove that the damage or loss resulted from an intentional or reckless act of the carrier.489 From a general perspective, this patchwork of rules on burden of proof is far 251 from creating a complete system with a clear allocation of burden of proof between the carrier and cargo interest. When viewed from this perspective, the lengthy provisions on burden of proof in the Rotterdam Rules may seem preferable. However, the complexity of the allocation set by the provisions in the rules may present difficulties in achieving uniformity between the jurisdictions in relation to the application of the provisions.490 10. Excepted Perils

A quick glance at the excepted perils in the Hague, Hague-Visby and Rotter- 252 dam Rules suggests that most of the traditional excepted perils in the Hague and Hague-Visby Rules are contained in the Rotterdam Rules. One of the major changes brought about by the Rotterdam Rules is the abolition of the “nautical fault” exception. Adopted by the Hague and Hague-Visby Rules, the nautical fault exception has been one of the key defences of carriers in cargo claims governed by the rules: it has effectively enabled carriers to defeat liability where loss of or damage to cargo is caused by an “act, neglect, or default of the master, 485 See, for instance, Article IV(1). 486 The rules are silent as to which party has the burden to prove that the loss is caused by the unseaworthiness of the vessel. Under English law, the prevailing view is that the cargo interest must prove that the effective cause of the loss is the initial unseaworthiness of the vessel. See Wilson (fn. 222), p. 190. Where, however, the sinking of the vessel is due to unexplained reasons it raises an inference that the vessel was initially unseaworthy, see The Torenia [1983] 2 Lloyd’s Rep. 210 (QBD), 219. For further discussions on this issue, see also The Albacora SRL v. Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep. 53 (HL), 61. 487 See fn. 486. 488 See Article IV(2)(c). For English law, see also The Apostolis [1996] 1 Lloyd’s Rep. 475 (QBD), quoted in Treitel and Reynolds (fn. 5), para. 9-243. 489 See Article IV(5)(e). 490 For a similar view, see Treitel and Reynolds (fn. 5), para. 10-023.

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mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.”491 Under English law, the usefulness of this exception to carriers has nonetheless been somewhat curtailed following the restrictive interpretation of this exception by English courts: in order to keep the carrier’s obligation to care for cargo effective, the courts have allowed carriers to shield themselves under this defence only in cases of a negligent failure or act which is in essence related to the management of the ship and not of the cargo.492 This particular exception has been controversial over the years: following the advancements in navigation and communication techniques, it has been widely accepted that the carrier should not be allowed to escape from liability for losses arising from errors of navigation and management of the vessel.493 For this reason, the exception does not appear in the Hamburg Rules and the Rotterdam Rules. 253 It is noticeable that the fire exception as adopted in the Hague and HagueVisby Rules has also not been retained in the Hamburg and Rotterdam Rules. The exception has been subject to criticism over the years largely because it enables the carrier to escape from liability for a loss arising from fire, unless such loss is caused by the actual fault or privity of the carrier.494 It has been widely felt that carriers should be liable for fire caused by the fault of their servants or agent, whose acts and omissions are otherwise attributable to them. Under English law, the fire exception has been defined restrictively: English courts have not allowed carriers to rely on the fire exception in the case of fire caused by the unseaworthiness of the vessel before and at the beginning of the voyage.495 Furthermore, where fire results from the fault of a servant or agent who has not been properly supervised by the carrier, this will amount to actual fault or privity on the part of the carrier.496 254 In the Hamburg Rules, the fire exception operates differently in that the carrier’s liability subsists in the case of a loss arising from fire which has been caused by or attributable to the fault of the servants or agents of the carrier. The same is also true of the Rotterdam Rules: apart from the fault of the carrier, the fault of any person referred to in Article 18, which includes the carrier’s servants and agents, is sufficient to bar the carrier from invoking the fire exception. In the

491 See Article IV(2)(a) of the Hague and Hague-Visby Rules. It is worthy of note that the carrier may avoid liability in proportion to the extent of the contribution of the excepted event to the occurrence of the loss, see Gosse Millerd Ltd. v. Canadian Government Merchant Marine Ltd. (1928) 32 Ll. L. Rep. 91 (HL). 492 Gosse Millerd Ltd. v. Canadian Government Merchant Marine Ltd, above. On the interpretation of the exception by English courts, see also The Aconcagua [2011] 1 Lloyd’s Rep 683 (CA). 493 See the report of the UNCITRAL Working Group III (Transport Law) on the work of its tenth session (Vienna, 16–20 September 2002), para. 35. 494 Where the carrier is a company, as is typically the case, the acts or omissions of the “directing mind” of the company can amount to actual fault or privity on the part of the carrier. See The Star Sea [1997] 1 Lloyd’s Rep. 360, 374 (HL). 495 Maxine Footwear Ltd. v. Canadian Government Merchant Marine Ltd. [1959] AC 589 (HL). 496 See The Marion [1984] 2 Lloyd’s Rep. 1 (HL), quoted in Wilson (fn. 222), p. 276.

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Rotterdam Rules, the application of the fire exception is further restricted with the reference to “fire on the ship” in the provision.497 With the seaworthiness obligation rendered continuous in the Rotterdam 255 Rules, a further question arises as to whether a carrier can rely on the fire exception where the vessel becomes unseaworthy during the voyage due to fire.498 From the perspective of English law, such cases illustrate the difficulties in determining how the fire exception will operate with the carrier’s continuous seaworthiness obligation.499 It would appear that there would be differences between the answers given by the courts in different jurisdictions. The catalogue of excepted perils is also lengthier in the Rotterdam Rules 256 than in the Hague and Hague-Visby Rules. Added to the list are the exceptions to liability arising from (a) operations performed by the shippers or consignees under FIO and similar clauses, (b) reasonable measures to avoid or attempt to avoid damage to the environment, and (c) acts of the carrier in pursuance of the powers conferred by Articles 15 and 16, dealing with dangerous cargo. As regards the exceptions in relation to warlike situations, the Rotterdam Rules add terrorism and piracy to the list of exceptions.500 All these new exceptions create a significantly different liability regime than that of the Hague and Hague-Visby Rules. The multimodal aspect of the Rotterdam Rules also brings an additional layer of difference due to its likely impact on the overall operation of the exceptions. 11. Deviation

The Conventions do not define deviation, and the Hamburg Rules do not even 257 talk of deviation. However, the circumstances in which deviation is not a breach of contract of carriage is spelled out, albeit in general terms, in the Hague and Hague-Visby Rules. a) The Hague and Hague-Visby Rules

Article IV(4) the Hague and Hague-Visby Rules provides:

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any deviation in saving or attempting to save life or property at sea or any reasonable deviation shall not be deemed to be an infringement or breach of these Rules or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom.

With this limited guidance provided by the Hague and Hague-Visby Rules, a 259 number of questions are left to the national courts to decide: what constitute “deviation” and “reasonable deviation”? What effect do the liberty to deviate clauses have on the answer to the first question? Finally, what consequences flow from unjustified deviation?

497 498 499 500

See Article 17(3)(f) of the rules. This was also raised by Diamond (fn. 91), p. 467. Ibid. See Article 17(3)(c) of the Rotterdam Rules.

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Under English common law, deviation is in general terms defined as an intentional diversion of the ship from the contractual – and in its absence from the customary – route.501 By and large, the contractual route is decided by the liberty to deviate clauses, which are commonplace in contracts of carriage. Under English law, these contracts are given effect in accordance with the letter and spirit of the contract of carriage.502 Irrespective of its general wording, a liberty to deviate clause is thus not interpreted in a way to frustrate the main objective of the contract of carriage.503 261 Under English law, the traditional common law approach was to deprive a deviating carrier – who deviated unjustifiably – of the benefits and protections provided under the contract of carriage.504 This approach survived the Hague and Hague-Visby Rules in early cases.505 Under English law, as it currently stands, the issue of whether a deviating carrier is still to be treated as such remains uncertain. It is likely that if this issue is brought before the courts, they will allow the deviating carrier to rely on the limitations and defences under the Hague and Hague-Visby Rules. The words “in any event” found in the provisions on package unit limitation506 and time bar507 in the Hague and Hague-Visby Rules support a departure from the traditional view established in early cases on deviation.508 260

501 502 503 504

505 506

507 508

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Leduc v. Ward (1888) 20 QBD 475, 481–482. GH Renton v. Palmyra (The Caspiana) [1957] AC 149 (HL). See Glynn v. Margetson [1893] AC 351 (HL). See also Leduc v. Ward, above. See Hain SS Co. v. Tate & Lyle (1936) 155 LT 177 (HL). A carrier who unjustifiably deviated was thus treated as a common carrier. This had the effect of putting the deviating carrier under a strict duty to deliver the goods in the same condition as they were received. The upshot of this was that the deviating carrier was only allowed the protection of five common law exceptions, which were namely acts of God, acts of the Queen’s enemies, inherent vice in the goods, defective packing of the goods and the intentional loss of goods jettisoned in a general average sacrifice. These common-law exceptions were available to the carrier only if it could prove that the loss would have occurred even if the vessel had not deviated. See Morrison & Co. Ltd. v. Shaw, Savill & Co. [1916] 2 KB 783 (CA). See also C. Debattista, “Fundamental breach and deviation in the carriage of goods by sea” JBL, 1989, pp. 22, 23. Hain SS Co. v. Tate & Lyle (1936) 155 LT 177 (HL); Stag Line Ltd v. Foscolo, Mango Ltd. [1932] AC 328 (HL). See Article IV(5) of the rules. See also the decision of the English Court of Appeal in The Kapitan Petko Voivoda [2003] 2 Lloyd’s Rep. 1 (CA). There, the words “in any event” spelled out in Article IV(5) of the Hague and Hague-Visby Rules was read to mean “in any case” whether or not the breach of contract is particularly serious. Note, however, that Article IV(5)(e) of the Hague and Hague-Visby Rules still has the effect of preventing carriers from relying on package or unit limitation where the carrier has acted wilfully or recklessly. See Article III(6) of the Hague and Hague-Visby Rules. See The Kapitan Petro Voivoda, above, and The Antares [1987] 1 Lloyd’s Rep 424, both of which suggest that the courts may now decide differently from the early cases on deviation. With these two cases, it was settled that unauthorised deck carriage, which had previously been labelled as “quasi-deviation” and had thus been made subject to the same consequences as geographical deviation, did not deprive carriers of the right to benefit from limitations and defences in the Hague and Hague-Visby Rules. As regards the elimination of the doctrine of fundamental breach in the context of general contract law, see Photo Production Ltd. v. Securicor Transport Ltd. [1980] AC 827 (HL).

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As regards the application of the time-bar provision irrespective of any un- 262 justifiable deviation, further support can be drawn from its new wording in Article III(6) of the Hague-Visby Rules: in comparison with the time-bar provision in Article III(6) of the Hague Rules, which refers to “all liability in respect of loss or damage”, the new wording talks of “all liability whatsoever in respect of the goods”. This change in the wording has led the courts to allow the use of the time-bar provision in a wide variety of claims against the carrier.509 Thus, there appears to be no reason for treating the time-bar provision in the Hague-Visby Rules as inapplicable to cargo claims arising from losses caused by unjustifiable deviation. On the question of what constitutes unjustified deviation, guidance must be 263 drawn from Article IV(5) of the rules, which provides that: “Any deviation in saving or attempting to save life or property at sea or any reasonable deviation shall not be deemed to be an infringement or breach of these Rules or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom.” In relation to the test of “reasonableness” Lord Atkin in Stag Line Ltd. v. Foscolo Mango Ltd. stated: The true test seems to be what departure from the contract voyage might a prudent person controlling the voyage at the time make and maintain, having in mind all the relevant circumstances existing at the time, including the terms of the contract and the interests of all parties concerned, but without obligation to consider the interests of any one as conclusive.510

Hence, in Kish v. Taylor deviation of the vessel was held to be reasonable al- 264 though she went off the contractual route for repairs due to the overloaded cargo which rendered the vessel unseaworthy at the beginning of the voyage.511 b) The Hamburg Rules

Unlike the Hague and Hague-Visby Rules, the Hamburg Rules do not ex- 265 pressly talk of deviation, although Article 5(6) provides that “the carrier is not liable, except in general average, where loss, damage or delay in delivery resulted from measures to save life or from reasonable measures to save property at sea”. The effect of this provision is twofold. First, unlike the Hague and HagueVisby Rules, any deviation for saving or attempting to save property of third persons is not acceptable per se. The rules require that deviation for these purposes be reasonable in the relevant circumstances. Hence, carriers face potential liability where deviation to save or attempt to save property of third parties are later found to be unreasonable. Secondly, carriers are not excused from “any reasonable deviation”, whilst the opposite is true with respect to carriers under the Hague and Hague-Visby Rules. Consequently, in case of any reasonable deviation which cannot be brought squarely within Article 5(6), carriers under the 509 See The Antares, above, and The Captain Gregos [1990] 1 Lloyd’s Rep. 310 (CA). 510 Stag Line Ltd. v. Foscolo Mango Ltd. [1932] AC 328 (HL), pp. 343–344. See also Debattista (fn. 506), pp. 22 et seq. 511 See [1912] AC 604 (HL).

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Hamburg Rules would only have the general defence in Article 5(1) to rely on when seeking to avoid liability.512 c) The Rotterdam Rules

The Rotterdam Rules choose a different path from those taken in the previous Conventions. The question of whether deviation constitutes breach of a carrier’s obligation is entirely left to national law. Article 24, which is the main provision on deviation, merely states what consequence does not flow from deviation: deviation is not of itself sufficient to deprive carriers and any of the persons defined in Article 18 of any defence or limitation provided in the Rules, even if the loss, damage or delay resulted from unjustified deviation. However, Article 24 further states that this is applicable to the extent provided in Article 61, which contains a provision similar to that of Article IV(5)(e) of the Hague-Visby Rules: neither the carrier nor any of the persons mentioned in Article 18 is entitled to rely on the limitations provided in Articles 59 and 60, where loss of, damage to or delay in delivery of the goods resulted from its own personal act or omission. Consequently, deviation is only of itself sufficient to deprive carriers of the limitation in Articles 59513 and 60514 where the circumstances under Article 61 arise. Given that the exception comprises only Articles 59 and 60, the time-bar provision in Article 62 will be unaffected and thus be applicable in cases of deviation, regardless of any personal act or omission of the carrier or any of the persons mentioned in Article 18. 267 Article 17 of the Rotterdam Rules is also related to deviation, for it provides three main exceptions to carriers’ liability where the loss, damage or delay arises from (a) saving or attempting to save life at sea,515 (b) taking reasonable measures to save or attempt to save property at sea,516 or (c) taking reasonable measures to avoid or attempt to avoid damage to the environment.517 The exceptions (a) and (b) are the same as those adopted in the Hamburg Rules. Thus, these exceptions equally have the effect of releasing carriers from liability where deviation occurred to engage in a rescue operation to save life at sea or to take reasonable measures to save the property at risk. Exception (c), which was not stated as an exception in the previous Conventions, will enable carriers to defeat liability for loss, damage or delay that resulted from their interruption of the voyage to make efforts to protect the environment.518 266

512 513 514 515 516 517 518

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See Article 5(1) of the Rules. This provision deals with package unit limitation. This article talks of limits of liability for losses caused by delay. Article 17(l). Article 17(m). Article 17(n). For further discussions, see Tsimplis (fn. 428), pp. 59–61.

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12. Contracting Out

The extent to which carriers’ contract terms survive the mandatory sea car- 268 riage conventions is decided by the so-called “non-derogation provision” spelled out in each of these conventions. a) The Hague and Hague-Visby Rules

In the context of the Hague and Hague-Visby Rules, Article III(8) provides 269 that: any clause, covenant or agreement in a contract of carriage which a) relieves the carrier or the ship519 from liability for loss or damage to, or in connection with goods arising from negligence, fault, or failure in the duties and obligations provided in this article, or (b) lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect.

The non-derogation provision has an overriding effect where the Hague or 270 Hague-Visby rules apply of their own force to bills of lading. In cases where the rules merely have a contractual effect, the question whether Article III(8) can invalidate the terms in a bill of lading becomes a matter of contract construction. Where the Rules apply of their own force, English courts interpret the Article 271 purposively.520 Consequently, any term which has either a direct or indirect effect of removing or lessening the carrier’s liability more than the Rules allow is struck down by Article III(8).521 Where the offending provision is severable, only the part that contradicts Article III(8) is invalidated, and the remaining part of the provision remains applicable.522 Over the years, validity of a wide range of terms in bills of lading has been challenged on the grounds that they had the effect of removing or lessening carriers' liability contrary to Article III(8) of the Rules. The terms so challenged range, inter alia, from FIO and similar claus-

519 The predominant view under English law is that the word “ship” is added to make the provisions applicable also in the case of in rem proceedings against the carrying ship, where the owner of that ship is the contractual carrier. Notably, the word “ship” is also used in the context of Article III(6) and IV(1), (2), (3), and 5(e) and (h). See The Aries [1977] 1 WLR 185 (HL), 188, per Lord Wilberforce, quoted in Treitel and Reynolds (fn. 5), para. 9-180. For another meaning of “ship”, see The Starsin [2004] 1 AC 715 (HL), paras. 113–116, per Lord Hoffmann. 520 See The Morviken [1982] 1 AC 565 (HL), 573. 521 See The Morviken, above, where a jurisdiction clause which designated Dutch courts for dispute resolution was struck down by Article III(8). The bill of lading was held to be mandatorily governed by the Hague-Visby Rules, whilst the designated Dutch courts would have applied the Hague Rules, given that the Netherlands was a Hague state. Hence, the jurisdiction clause was held to have the effect of lessening the carrier’s liability by making the carrier subject to a lower package unit limitation. 522 The Ion [1971] 1 Lloyd’s Rep. 541.

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es,523 strike,524 liberty to carry on deck,525 forum selection526 and Himalaya527 clauses, through to “said to contain” and similar clauses.528 272 Whilst the Hague and Hague-Visby Rules do not allow carriers to remove or lessen their liabilities and obligations contrary to Article III(8), they give carriers the freedom to increase their responsibilities and obligations in the Rules.529 Where the shipment is not an ordinary shipment made in the course of trade, freedom of contract prevails, and therefore a contract of carriage which even strips the carrier of any liability whatsoever will be immune to Article III(8). Needless to say, freedom of contract also prevails as regards carriers’ obligations and liabilities outside the mandatory tackle-to-tackle period.530 The same is also true in cases where the Hague-Visby Rules do not have a mandatory force. b) The Hamburg Rules 273

Article 23 of the Hamburg Rules similarly provides that any term in a contract of carriage is null and void to the extent that it derogates, directly or indirectly, from the Rules. Just as with the Hague and Hague-Visby Rules, the invalid provisions can be severed from the contract of carriage, and carriers are given the freedom to increase their responsibilities and obligations under the Rules. As an additional layer of protection for cargo interests, Article 23 also dictates that any document evidencing the carriage contract must contain a statement that the contract is subject to the Hamburg Rules, including the non-derogation clause. The Article further states that the carrier is responsible for any loss arising as a result of (a) a stipulation which is invalid by virtue of the nonderogation provision or (b) its omission to insert the statement referred to in the Article. 523 See The Jordan II [2005] 1 Lloyd’s Rep. 57 (HL). 524 See Renton v. Palmyra [1956] 1 QB 462 (HL). 525 See Svenska Traktor Aktiebolaget v. Maritime Agencies (Southampton) Ltd. [1953] 2 QB 295 (QBD), where part of the liberty to deviate clause stating that the carrier was not liable for the goods carried on deck was invalidated by Article III(8). Also a provision that re-defines “package” for the purposes of the package unit limitation will be struck down by Article III(8) if the provision has the effect of lessening the carrier’s liability more than is allowed by the Rules. See The River Gurara [1988] QB 610. 526 The Merak [1965] P. 223 (CA) and The Ion [1971] 1 Lloyd’s Rep. 541, where arbitration clauses were held to be valid. Jurisdiction clauses are not invalid per se, although English courts can invalidate such clauses if their application has the effect of lessening or removing the carrier’s liability contrary to Article III(8), see The Morviken fn. 520. See also The Benarty [1984] 2 Lloyd’s Rep. 244 (CA). 527 The Starsin [2004] 1 AC 715 (HL), which involves a Himalaya clause stating inter alia that the party relying on the clause shall be exempt from “any liability whatsoever to the shipper”. Where a shipowner who was not the contractual carrier relied on the Himalaya clause to benefit from the defences and limitations provided in the bill of lading, the court held that they could do so, except for the highlighted part of the Himalaya clause, which was struck down by Article III(8). 528 Such clauses are not invalidated by Article III(8), See The Mata K [1998] 2 Lloyd’s Rep. 614 (QBD), p. 620; The Atlas [1996] 1 Lloyd’s Rep. 642 (QBD). 529 See Article V. 530 See fn. 421.

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c) The Rotterdam Rules

The non-derogation provision in Article 79 of the Rotterdam Rules brings 274 novelty in that it affords protection in both ways. The provision invalidates any term to the extent that (a) it directly or indirectly excludes, limits and increases the obligations and liabilities of the shipper, consignee, controlling party, holder or documentary shipper or (b) it directly or indirectly excludes or limits the obligations and liabilities of the carrier and maritime performing party. There is another reason why the non-derogation provision in the Rotterdam Rules would appear to bite against a wider range of provisions in contracts of carriage. Article III(8) of the Hague and Hague-Visby Rules invalidates only those provisions which have the effect of lessening or removing the carrier’s liability for loss or damage to, or in connection with goods arising from negligence, fault, or failure in the duties and obligations provided. On the other hand, the non-derogation clause in the Rotterdam Rules invalidates any provision that has either direct or indirect effect of lessening and removing any obligations and liabilities of the carrier under the Rules. At this juncture, it must be noted that the non-derogation provision has this 275 wide application in cases where the conditions for the volume contract exception does not find room for application. The derogations which satisfy the formal requirements set out in Article 80 and which are contained in a volume contract as described in the same Article are not subject to Article 79. What the parties cannot derogate from even in the context of volume contracts is the so-called “super-mandatory provisions” listed in Article 80(4). With the super-mandatory provisions talking of the obligations of both carriers and shippers, the duality approach also appears here. 13. Limitation of Liability

Given the necessity of quantifying the risk of sea carriage especially for the 276 purposes of determining freight and insurance rates, all Conventions contain a provision on limitation of carriers’ liability. The amount of limitation provided obviously reflects what the draftsmen of these Conventions considered to be the right balance between the need for encouraging investment in shipping and for urging carriers to take care of cargo. a) The Hague Rules

In the Hague Rules, the limit of liability for “any loss or damage in connec- 277 tion with the goods”531 is the gold value of 100 pounds sterling per package or unit or the equivalent of that sum in another currency. The limitation applies unless a higher value is declared by the shipper and inserted in the bill of lading.532 531 For discussions regarding liability for delay in the context of the Hague and Hague-Visby Rules, see fn 280. 532 See Articles IV(5) and IX of the Hague Rules.

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There were two main problems with this formula. First, as a result of subsequent inflation, the agreed figure became too low. Secondly, the reference to “package or unit” became somewhat unhelpful especially after the container revolution. b) The Hague-Visby Rules 278

The Hague-Visby Rules, as they currently stand, remedy these flaws in two ways. First, the limitation amount533 is based on Special Drawing Rights (“SDR”),534 and is increased to 666.67 SDRs per package or unit.535 In case of heavy and/or unpacked items, especially for those weighing more than 333 kilogramme, an alternative limitation is introduced: 2 units of account per kilogramme of gross weight of the goods lost or damaged.536 Hence, the cargo interest is allowed to claim the higher of the two limitations. Secondly, where a container or similar article is used, the number of packages or units enumerated in the bill of lading “as packed”537 in such article of transport is deemed the number of packages or units for limitation purposes.538 Any definition of “unit” or “package” which has the effect of lessening carriers’ liability more than the limitation provisions is invalid by virtue of Article III(8).539 Where the enumerated packages or units are qualified by words “said to contain” or by a similar wording, this does not remove the enumeration for limitation purposes.540 Nonetheless, such wording removes the evidential effect of the representation as to quantity.541 Just as with the Hague Rules, the limitations apply, unless the nature and

533 As with the Hague Rules, the limitation amount is envisaged for the carrier’s liability for “any loss or damage in connection with the goods”. As regards the carrier’s liability for delay under the Hague-Visby Rules see fn 280. 534 See Article IV(5)(d) of the Hague-Visby Rules. 535 The Visby amendments initially replaced the pound Sterling by Franc Poincare, and the limitation amount was first set at 10.000 Franc Poincare per package or unit. Later on, the Franc Poincare was replaced by Special Drawing Rights. 536 Hence the cargo interest is given the option to rely on either the weight limitation or “package or unit” limitation, whichever is higher. See Article IV(5)(a). See also the English case of The Limnos [2008] 2 Lloyd’s Rep. 166 (QBD), which involved a partly damaged cargo. There, Burton J. took the view that the limitation only applied to the damaged part of the cargo, although the economic value of the undamaged part of the cargo was also depreciated. In so holding, he said at 175: “It is in my judgment not possible to describe the undamaged goods in this case as ‘economically damaged’. Their value may have been affected. There may be depression in respect of their price. The goods may be depreciated. But in my judgment they cannot sensibly be described as damaged.”. 537 See El Greco (Australia) v. Mediterranean Shipping Co. [2004] 2 Lloyd’s Rep. 537, where the Australian court took the view that, for the operation of Article IV(5)(c), the bill of lading needs to clearly set out the number of packages or units separately packed for transportation. 538 See Article IV(5)(c). 539 See The River Gurara [1988] QB 610 (CA). Note that the carrier is allowed to increase the limitation by contract, see Article IV(5)(g). 540 See El Greco (Australia) v. Mediterranean Shipping Co. [2004] 2 Lloyd’s Rep. 537. For a similar view, see Cooke et al. (fn. 183), para. 85-409. 541 For discussions on this issue see section D 2., above.

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value of the goods have been declared by the shipper before shipment and inserted in the bill of lading.542 c) The Hamburg Rules

The limitation provision in Article 6 of the Hamburg Rules also adopts a dual 279 limitation system in relation to the carrier’s liability for loss of or damage to goods: subsection (1)(a) states that such liability is limited to “an amount equivalent to 835 units of account per package or other shipping unit or 2.5 units543 of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher”. Hence, in the case of any package weighing more than 334 kg or of bulk cargo, the limitation based on the gross weight of the goods would be of use to the cargo interest. By virtue of subsection (1)(b) of Article 6, the carrier’s liability for delay is limited to an amount equivalent to two and a half times the freight payable for the goods delayed, but not in any case more than the total freight payable under the contract of carriage. On the shipper’s declaration of value of the goods, the Hamburg Rules do not require that the value be recorded in the bill of lading: a contractual agreement between the carrier and shipper is sufficient to replace the limitations, provided that the declared value is higher than the limitation amount set by the rules.544 Saving the cases where a higher limitation amount is fixed by the carrier and 280 shipper, the Hamburg Rules also limit the maximum compensation for the aggregate liability of the carrier under subsections (1)(a) and (1)(b): subsection (1) (c) provides that such liability shall in no case exceed the limitation which would be established under subsection (1)(a) for total loss of the goods. In case of containerised cargo, the Hamburg Rules also enable the treatment of each of the items listed in the transport document “as packed”545 in such article of transport as unit or package for establishing the limitation.546 d) The Rotterdam Rules

Save in cases of losses caused by delay, the carrier’s liability for any breach 281 of its obligation under the rules is limited to (a) 875 units of account per package or other shipping unit, or (b) 3 units of account per kilogram of the gross weight of the goods “that are subject of the claim or dispute”, whichever amount is the higher.547 Thus, the Rotterdam Rules also follow a dual system, as with the previous Conventions, although the amounts of limitation are higher. The limita-

542 Article IV(5)(a). By virtue of Article IV(5)(f), the declaration shall only constitute prima facie evidence as to the nature and value of the goods. 543 For the definition of unit, see Article 26 of the Hamburg Rules. 544 See Article 6(4). 545 This provision has its counterpart in Article IV(5)(c) of the Hague-Visby Rules. On the interpretation of the words “as packed” in that context, see fn. 539. 546 See Article 6(2)(a). 547 See Article 59 of the rules.

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tions set by the rules apply in cases (1) where “value”548 of the goods has been declared by the shipper and has been recorded in the contract particulars,549 or (2) where a higher amount has been agreed between the carrier and shipper. 282 The limitation provisions in the rules have two distinctive features: first, the specified limits apply where the carrier breaches any of its obligations under the Convention. They thus apply in a wider scope than the limitation provisions in the Hague, Hague-Visby and Hamburg Rules. Secondly, unlike the Hamburg Rules, which expressly provide that the weight limit applies to the goods lost or damaged, the weight limit in the Rotterdam Rules refer to the gross weight of the goods “that are subject of the claim or dispute”.550 283 As regards containerised cargo, each package or shipping unit enumerated in the contract particulars “as packed”551 is similarly defined as one shipping unit by virtue of Article 59(2). On delayed delivery of the goods, the liability for economic loss due to delay is limited to two and a half times the freight payable. As with the Hamburg Rules, the maximum compensation recoverable under Articles 59 and 60 is stated to be limited to the amount that would be established pursuant to Article 59(1) in respect of the total loss of the goods. 14. Breaking the Limits 284

The specified limitations provided in all the Conventions are subject to an overarching principle: the carrier loses the benefit of limitation of its liabilities if it is proved that the loss or damage resulted from a personal552 act or omission of the carrier done with an intention to cause loss or damage or recklessly and with the knowledge that (such)553 loss or damage would probably result. In the 548 By way of comparison, see the limits specified in the Hague-Visby Rules, which can be bypassed where the shipper declares the “nature and value of the goods”, see fn 542. 549 For the definition of “contract particulars” see Article 1(23) of the Rules. 550 However, the calculation of the limitation amount on the basis of the amount of claim or dispute may in some cases produce unfair results. For the legal position under English law, see The English court’s decision in the Limnos, fn. 536. 551 This provision has its counterpart in Article IV(5)(c) of the Hague-Visby Rules. On the interpretation of the words “as packed” in that context, see fn. 539. 552 In the case of a legal entity, this should be taken to mean the acts or omissions of the persons who are the “directing mind and will” of the entity, see Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. [1915] AC 705 (HL), 713–714. For English law, see also The European Enterprise [1989] 2 Lloyd’s Rep. 185 (QBD); The Lady Gwendolen [1965] P 294 (CA); and The Star Sea [2001] 1 Lloyd’s Rep. 1 (HL). In exceptional circumstances, the act or omission of a person who cannot be described as such may break the limitation. This person can be “the Designated Person” under the ISM Code or the “Company Security Officer” under the ISPS Code, depending on the circumstances of the case, see R. Shaw and M. Tsimplis, The Liabilities of the Vessel, in Y. Baatz, Maritime Law, 2nd edn, 2011, p. 323. 553 In the Hague-Visby Rules, Article IV(5)(e), a similar formula but without the word “such” appears. This leaves the question as to whether the limitation can be broken due to recklessness of the carrier with knowledge that some damage or loss would probably occur. For further discussions on this issue, see M. Tsimplis, Limits of Liability, in Y. Baatz et al., The Rotterdam Rules, 2009, paras. 60-08 and 61-07. Reference to “such” loss or damage is made both in the Rotterdam and the Hamburg Rules with the effect that an intentional or reckless act or omission in respect of “such” loss or damage can only break the limitation where the

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context of the Hague-Visby Rules, with the “servants and agents”554 of the carrier being brought within the protective sphere of the rules, the aggregate of the amounts recoverable from the carrier, and its servants and agents is stated not to exceed the limit provided in the Rules.555 Furthermore, as with carriers, the servants and agents of carriers also lose their right to rely on these limitations where the damage results from their personal acts or omissions which were either intentional or reckless and with knowledge that some “damage”556 would probably result. In similar terms, the Hamburg Rules entitle the servants and agents of the carrier to rely on the same limitations and defences that the carrier has under the Rules,557 provided that the damage did not result from their intentional or reckless act or omission.558 So far as the Rotterdam Rules are concerned, Article 61 provides a similar 285 test in determining whether the right to limitation has been lost. However, the Article would appear to have a distinctive feature: with the maritime performing party added to the scope of the Rotterdam Rules, the loss of limitation of liability is spelled out both in respect of carriers and of maritime performing parties. It is noteworthy that a person seeking to rely on the limitation – whether it is a carrier or a maritime performing party – loses the right to limit only in cases where the loss or damage resulted from its personal acts or omissions. Hence, a carrier does not lose its right to limit where a loss or damage is attributable to the reckless or intentional act or omission of a maritime performing party. When compared with the provisions on breaking the limitation provided in 286 the Hague-Visby and Hamburg Rules, Article 61 has a wider application: this is the result of the reference to “maritime performing parties” therein, which comprises not just the carrier’s servants and agents but also other different types of third party. Application of the Rules on breaking the limitation of liability is reinforced by an express provision in the same Article to the effect that contractual limitations are also made subject to these rules. 15. Global Limitations

The limitations discussed above need to be considered together with the effect 287 of the international conventions on limitations of liability. The cargo owner’s claim is subject to two limitations. Following the application of the ‘package or unit’ limitation, the amount of liability may be scaled down even further pursuant to the applicable global limitation based on an international convention or national law. To create this effect, an express provision in similar terms is

554 555 556 557 558

type of loss or damage actually occurred is foreseeable. See Article 8 of the Hamburg Rules and Article 61 of the Rotterdam Rules. See Article IVbis, subsection (2). See Article IVbis, subsection (3). See Article IVbis, subsection (3). See Article 7(2) of the Hamburg Rules. See Article 8(2) of the Hamburg Rules.

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spelled out in all the sea carriage Conventions.559 The majority of the EU and EFTA states are party to the Convention on Limitation of Liability for Maritime Claims 1976 with the Protocol to the Convention 1996, which became applicable in 2004. Leaving these states to one side, a few states are party either to the 1976 or the 1957 Limitation Conventions, and there are a number of states which are not party to any international convention on limitation of liability.560 16. Notice of Claims and Time for Suit 288

In any cargo claim, shipping lawyers are naturally concerned with two important procedural matters: the time to file a protest and to initiate legal proceedings. These shall be dealt with in turn. Time to File a Protest

The first two paragraphs of Article III(6) of the Hague and Hague-Visby Rules set out the prima facie effect of not notifying the carrier in writing of any loss of or damage to the goods within the prescribed time limits: goods delivered by the carrier are deemed to be in accordance with the description of the goods in the bill of lading. Consequently, the cargo interest is left with the burden of proof that the goods have not been lost or damaged after their delivery by the carrier.561 To prevent this happening, the cargo interest is required to serve a written notice either before or at the time of delivery of the goods, if the loss or damage is apparent; or within three days of delivery of the goods, if the loss or damage is not apparent. If the condition of the goods at the time of their delivery has been the subject of a joint survey or inspection, a written notice is not required.562 290 Article 19 of the Hamburg Rules spells out in similar terms the prima facie effect of the cargo interest’s failure to serve notice to the carrier of any loss of or damage to the goods handed over to the cargo interest. In case of apparent loss of or damage to goods, such prima facie effect follows from the cargo interest’s failure to notify the carrier of such loss or damage in writing not later than the working day after the day when the goods have actually been handed over to the cargo interest.563 In case of non-apparent loss or damage, the time for serving notice is extended to 15 consecutive days after the goods have been handed 289

559 See Article 83 of the Rotterdam Rules, Article VIII of the Hague and Hague-Visby Rules and Article 25 of the Hamburg Rules. 560 For a snapshot of the global limitation regimes within the EU and EFTA, see Gard AS, “Global Limitation (LLMC), May 2013, p. 31, which can be accessed online http:// www.gard.no/ikbViewer/Content/72992/Global%20limitation%20and%20ratifications%20May%202013.pdf. 561 See Eder (fn. 348) para. 20-058. 562 See the second paragraph of Article III(6). 563 Note the definition of “delivery” in Article 4(b) of the rules. It appears that the time to file a protest can start to run even after the goods are only deemed to be delivered pursuant to Article 4(b)(ii) or Article 4(b)(iii) of the rules.

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over to the cargo interest.564 In the case of delay in delivery of the goods, the consequence arising from the cargo interest’s failure to notify the carrier within 60 consecutive days after the day of delivery would appear drastic: a cargo interest who has failed to notify the carrier within the prescribed time limit loses the right to claim against the carrier for its losses arising from the delay. The same Article in the Hamburg Rules also provides a time period for carriers and actual carriers who sustained loss or damage due to the fault or neglect of a shipper, its servants or agents. The failure on the part of such carriers and actual carriers to notify the shipper within 90 consecutive days after the occurrence of such loss or damage or after delivery of the goods, whichever is later, constitutes prima facie evidence that no such loss or damage has been sustained.565 Under Article 23(1) of the Rotterdam Rules, the cargo interest is required to 291 notify the carrier in writing before or at the time of delivery of apparent loss or damage. The Article further provides that the time to file a protest is seven working days in the case of non-apparent loss or damage.566 The failure to serve such notice brings with it the prima facie evidence that the goods delivered are in accordance with the description provided in the bill of lading. The fact that this failure only has a prima facie effect is emphasised in the Article: it is expressly stated that non-compliance with the notice requirement does not affect the right to claim compensation for loss of or damage to goods under the Rules. Nonetheless, the situation is different in the case of delayed delivery: there is no compensation for delay, if the cargo interest fails to serve a written notice of protest to the carrier within 21 consecutive days of delivery of the goods.567 The main point emerging from the observations above is the importance of 292 determining the point at which the time to file a protest starts to run. In the Hague and Hague-Visby Rules, the time to file a protest starts to run from delivery, although what constitutes delivery is left to the applicable national law.568 The Rotterdam Rules not only take delivery as the basis for the commencement of the time limit, also define delivery.569 The Hamburg Rules choose a different path, providing that the time limit starts to run when the goods are handed over to the cargo recipient. No doubt, the differences between these rules are of great practical importance to carriers and cargo recipients, with carriers often handing the goods over to an authority or a third party pursuant to a national regulation applicable at the discharge port.

564 See Article 19(2) of the Hamburg Rules. It must be noted that, as with the other Conventions, this time period does not apply where the loss or damage is ascertained in a joint inspection on delivery, see Article 19(3) of the rules. 565 See Article 19(7) of the rules. 566 It must be noted that, as with the previous Conventions, the notice requirement is waived where a loss or damage is ascertained in a joint inspection. See Article 23(3). 567 Article 23(4) of the Rotterdam Rules. 568 See fn. 427. 569 See Article 12 of the rules.

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17. Time Bar 293

As has been discussed above in detail, all Conventions impose certain obligations on carriers, whilst affording certain protections. The key protection conferred upon carriers is the time bar, whereby cargo interests lose the right to bring legal proceedings against carriers if they have failed to do so within the specified time period. The wording of the time bar is of great importance especially for the purposes of determining what types of carrier liability are subject to the time bar. a) The Hague and Hague-Visby Rules

In the Hague Rules, the carrier and the ship570 shall in any event be discharged from “all liability in respect of loss or damage” unless “suit is brought within one year571 after delivery of the goods or the date when the goods should have been delivered”. 295 To ensure a wide application,572 the time-bar provision in the Hague-Visby Rules makes reference to “all liability whatsoever in respect of the goods”. This wording is noticeably wider than that of the time-bar provision in the Hague Rules, which talks of “all liability in respect of loss or damage”. In order to prevent cargo interests from circumventing the time bar by initiating an action against carriers in tort, the Hague-Visby Rules also introduce a special provision, Article IVbis 1, which provides: “the defences and limits of liability provided for in these rules shall apply in any action against the carrier in respect of loss of or damage to goods covered by a contract of carriage whether the action be founded in contract or tort.” 296 In the English case of The Captain Gregos, the court took the view that the wording of the time-bar provision in the Hague-Visby Rules was apt to cover even the cases of so-called “wrong delivery or misdelivery”573 which occurred within the tackle-to-tackle period.574 Hence, they took the view that a carrier 294

570 For discussions, see fn 519. 571 Note that Article III(6) of the Hague-Visby Rules expressly allow parties to extend the time bar by contract. 572 The travaux préparatoires of the Visby Protocol show that application of the time bar was extended especially in order to cover the cases of “wrong delivery”, The Captain Gregos [1990] 1 Lloyd’s Rep. 310, (CA) 313, per Lord Bingham. 573 The Captain Gregos [1990] 1 Lloyd’s Rep. 310 (CA), 313, per Lord Bingham. In that case, it was alleged there was wrong delivery of oil through deliberate misappropriation. The allegation was that the shipowner used part of the cargo to bunker the vessel, transhipped part of the cargo and deliberately omitted to discharge the full cargo at the discharge port. 574 So far as English law is concerned, where delivery takes place after the tackle-to-tackle period, as it generally does, the carrier who delivers the cargo to a person not entitled to them would be deprived of all the protections and exclusions in its contract of carriage, The Stettin (1889) 14 PD 142. However wide, the exclusion clauses are not generally treated as apt to displace this rule, Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. [1959] AC 576 (PC). Nonetheless, well-crafted exclusion clauses referring specifically to the cases of misdelivery may achieve the result desired by carriers. See the decision of Court of Appeal of New South Wales in The Antwerpen [1994] 1 Lloyd’s Rep. 213.

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who has deliberately omitted to discharge the full cargo at the discharge port would be entitled to rely on the time bar,575 although such a carrier would lose the benefit of the package unit limitation.576 Despite this wide application of the time-bar provision in Article III(6) of the rules, the court in The Captain Gregos narrowly interpreted Article IVbis: they held that Article III(6) would not be applicable to an action in tort brought by a cargo interest against a shipowner who is not party to the contract of carriage.577 This approach would appear in accordance with the main purpose of the rules, which is to regulate the relations between the parties to the contract of carriage contained in or evidenced by a bill of lading or any similar document of title.578 Given that the time-bar provision only talks of “suit” but not of arbitration, 297 the question arises as to whether arbitration proceedings can also be brought within the time-bar provision. Under English law, despite the word “suit”, the time bar is accepted to apply to both arbitration and litigation proceedings.579 Consequently, the cargo interest that is required by the contract of carriage to institute arbitration proceedings will need to do so within one year, unless the contract provides a longer time period. Hence, in order to prevent the time bar running, the cargo interest must bring its claim before a “competent” court or tribunal.580 In practice, determining the competent forum could be more difficult than one might think, especially in cases where a cargo interest’s contract of carriage contained in a bill of lading that incorporates a jurisdiction or an arbitration clause of a charterparty. The main difficulty is that copies of the referred charterparties seldom travel with bills of lading, and the bill of lading holders hardly ever have the chance and the right to see the charterparty terms, including the forum selection clause.581 On the question of when the time-bar clock starts ticking, there are two alter- 298 native thresholds adopted in the Hague and Hague-Visby Rules: actual delivery 575 The same consequence would also flow from the application of the Rotterdam Rules. See the time-bar provision in Article 62, which is not made subject to the provision on the loss of the benefit of limitation of liability in Article 61. 576 See The Captain Gregos [1990] 1 Lloyd’s Rep. 310 (CA), 316, per Lord Bingham. See also Article IV(5)(e) of the Hague-Visby Rules. In a similar vein, if a servant or agent of the carrier wilfully damages or misappropriates the goods, it cannot also rely on the package unit limitation, see Article IVbis, rule 4. This would also be the case under the Hamburg Rules (see Article 8) and Rotterdam Rules (Article 61). It is worthy of note that the package unit limitation in the Rotterdam Rules is intended to cover also the cases of misdelivery and misinformation, see UN doc A/CN.9/WG.III/WP.101. See also M.A. Huybrechts, “Package limitation in modern maritime transport treaties: a critical analysis” JIML (2011) 17, p. 90 et seq. 577 See The Captain Gregos [1990] 1 Lloyd’s Rep. 310 (CA), 317-318, per Lord Bingham. 578 Such a justification would not, however, be compelling in a cargo claim governed by the Rotterdam Rules. For a criticism of the case, see F. Berlingieri, “The Hague-Visby Rules and actions in tort”, Law Quarterly Review (1991) p. 18 et seq. 579 See The Merak [1964] 2 Lloyd’s Rep. 527 (CA). 580 The Markos N [2000] 2 Lloyd’s Rep. 243 (QBD). 581 For further discussions on this topic, see Ozdel (fn. 434), p. 181 et seq. See also M. Ozdel, Bills of Lading Incorporating Charterparties, 2015.

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and the time when the goods should have been delivered. In the English case of The Sonia,582 the vessel discharged the cargo in Greece, after the cargo had been rejected at Lagos, which was the contractual port of discharge initially agreed upon. The court held that the time bar started to run not from the time when the cargo should have been delivered, which would be the time when the vessel arrived at Lagos, but from the eventual discharge of the goods in Greece. Under the Hague and Hague-Visby Rules, failing to initiate litigation or arbitration proceedings in accordance with Article III(6) of the rules extinguishes the liability of the carrier.583 Nonetheless, under English law, the time bar does not generally prevent a cargo interest from relying on the carrier’s breach of its obligations as a defence.584 b) The Hamburg Rules 299

Whereas the time-bar provision in the Hague and Hague-Visby Rules operates only in favour of the carrier, the one in the Hamburg Rules operates both ways. Any action either in tort or contract585 is time barred if no legal proceedings have been brought within two years from the time when the goods have been delivered or should have been delivered.586 It is striking that the words “time-barred” is preferred in the Hamburg Rules instead of the reference to “discharge of liability” made in the Hague and Hague-Visby Rules. Given this change in the wording, the time bar in the Hamburg Rules should merely bar the relevant claim but not extinguish it. The time-bar provision in the Hamburg Rules also expressly mentions both litigation and arbitration proceedings, possibly in order to avoid the uncertainties arising from the word “suit” used in the Hague and Hague-Visby Rules. Furthermore, the two-year time bar can be extended unilaterally by the party against whom the legal proceedings have been brought. This is in contrast to the right to extend the time bar by mutual agreement of the parties under the Hague-Visby Rules, although this distinction is far from creating any significant difference in practice. c) The Rotterdam Rules

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On time for suit, Article 62 of the Rotterdam Rules has patterns similar to Article 20 of the Hamburg Rules: it provides a two-year time bar which can operate in favour of both parties, as well as expressly making both arbitral and judicial proceedings subject to the time bar. In line with the inference drawn from the use of the phrase “time-barred” under the Hamburg Rules, Article 62 ex582 See The Sonia [2003] 2 Lloyd’s Rep. 201 (CA). 583 The Aries [1977] 1 Lloyd’s Rep. 334 (HL), 336, per Lord Wilberforce, where his Lordship stated: “... it is a time bar of a special kind, viz. one which extinguishes the claim... not one which... bars the remedy while leaving the claim itself in existence”. 584 Aikens et al. (fn. 16) para. 10-167 quoting The Fiona [1993] 1 Lloyd’s Rep. 257 (CA). 585 S. Mankabady, “Comments on the Hamburg Rules”, in S. Mankabady, ed., The Hamburg Rules on the Carriage of Goods by Sea, 1978, p. 96. 586 See Article 20 of the rules.

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pressly provides that a time-barred claim can in any case be relied upon as a defence or set-off. Compared with the scope of application of the time-bar provisions in the Hague, Hague-Visby and Hamburg Rules, the one in this Convention naturally has a much wider scope: given that the provision talks of “proceedings in respect of claims or disputes arising from a breach of an obligation under this Convention”, the time bar applies to any action initiated by the carrier or maritime performing party against the consignee, shipper or documentary shipper. It equally applies when a person from the latter category initiates legal proceedings against the carrier or a maritime performing party. The scope of application is presumably wider also because the time bar ap- 301 plies to any claims or disputes arising from a breach of an obligation. This wording, which is evidently wider than those used in the time-bar provisions of the previous Conventions, clarifies that claims of “wrong delivery” and misinformation are also subject to the time bar.587 As with the previous Conventions, the time-bar clock will start ticking under this Convention upon actual delivery or from the time when the goods should have been delivered.588 18. Action for Indemnity

First introduced in the Hague-Visby Rules, the provisions on actions for in- 302 demnity are similar in all the sea carriage Conventions. Their effect is to enable parties such as contractual carriers to bring a recourse action to actual carriers after the expiration of the one-year time-bar period.589 Such an extension of time to bring an action is justifiable, particularly since a person seeking indemnity may not be in a position to settle the claim and sue for indemnity within a year. The extended period in Article III(6)bis of the Hague-Visby Rules is based on the time allowed by the law of the court seized of the case, although this is subject to a minimum period: “the period allowed shall not in any case be less than three months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself”. In the Hamburg Rules the minimum period is extended to 90 days.590 This is also true of the Rotterdam Rules, where there is a further clarification: the minimum period starts to run from the day when the person instituting the action for indemnity has either settled the claim or has been served with process in the action against itself, whichever is earlier.591

587 See fn. 576. 588 Whilst the time bars in the previous Conventions do not regulate the position in case of part delivery, Article 62 of the Rotterdam Rules does: in such cases, time starts to run on the last day on which the goods should have been delivered. 589 See Eder et al. (fn. 348) para. 20-064. Another type of action which comes under this section is the actions brought by the subrogated insurers against the carrier. 590 See Article 20(5) of the Hamburg Rules. 591 See Article 64 of the Rotterdam Rules.

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F. Shipper’s Liability 303

As regards the shippers’ liability, the Rotterdam Rules bring novelty in three main respects. First, unlike the Hague, Hague-Visby and Hamburg Rules, the provisions in the Rotterdam Rules on the liability of shippers are not confined to those in respect of dangerous goods and accuracy of the information they provide on the particulars of the goods shipped. Secondly, as well as being subject to the time bar,592 liability of shippers as set out in the Rules cannot be increased or decreased by contract provisions593Thirdly, in addition to the shipper who has entered into the contract of carriage with the carrier, the documentary shipper, who has accepted to be named as shipper in the transport document or electronic transport record594 is also made subject to these liabilities.595 1. The Hague and Hague-Visby Rules

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Article IV(6) of the Hague and Hague-Visby Rules talks of the carrier’s right to land, destroy or render innocuous goods of a dangerous nature, without any liability, where such goods have been shipped without the informed consent of the carrier, its master or agent.596 In addition, the Rules expressly vest carriers with the right to indemnity for all losses and expenses directly or indirectly597 arising out of or resulting from such shipment.598 In cases where the goods that have been shipped with the informed consent of the carrier, its master599 or servant become a danger to ship or cargo,600 the carrier is also entitled to land, de-

592 See Article 62 of the Rotterdam Rules. 593 Hence the provisions on the shipper’s liability are made subject to the non-derogation provision even in cases where the volume contact exception applies. See Article 80(4) of the rules. 594 See Article 1(9) of the Rotterdam Rules. 595 See Article 33 of the Rotterdam Rules. Considering the wording of the Article, it is clear that the documentary shipper is subject to these liabilities, while being entitled to the same rights and defences as the shipper. 596 However, the carrier may be entitled to damages despite the master’s consent to shipment of dangerous cargo without authority, see Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240 (CA). 597 For an illustration of the damages arising indirectly from the shipment of dangerous cargo, see The Giannis NK [1998] 1 Lloyd’s Rep 337 (HL), 342, where the cargo had to be jettisoned as the health authorities of the Dominican Republic did not allow the vessel to discharge the cargo which was found to be infested with Khapra bettle. 598 Where the Hague-Visby Rules apply, Article IV(6) supplant the English common law rules as to dangerous cargo, see The Fiona [1993] 1 Lloyd’s Rep. 257 (CA), at 267-268 (affirmed by the Court of Appeal in [1994] 2 Lloyd’s Rep 506). Under Article IV(6), goods that only cause delay to the carrier is not treated as dangerous. However, where the carriage or discharge of a specific cargo constitutes ‘violation of or non-compliance with some municipal law’ that specific cargo may be considered as dangerous, see The Darha Radhe [2009] 2 Lloyd’s Rep 175 (QBD), at para 31, per Tomlinson J. 599 See fn 598. 600 In comparison, see Article 13(4) of the Hamburg Rules.

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stroy or render innocuous such goods without liability except to general average, if any.601 Under English law, the right of the carrier to indemnity towards the ship- 305 per persists even if the constructive possession of the goods is transferred to a third party, such as through the transfer of bills of lading.602 Against such a shipper who has failed to fulfil its duty to inform the carrier as to the dangerous nature of the cargo, the carrier loses the right to indemnity where the effective cause of the loss is its breach of the seaworthiness obligation.603 On the question of whether the consignee, to whom the constructive possession of the goods is transferred, can also be held liable for the shipment of dangerous cargo, it must be answered in the affirmative.604 The shipper’s duty as to dangerous cargo under the Hague-Visby Rules is 306 interpreted by English courts as a strict duty.605 When determining the liability of the shipper, what types of goods constitute dangerous goods is of great importance. The Hague and Hague-Visby Rules do not give a definition of dangerous goods, but there is a reference to “goods of an inflammable, explosive or dangerous nature to the shipment” in Article IV(6). Under English law, the phrase “dangerous goods” used in this context is not interpreted eiusdem generis with the preceding words.606 Nonetheless, these words are not interpreted to embrace goods that merely cause delay to the carrier.607 2. The Hamburg Rules

In Article 13 of the Hamburg Rules, it is expressly stated that the shipper’s 307 duty is to inform the carrier of the dangerous nature of goods of which the carrier ought not reasonably to be aware. By comparison, under the Hague and Hague-Visby Rules this strict duty is inferred. Under the Hamburg Rules, the consequences arising from the shipper’s failure to comply with this duty are very similar to those in the Hague and Hague-Visby Rules: the carrier has the right to (i) unload, destroy or render innocuous dangerous goods, without payment of any compensation, and (ii) to cover the loss resulting from the shipment

601 Depending on the terms of the contract of carriage, the carrier may have a right to indemnity arising from the shipment of dangerous goods to which the carrier, its master or servant has consented with knowledge. Aikens et al. (fn. 16) para. 10-320. 602 See s.3(3) of COGSA 1992. See also The Athanasia Comninos [1990] 1 Lloyd’s Rep 277 (QBD), 281, per Mustill J. 603 The Fiona [1993] 1 Lloyd’s Rep 257 (CA); The Kapitan Petko Voivoda [2003] 2 Lloyd’s Rep 1 (CA). 604 Section 3(1) of COGSA 1992. 605 For English law, see The Giannis NK (fn. 597), p. 342, where it was held that this duty is not subject to Article IV(3) and is thus strict. At English common law, this duty is also strict, see Brass v. Maitland (1856) 6 E&B 470 (CA). 606 The Giannis NK, above, p. 346, per Lord Steyn. 607 See fn 598.

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of such goods.608 Where a dangerous cargo shipped with the carrier’s knowledge and consent has become an actual danger to life or property, the carrier will have the same rights to dispose of the cargo except as to general average.609 3. The Rotterdam Rules

Unlike the other Conventions, the Rotterdam Rules give a description of “dangerous goods”: goods which by their nature or character are, or reasonably appear likely to become, a danger to persons, property or to the environment. The reference to environment is also a novelty. Similar to Article 13 of the Hamburg Rules, Article 32 of the Rotterdam Rules, which deals with dangerous goods, also expressly imposes on the shipper a strict610 duty to inform the carrier of such dangerous character of the goods. However, the latter provision additionally requires that such notice be given in a timely manner before delivery of the goods to the carrier or performing party. Just as with the previous Conventions, the carrier’s right to indemnity for the loss arising from the shipper’s failure to fulfil this duty is spelled out in the Article. 309 Just as with the Hague and Hague-Visby Rules, what is not spelled out in the Article is the issue of whether the carrier is entitled to indemnity for the shipment of dangerous goods, even in cases where the shipper has fulfilled its duty to inform the carrier. It seems that the carrier may be so entitled if this is allowed under the applicable national law. A similar approach can also be taken in the context of Article 13 of the Hamburg Rules, which states that the right to indemnity may not be invoked where the goods are taken with knowledge of their dangerous character. Hence, under the Hamburg Rules, the question of whether this right can actually be invoked would also appear to be left to national law.611 310 Similar to Article 13 of the Hamburg Rules, Article 32 of the Rotterdam Rules also expressly requires the shipper to label or mark dangerous goods. Newly added to this duty is the reference to the law and regulations pertaining to labelling and marking dangerous goods, as well as to the carrier’s right to indemnity for losses arising from the non-fulfilment of this duty. 311 In addition to the carrier’s right to indemnity for losses arising from the shipment of dangerous goods, the carrier’s right to dispose of the dangerous goods is also acknowledged under Article 15 of the Rotterdam Rules. It is worthy of note that, compared to the similar provisions in the Hague, Hague-Visby and Hamburg Rules, the scope of the carrier’s right to dispose is wider here in three main respects: first, unlike the previous Conventions, the Rotterdam Rules allow the carrier to unload, destroy or hold harmless goods that only appear like308

608 See Article 13 of the Hamburg Rules. Unlike the Hague and Hague-Visby Rules, the article refers to both carriers and actual carriers. Furthermore, the loss referred to in (ii) above would possibly include economic losses arising from the delay in delivery. 609 Article 13(4) of the Hamburg Rules. 610 Article 30(1) of the Rotterdam Rules. 611 For the position under English law, see fn 598.

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ly to become an actual danger. In the former sets of rules, the carrier can only do so where the goods actually become a danger. Secondly, in the Rotterdam Rules, the right to dispose of the goods can be exercised when the goods are dangerous to the environment. Thirdly, with the addition of the performing party, this right can be exercised by different persons, especially by carriers in multimodal carriage. On dangerous goods, another relevant provision is found in Article 16 of the Rules, which confers upon the carrier and the performing party the right to sacrifice goods when this is reasonably made for the common safety or preservation of life or property. It is worthy of note that preservation of the environment is not stated as a ground for sacrificing goods under Article 16. 4. Other Duties of the Shipper

The Rotterdam Rules require the shipper to provide information, instructions 312 and documents to the carrier for the proper handling and carriage of the goods612 and for the compilation of contract particulars.613 Where the shipper’s failure to provide information for compilation of the contract causes loss or damage, the shipper will be liable to the carrier for such loss or damage.614 This rule is also acknowledged in similar terms under the Hague,615 Hague-Visby616 and Hamburg Rules.617 At this juncture, a question arises as to whether the shipper remains liable under these provisions where the constructive possession of the goods have been transferred to third parties, such as the transferees of bills of lading: Article 17 of the Hamburg Rules expressly gives an affirmative answer to this question. The same conclusion can also be reached in the context of the Hague, Hague-Visby and Rotterdam Rules.618 Furthermore, the Rotterdam Rules set out a default rule in Article 27 regard- 313 ing the shipper’s obligation to deliver goods ready for carriage. The same Article also reinforces the effects of FIO and similar clauses, providing that the shipper shall be responsible for the proper and careful performance of the operations undertaken under such clauses. The Article further requires the shipper to make sure that the goods delivered will in any event withstand the intended carriage and not cause any harm to persons or property. In cases where the goods

612 Articles 28 and 29 of the Rotterdam Rules. 613 Article 31 of the Rotterdam Rules. 614 It is worthy of note that this duty is strict, as with the shipper’s duty regarding dangerous cargo, see Article 30(1) of the Rotterdam Rules. 615 See Article III(5) of the Hague Rules. See also Article IV(5)(h), which states that “neither the carrier nor the ship shall be responsible in any event for loss or damage to, or in connection with, goods if the nature or value thereof has been knowingly misstated by the shipper in the bill of lading”. 616 See Article III(5) of the Hague-Visby Rules. See also Article IV(5)(h), above. 617 See Article 17 of the Hamburg Rules. A similar effect to that created by IV(5)(h) of the Hague and Hague-Visby Rules is also created by Article 12 of the Hamburg Rules. The same is also true of Article 17 of the Rotterdam Rules. 618 See Article 30 of the Rotterdam Rules and Articles III(5) of the Hague and Hague-Visby Rules. For English law, see s. 3(3) of the COGSA 1992.

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are to be packed in a container by the shipper, the shipper must properly and carefully stow, lash and secure the contents of the container in such a way that they will not cause harm to persons or property. 314 A final remark on shipper’s liability needs to be made by reference to Article 30 of the Rotterdam Rules. Two main points emerge from this Article. Firstly, leaving aside the shipper’s duty as to dangerous cargo and providing information for compilation of contract particulars, the shipper’s liability for breach of its remaining obligations under the Rules is based on fault.619 Furthermore, subsection 3 of the same Article acknowledges that the shipper shall only be liable for the loss and damage which is attributable to its fault or to the fault of the persons specified in Article 34. In so doing, the provision makes it clear that proportionate liability is also accepted for the shipper. G. Conclusion 315

This chapter has discussed what impact each of the sea carriage conventions has on the rights and obligations of the carrier and cargo interest in international carriage of goods by sea. The conclusion that can safely be drawn from the observations above is that each of these conventions represents a compromise between the conflicting interests of the carrier and cargo interest. It is also true that, against the background of the ever-changing practices in shipping and international trade, the liability regimes within the EU and EFTA are fragmented. The journey to harmonisation, which started with the Hague Rules, still continues after the promulgation of the Rotterdam Rules. One may consider the Rotterdam Rules as the beginning of a new chapter in the international carriage of goods by sea. Although they may not even receive the required level of acceptance for entry into force, it would appear that the Rotterdam Rules have paved the way for change.

619 See Article 30(2) of the Rotterdam Rules.

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II. Maritime Confict of Laws and Jurisdiction A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Conflicts of Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The general Rule of Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Special Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The Recast Regulation and International Conventions on Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Jurisdiction Agreements and their Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Finding the Court Competent to decide the Question of Validity . . . 6. Jurisdiction Agreements designating the Courts of a Non-Member State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Anti-Suit Injunctions and Enforcement of Forum Selection Clauses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Rotterdam Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Jurisdiction Agreements entered into after a Dispute has arisen

8 11 18 30 38 49 57 59 68 80

C. Conflict of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 1. Determining the Law applicable to Contractual Obligations. . . . . . . . 84 a) Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 b) Restrictions on Party Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 c) In the Absence of a Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 d) Rules on Contracts of Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 e) Overarching Limitations to the Application of the Rules in Rome I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 2. Determining the Law applicable to Non-Contractual Obligations . . 104 D. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Literature: Briggs, Forum Non-Conveniens and ideal Europeans Lloyd’s Maritime and Commercial Law Quarterly 2005, pp 378; Collins, Dicey, Morris and Collins on the Conflict of Laws (15th edn, 2014); Herber, Jurisdiction and arbitration – should the new Convention contain rules on these subjects? Lloyd’s Maritime and Commercial Law Quarterly 2002, pp 405; Hess, Pfeiffer and Schlosser, The Brussels I Regulation (EC) No 44/2001, the Heidelberg Report on the Application of the Regulation Brussels I in 25 Member States” (Study JLS/C4/2005/03), (2008); Ozdel, Bills of Lading Incorporating Charterparties (2015); Ozdel, Security or more than security? Shipping and Trade Law 2009, pp 2; Peel, Forum Non-Conveniens and European ideals, Lloyd’s Maritime and Commercial Law Quarterly 2005, pp 363; Ulfbeck, Direct Actions Against the Insurer in a Maritime Setting: The European Perspective, Lloyd’s Maritime and Commercial Law Quarterly 2011, pp 293.

A. Overview

It is very common for shipping disputes to give rise to battles over jurisdic- 1 tion and the applicable law. Usually connected to more than one state, shipping transactions and incidents leave claimants with the option to choose from a number of available fora. For this reason, it is common for claimants in shipping disputes to “forum shop” by referring their disputes to the forum that they consider to be the most beneficial and convenient. When choosing “the most beneficial and convenient” forum, claimants’ attention is usually drawn to two main issues:

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the merits of their claim pursuant to the potentially applicable laws1 and the issue of whether they can obtain an award or a judgment that is enforceable in jurisdictions where their defendants’ assets are located. 2 This chapter will initially concentrate on how the competence of a court can be established by reference to Regulation (EU) No 1215/2015 of the European Parliament and of the Council of 12 December 2012 (the Recast Regulation), which has been the successor to Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Regulation). There is no complete succession in that the Regulation is still applicable to proceedings instituted before 10 January 2015 and to judgments given before that date.2 The Recast Regulation significantly enhances the enforcement of forum selection clauses. To create this effect, a number of important changes have been introduced. However, some of the rules in the Regulation have also found their way into the Recast Regulation.3 For this reason, the case law related to the rules in the Regulation that are not substantially different from those in the Recast Regulation still provides guidance on some issues of jurisdiction. 3 This chapter will discuss, in particular, the current legal landscape related to the enforcement of arbitration and exclusive jurisdiction clauses in shipping contracts. Despite the unquestionable popularity of forum selection clauses in shipping contracts, recent years have seen “torpedo actions” in which recalcitrant parties seise a court first in order to defeat the jurisdiction of the forum designated in the forum selection clause.4 The main reason for these actions would appear to be the divergence between the views taken by different legal systems on one crucial issue: the question of consent. The justification, or lack thereof, for the enforcement of forum selection clauses mainly5 rests on “consent”. Forum selection clauses give rise to some form of waiver as to each party’s right to in1 Undoubtedly, this will be decided by the competent forum before which the dispute has been brought. See M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), Chapter 1. 2 See Article 66 of the Recast Regulation. 3 See, for instance, Article 5(1) of the Regulation on special jurisdiction in matters relating to contract, which now has its counterpart in Article 7(1) of the Recast Regulation. See also Article 5(3) of the Regulation on special jurisdiction in matters relating to tort, delict or quasidelict. The counterpart of this article is found in Article 7(2) of the Recast Regulation on the same terms. 4 Ultimately, these torpedo actions did not prove effective particularly since they could not stop the arbitration proceedings. There is nothing in the Regulation or within the European Court of Justice decisions requiring arbitrators to stay the arbitration proceedings until the court first seised of the same dispute assumes jurisdiction to rule on the merits. See the Front Comor [2012] EWCA Civ 27. 5 Arbitrators are competent to resolve only those disputes that are ‘capable of settlement by arbitration’. See Article 2059 of the French Civil Code. There is no uniform view as to what matters are arbitrable. See also Articles II(1) and V(2)(a) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). Under US law, there is a federal policy in favour or arbitrability, see Mitsubishi Motors Corporation v. Soler Chrysler Plymouth Inc, 473 US 614, 105 S Ct 3346 (1985).

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voke the jurisdiction of otherwise competent courts. Against this backdrop, the question of consent generally presents itself as the key jurisdictional issue, where one of the parties invokes the validity of an arbitration or exclusive jurisdiction clause. In the context of maritime law, the question of consent has an additional di- 4 mension. An obligation to arbitrate or litigate in a particular forum can in some jurisdictions be imposed on those cargo interests who have not actually consented to be bound by such an obligation. Under English law, it is possible for a cargo interest to be deemed to have consented to arbitrate or litigate pursuant to a forum selection clause, despite the absence of actual consent. In particular, this happens in cases where the contract of carriage that the cargo interest has entered into with a carrier is contained in or evidenced by a bill of lading or a similar transport document issued in transferable form. There is great value in enforcement of arbitration and exclusive jurisdiction clauses through the operation of deemed consent in these contracts for two reasons. Firstly, one incident during the carriage of goods by sea may affect several cargo interests holding bills of lading as their contract of carriage. In such cases, all the claims of these cargo interests should be dealt with in one forum pursuant to one legal system provided in the bills of lading. This would save much expense on the resolution of the dispute, as well as preventing the risk of irreconcilable decisions.6 Secondly, the terms of carriage in the bill of lading cannot physically or practically be negotiated between the carrier and every subsequent holder to whom the bill of lading is transferred. However, the application of deemed consent to forum selection clauses in 5 bills of lading is not recognised in all European legal systems.7 This divergence between the views taken by different European legal systems, as well as the ability of arbitral tribunals to rule their own jurisdictions,8 have given rise to a wellknown problem within the European Union: parallel litigation and/or arbitration proceedings in multiple fora. In addition to parallel litigation and/or arbitration proceedings, recent 6 years have seen discussions as to whether a forum selection clause in a contract of carriage should be upheld against a party who had no means of negotiating

6 Also raised in the English case of The KH Enterprise [1994] AC 324 (PC). 7 See, for instance, the decision in The Wadi Sudr, which involved the decision of a Spanish court against the incorporation of a charterparty arbitration clause into a bill of lading. Unlike the decision of the Spanish court, through the eyes of English courts, the arbitration clause was indeed part of the bill of lading and was thus binding upon the bill of lading holder. See [2009] 1 Lloyd’s Rep 666 (QBD), reversed in [2010] 1 Lloyd’s Rep 193 (CA). 8 This is explained by reference to the so-called “Kompetenz-Kompetenz rule”. For the application of the rule under English law, see section 31 of the English Arbitration Act 1996. The arbitrators’ power to determine their jurisdiction is not absolute and has its own limits. See Dallah Real Estate and Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46.

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the terms of carriage, including the forum selection clause.9 Although the Rotterdam Rules shift the central concern of protecting the “weak” to striking the “fair” or “right” balance of risk between carriers and cargo interests, the rules show a tendency to “protect” cargo interests against forum selection clauses. The Rotterdam Rules contain two chapters, one on jurisdiction and the other on arbitration. In essence, these chapters aim to give cargo interests the option to choose from a number of available fora, including the one provided in the forum selection clause. From the perspective of the countries that have a long tradition of enforcing forum selection clauses, these chapters in the Rotterdam Rules are open to criticism principally for restricting the enforcement of forum selection clauses to certain cases. Due to the controversy they raise, the chapters will not be binding upon a contracting state, unless it specifically opts in to those chapters. Given the importance of the Rotterdam Rules to the legislative future of the international carriage of goods by sea, this chapter will also discuss the practical and legal implications of the chapters on jurisdiction and arbitration in the Rotterdam Rules. 7 After determining the competent court or tribunal, but before moving onto the merits of any shipping dispute, the other essential step is to find the law applicable to the dispute at hand. When compared with the issues of jurisdiction, the question of applicable law might seem more straightforward. Where a shipping dispute is brought before the court of a Member State, the court will, in most cases,10 be guided by two main EU Regulations when determining the applicable law: Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (“Rome I”)11 and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 (“Rome II”). The last part of this chapter will examine briefly how courts navigate through these rules as they determine the law applicable to a shipping dispute. B. Conflicts of Jurisdiction 8

For the purposes of deciding whether to assume jurisdiction, the court of a Member State, before which a shipping dispute has been brought, is now princi-

9 For a view against the enforcement of forum selection clauses on bill of lading holders, see R. Herber, “Jurisdiction and arbitration – should the new Convention contain rules on these subjects?” (2002) LMCLQ 405. 10 Rome I and Rome II exclude from their scope a number of specified contractual and non-contractual obligations. For exclusions, see Article 1 of Rome I and Article 1 of Rome II. 11 Rome I has been the successor to the Convention on the law applicable to contractual obligations (Rome Convention). There is no complete succession in that the Rome Convention is still applicable to contracts concluded before 17 December 2009. See Article 28 of Rome I.

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pally guided by the Recast Regulation.12 Just as with the ambit of the Regulation, that of the Recast Regulation is also wide. The Recast Regulation governs all “civil and commercial matters”, irrespective of the nature of the court13 or tribunal.14 What constitutes a civil or commercial matter is decided by reference “first, to the objectives and scheme of the Convention and secondly, to the general principles which stemmed from the national legal systems as a whole”.15 Arbitration is excluded by Article 1(2)(d) from the scope of the Recast 9 Regulation.16 The decisions of the European Court of Justice (CJEU) suggest that when determining whether any proceedings are within the scope of the arbitration exception, “the nature of the subject-matter of the proceedings” is decisive.17 In Van Uden Maritime B v. Kommanditgesellschaft in Firma Deco-Lin, the question was whether it was possible for a party to obtain interim relief by the court of a Member State, where there was an arbitration agreement binding upon the parties.18 The CJEU held that the court had jurisdiction to hear an application for interim relief even in cases where the parties had effectively excluded the jurisdiction of the courts by providing for disputes to be referred to arbitration. The CJEU took the view that “the person seeking a measure intended to preserve a factual or legal situation must be able to apply to his nearest court”.19 Different considerations arose in the Atlantic Emperor,20 where a purchaser 10 resorted to English courts for the appointment of an arbitrator following the re12 As will be recalled, the Recast Regulation has been the successor to the Regulation. The Regulation replaced the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters. The EFTA Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the parallel Lugano Convention) 1988 strengthened the economic cooperation between the European Communities and EFTA. Following the adoption of the Regulation and the enlargement of the European Union, the Lugano Convention became only applicable to Iceland, Norway and Switzerland. Recently, the revised Lugano Convention has entered into force in Denmark, Norway, Iceland, Switzerland and the EU. For more information, see L. Collins, Dicey, Morris and Collins on the Conflict of Laws (London: Sweet & Maxwell, 2014), paras. 11-010 and 11-020. 13 See Article 1(1) of the Recast Regulation. This same provision can also be found in Article 1(1) of the Regulation. 14 Here the word “tribunal” should not be taken to mean arbitral tribunal, particularly since the Recast Regulation does not apply to arbitration, see Article 1(2)(d). This provision has its counterpart in Article 1(2)(d) of the Regulation. 15 See Preservatrice Fonciere TIARD SA v. Staat der Nederlanden (Case C-266/01) [2004] I.L.Pr. 32. See also, Lufttransportunternehmen GmbH & Co KG v. Organisation Européenne pour la Sécurité de la Navigation Aérienne (Eurocontrol) (Case C-29/76) [1976] ECR 1541. 16 See fn. 13, above. See also B. Hess, T. Pfeiffer and P. Schlosser, “The Brussels I Regulation (EC) No 44/2001, the Heidelberg Report on the Application of the Regulation Brussels I in 25 Member States” (Study JLS/C4/2005/03), C.H. Beck, Hart, Nomos, 2008 (“the Heidelberg Report”). 17 See para. 107 of the Heidelberg Report. 18 (C-391/95)[1998] ECR I-7091. 19 Ibid., para 135. Decisions of arbitrators regarding the scope and validity of the arbitration agreement fall outside the scope of the Regulation, see West Tankers v. Allianz SpA [2012] EWHC 854 (Comm). The Recast Regulation gives this proposition more strength. 20 Marc Rich & Co AG v. Societá Italiana Impianti PA (Case C-190/89) [1991] ECR I-3855.

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fusal of its supplier to cooperate. Prior to the application of the purchaser to English courts, the supplier had commenced legal proceedings in Italy for a declaration that it was not liable to the purchaser. The CJEU held that ancillary measures such as the appointment of an arbitrator fell outside the scope of the Regulation by reason of the arbitration exception under Article 1(2)(d). The court also went on to hold that the arbitration exception also covered the preliminary dispute as to the existence of an arbitration agreement. 1. The general Rule of Jurisdiction

The general rule of jurisdiction is based on the defendant’s domicile.21 Hence, Article 4(1) of the Recast Regulation provides that: “Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State”.22 12 As long as the defendant is domiciled in one of the Member States, the domicile of the claimant is generally not relevant.23 The Recast Regulation does not, in principle,24 apply to defendants domiciled in a non-Member State. In the case of such defendants, the Recast Regulation requires the courts of Member States to apply their own national laws to determine their jurisdiction. 13 With Article 25, the Recast Regulation introduces an important exception to the application of the domicile rule. Where the courts of a Member State are chosen by the parties to have jurisdiction to settle any disputes, the chosen courts shall have jurisdiction, regardless of the domicile of the parties.25 However, the chosen courts shall not have jurisdiction where the agreement conferring jurisdiction is null and void as to its substantial validity under the law of that Member State.26 These rules on jurisdiction agreements are significantly different from those in the Regulation. For a jurisdiction agreement designating the courts of a Member State to come within the purview of the Regulation, at least one of the parties to the agreement has to be domiciled in a Member State. 11

21 For the meaning of “domicile” where the defendant is a corporation, see Article 63 of the Recast Regulation. The same provision can also be found in Article 60 of the Regulation. To determine whether a natural person is domiciled in the Member State whose courts are seized of a matter, the court must apply its own national law, see Article 62 of the Recast Regulation. The same provision can also be found in Article 59 of the Regulation. Under English law, the issue of domicile is decided by reference to the time at which the proceedings are issued, see Canada Trust Co v. Stolzenberg [1998] CLC 34. 22 The counterpart of this provision is found in Article 2(1) of the Regulation on the same terms. 23 See Group Josi Reinsurance Co SA v. Compagnie d’Assurances Universal General Insurance Co (Case C-412/98) [2000] ECR I-5925. 24 See Article 6(1) of the Recast Regulation. The article provides that, in the case of a defendant domiciled in a non-Member State, the jurisdiction of the court of a Member State shall, subject to Article 18(1), Article 21(2) and Articles 24 and 25, be determined by the law of that Member State. A similar provision is also found in Article 4(1) of the Regulation. 25 For comparison, see Article 23 of the Regulation, which requires at least one of the parties to the jurisdiction agreement to be domiciled in a Member State. This also constituted an exception to the basic rule based on the defendant’s domicile. 26 See Article 25(1) of the Recast Regulation.

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The Regulation does not contain a provision on the substantive validity of jurisdiction agreements. Where a party anticipates that it will be sued by its counterparty for liability, the courts allow the former party to initiate proceedings for a declaration of nonliability. In a cargo claim, shipowners can, therefore, bring an action before a competent court to obtain a decree for limitation of liability or a declaration of non-liability, instead of waiting to be sued by cargo interests. In the Front Comor, the shipowners brought arbitration proceedings against the charterers’ subrogated insurers for a declaration of non-liability. During the arbitration proceedings, the insurers also brought proceedings in respect of the same dispute. After obtaining an award in their favour, the shipowners applied to English courts to enforce the award. The Court of Appeal held that the shipowners were entitled to enforce the award and to have the declaratory award entered as a judgment under section 66 of the English Arbitration Act 1996 before judgment on the merits was given by the Italian court.27 In the case of an action in rem, it is necessary to look at the substance of the dispute, considering by whom the action is defended and who has the interest in defending the action. In The Maciej Rataj,28 the shipowner of The Tatry initiated proceedings against some of the cargo interests in the Netherlands for a declaration of liability. Some of the cargo interests then initiated in rem proceedings in England by arresting a sister ship, The Maciej Rataj. The CJEU held that the defendant of the in rem proceedings in England was the shipowner and this triggered the application of the lis pendens rule in Article 27 of the Regulation (now in Article 29 of the Recast Regulation). Where, by virtue of Article 4 of the Recast Regulation, jurisdiction is conferred on the court of a Member State, that court cannot, in principle, decline jurisdiction on the grounds that the court of a non-Member State would be a more appropriate forum for the trial of the action. This rule has its roots in the decision of the CJEU in Owusu v. Jackson,29 which was decided when the Regulation was in force. Following the decision, it became difficult, particularly for English courts, to determine in what circumstances English courts could stay proceedings on the basis of forum non-conveniens when they had jurisdiction over defendants by virtue of the domicile rule. In Winnetka Trading Corp v. Julius Baer International Ltd,30 the English court had jurisdiction over the defendant pursuant to the domicile rule. However, the court stayed proceedings in favour of a jurisdiction clause designating the courts of a non-Member State. Distinguishing the decision in Owusu v. Jackson, the court took the view that the decision in Owusu “was a forum non-conve27 West Tankers Inc v. Allianz SpA (the Front Comor) [2012] EWCA Civ 938. 28 (Case-C 406/92) [1994] ECR I-5439. On the application of the lis pendens rule, see also Gubisch Machinenfabrik KG v. Giulio Palumbo (Case C-144/86) [1987] ECR 4861. 29 (Case C-281/02) [2005] ECR I-1383. 30 [2008] EWHC 3146.

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niens case” and that it was not a case related to the enforcement of jurisdiction clauses.31 Similarly, in Ferrexpo AG v. Gilson Investments Ltd, Smith J took the view, as obiter, that the domicile rule did not prevent English courts from enforcing exclusive jurisdiction clauses designating the courts of a nonMember State.32 As will be discussed below, the Recast Regulation now provides guidance as to whether the courts of Member States should, in such cases, enforce jurisdiction clauses designating the courts of a non-Member State.33 2. Special Jurisdiction

Article 5 of the Recast Regulation34 provides that: “Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter.” 19 The rules of special jurisdiction provided in these sections constitute derogations from the principle that jurisdiction is vested in the courts of the defendant’s domicile.35 For present purposes, the rules of special jurisdiction contained in Section 2 are examined first. Discussion of the rules of special jurisdiction in Section 7 (on exclusive jurisdiction agreements) will follow. 20 In matters relating to a contract, Article 7(1) of the Recast Regulation provides that a defendant can be sued in the place of performance of the “contractual”36 obligation in question. This rule will be useful where the place of performance of the obligation in question and that of the defendant’s domicile are in different Member States. The place of performance of the obligation in question is decided pursuant to the conflict of laws rules of the court of the Member State before which the matter is brought.37 To determine the place of performance, the obligation that forms the subject matter of the dispute, and not 18

31 Ibid., para. 23. 32 [2012] EWHC 721 (Comm). In this case, the court accepted the “reflexive effect” of the regulation, while staying proceedings in favour of the Ukrainian court, which was first seised with proceedings in relation to a dispute involving the same cause of action and between the same parties. In so doing, the court held that it was entitled to rely on the “first-seised rule” under Article 27 of the Regulation (now Article 29 of the Recast Regulation) to stay proceedings in favour of the courts of a non-Member State, as if the courts were those of a Member State. It is clear under the Recast Regulation that the jurisdictional rules therein have a reflexive effect, see Articles 33 and 34 of the Recast Regulation. 33 See the section entitled “Jurisdiction Agreements”. 34 A similar provision is also found in Article 3 of the Regulation. 35 See McGraw-Hill International UK (Ltd) v. Deutsche Apotheker- und Ärztebank Eg and Others [2014] EWHC 2436 (Comm), per Cooke J. para. 18, following Kalfelis v. Bankhaus Schroder, Munchmeyer, Hengst & Co (Case C-189/87) [1988] ECR 5565. 36 Réunion Europénne SA v. Spliethoff’s Bevrachtingskantoor BV (Case C-51/97) ECR I-6511. 37 See also Leathertex Divisione Sintetici SpA v. Bodetex BVBA (Case C-420/97) [1999] ECR I-6747, 6791 para. 33 and Industrie Tessili Italiana Como v. Dunlop AG (Case 12/76) [1976] ECR 1473.

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the whole contact, must be taken into account.38 However, the rule in Article 7(1) is not applicable where a single place of performance is not identifiable.39 On the question of which matters should be deemed “contractual” for the 21 purposes of application of this provision, some useful guidance can be drawn from the decision of the CJEU in Fonderie Officine Meccaniche Tacconi SpA v. Heinrich Wagner Sinto Maschinenfabrik GmBH.40 There, the CJEU held that an action founded on pre-contractual liability for breach of the obligation to negotiate in good faith was not a contractual matter for the purposes of the application of Article 5(1) of the Regulation (now Article 7(1) of the Recast Regulation). However, in Agnew v. Lansforsakringsbolagens AB,41 the House of Lords held, by a majority, that a claim for rescission of an insurance contract due to alleged pre-contractual non-disclosure and misrepresentation was within Article 5(1) of the Regulation.42 Article 7(1)(b) provides that, unless otherwise agreed by the parties, in the 22 case of the sale of goods, the place of performance of the obligation in question shall be where the goods were delivered or should have been delivered under the contract. In contracts for the international sale of goods, it is common for the designated place of delivery to be at some distance from the agreed destination. When this is the case, the seller is deemed to have discharged his obligation to deliver the goods prior to their actual delivery by the carrier at destination. Hence, in international sales contracts on shipment terms, unless otherwise agreed by the parties, the goods are deemed to have been delivered to the buyer on shipment. In Scottish Newcastle International Ltd v. Othon Ghalanos Ltd,43 the House of Lords held that Liverpool, which was the place of shipment under a sale contract on FOB terms, was the place of delivery for the purposes of the application of Article 5(1)(b) of the Regulation, which is now Article 7(1)(b) of the Recast Regulation. Pursuant to Article 7(2) of the Recast Regulation, in matters relating to tort, 23 delict or quasi delict, a defendant may be sued in the courts of a Member State

38 See The Sea Maas [1999] 2 Lloyd’s Rep. 281 (QBD), which was concerned with a cargo claim based on the carrier’s alleged breach of its obligation to exercise due diligence in providing a seaworthy ship at the commencement of the voyage. Rix J (as he then was) held that the place of performance of that obligation was not the port of discharge, but the port of loading. See also Ets A de Bloos SPRL v. Société en commandite par actions Bouyer (Case C-14/76) [1976] ECR 1497, 1508. 39 Besix SA v. Wasserreinigungsbau Alfred Kretzschmar GmbH & Co KG (Case C-256/00) [2002] ECR I-1699. 40 (Case C-334/00) [2002] ECR I-7357. 41 [2000] UKHL 7. 42 See also Kleinwort Benson Ltd v. Glasgow City Council, where the House of Lords held that a claim for restitution arising from “interest rate swap agrements” that had been found to be ultra vires and thus void ab initio did not fall within Article 5(1). On the question of whether disputes related to the restitution of an amount paid under an allegedly invalid contract, see Profit Investment Sim SpA v. Ossi and Commerzbank AG, Case C-366/13) (pending). 43 [2008] UKHL EWCA Civ 150. For a similar line of thinking, see Ceska sporitelna as v. Feichter (Case C-419/11) [2013] I.L.Pr. 375.

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where the harmful event occurred or “may occur”. In Haldelswekerij GJ Bier v. Mines de Potasse d’Alsace SA,44 the CJEU considered the phrase “where the harmful event occurred or may occur”. They took the view that the provision must be read in a way such as to entitle the claimant in a tort claim to sue either in the place where the damage occurred or in the place of the incidents giving rise to that damage.45 The expression “the place where the harmful event occurred” is not interpreted widely: in the case of pure financial damage, which occurred in a Member State, affecting part of the victim’s assets located in another Member State, this expression was held by the CJEU not to cover the latter place.46 If one of the several presumed perpetrators of an alleged harmful act is sued within the jurisdiction where it had not committed the act, this expression will also not be interpreted in a way to allow the court to assume jurisdiction.47 24 In the context of shipping disputes, it may be difficult to determine the place where the harmful event occurred and the place of events giving rise to that damage. In the decision of the CJEU in Réunion Europénne SA v. Spliethodd’s Bevrachtingskantoor BV,48 a cargo claim brought by a consignee of a bill of lading against the actual maritime carrier, who was not mentioned in the bill of lading, was held to fall within Article 7(3) of the Recast Regulation. The CJEU held that, given the difficulty in locating the damage, that place was to be regarded as the place where the actual maritime carrier was to deliver the goods. 25 In Section 2 of the Recast Regulation, there are specific rules that are peculiar to shipping disputes. The first provision to examine is Article 7(7) of the Recast Regulation. The article talks of disputes concerning the payment of remuneration claimed in respect of the salvage of a cargo or freight. It provides that such disputes can be brought in the courts of the Member State in which the cargo or freight in question has been arrested or could have been arrested but for the security provided. The provision makes clear that it only applies where the defendant is claimed to have an interest in the cargo or freight or had such an interest at the time of salvage. 26 The second provision is Article 9 of the Recast Regulation. The article provides that: Where by virtue of this regulation a court of a Member State has jurisdiction in actions relating to liability arising from the use or operation of a ship, that court, or any other court substituted for this purpose by the internal law of that Member State, shall also have jurisdiction over claims for limitation of such liability.

27

Hence, where a shipowner is sued by a cargo interest in his domicile, the shipowner will be able to commence limitation proceedings in the same court, or any other court substituted for this purpose by the national laws of that Member 44 (Case C-21/76) [1976] ECR 1735. 45 Kronhofer v. Maier (Case C-168/02) [2004] ECR I-6009. For the application of the principle in the context of shipping disputes, see The Seaward Quest [2007] EWHC 1460 (Comm). 46 Ibid. 47 (Case C-228/11) [2013] I.L.Pr. 30. 48 (Case C-51/97) [1998] ECR I-6511.

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State. This rule will also apply where the shipowner, but not the cargo interest, brings an action to obtain a declaration of non-liability before the court of a Member State that has jurisdiction by virtue of this regulation.49 Article 8(1) talks of multiple defendants. It provides that the courts of a 28 Member State where any of the defendants is domiciled shall have jurisdiction where the claims against the co-defendants “are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings”.50 For the purposes of deciding whether the claims are sufficiently connected, the courts do not look at the legal bases of the claims. Thus, the CJEU in Freeport Plc v. Olle Arnoldsson51 found a sufficient connection between the claims against Freeport and Freeport AB despite the fact that the claim against Freeport was contractual, while the one against Freeport AB was based on tort. Furthermore, under Article 8(2), the court of a Member State can consolidate 29 third-party proceedings with those original proceedings seised by the court. However, the court’s ability to consolidate is made subject to the condition that the third-party proceedings have not been instituted with the sole intention of removing the third party from the jurisdiction of the court most competent to determine the matter.52 For this reason, an exclusive jurisdiction clause that meets the requirements of Article 25 of the Recast Regulation will prevent the consolidation of proceedings under Article 6(2).53 3. The Recast Regulation and International Conventions on Jurisdiction

Article 71 of the Recast Regulation provides that it will not affect the applica- 30 tion of any conventions to which the Member States are parties and which govern jurisdiction or the recognition or enforcement of judgments.54 In a maritime context, there are a number of international conventions “governing jurisdiction or the recognition of judgments” for the purposes of Article 71. Included in these conventions is the International Convention for the Unification of Certain Rules Relating to the Arrest of Ships 1999 (Arrest Convention). Pursuant to Article 7(1) of the Arrest Convention, the courts of the country in which the arrest was made shall have jurisdiction to determine the merits of the case, provided that the domestic law of that country gives jurisdiction to such courts.55 49 This provision is in line with Article 11 of the 1976 Limitation Convention, which entitles the shipowner to constitute a limitation fund in the place where legal proceedings are instituted in respect of claims subject to limitation. 50 See Kalfelis v. Bankhaus Schroder, Munchmeyer, Hengst & Co (Case C-189/87) [1988] ECR 5565. However, the provision does not apply to defendants who are not domiciled in another Member State, see Land Berlin v. Sapir (Case C-645/11) [2013] I.L.Pr. 481. 51 (Case C-98/06) [2007] ECR I-8319. 52 See Groupement d’Intérêt Economique (GIE) Réunion Européenne v. Zurich España (Case C-77/04) [2005] ECR I-4509. 53 Ibid. 54 This rule was also stated in Article 71 of the Regulation on identical terms. 55 The same provision also appears in Article 7(1) of the Arrest Convention 1952.

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Thus, if a ship carrying a cargo, or a sister ship of the carrying ship, is arrested in England in respect of a cargo claim, English courts will have jurisdiction on the merits of the dispute under Article 7(1) of the Arrest Convention. Given the effect of Article 71 of the Recast Regulation, English courts will have jurisdiction even in the case of a defendant domiciled in another Member State. In order for the courts to assume jurisdiction pursuant to Article 7(1) of the Arrest Convention, the ship must be actually arrested.56 In stark contrast to the requirement for actual arrest under the Arrest Convention, Article 1(1) of the Collision Convention provides that a collision action can be brought where the ship or a sister ship has been arrested or could have been arrested, but for the security provided.57 In the Bergen,58 the vessel was arrested in respect of a cargo claim under a bill of lading that contained an exclusive jurisdiction clause in favour of German courts. Clarke J (as he then was) held that, pursuant to Article 17 of the 1968 Brussels Convention (now Article 71 of the Recast Regulation), the Arrest Convention prevailed and that the 1968 Brussels Convention was not applicable. However, given that the bill of lading contained an exclusive jurisdiction clause in favour of German courts, the court stayed the proceedings in favour of the German courts. The reason behind the stay of proceedings was the traditional approach of English courts in favour of enforcement of forum selection clauses: English courts uphold jurisdiction and arbitration clauses, unless there are strong reasons for not doing so.59 32 Where there is no clear conflict between an international convention governing jurisdiction or the recognition of judgments and the Recast Regulation, the provisions in both sets of rules will be applicable. In the Maciej Rataj,60 a sister ship was arrested in England. Although the English court had jurisdiction to rule on the merits of the dispute pursuant to the Arrest Convention, the same dispute had already been brought before Dutch courts. The CJEU ruled that, since the Arrest Convention did not contain any provision on lis pendens and related actions, those provided in the 1968 Brussels Convention (now in Section 9 of the Recast Regulation) would be applicable. Hence, the Dutch court, as the court first seised, had priority to rule on its own jurisdiction. 33 The issue of whether the Hague and Hague-Visby Rules are an international convention “governing jurisdiction or the enforcement of judgments” is not as clear as it might at first seem. The main reason for this is the House of Lords decision in The Morviken.61 There, a cargo dispute arose under a bill of lading 31

56 See The Deichland [1989] 2 All ER 1066 (CA); and The Anna H [1995] 1 Lloyd’s Rep. 11 (CA). 57 See the International Convention for the Unification of Certain Rules Concerning Civil Jurisdiction in Matters of Collision, 1952 (Collision Convention). See also The Po [1991] 2 Lloyd’s Rep 206. 58 [1997] 2 Lloyd’s Rep 710 (QBD). 59 See Donohue v. Armco [2002] 1 Lloyd’s Rep 425 (HL). 60 (Case-C 406/92) [1994] ECR I-5439. 61 [1983] 1 AC 565 (HL).

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that contained an exclusive jurisdiction clause in favour of Dutch courts. The bill of lading was mandatorily governed by the Hague-Visby Rules. The House of Lords stuck down the exclusive jurisdiction clause, on the basis of Article III(8) of the Hague-Visby Rules, which prohibited carriers from removing or lessening their liabilities otherwise than as provided in the rules. The reasoning of the court was that upholding the jurisdiction clause would result in the carrier being subject to a lower amount of limitation than that provided under the Hague-Visby Rules. Hence, the court refused to stay the action on the grounds that, Dutch courts, which would apply the Hague Rules with the lower amount of limitation, would give cargo interests a significantly lower amount for damages than the English courts. Following the decision of The Morviken, there is no question that the Hague- 34 Visby Rules may have a jurisdictional effect. What remains unclear is whether this justifies the treatment of the Hague-Visby Rules as an international convention “governing jurisdiction or the enforcement of judgments”.62 This issue has not been decided by the CJEU. With the new provisions in the Recast Regulation, which significantly enhance the enforcement of jurisdiction agreements, it is now very likely that Article 71 will be interpreted as not covering the Hague and Hague-Visby Rules. Hence, in the case of a bill of lading with an exclusive jurisdiction clause designating the courts of another Member State, it is very likely that English courts will stay proceedings in favour of the chosen courts without considering whether the chosen courts would apply a lower amount of limitation. Unlike the Hague and Hague-Visby Rules, the Hamburg Rules contain ex- 35 press provisions on jurisdiction and arbitration. Given that some of the states have ratified the Hamburg Rules,63 these rules will prevail over the Recast Regulation where there is a clear conflict between the provisions of these sets of rules on jurisdiction. One of the key conflicts between these sets of rules is that while the Recast Regulation recognises and gives effect to party autonomy to a great extent, the Hamburg Rules substantially curb the carrier’s right to invoke jurisdiction clauses in certain types of contract of carriage, giving cargo interests a wide range of available fora for their cargo claims.64 Just as with the Hamburg Rules, the Rotterdam Rules also contain provisions 36 on jurisdiction and substantially restrict the enforcement of jurisdiction clauses. The rules allow cargo interests to avoid jurisdiction clauses in certain types of contract of carriage, by providing cargo interests with a wide range of optional fora for their cargo claims against carriers.65 In stark contrast to the provi-

62 For further discussions on this, see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), p. 180. 63 The contracting states are Austria, Hungary and Romania. 64 See Article 21 of the Hamburg Rules. 65 This will be discussed below.

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sions on jurisdiction in the Hamburg Rules, Chapter 14 of the Rotterdam Rules, containing the rules on jurisdiction, is optional. 37 If the European Union were to ratify the Rotterdam Rules and opt into Chapter 14, it would be essential to amend the provisions of the Recast Regulation accordingly. If only some of the Member States were to ratify the rules and opt into the chapter, would the courts of such Member States be able to strike down an exclusive jurisdiction clause designating the courts of another Member State by reason of Article 79 of the Rotterdam Rules? Article 79 of the Rotterdam Rules provides that any clause directly or indirectly excluding or limiting the obligations of the carrier under the rules is invalid. Although exclusive jurisdiction clauses may indirectly affect the substantial rights and obligations of the parties, such courts would still probably have to give effect to the exclusive jurisdiction clause pursuant to Article 29 of the Recast Regulation.66 4. Jurisdiction Agreements and their Validity

As will be recalled, the domicile rule does not apply in cases where there is a jurisdiction agreement that satisfies the formal and substantive requirements provided in Article 25 of the Recast Regulation. Where parties conclude a jurisdiction agreement designating the courts of a Member State, the court chosen shall have jurisdiction, regardless of the domicile of the parties, provided that the agreement is valid. Hence, for a jurisdiction clause to be brought within Article 25, it is not essential for at least one of the parties to be domiciled in a Member State. There was such a requirement under Article 23 of the Regulation. 39 On substantive validity of jurisdiction agreements, Article 25(1) expressly provides that an agreement designating the courts of a Member State should be valid under the law of that Member State. Pursuant to Recital 20 of the Recast Regulation, the reference to the law of the Member State should be taken to include the rules of conflict of laws of that Member State. Furthermore, the new provision in Article 25(5) of the Recast Regulation expressly provides that a jurisdiction clause in a contract must be treated as separate from the contract. 40 Unlike the Recast Regulation, the Regulation was silent on the issue of determining the substantive validity of jurisdiction agreements. This raised a question: under which law did the substantive validity of jurisdiction clauses have to be decided for the purposes of Article 23? In Joint Stock Company “Aeroflot Russian Airlines” v. Berezovsky, the English Court of Appeal held that this issue was to be decided by reference to the autonomous European regime and not by the putative applicable law of the contract.67 In this context, the CJEU in Estasis Salotti v. RUWA took the view that the requirements on “formal 38

66 This is simply because Article 71 should not be interpreted in a way to allow Member States to unilaterally enter into a convention that conflicts with the jurisdictional rules in the Recast Regulation. 67 [2013] 2 CLC 206, 229.

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validity” under Article 23 were to ensure that consensus between the parties was established.68 Despite these attempts to bring uniformity to the laws governing the 41 question of consent, the significant dissimilarities between the Member States’ laws on this question remained prevalent. One of the key dissimilarities is the way in which the courts of different Member States decide the question of incorporation of forum selection clauses into bills of lading.69 Another important difference is the enforcement of jurisdiction clauses in the case of direct action claims against insurers. Under English law, a claimant is, in such cases, deemed to step into the shoes of the assured. The upshot of this is that a claimant pursuing a direct action against the insurer becomes, in principle,70 bound by the jurisdiction clause in the relevant insurance contract.71 The same line of thinking is also followed in the case of a claim involving a subrogated insurer. Hence, a subrogated insurer who wishes to bring a claim against the assured’s counterparty in a contract is, in principle,72 subject to the jurisdiction clause in that contract.73 However, these claims are regarded as independent in some other European jurisdictions.74

68 (Case C-24/76) [1976] ECR 1831, para. 7. 69 Although related to the incorporation of an arbitration clause into a bill of lading, the English Court of Appeal decision in The Wadi Sudr is illustrative, see [2010] 1 Lloyd’s Rep 193 (CA). There, the court held that the Spanish court’s preliminary decision against the incorporation of the arbitration clause was binding upon the English courts and that the decision fell within the scope of the Regulation. Through the eyes of English courts the arbitration clause was in fact incorporated. On this issue, see M. Ozdel, Bills of Lading Incorporating Charterparties (Oxford: Hart Publishing, 2015). The Recast Regulation now removes the effect of the decision by expressly providing that the courts of a Member State will not be bound by the decision of the court of another Member State on the validity and scope of an arbitration agreement, see Recital 12 of the Recast Regulation. 70 Both in the Regulation and the Recast Regulation, there are certain restrictions on the enforcement of jurisdiction agreements in the case of disputes relating to insurance, see section 3 of the Recast Regulation and section 3 of the Regulation. 71 See Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd (The Hari Bhum No 1) [2008] EVCA Civ 1598. 72 See fn. 73, below. 73 See the House of Lords decision in West Tankers Inc v. Ras Riunione Adriatica di Sicurta SpA and Others (the Front Comor) [2007] UKHL 4. There, it was held that the charterer’s subrogated insurers were bound by the arbitration clause in the charterparty. The question of whether English courts could compel the subrogated insurers to arbitrate by granting an antisuit injunction was referred to the CJEU. On this question, the CJEU held that it was not consistent with the Regulation for a court of a Member State to grant an anti-suit injunction against a party who brought litigation proceedings in another Member State on the grounds that such proceedings were in breach of an arbitration agreement, see Case C-185/07 [2009] ECR I-663. 74 See V. Ulfbeck, “Direct Actions Against the Insurer in a Maritime Setting: The European Perspective” (2011) Lloyd’s Maritime and Commercial Law Quarterly: 293 et seq.

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On formal validity, Article 25(1) goes on to state that the jurisdiction agreement shall be either: (a) (b) (c)

in writing or evidenced in writing;75 in a form which accords with practices that the parties have established between themselves; or in international trade or commerce, in a form that accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.76

These formal requirements, which are also stipulated in the Regulation in the same terms, attracted much litigation prior to the entry into force of the Recast Regulation. This is particularly true of subsection (c), which talks of jurisdiction agreements in a form that accords with a trade usage of which the parties are or ought to have been aware. This provision provides a more relaxed rule of formality for jurisdiction agreements where the parties are engaged in trade and commerce. The rationale behind this provision is that, given the way in which parties enter into international trade and shipping transactions, it may not be sensible to require actual consent to hold parties bound by a jurisdiction agreement. Hence, where appropriate, parties engaged in trade and commerce may be deemed to have consented to a jurisdiction clause, regardless of the lack of their actual consent. 44 The justification for the application of “deemed consent” in international trade and commerce can be best illustrated by reference to contracts of carriage contained in or evidenced by bills of lading. Usually issued in transferable form, bills of lading generally pass through the hands of numerous traders, who do not have any means of negotiating the terms in the bills of lading. However, jurisdiction clauses, whether express or incorporated, are commonplace in bills of lading, and bill of lading holders, as sophisticated businessmen, are expected to be aware of this. When viewed from this perspective, a jurisdiction clause in a bill of lading that accords to the usage of trade and commerce – such as a bill of lading on an international standard form – should be binding upon the bill of lading holder through the application of the principle of “deemed consent”. 43

75 On this matter, see also Article 25(2), which states that “any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’”. See also the CJEU decision in Galeries Segoura v. Firma Rahim Bonakdarian (Case C-25/76) [1977] 1 CMLR 361. There, the CJEU took the view that an oral contract which did not make any reference to the existence of general conditions for sale and the jurisdiction clause contained therein, does form part of the contract. The subsequent confirmation note incorporating the general conditions, including the jurisdiction clause was held insufficient in the absence of consistent previous dealing between the parties. The same view is also taken at English common law, see Jayaar Impex Limited v. Toaken Group Ltd. [1996] 2 Lloyd’s Rep 437 (QBD). 76 Article 17 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, which has now its counterpart in Article 25 of the Recast Regulation, did not contain any reference to “usages of international trade and commerce”. This formal requirement was added with the adoption of the Accession Convention of 1978, and it was later clarified in the Convention of San Sebastian of 26 May 1989.

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In Trasporti Castelletti Spedizioni Internazionali SpA v. Hugo Trumpy SpA,77 the CJEU held that original parties to a bill of lading, namely the shipper and the carrier, would be bound by the jurisdiction clause in the bill of lading, which accorded to the usage of trade and commerce.78 Although the bill of lading in that case was only signed by the master, as agent for the carrier, the jurisdiction clause was binding upon the shipper. On the question of whether a jurisdiction clause in a bill of lading can be binding upon the consignee or endorsee of the bill of lading, the main guidance is the CJEU decision in The Tilly Russ.79 The decision clearly suggests that where the jurisdiction agreement satisfies the formalities as between the original parties to the bill of lading, the agreement will equally be binding upon the consignees/endorsees. However, this is subject to the satisfaction of one condition: for the consignees/endorsees to be equally bound by the jurisdiction clause, they must have succeeded to the rights and obligations of the respective shippers pursuant to the relevant national law. The question of which national law is applicable for these purposes is determined by the national court applying its own rules of private international law. Under English law, rights and obligations80 under bills of lading can be transferred to consignees and endorsees of bills of lading. Pursuant to the English Carriage of Goods by Sea Act 1992, “the lawful holder of a bill of lading”81 to whom the bill of lading has been transferred is deemed to have succeeded to “all rights of suit” under the bill of lading as if it had been a party to that contract.82 Bills of lading referred to in that Act do not include “straight bills of lading”. Nonetheless, for the purposes of application of the Act, this type of bill of lading also comes within the scope of the Act, as it is treated as a “seawaybill”.83 Under English law, it is therefore possible for the consignees/endorsees to succeed to the rights and obligations of shippers. When this happens, it will be possible for the carrier to compel the holder to litigate pursuant to the jurisdiction clause in the bill of lading. The final point on the question of validity is the new provision in Article 25(5) on the separability of jurisdiction clauses. The provision states that a jurisdiction clause in a contract is taken as independent of the other terms of the con-

77 (Case C-159/97) [1999] ECR I-1597. 78 Ibid., at 510–511. The CJEU further suggested that it was for the national courts to determine the usages for the purposes of this assessment. 79 (Case C-71/83) [1984] ECR 2417. 80 Liabilities can only be transferred to consignees/endorsees of a bill of lading when they take a step, as defined under section 3(1) of the Carriage of Goods by Sea Act 1992, to enforce the contract of carriage, see The Berge Sisar [1998] 2 Lloyd’s Rep 475 (CA). 81 See s. 5(2) of the 1992 Act. 82 For consignees/endorsees to be treated as a lawful holder, they must have the bill of lading in their possession. By the act, the word “holder” is used to refer to endorsees to whom the bill of lading has been transferred either in full or blank, as well as consignees. See, in particular, ss 1(2), 2(2) and 5(2) of the 1992 Act. 83 See AP Moller-Maersk v. Sonaec Villas [2011] 1 Lloyd’s Rep 1 (QBD).

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tract. This is to the effect that merely attacking the validity of the main contract, in which a jurisdiction clause is contained, does not, in principle, constitute a challenge to the validity of the jurisdiction clause.84 5. Finding the Court Competent to decide the Question of Validity 49

The Recast Regulation enhances the enforcement of jurisdiction agreements in many respects. One of the key provisions to that effect is found in Article 31(2), which provides that: Without prejudice to Article 26,85 where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement.86

50

This provision87 effectively reverses the rule established by the decision of the CJEU in Erich Gasser GmbH v. MISAT SRL88 – a judgment handed down by the CJEU prior to the entry into force of the Recast Regulation. With this decision, the designated court’s assumption of jurisdiction by virtue of Article 23 was made subject to Article 27 of the Regulation – which is part of the lis pendens rule. Article 27(1) of the Regulation provides that: Where proceedings in the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of it own motion stay proceedings until such time as the jurisdiction of the court first seised is established.

51

Article 27(2) of the Regulation further provides that: Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.

52

Thus, in the case of multiple proceedings pending in different Member States and involving the “same cause of action”89 and between the same parties, 84 For the application of the separability rule in the context of arbitration agreements, see the decision of the House of Lords in Fiona Trust and Holding Corporation v. Yuri Primalov [2007] UKHL 40. 85 This provision talks of submission of parties to the jurisdiction of a court seised. 86 See Article 31(4) of the Recast Regulation, which provides that this rule does not apply to matters referred to in Sections 3, 4 or 5, where the policyholder, the insured, a beneficiary of the insurance contract, the injured party, the consumer or the employee is the claimant and where the agreement is not valid under a provision contained in those sections. 87 This provision does not apply, however, in the case of conflicting jurisdiction agreements between parties. 88 (Case C-116/02) [2003] ECR I-3565. 89 In the case of “related actions” pending in the courts of different Member States, Article 28(1) of the Regulation (now Article 30(1) of the Recast Regulation) provides that any court other than the court first seised “may” stay proceedings. If the related actions are closely connected, the courts other than the court first seised may stay proceedings in order to “encourage harmonious judicial decisions and thereby obviate the danger of judgments which conflict with each other, albeit only as regards their reasoning”. See the Maciej Rataj (Case C-406/92) [1994] ECR I-5439, para. 28. See also Maersk Olie & Gas A/S v. Firma M de Haan en W de Boe (Case C-39/02) [2004] ECR I-9657; JP Morgan Europe Ltd v. Primacom AG [2005] EWHC 945. On related actions, see also fn. 73. If the conditions under Article 28(2) of the Regulation

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the court first seised has priority to rule on its own jurisdiction.90 In light of the CJEU decision in Erich Gasser, the combined effect of Articles 23 and 27 is this: the court designated under a jurisdiction agreement shall not have jurisdiction by virtue of Article 23 where the court of another Member State has been seised of proceedings first and established its jurisdiction pursuant to the Regulation. This decision paved the way for “torpedo actions”: it enabled parties to avoid a jurisdiction agreement by bringing an action first before a court that was most likely to find the agreement invalid and assume jurisdiction. Given these detrimental effects of the CJEU decision in Erich Gasser on the 53 enforcement of jurisdiction agreements, one question became of great importance: what should be understood by the “same cause of action” for the purposes of application of Article 27 of the Regulation? In Gubish Maschinenfabrik KG v. Palumbo,91 the question was whether the two sets of proceedings, one for a declaration that a contract was inoperable and the other for obtaining judgment for the amount of the price in that contract, involved the “same cause of action”. The CJEU in Gubish Maschinenfabrik held that they did. The line of reasoning behind the decision was later followed in a shipping case – The Maciej Rataj.92 The initial proceedings brought by the carrier in the Netherlands for a declaration of non-liability and the subsequent proceedings initiated by cargo interests in England against the carrier for damages were held to have the same cause of action. However, some but not all of the parties to the second action in England were the same as the parties to the first action brought in the Netherlands. As a result, the CJEU held that court second seised “had to” decline jurisdiction only in respect of the claims brought by the cargo interests who were parties to both sets of proceedings.93 Although the decisions above may suggest that the first-seised rule has a 54 wide application, judicial decisions have so far established important limitations to the application of the rule. In Maersk Olie & Gas A/S v. Firma M de Haan en W de Boer,94 the CJEU held that proceedings for limitation of liability under the 1957 Limitation Convention did not involve the same cause of action as proceedings for damages. The rationale behind this decision was that the former set of proceedings was for limitation of the shipowner’s liability, while the latter set

90 91 92 93

94

(now Article 30(2) of the Recast Regulation are satisfied, the court second seised may decline proceedings in favour of the court first seised. Pursuant to Article 30 of the Regulation (now Article 32 of the Recast Regulation), the general rule is a court shall be deemed to be seised at the time when the document instituting the proceedings is lodged with the court. (Case C-144/86) [1989] ECC 420. (Case C-406/92) [1994] ECR I-5439. As regards the actions brought by other cargo interests against the carrier, these actions were held to be “related actions” for the purposes of the application of Article 28. The CJEU interpreted Article 28 broadly to the effect that actions by cargo interests against carriers concerning the different parts of a bulk cargo shipped under separate contracts of carriage but on identical carriage terms were treated as “related”. On related actions, see also fn. 89. (Case C-39/02) [2004] ECR I-9657.

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of proceedings was for the determination the shipowner’s liability for the damage. 55 On the application of the first-seised rule, some useful guidance can also be drawn from the recent UK Supreme Court decision in The Alexandros T.95 Following the sinking of The Alexandros T, the owners made a claim against the insurers, who refused to cover the loss. The dispute was initially brought before English courts, but the parties later settled. The settlement agreements were embodied in Tomlin orders, as a result of which the English proceedings stayed. Pursuant to these settlement agreements, the owners agreed to indemnify the underwriters against any claim brought against them by the owners. The agreements also contained an exclusive jurisdiction clause in favour of English courts. More than three years later, the owners brought a tort claim against the insurers in Greece. The insurers brought English proceedings for a declaration that Greek proceedings were in breach of the exclusive jurisdiction clause in the settlement agreements. The Supreme Court held that Article 27 of the Regulation (now Article 29 of the Recast Regulation) did not apply to the English proceedings, as it did not involve the same cause of action as the Greek proceedings and therefore did not have to be stayed under Article 27. In so holding, the Supreme Court took the view that the claims in England and Greece were not “mirror images” of one another. The fact that the insurers could use the settlement agreement as a defence in Greek proceedings was therefore irrelevant. 56 As will be recalled, with the entry into force of the Recast Regulation, the effects of the CJEU decision in Erich Gasser have been removed. Article 29 of the Recast Regulation effectively creates an exception to the application of the lis pendens rule. With this new provision, the court chosen in the exclusive jurisdiction agreement will, in principle,96 have priority to determine the validity of the agreement, as well as its applicability to the dispute before it. 6. Jurisdiction Agreements designating the Courts of a Non-Member State 57

Where jurisdiction is conferred on the court of a Member State pursuant to the Recast Regulation, can the court decline jurisdiction in favour of a valid jurisdiction agreement designating the courts of a non-Member State? Although Article 29 of the Recast Regulation only talks of jurisdiction agreements designating the courts of a Member State, can a “reflexive effect” be given to the provision in Article 29 in order to entitle the courts to stay proceedings in favour of the chosen courts of a non-Member State? This question was discussed at length in the context of the Article 27 Regulation.97 In Winnetka Trading Corp v. Julius Baer International Ltd,98 the English court stayed proceedings in favour 95 [2013] UKSC 70. 96 See fn. 73. 97 See A. Briggs, “Forum Non-Conveniens and ideal Europeans” (2005) LMCLQ: 378; A. Peel, “Forum Non-Conveniens and European ideals” (2005) LMCLQ: 363. 98 [2008] EWHC 3146.

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of a jurisdiction clause designating the courts of a non-Member State, although it had jurisdiction over the defendant pursuant to the domicile rule. Articles 33 and 34 of the Recast Regulation now make clear that the provi- 58 sions regarding identical and related proceedings will have a “reflexive effect”. However, the court in a Member State will not be bound, but will have discretion, to stay proceedings in favour of the courts of a non-Member States even in the case of multiple proceedings involving the same cause of action and between the same parties. Where there is a jurisdiction agreement designating the courts of a non-Member State and where the chosen court is the court first seised, a court in a Member State that has also been seised of the identical proceedings may stay proceedings in favour of the chosen court.99 7. Anti-Suit Injunctions and Enforcement of Forum Selection Clauses

Following the “torpedo actions” in the wake of the CJEU decision in Erich 59 Gasser GmbH v. MISAT SRL,100 the question then was: could parties to jurisdiction agreements designating the courts of a Member State be compelled to litigate before the chosen courts through the grant of anti-suit injunctions? In Turner v. Grovit,101 the CJEU held that an anti-suit injunction should not be granted to restrain a defendant from pursuing proceedings in the court of a Member State, even in cases where the defendant brought the proceedings in bad faith. In so holding, the CJEU took the view that the grant of an anti-suit injunction in order to restrain a party from starting or continuing an action before the courts of a Member State would undermine the “mutual trust” between the courts of all Member States. The much-cited decision of the CJEU in the Front Comor102 extended this 60 rule even further: the court held that anti-suit injunctions could also not be brought against a defendant who brought litigation proceedings in the courts of a Member State in breach of an arbitration agreement. Although matters of arbitration are expressly excluded from the scope of the Regulation,103 the CJEU held that it was not consistent with the Regulation for a court of a Member State to grant an anti-suit injunction against a party who brought litigation proceedings in another Member State on the grounds that such proceeding were in breach of an arbitration agreement. With the recent decision of the Court of Justice of the European Union in the Gazprom case,104 it is now clear that the prohibition on the grant of anti-suit injunctions has its limits: the decision shows that the prohibition cannot be extended in such a way as to prohibit the courts of

99 100 101 102 103

See Recital 24. (Case C-116/02) [2003] ECR I-3565. (Case C-159/02) ECR I-3565. (Case C-185/07) [2009] ECR I-663. The arbitration exception is also adopted in the Recast Regulation, see Article 1(2)(d) of the Recast Regulation. 104 Case 536/13 [2015] 1 Lloyd’s Rep. 610.

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Member States from recognising and enforcing arbitration awards in the form of anti-suit injunctions. In support of this view, the court in the Gazprom case said: It should be remembered first of all that … arbitration does not fall within the scope of No 44/2001, since the latter governs only conflicts of jurisdiction between courts of the Member States. As arbitral tribunals are not courts of a State, there is, in the main proceedings, no such conflict under that regulation.105 The reasoning of the court in the Gazprom case and the strong emphasis on the separation of arbitration from the rules of conflicts of jurisdiction in the Recast Regulation make one further point clear. In the context of the Recast Regulation, it will also be for the Member States to decide whether to enforce an award in the form of an anti-suit injunction pursuant to the New York Convention. Although there will thus be no barriers to enforcement of arbitration agreements under the Recast Regulation, one must not lose sight of the fact that there is no uniform treatment of arbitral awards under the New York Convention.106 It appears that much will now turn on the differences between the ways in which the arbitration awards are enforced and recognised by the Member States. 61 In the wake of the Gazprom case, the decision in the Front Comor still remains intact.107 Thus, English courts still cannot grant anti-suit injunctions against a party who has brought litigation proceedings in another Member State, whether or not the proceedings have been brought in breach of a forum selection agreement. Given the scope of application of the Regulation and the Recast Regulation, English courts still have discretion to grant an injunction to restrain a party from commencing or pursuing proceedings in a court of a non-Member State.108 In U & M Mining Zambia Ltd v. Konkola Copper Mines,109 parties entered into an arbitration agreement providing for arbitration at the London Court of International Arbitration (LCIA). There, the court did not grant an anti-suit injunction against the party who brought Zambian litigation proceedings on the grounds that the Zambian litigation proceedings were brought only to obtain interim remedies and that the LCIA rules “implicitly” recognised a party’s right to apply to any state court for interim relief. Thus, the decision clearly suggests that bringing foreign litigation proceedings before a foreign court may not necessarily constitute a breach of an arbitration agreement where those proceedings were brought to obtain interim remedies. However, different considerations

105 Ibid, at para 36. 106 This was the lesson learnt from the recent Supreme Court decision in Dallah Real Estate and Tourism Holding Comoany v. The Ministry of Religious Affairs Government of Pakistan [2010] UKSC 46. 107 See paragraph 33 of the judgment in the Gazprom Case, Case 536/13 [2015] 1 Lloyd’s Rep. 610. 108 See s. 37 of the Senior Courts Act 1981 and s. 44 of the English Arbitration Act 1996. Section 44 of the English Arbitration Act 1996 applies regardless of the seat of the arbitration. 109 [2013] 2 Lloyd’s Rep 218 (QBD).

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arose in The Duden110 and The Kallang,111 where the arrest proceedings were in both cases brought not to obtain security but purely to compel the shipowners to litigate in Senegal despite the valid arbitration agreements providing for London arbitration. Consequently, the courts in both cases granted anti-suit injunction against the parties that brought litigation proceedings in Senegal.112 Under English law, the courts can grant anti-suit injunctions in cases where 62 the ends of justice require it and where a party can establish that the other party has breached his/her legal or equitable right not to be sued before a foreign court.113 If a party can establish that the other party brought foreign proceedings in breach of a forum selection clause, the courts tend to take the view that these conditions have been satisfied.114 Hence, they enforce forum selection clauses, unless there are strong reasons for not doing so.115 English courts can grant an anti-suit injunction to restrain a party from continuing or commencing proceedings before the courts of a non-Member State in breach of an arbitration agreement even in cases where no arbitration is commenced or contemplated.116 The restriction on the grant of anti-suit injunctions, combined with the unde- 63 sirable effects of the CJEU decision in Erich Gasser GmbH v. MISAT SRL,117 has caused serious barriers to the enforcement of forum selection agreements. As will be recalled, in order to enhance the enforcement of jurisdiction agreements, the Recast Regulation now introduces an exception to the first-seised rule: where a court of a Member State chosen in an exclusive jurisdiction agreement is seised of proceedings, the courts of other Member States shall stay proceedings for the chosen court to rule on its jurisdiction. Under the Regulation, it was thus much easier for parties to avoid their arbi- 64 tration agreements. One of the abusive litigation tactics was to initiate litigation proceedings in the courts of a Member State that was likely to assume jurisdiction and decide against the validity of the arbitration agreement. To counter such abusive litigation tactics, parties who wished to rely on their arbitration agreements could bring arbitration proceedings, obtain an award and have it recognised as a judgment in the courts of a Member State before a judgment on the merits was given by the court first seised.118 Although it was possible that the award would not be enforceable by the court first seised, the courts of other 110 111 112 113 114 115 116

117 118

[2008] EWHC 2762 (QBD). [2008] EWHC 2761 (QBD). See M. Ozdel, “Security or more than security?” (2009) Shipping and Trade Law. Société Aérospatiale v. Lee Kui Jak [1987] AC 871 (HL); British Aerospace plc v. Dee Howard Co [1993] 1 Lloyd’s Rep 368. The Angelic Grace (CA) [1995] 1 Lloyd’s Rep 87. Donohue v. Armco [2002] 1 Lloyd’s Rep 425 (HL). AES Ust-Kamenogorsk Plant LLP v. Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35. In the absence of a forum selection clause, the courts may also grant an anti-suit injunction where the ends of justice require it and where the English court is the natural forum and the foreign proceedings are vexatious or oppressive. See fn. 108. See fn. 88. For more discussions on this, see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), pp. 116–121.

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Member States would probably enforce the award pursuant to the New York Convention, unless there was a judgment on the same dispute already given by the court first seised. With the new provisions in the Recast Regulation, it is now possible for the courts of Member States to enforce an arbitral award pursuant to the New York Convention, irrespective of an irreconcilable earlier judgment given in another Member State.119 65 In order to keep arbitration agreements intact from the rules of jurisdiction under the Recast Regulation, Recital 12 of the Recast Regulation gives teeth to the arbitration exception: the decision of the courts of any Member State as to whether an arbitration agreement is null, void, inoperative or incapable of being performed shall not be subject to the rules under the Recast Regulation. Consequently, no court has priority to determine the validity of arbitration agreements. Given that this rule may give rise to conflicting decisions between the courts of different Member States on the validity of arbitration agreements, the Recast Regulation goes on to provide a further provision to resolve such possible conflicts: where a court of a Member State decides against the validity of an arbitration agreement, assumes jurisdiction pursuant to the Recast Regulation and goes on to rule on the merits of the dispute, the judgment of that court will be recognised and enforced under the Recast Regulation. However, an arbitration award rendered in respect of the same dispute will triumph over that judgment and will be enforced pursuant to the New York Convention. 66 With these new provisions in Recital 12, the decision of the Wadi Sudr120 is effectively reversed in the Recast Regulation. In the Wadi Sudr, bill of lading holders initiated Spanish litigation proceedings against the carrier under the bill of lading. After the Spanish proceedings, the carrier commenced arbitration in London for a declaration of non-liability, as well as an action in the Commercial Court seeking a declaration that the substantive dispute was subject to an arbitration agreement. Through the eyes of English courts, the dispute was subject to arbitration in London, with the bill of lading effectively incorporating the charterparty arbitration clause pursuant to English law, which was the putative applicable law of the bill of lading.121 However, the Spanish court, as the court first seised, made a preliminary decision that the arbitration clause was not incorporated into the bill of lading and that they had jurisdiction to rule on the merits. 67 In the Court of First Instance,122 Gloster J held that, given the arbitration exception under the Regulation, the Spanish court’s preliminary decision on incorporation was not binding. She further held that the bill of lading incorporated the 119 See Recital 12 of the Recast Regulation. 120 [2009] 1 Lloyd’s Rep 666, reversed in [2010] 1 Lloyd’s Rep 193 (CA). 121 On the issue of what law governs the question of incorporation, see M. Ozdel, “Presumptions on the Law Governing the Incorporation of Forum Selection Clauses: Should the Putative Applicable Law Lead the Way?” (2011) 4 Journal of Business Law, 357–370. See also, M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), Chapter 1. 122 [2009] 1 Lloyd’s Rep 666.

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arbitration clause providing for arbitration in London. The Court of Appeal in the Wadi Sudr123 overturned the judgment of Gloster J, holding that the preliminary ruling of the Spanish court on incorporation fell within the scope of the Regulation. One of the main foundations for this decision was the opinion of the Advocate General in the Front Comor.124 There, the Advocate General took the view that the questions of validity and incorporation of arbitration agreements would not fall outside the scope of the Regulation where the subject matter of the dispute, which was tied up with the preliminary ruling on arbitration, fell within the scope of the Regulation.125 With the new provisions in the Recast Regulation, decisions of the courts of Member States on the validity of arbitration agreements are no longer binding upon the courts of other Member States. a) The Rotterdam Rules

The chapters on jurisdiction and arbitration in the Rotterdam Rules con- 68 siderably hinder enforcement of forum selection clauses in certain types of contract of carriage. This particular aspect of the Rotterdam Rules falls into conflict with the rooted-liberal approaches of various jurisdictions towards forum selection clauses. For this reason, these chapters are rendered optional: contracting states can opt into either one or both the chapters pursuant to Article 91 of the Rotterdam Rules, by making a declaration that they will be bound by one or both of the chapters. When these chapters are applicable, the default position is that cargo interests 69 will be entitled to institute court proceedings against carriers in any of the jurisdictions listed in Article 66. Under Article 66 of the rules, actions against the carrier can be brought: a)

b)

in a competent court within the jurisdiction of which is situated in one of the following places: (i) The domicile of the carrier; (ii) The place of receipt agreed in the contract of carriage; (iii) The place of delivery agreed in the contract of carriage; or (iv) The port where the goods are initially loaded on a ship or the port where the goods are finally discharged from a ship; or In a competent court or courts designated by an agreement between the shipper and the carrier for the purpose of deciding claims against the carrier that may arise under this Convention.

Alternatively, cargo interests can, pursuant to Article 75, initiate arbitration 70 proceedings against carriers in a place designated for that purpose in the arbitration agreement or in one of the listed places that are identical to those provided in Article 66. 123 [2010] 1 Lloyd’s Rep 193 (CA). 124 (Case C-185/07) [2009] ECR I-663. 125 This line of thinking was later sought to be extended in West Tanker Inc v. Allianz SpA. There, the question was whether arbitrators had jurisdiction to award equitable damages for breach of an arbitration agreement. Flaux J held that, given the arbitration exception under the Regulation, the Regulation was not an obstacle for arbitrators to award damages for such breaches. See [2012] EWHC 854 (Comm.).

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The key exception to the right to choose the forum arises in the case of a volume contract between the shipper and the carrier. Thus, forum selection agreements contained in a volume contract are binding upon the original parties provided that a number of formal requirements provided in the rules are satisfied. 72 Article 67(1) provides that jurisdiction agreements will be binding between the parties to such contracts only if the parties so agree and the jurisdiction agreement satisfies the following requirements: 71

a)

b)

73

It must be contained in a volume contract126 that clearly states the names and addresses of the parties and either (i) is individually negotiated or (ii) contains a prominent statement that there is an exclusive choice of court agreement and specifies the sections of the volume contract containing that agreement, and It must clearly designate the courts of one Contracting State or one or more specific courts of one Contracting State.

Similarly, pursuant to Article 75(3), an arbitration agreement will be binding upon the parties to the agreement if the agreement is contained in a volume contract that satisfies the following formal requirements: a) b)

Names and addresses of the parties must be clearly stated; and It is individually negotiated or it contains a prominent statement that there is an arbitration agreement and specifies the sections of the volume contract containing the arbitration agreement.

Although comprehensive, application of the formal requirements for the enforcement of forum selection clauses in volume contracts may not be as straightforward as it might at first seem. This is particularly true of the requirement that original parties to the volume contract must either negotiate the exclusive forum selection agreement or make a “prominent” reference to such an agreement. The practical difficulty in applying this requirement is that the issue of what constitutes “prominent” will be bound up with the factual circumstances of the case. One of the key considerations for the courts will be whether a forum selection clause incorporated into a volume contract through words of incorporation in the volume contract can make the reference “prominent” for the purposes of enforcement of the forum selection clause. The requirement for a “prominent” reference will thus create further diversity between the courts in different contracting states on the enforcement of forum selection clauses in volume contracts under the Rotterdam Rules.127 75 Pursuant to Articles 67(1) and 75(4) of the Rotterdam Rules, it is possible for a forum selection agreement in a volume contract to be binding upon a person that is not a party to the volume contract. Application of such forum selec74

126 See also Article 3, which states that the volume contract must also be in writing. Under this article, electronic communications are also treated as in writing provided that the use of such means is with the consent of the person by which it is communicated and of the person to which it is communicated. 127 For further discussions on this see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), p. 189.

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tion agreements to third parties is recognised in cases where the designated forum is situated in one of the listed places below:128 (i) (ii) (iii) (iv)

the domicile of the carrier; the place of receipt agreed in the contract of carriage; the place of delivery agreed in the contract of carriage; or the port where the goods are initially loaded on a ship or the port where the goods are finally discharged from a ship.

Other requirements are that the forum selection agreement should be ex- 76 pressly provided in the transport document129 or electronic transport record130 and that the third party should be “timely” and “adequately” informed regarding the exclusivity of the agreement and the designated forum. As regards arbitration agreements, the rules further require that enforcement of such agreements against third parties be permitted under the applicable law.131 In the case of jurisdiction agreements, the additional requirement is that the court seised should recognise application of the agreement to the third party.132 As with other formal requirements for the enforcement of forum selection 77 agreements under the Rotterdam Rules, these requirements also appear to cast a cloud of uncertainty over this matter. The courts in various jurisdictions may certainly have different views on whether a notice of the forum selection clause given to the third party was “timely” and “adequate”. Also the rule that a jurisdiction agreement cannot be binding upon a third party if the court seised recognises the binding effect of the agreement gives rise to even more problems in two respects. Firstly, having experienced the abusive litigation tactics due to the “first-seised rule” under the Regulation, this rule encourages forum shopping and exacerbates jurisdictional conflicts. Secondly, if the EU were to ratify the Rotterdam Rules, this rule would clearly contradict the exception to the “firstseised rule” under Article 31(1) of the Recast Regulation. In the case of non-liner transportation,133 the Rotterdam Rules considerably 78 relieve carriers of the burden of having to satisfy the formal requirements discussed above. Where a carrier seeks to enforce an arbitration clause that is incorporated from a charterparty, or a similar contract, into a transport document, such as a bill of lading, the carrier can avoid the requirements and enforce the charterparty arbitration clause against the “holder”134 if: a) b)

the parties to the charterparty, or the similar contract, and the date of its making are stated in the transport document, and the arbitration clause is expressly referred to in the transport document.

128 For arbitration agreements, see Article 75(2)(b) and for jurisdiction agreements, see Article 66(a) of the Rotterdam Rules. 129 For the definition of transport document, see Article 1(14) of the Rotterdam Rules. 130 For the definition of electronic transport record, see Article 1(18) of the Rotterdam Rules. 131 See Article 75(4)(d) of the Rotterdam Rules. 132 See Article 67(2)(d) of the Rotterdam Rules. 133 See Article 1(3) and (4) of the Rotterdam Rules. 134 See Article 1(10) of the Rotterdam Rules.

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Where the transport document does not have the required content, the arbitration agreement in that document will be subject to the general formal requirements discussed above. Considering the position of holders both in liner and non-liner transport, it is difficult to justify why a carrier in liner trade can enforce an arbitration clause against a bill of lading holder in liner trade more readily than a holder in non-liner trade. One may expect that the position of the latter should equally raise concerns, given that holders do not generally have any means of knowing the terms of the charterparty referred to in the bill of lading.135 b) Jurisdiction Agreements entered into after a Dispute has arisen

Under Article 75 of the Rotterdam Rules, where parties enter into a jurisdiction agreement after a dispute has arisen, that jurisdiction agreement shall be binding upon the parties provided that the chosen court is a “competent court”.136 Pursuant to Article 1.30 of the rules, a competent court means a court in a contracting state that, according to the rules on the internal allocation of jurisdiction among the courts of that state, may exercise jurisdiction over the dispute. Furthermore, where a defendant appears before a competent court without contesting the jurisdiction in accordance with the rules of that court, the court will have jurisdiction. Both of these rules on jurisdiction would appear to take precedence over Articles 66 and 67 of the Rotterdam Rules on actions against carriers and jurisdiction agreements. It is not clear whether Article 75 can equally take precedence over Articles 76 and 77, which talk of arbitration agreements and arbitration agreements in non-liner transportation, respectively. 81 The Rotterdam Rules are also not clear as to whether parties who entered into an arbitration agreement after a dispute has arisen (a “submission agreement”) can equally be bound by their agreement regardless of the provisions in Chapter 15 on arbitration. In the absence of any provision on this matter, the answer to this question would perhaps be decided by reference to the arbitration laws of the Contracting States. Under English law, a submission agreement would be binding upon its parties.137 80

C. Conflict of Laws 82

Where a court of a Member State assumes jurisdiction related to a maritime dispute, involving conflict of laws, two main instruments guide the court

135 See M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), p. 189. 136 See Articles 72(1) and 1.30 of the Rotterdam Rules. 137 Under English law, submission agreements can be express or implied. See The Amazonia [1990] 1 Lloyd’s Rep 236 (CA), 244; Gulf Import & Export Co v. Bunge [2008] 1 Lloyd’s Rep 316 (QBD).

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through the process of determining the law applicable to the dispute:138 Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) and Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 (Rome II). Where a maritime dispute, involving a conflict of laws, is based on a non- 83 contractual obligation, the provisions on conflict of laws in Rome II can find room for application. Temporal application of Rome II was not clear given the two seemingly irreconcilable provisions in Articles 31 and 32 of Rome II. Following Homawoo v. GMF Assurance SA, it became clear that Rome II was only applicable to “events” giving rise to the damage in question that occurred on, or after, 11 January 2009.139 In the case of a maritime dispute that involves a conflict of laws related to contractual matters, either the conflict of laws rules in the Rome Convention or those in Rome I will in principle apply to such a dispute. As regards contractual disputes arising from contracts entered into before 17 December 2009, the Rome Convention will be applicable, while those arising from contracts made after that date will be governed by the conflict of law rules in Rome I.140 Application of these EU instruments is somewhat wider than that of the Regulation and the Recast Regulation. The court of any Member State applies the instruments even where parties are domiciled outside the EU or choose the laws of a non-Member State as the law governing their disputes. 1. Determining the Law applicable to Contractual Obligations

Under Article 1(1) of Rome I, the rules apply “in situations involving a con- 84 flict of laws to contractual obligations in civil and commercial matters”.141 Pursuant to Article 1(2) of Rome I, disputes related to a number of issues are excluded from the scope of application of Rome I. Of these issues, the most relevant is “obligations arising under bills of exchange, cheques and promissory notes and other negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character”.142 Whether the disputes under bills of lading were covered by this exception was 138 On the question of how an arbitrator sitting in London is to decide the law governing the dispute, see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), Chapter 1. 139 [2010] EWHC 1941. 140 See fn. 11. 141 For a comparison, see Article 1 of the Rome Convention, which refers to “any situation involving a choice between the laws of different countries”. 142 See Article 1(2)(d). For other exclusions, see for instance Article 1(2)(i) of Rome I, which talks of “obligations arising out of dealings prior to the conclusion of a contract”. Whether disputes as to pre-contractual obligations came within the Rome Convention was unclear, as there was no provision on this matter. See also Article 1(2)(j), which excludes specific types of life insurance contracts. Except for the cases of insurance contracts covering a “large risk”, Rome I affords some protection to assureds in other types of insurance contracts. For the definition of “large risk”, see Article 5(d) of the First Council Directive 73/239/EEC of 24 July 1973. See Article 7(2) of Rome I.

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not clear under the Rome Convention, particularly since bills of lading are treated as negotiable instruments in some Member States. With the additional provisions in Recital 9 of Rome I, it is now clear that the exclusion applies to bills of lading only “to the extent that the obligation under the bill of lading arises out of its negotiable character”.143 85 Pursuant to Article 1(2)(e) of Rome I,144 the rules are not applicable to “arbitration agreements and agreements on the choice of court”. Thus, English courts apply the conflict of laws rules at common law to the question of validity of arbitration and jurisdiction agreements. At English common law, party autonomy is principally adopted: the law chosen by the parties need not have any connection with the parties or their contract.145 Parties’ choice of law is upheld to the extent that doing so is not contrary to the English mandatory rules and public policy.146 Hence, when deciding whether to uphold an implied147 or express choice of law, no specific account is given to the reasonableness of the choice of law or to the inequality of bargaining power between the parties. a) Choice of Law 86

As with English common law, party autonomy is also principally accepted in Rome I. Article 3(1) provides that the law chosen by the parties to a contract shall govern the contract. The choice can be either express or implied. For an implied choice of law, parties’ choice must be “clearly demonstrated by the terms of the contract or the circumstances of each case”.148 In the Rome Convention, the implied choice of law is described as a choice of law that is

143 To cover those non-contractual disputes arising under such documents, a similar provision is also provided in Article 1(1)(c) of Rome II. 144 For the same exclusion see, Article 1(2)(d) of the Rome Convention. 145 Vita Food Products Inc v. Unus Shipping Co Ltd [1939] 63 Ll L Rep 21 (HL), 28. In the absence of an implied or express choice of law, the contract is governed by the law of the country with which it is more closely connected, see Bonython v. Commonwealth of Australia [1951] AC 201 (PC). 146 The Hollandia [1983] 1 AC 565 (HL), where the House of Lords struck down the choice of law clause in a bill of lading providing for Dutch law on the basis of Article III(8) of the Hague-Visby Rules. 147 Regarding the implied choice of law, see the decision in Compagnie Tunisienne de Navigation SA v. Compagnie d’Armement Maritime SA [1970] 2 Lloyd’s Rep 99 (HL), where their Lordships took the view that, where parties enter into a forum selection agreement, their choice of forum could be taken as an implied choice of the law of that forum. They further held that, although persuasive, forum selection agreements were not decisive on the question of governing law. Parties’ use of standard contracts may also be taken as an implied choice of law, see Amin Rasheed Shipping Corporation v. Kuwait Insurance Co [1983] 2 Lloyd’s Rep 365, 369 (HL). English courts have also drawn an inference that interrelated contracts are intended to be governed by the same applicable law, see The Njegos [1936] P 90, 100; The Elli 2 [1985] 1 Lloyd’s Re 107 (CA); Egon Oldendorff v. Libera Corporation [1996] 1 Lloyd’s Rep 380 (QBD); The SLS Everest [1981] 2 Lloyd’s Rep 389, 392 (CA). For a criticism of this rule, see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), Chapter 1. 148 See Article 3(1) of Rome I.

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“demonstrated with reasonable certainty by the terms of the contract or the circumstances of each case”.149 “Reference” in Article 3(1) is taken as a reference to the law of a country.150 87 Thus, in Shamil Bank of Bahrain EC v. Beximco Pharmaceuticals Ltd, the parties’ reference to Sharia law could not be given effect to.151 Similarly, in Dubai Islamic Bank v. PJSC Energy Holding BSC, the choice of English law “save in so far as inconsistent with the principles of Sharia Law” was also held to be of no effect.152 However, it is possible for parties to incorporate a specific set of rules, such as foreign legislation, into their contracts. However, incorporation of foreign legislation, such as the US Carriage of Goods by Sea Act 1936, is not taken as an implied choice in favour of that foreign law in general.153 On implied choice of law, the decision in Egon Oldendorff v. Libera Corp,154 88 is illustrative. There, the arbitration clause providing for London arbitration was held to “demonstrate with reasonable certainty” the parties’ choice of English law. Similarly, in Gan Insurance Co Ltd v. Tai Ping Insurance Co Ltd, the parties’ use of reinsurance clauses that were commonly used in the London reinsurance market was held to demonstrate with reasonable certainty the parties’ choice of English law.155 An express choice of law in one of two interrelated contracts can demon- 89 strate an implied choice of law for the other contract. In Global Distressed Alpha Fund 1 Ltd Partnership v. PT Bakrie Investindo, there were two connected contracts:156 a charterparty and a guarantee given for the charterer’s performance of the charterparty. Considering the express choice of English law made under the charterparty, Teare J held that parties to the guarantee had chosen, albeit implicitly, English law to govern the guarantee. In support of this finding, Teare J said:157 Since the guarantee purported to guarantee obligations is expressly governed by English law and subject to English jurisdiction, I consider that the reasonable and objective inference to be drawn from the circumstances of the case is that the parties to the guarantee … impliedly chose English law as the applicable law of the guarantee.

149 See Article 3(1) of the Rome Convention. 150 However, arbitration laws of many countries allow parties to choose a non-national system of law, such as lex mercatoria to govern their disputes. For English arbitration law on this matter, see s 46(1)(a) of the English Arbitration Act 1996. 151 [2004] EWCA Civ 19. 152 [2013] EWHC 3186 (Comm.). See also the decision in The Iran Vojdan [1984] 2 Lloyds’ Rep. 380 (QBD), where it was held that “floating choice of law” clauses are also of no effect. 153 See The Stolt Sydness [1997] 1 Lloyd’s Rep 273 (QBD). 154 [1996] 1 Lloyd’s Rep. 380 (QBD). 155 [1999] CLC 1270 (CA). 156 On the application of this line of thinking in the context of bills of lading incorporating charterparties, see M. Ozdel, Bills of Lading Incorporating Charterparties (London: Hart Publishing, 2015), Chapter 1. 157 [2011] EWHC 256 (Comm), para. 170.

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Pursuant to Article 10 of Rome I, the material validity of a contract, or of any term of a contract, is to be decided pursuant to the law that would govern if the contract or the term therein were valid. Under Article 10(2), there is an exception to the application of this putative reasoning: the application of the putative applicable law can be set aside when it is established that (a) it is unreasonable to apply the putative applicable law to the issue of contract formation; and (b) the parties have not consented to be bound by such a contract or term. 91 In The Epsilon Rosa,158 the bill of lading holders unsuccessfully relied on this exception when seeking to prevent the incorporation of a charterparty arbitration clause into the bill of lading. The arbitration clause providing for arbitration in London carried with it an implied choice of English law. Steel J took the view that applying the putative proper law of the bill of lading, namely English law, to the question of incorporation was not unreasonable, although the bill of lading holders did not even have a chance to see the terms of the charterparty referred to. He further stated that the arbitration clause was not, contrary to the holders’ submission, unreasonable, given the wide use of arbitration clauses in charterparties. To support the application of the putative proper law to the question of incorporation, Steel J relied on Article 8(1) of the Rome Convention, which now has its counterpart in Article 10(1) of Rome I.159 90

b) Restrictions on Party Choice 92

Although party autonomy is principally accepted in Rome I, there are certain exceptions. Article 3(3) of Rome I provides that: Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which “cannot be derogated from by agreement”.160

93

As is clear from the wording, this limitation on party choice is relevant in cases where a dispute is not connected with more than one state. By Article 3(4), parties’ freedom of choice of the law of a country is also subject to limitation in cases where all elements relevant to the situation at the time of the choice are located in one or more Member State. The parties’ choice of that law will not prejudice the application of provisions of Community law, where appropriate in the Member State of the forum, which cannot be derogated from by agreement. While both Article 3(3) and 3(4) talk of rules that cannot be derogated from by agreement, Article 9 talks of “overriding mandatory provisions”. Overriding mandatory provisions are defined in Article 9(1) and, by Recital 37 of Rome I, 158 [2002] 2 Lloyd’s Rep 701 (QBD). 159 Steel J did not err in applying the putative proper law of the bill of lading to the question of incorporating arbitration clauses into bills of lading. However, his reliance on the Rome Convention was, with respect, at odds with the fact that arbitration and choice of court agreements were excluded from the scope of the Rome Convention. 160 This phrase can be taken to mean “mandatory rules”, such as Article III(8) of the HagueVisby Rules.

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they are interpreted more restrictively then those rules that cannot be derogated from by agreement. Under Article 9(2), parties’ freedom of choice of law is made subject to 94 overriding mandatory provisions of the law of the forum. By Article 9(3),161 the court before which a dispute has been brought is also given discretion to apply overriding mandatory rules of a third country where the contract is to be performed or has been performed, insofar as the overriding mandatory provisions render the performance unlawful.162 c) In the Absence of a Choice of Law

Where parties have not chosen the law of a country to govern their contracts 95 pursuant to Article 3, Article 4(1) provides a set of rules163 to determine the law applicable to specific types of contract. In the case of a contract for the sale of goods, the law governing that contract will be the law of the country where the seller has his habitual residence. Where a contract cannot be brought within those rules set out in Article 4(1) or where the elements of the contract are covered by more than one of the rules therein, Article 4(2) finds room for application: the applicable law of that contract will be “the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence”. On the question of what constitutes characteristic performance, the decision in Bank of Baroda v. Vysya was illustrative.164 There, the court held that, in the case of letters of credit, the characteristic performance is the performance of the bank that issues the letter of credit. Characteristic performance is generally taken to mean the performance for which payment is due.165 This line of thinking is not, however, of assistance in reinsurance contracts: in such cases, characteristic performance is considered to be that of the re-insurer, who promises to make a payment when an insured risk occurs.166

161 This rule is also applicable at English common law. See Regazzoni v. KC Sethia [1958] AC 301 (HL). 162 This provision is similar to Article 7(2) of the Rome Convention. A much wider version of Article 9(3) is found in Article 7(1) of the Rome Convention. Article 7(1) had the effect of limiting party autonomy in cases where the parties’ choice of law prejudices the law of a third country with which the dispute has a close connection. This provision was not in force in the UK and many other Member States. 163 In the Rome Convention, the concept of presumptions was in use when setting out the rules in the absence of choice of law. See Article 4 of the Rome Convention. 164 [1994] 2 Lloyd’s Rep 87 (QBD). 165 For further discussions on this issue, see L. Collins, Dicey, Morris and Collins on the Conflict of Laws (London: Sweet & Maxwell, 2014), para. 32-075. 166 Dornoch Limited v. The Mauritius Union Assurance Company Limited [2006] EWCA Civ 389.

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Article 4(3) goes on to state that the rules above are not applicable to cases where it is “clear”167 from all the circumstances that the contract is “manifestly” more closely connected with a country other than those indicated in subsections (1) or (2). In such cases, the law of the country with which the contract is “manifestly”168 more closely connected will be the law applicable to that contract. Under Article 4(4), where the law applicable to a contract cannot be determined pursuant to subsections (1) or (2), the contract will be governed by the law of the country with which it is most closely connected. d) Rules on Contracts of Carriage

97

On determining the governing law of a maritime dispute, Article 5 Rome I is of particular assistance. The provision sets out special rules for contracts of carriage of goods and carriage of passengers. As regards a contract of carriage of goods that does not contain an implied or express choice of law, Article 5(1) provides that: the law applicable shall be the law of the country of “habitual residence”169 of the carrier, provided that the place of receipt or the place of delivery170 or the habitual residence of the consignor is also situated in that country.

Given that contracts of carriage of goods by sea are, almost in all cases, connected to more than one state, the requirements stated in the rule can hardly be met in practice. Article 5(1) further provides that where the requirements are not met, the contract of carriage will be governed by the law of the country where the place of delivery as agreed by the parties is situated.171 99 Unlike the Rome Convention, Rome I also provides rules to determine the law applicable to contracts for the carriage of passengers. Article 5(2) gives par98

167 Under the Rome Convention, there was no specific requirement that the “manifest” connection must be “clear” from all the circumstances. However, following the decision in Intercontainer Interfrigo SC (ICF) v. Balkenende Oosthuizen BV (Case C-133/08) [2009] ECR I-9687, it became clear that Article 4(5) of the Rome Convention, which now has its counterpart in Articles 4(3) and 4(4) of Rome I, should be interpreted to that effect. 168 The Rome Convention used the expression “if it appears from the circumstances as a whole that the contract is more closely connected with another country”, while Article 4(3) of Rome I speaks of a “manifestly close connection”. The additional word “manifestly” suggests that the threshold for the application of Article 4(3) of Rome I is higher than that of Article 4(5) of the Rome Convention. 169 Under Article 4(4) of the Rome Convention, the reference was to the “principal business of the carrier”. 170 Considering the rise of multimodal carriage of goods, the provision refers to the places of receipt and delivery, as opposed to the places of loading and discharge, as referred to in Article 4(4) of the Rome Convention. 171 For comparison, see Article 4(4) of the Rome Convention. Unlike Article 4(4) of the Rome Convention, Article 5(1) of Rome I sets out a rule applicable in cases where the country of habitual residence of the carrier is not situated in one of the listed places. Secondly, the Rome Convention contains a sentence on what constitutes a contract of carriage for the purposes of application of the rules. It states that it applies also to “single voyage charterparties and other contracts the main purpose of which is the carriage of goods”.

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ties a limited freedom to choose the law applicable to their contracts. For the choice of law to be effective, the chosen law must be the law of a country where: a) b) c) d) e)

the passenger has his habitual residence; or the carrier has his habitual residence; or the carrier has his place of central administration; or the place of departure is situated; or the place of destination is situated.

In the absence of a choice pursuant to the rule above, Article 5(2) further 100 states that the contract will be governed by the law of the country where the passenger has his habitual residence, provided that either the place of departure or the place of destination is situated also in that country. Where these requirements cannot be met in the circumstances, the applicable law of the contract will be the law of the country where the carrier has his habitual residence. Pursuant to Article 5(3), where it is clear from all the circumstances that the contract, in the absence of a choice of law, is manifestly more closely connected with a country other than that indicated in subsections (1) or (2), the law of that country will apply to the contract. In principle, the rules in Article 5 apply to all types of contract of carriage. 101 The exception to this is Article 6(4)(b), which states that the rules in Article 6, on consumer contracts, will apply to contracts of carriage related to package travel within the meaning of Council Directive 94/47/EC. For the purposes of the application of this directive, “package” means: the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than twenty-four hours or includes overnight accommodation: (a) transport; (b) accommodation; (c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package. The separate billing of various components of the same package shall not absolve the organiser or retailer from the obligations under this Directive.172

Thus, if a passenger concludes a contract of carriage that comes within the 102 scope of application of the directive, the conflict of laws rules in Article 6, not those in Article 5, will be applicable. When determining the law governing contracts of carriage of passengers, it is also essential to consider the effects of international conventions on the carriage of passengers.173 Under Article 25, Rome I gives priority to the application of international conventions to which one or more Member States are parties at the time the Rome I is adopted and which lay down conflict of laws rules relating to contractual obligations. In addition to international conventions, various EU instruments also regulate con-

172 See Article 2(1) of the directive. See also Pammer v. Reederi Karl Schluter GmbH & Co KG (Case C-585/08) [2010] ECR I-12527. 173 See the Athens Convention on carriage of passengers and their luggage by sea. The protocol of 2002 to the Athens Convention was adopted by the International Maritime Organization on 1 November 2002. The Athens protocol entered into force from 23 April 2014. On the application of the convention as amended by the protocol within the EU, See fn. 175 below.

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tracts for carriage of passengers.174 Undoubtedly, this may trigger the application of Article 23, which provides that Rome I will not prejudice the applications of Community law.175 e) Overarching Limitations to the Application of the Rules in Rome I 103

On the application of the specific rules on conflict of laws in Rome I, the final point to be made is that the rules are subject to a number of overarching limitations. Pursuant to Article 21, a court of a Member State before which a dispute has been brought may refuse to apply the law of a country specified by Rome I in cases where such application is manifestly incompatible with the public policy (ordre public) of the forum. Furthermore, Rome I shall not prejudice the application of provisions of Community law and international conventions, as described in Articles 23 and 25 respectively. 2. Determining the Law applicable to Non-Contractual Obligations

In the case of a dispute arising from a non-contractual obligation, the rules of conflict of laws are mainly drawn from Rome II. As stated earlier, Rome II applies to “events” giving rise to damages that occurred on, or after, 11 January 2009.176 The general rule for determining the governing law is found in Article 4(1) of Rome II. 105 After 1 November 1996, but prior to the entry into force of Rome II, English courts were principally guided by the Private International Law (Miscellaneous Provisions) Act 1995 (1995 Act) when determining the law governing disputes relating to tort, delict or quasi delict.177 The main purpose of the act was to abolish the “double actionability rule”. Pursuant to this rule, a tort committed in a foreign country was only actionable in cases where the act would have given rise to a liability in tort if it had been committed in England.178 The scope of application of Rome II is much wider than that of the 1995 Act. By Article 2(1), Rome II applies to damages arising out of tort/delict, unjust enrichment, negotiorum gestio or culpa in contrahendo. Rome II also applies to the issue of assessment of damages. Under the 1995 Act, this issue was treated as procedural and was thus governed by lex fori.179 The 1995 Act still applies to non-contractual obligations falling outside the scope of Rome II. Prior to the entry into force of the 1995 Act, the courts’ main guidance was the conflict of laws rules at Eng104

174 The text of the Athens Convention as amended by the Protocol of 2002 has been implemented by Regulation (EC) No 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents. Since 31 December 2012, the convention has become mandatory for Member States. See Article 12 of the Regulation. 175 See also Recital 40 of Rome I. 176 See Homawoo v. GMF Assurance SA [2010] EWHC 1941. 177 See s. 9 of the 1995 Act. 178 See Philips v. Eyre (1870–71) LR 6 QB 1. 179 Harding v. Wealands [2006] UKHL 32.

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lish common law. These rules may also find room for application in the case of a non-contractual obligation falling outside both Rome II and the 1995 Act. Article 4(1) provides that the law applicable to a non-contractual obligation arising out of a tort/delict will be the law of the country in which the damage “occurs”. This rule applies irrespective of the fact that the event that gave rise to the damage or the indirect consequences of that event occurred in a different country. However, by Article 4(2), where both parties to such a dispute have their habitual residence in the same country at the time when the damage occurs, the law of that country will apply to the dispute. Given the reference to “the law of a country”, Rome II does not apply to torts committed on the high seas.180 Rome II provides specific rules for certain types of non-contractual obligation,181 ranging from environmental damage,182 through to unjust enrichment.183 Party autonomy is also recognised in Rome II, although its application is much more restricted than that under Rome I. Pursuant to Article 14(1)(a), parties can agree to submit non-contractual obligations to the law of their choice by an agreement entered into after the event giving rise to the damage that has occurred. By Article 14(1)(b), the application of party autonomy is restricted in cases where parties choose the law of a country to govern their non-contractual obligation before the event giving rise to the damage: their choice of law will only be effective if all the parties are pursuing a commercial activity. Article 14 further provides that the choice must in any case be expressed or demonstrated with reasonable certainty. On the question of the extent to which the parties’ choice of law can be binding upon third parties, Article 14(1) also states that their choice of law will not prejudice the rights of third parties. This rule raises the further question of whether the consignee or endorsee of a bill of lading should be treated as a third party for the purposes of application of this rule. So far as English law is concerned, these parties cannot properly be treated as such, given the effect of s. 2(1)(a) of the English Carriage of Goods by Sea Act 1992: the transferee of an order bill of lading is vested in “all rights of suit under the contract of carriage as if it had been party to that contract”. On freedom of choice, Articles 14(2) and 14(3) of Rome II provide limits on choice of law similar to those in Articles 3(3) and 3(4) of Rome I. Under Article 14(2), where all the elements relevant to the situation at the time when the event giving rise to the damage occurs are located in a country other than the country whose law has been chosen, the parties’ choice of law will not prejudice the application of provisions of the law of that other country that cannot be derogated from by agreement. Furthermore, pursuant to Article 14(3), those provisions of 180 L. Collins, Dicey, Morris and Collins on the Conflict of Laws (2014), para. 35-017. 181 Non-contractual obligations arising out of defamation are not covered by Rome II, see Article 1(1)(g). 182 Article 7 of Rome II. 183 See Article 10 of Rome II.

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Community law, where appropriate as implemented in the Member State of the forum, that cannot be derogated from by agreement will triumph over the parties’ choice of law, where all the elements relevant to the situation at the time when the event giving rise to the damage occurs are located in one or more of the Member States. 110 As with Rome I, there are overarching limitations to the application of the conflict of laws rules in Rome II. Rome II shall not prejudice the overriding mandatory provisions184 and public policy185 of the forum, as well as the application of provisions of Community law and international conventions as described by Articles 27 and 28, respectively. D. Conclusion 111

Maritime disputes are in almost all cases connected to more than one state. This leaves parties to such disputes with the major issues of competent forum and applicable law. Substantial aspects of these issues are now regulated by various EU instruments that have recently entered into force. This chapter has discussed the key steps in finding the competent forum and applicable law, by reference to the three main European regulations, namely the Recast Regulation, Rome I and Rome II.

184 See Article 16. This provision is very similar to that in Article 9 of Rome I. As will be recalled, the overriding mandatory provisions are defined under Article 9(1) of Rome I. This definition should also be relevant for the purposes of application of Article 16 of Rome II. This can be supported by Recital 7 of Rome II, which provides that the substantive scope and the provisions of Rome II should be consistent with the instruments dealing with law applicable to contractual obligations. 185 See Article 26. On the meaning of public policy for the purposes of this provision, see Recital 32 of Rome II.

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III. Seafarers’ Rights and Maritime Employment Contracts in the EU Legal Order A. Introduction to International Maritime Labour Law and the Related EU Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Seafarers’ Recruitment, Training and Working Conditions Within the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. A Single Maritime Labour Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Minimum Standards on Living and Working Conditions. . . . . . . . . . . . 4. Health and Safety at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Economic Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Equal Treatment and Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Employee Information, Consultation and Social Dialogue . . . . . . . . . .

10 12 23 25 28 32 35

B. Promotion of Maritime Employment Within and By the EU . . . . . . . . . . . .

38

C. Linking the Labour Contract Statute in International Maritime Labour Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

D. The Legal Foundations of International Maritime Labour Law . . . . . . . . . 1. Regulation EC/593/2008 (Rome I-Regulation). . . . . . . . . . . . . . . . . . . . . . . a) Linking Principles for Individual Employment Contracts According to Article 8 Rome I-Regulation. . . . . . . . . . . . . . . . . . . . . . . . . aa) Purpose of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Structure of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Application of Article 8 Rome I-Regulation to Maritime Employment Relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The Interplay of the Maritime Labour Convention and Directive 2009/13/EC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Maritime Labour Convention of 2006 . . . . . . . . . . . . . . . . . . . . . . . . b) Directive 2009/13/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Intermediate Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E. Linking Maritime Employment Relationships pursuant to Article 8 Rome I‑Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. ”Subjective” Factors for Linking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Permissibility of Contractual Choice of Law. . . . . . . . . . . . . . . . . . . . . . b) Limitations of the Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Comparison of the Most Favourable Outcome. . . . . . . . . . . . . . . . . . . . 2. ”Objective” Factors for Linking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Current State of Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) No direct Application of the Opt-Out Clause (Article 8(4) Rome I‑Regulation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) The Ship as the Customary Workplace of the Seafarer . . . . . . (1) Assignment of Ships to a State under Public International Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Implications for Conflict of Laws . . . . . . . . . . . . . . . . . . . . . . . . . (a) Binding the European Concept on Conflict of Laws to the Requirements of International Law . . . (b) The Ship as the “Customary” Workplace . . . . . . . . . . (c) The Ship as a Workplace “in a State” . . . . . . . . . . . . . . (aa) Wording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (bb) Comparison with the Jurisprudence of the CJEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) Further Arguments in Favour of Flag State Linkage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (aa) On the same Level as Public Maritime Labour Law and the MLC 2006 . . . . . . . . . . . . . .

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50 50 51 51 52 54 57 58 63 65 66 66 66 67 69 70 71 72 73 74 75 77 77 78 80 81 83 85 85

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Chapter 2, III. (bb) Scrutinising European International Civil Procedure Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 (cc) Case Law and Doctrine in the Member States of the Rome I-Regulation . . . . . . . . . . . . . . 89 cc) Arguments against Using the “from which” Linkage (Article 8(2), first Sentence, second Alternative Rome IRegulation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 (1) Systematic Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 (2) Reasoning Behind the “from which” Linkage . . . . . . . . . . . 93 (3) Remaining Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 dd) Arguments Against Linking to the Business Location Responsible for Hiring (Article 8(3) Rome I-Regulation) . . . 96 (1) Systematic Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 (2) Employee Protection Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . 98 (3) Remaining Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 3. Closer Connection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 4. Extent of the Maritime Labour Contract Statute . . . . . . . . . . . . . . . . . . . . . 105 5. Correction of the Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 F. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

General Literature: Block, Anknüpfung im staatsfreien Raum (2012); Carballo Piñeiro, International Maritime Labour Law (2015); Christodoulou-Varotsi/Penstow, Maritime Work Law Fundamentals (2008); Churchill/Lowe, Law of the Sea (1999); Deinert, Internationales Arbeitsvertragsrecht, JbArbR 50 (2013) pp. 77; Dicey/Morris/Collins, The Conflict of Laws (2006); Drobnig/Puttfarken, Arbeitskampf auf Schiffen fremder Flagge (1989); Egler, Seeprivatrechtliche Streitigkeiten (2011); Graf Vitzthum (ed.), Handbuch des Seerechts (2006); v. Hein, in: Rauscher (ed.), EuZPR/EuIPR (2011), Article 8 Rome I-VO; Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/Pawlik/Neumann (eds.), The Human Element in Container Shipping (2012); Junker, Objektive Anknüpfung (2007); Junker, Internationales Arbeitsrecht im Konzern (1992); Lavelle (ed.), The Maritime Labour Convention 2006: International Labour Law Redefined (2013); Kaye, International Law of Contract (1993); Lorenzon, Safety and Compliance, pp. 339, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Ludewig, Kollektives Arbeitsrecht auf Schiffen (2012); Magnus, in: Staudinger, Kommentar (2011), Art. 8 Rome I-VO; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013); Mankowski, Employment Contracts under Art. 8 of the Rome I Regulation, in: Ferrari/ Leible (eds.), The Rome I Regulation (2009), pp. 171; Mankowski, Seerechtliche Vertragsverhältnisse (1995); Martiny, in: Münchener Kommentar zum BGB (2010), Article 8 Rome I-VO; Max Planck Institute for Comparative and International Privat Law, RabelsZ 68 (2004) pp. 1 (64) and RabelsZ 71 (2007) pp. 225; McConnell/Devlin/Doumbia-Henry, The Maritime Labour Convention, 2006: A Legal Primer to an Emerging International Regime (2011); Morse, Contracts of Employment in the E.E.C. Contractual Obligations Convention, in: North (ed.), Contract Conflicts (1982); Núnez-Müller, Die Staatszugehörigkeit von Handelsschiffen (1994); Plender/Wilderspin, The European Contracts Convention (2001); Plender/Wilderspin, The European Private International Law of Obligations (2009); Oetker, in: Münchener Arbeitsrechtskommentar (2009); Puttfarken, See-Arbeitsrecht (1988); Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO; Staudinger, in: Ferrari et al. (eds.), Internationales Vertragsrecht (2012), Article 8 Rome I-VO; Taschner, Arbeitsvertragsstatut und zwingende Bestimmungen nach dem EVÜ (2003); Winkler v. Mohrenfels/ Block, EAS B 3000 (2010); Yang, Jurisdiction of the Coastal State (2006).

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A. Introduction to International Maritime Labour Law and the Related EU Policies

From the outset, given the global characteristics of maritime transport, EU ac- 1 tion on seafarers, as on other maritime matters, had always to take into account the existence of broader international frameworks and organisations, such as the IMO and the ILO in particular. The EU has used them to further seafarer rights protection within and outside the EU. The negotiation and implementation of the ILO’s Maritime Labour Convention of 2006 (MLC 2006) is a striking example. The MLC 2006 now provides that the State parties will have to ensure that all seafarers and, to the extent provided in national laws, their dependants, have access to social security protection.1 It harmonizes existing basic rules and 68 international working standards for seafarers. In addition, the new instrument consolidated 45 former ILO Conventions to one single Convention. Its first years of operation has been quite successful.2 The aim of the MLC 2006 is to ensure the rights of seafarers during their 2 whole working relationship. The MLC complements other major international conventions and reflects international agreement on only the minimum requirements for working and living conditions for seafarers. Ratifying countries will also have to take steps to achieve comprehensive social security protection for seafarers. Ratifying countries must extend social security treatment not less favourable than, e.g., given to resident shore workers as regards seafarers subject to their social security legislation (including seafarers ordinarily resident in their territory).3 This will provide a certain minimum level of protection for third country seafarers but scope will still exist for improving the quality of this protection by international agreements which could also bring reciprocal benefits to EU nationals employed by third-country shipping companies. The primary aim of this Commentary is to analyse secondary EU legislation 3 on shipping and maritime transport. Thus, a complex modern instrument of public international law such as the MLC 2006 itself will not be commented on specifically.4 Nevertheless, as the MLC 2006 interacts with EU maritime labour law, some general observations on the instrument shall be made in the form of an overview: 1 See further Lorenzon, Safety and Compliance, pp. 356, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 2 See, e.g., Lloyd’s List of 19 August 2015, p. 8 (“MLC two years on: a positive driver for change”). 3 See ILO Regulation 4.5, Standard A4.5 and Guideline B4.5. 4 For further reading see, e.g., Lavelle (ed.), The Maritime Labour Convention 2006: International Labour Law Redefined (2013); McConnell/Devlin/Doumbia-Henry, The Maritime Labour Convention, 2006: A Legal Primer to an Emerging International Regime (2011).

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First, the entry into force of the MLC 2006 required ratification by 30 States representing 33% of the world’s tonnage by flag. These conditions were met in August 2012, allowing the Convention to become effective on 20 August 2013. The EU has actively supported the ratification process by stimulating early endorsement by all EU Member States representing over 26% of the global fleet (accompanied by those of EEA States). At the initiative of the European Commission, in June 2007, the Council adopted a Decision authorising ratification of the Convention by all EU Member States and inviting them to do so by 31 December 2010.5 5 Second, consultations and negotiations between the European Community Shipowners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) were held as foreseen in the labour relations field by Article 154 and 155 TFEU (ex 138 and 139). Agreement was reached between them in May 2008 on the changes needed to up-date EU law by incorporating certain elements more favourable to seafarers than the existing provisions. These concerned working time and young persons. In July 2008, the Commission adopted the proposal necessary to give binding legal effect to the agreement and implementing the necessary changes to existing EU law.6 The Council reached a common position on the proposal in December 2008 and it was formally adopted relatively quickly.7 As a further step, the Commission in 2012 adopted two proposals for legislation on enforcement of the MLC 2006 provisions as transposed into EU law by the competent authorities of the EU Member States as both port and flag States.8 These Directives were adopted in 2013 to become effective at the Convention’s entry into force later in 2013.9 6 In material terms, the MLC 2006 now applies to all seafarers and also to a wide variety of ships, which are commonly in use for commercial functions, whether publicly or privately owned.10 The instrument consists of three major parts, i.e., its articles, the regulations and the codes. The fundamental rights and principles of the MLC 2006 stipulate that every ratifying State has to ensure that its domestic legislation is granting all seafarers the right for a safe work place and decent working and living conditions on a ship. Each ratifying State shall guarantee that its laws and regulations respect the fundamental right to freedom 4

5 OJ L161/63 of 22 June 2007. 6 Proposal for a Council Directive implementing the Agreement concluded by the European Community Shipowners’ Association and the European Transport Workers’ Federation on the Maritime Labour Convention 2006 and amending Directive 1999/63/EC, COM(2008)422 final, 2 July 2008. 7 Directive 2009/13, OJ L124/30 of 20 May 2009. 8 COM/2012/129 final and COM/134 final of 28 March 2012; see OJ C/2012/174/4 of 16 June 2012. 9 Directive 2013/54/EU of 20 November 2013 concerning certain flag State responsibilities for compliance with and enforcement of the Maritime Labour Convention, 2006, OJ L329/1 of 10 December 2013; and Directive 2013/38/EU of 12 August 2013 amending Directive 2009/16/EC on port State control, OJ L218/1 of 14 August 2013. 10 However, it is not applicable with regard to ships engaged in fishing or in similar practices, traditional ships like shows and junks, or warships and naval auxiliaries.

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of association and the right concerning the elimination of any form of forced or compulsory labour, child labour or discrimination in respect of employment and occupation. Seafarers also have the right for social protection which includes health protection and medical care. The code includes all details relating to the implementation of the regulations. 7 Part A includes legally binding standards for all ratifying countries, Part B comprises non-binding standards. The non-binding standards also advise on an effective implementation of the binding regulations. The regulations and the code arrange standards for working- and living-conditions on board a ship. They are divided in five titles: Title 1 determines the minimum requirements for seafarers to work on a ship, Title 2 provides the conditions of employment, Title 3 includes rules on accommodation, recreational facilities, food and catering, Title 4 regulates health protection, medical care, welfare and social security protection. Title 5 completes the instrument with rules on compliance and enforcement of the MLC 2006. In principle, the MLC is applicable to all vessels subject to regular checks of 8 working and living conditions for seafarers. Even if a vessel’s flag State has not ratified the MLC 2006, the instruments incorporates the well-established “no more favourable treatment” principle as an important element to ensure fair competition of shipowners complying with the MLC 2006. As a result, maritime labour law-related vessel inspections emerges as a new pillar of the existing international framework for Port State Control. Via its Directive 2013/38/EU11 – amending the intra-EU framework on Port State Control – the EU has reacted to this international development. Finally, vessels over 500 gross tonnage are legally obliged to have specific 9 documents on board, the Maritime Labour Certificate and a Declaration of Maritime Labour Compliance (DMLC). The DMLC consists of two parts and needs to be added to the Maritime Labour Certificate. The DMLC refers to the national rules on implementation of the MLC 2006 for working and living conditions on board the ship, specifically, minimum age, medical certification, qualifications of seafarers, hours of work or rest, food and catering. Part I of the Declaration is to be prepared by the flag State. Part II should be drawn up and maintained by the company for every ship. It shall identify the measures adopted by the company to comply with the MLC 2006. Thus, the purpose of the DMLC is to evidence conformity with the MLC standards, second, to support the PSC inspectors in controlling the required (domestic) implementation of its Rules. 1. Seafarers’ Recruitment, Training and Working Conditions Within the EU

From an early date, the EU’s development of a common transport policy 10 included social objectives, as one would expect of a programme first conceived 11 Directive 2013/38/EU of 12 August 2013 amending Directive 2009/16/EC on port State control, OJ L218/1 of 14 August 2013.

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largely in the 1960s. In the maritime sector, policy development and debate was conditioned by a particular phenomenon to which other transport modes were not subjected: This is continuous “flagging out” of merchant shipping to maintain or improve competitiveness by cost reduction, not least the cost of labour. Only in the last decade has this trend been brought to an end on the basis of the current Commission guidelines on State aid regimes and replaced by one of modest expansion, though as yet without significant improvement in employment creation.12 That regime allows the Member States to reduce the levels of taxation and social security payments applicable to the sector to competitive levels with those of other countries. 11 Another factor of considerable importance since the adoption of measures to create a single shipping market in the late 1980s and early 90s has been the emphasis given to maritime safety with the adoption of a series of measures for the most part giving binding legal force to international standards, notably those of the IMO and ILO. Many of these specifically protect seafarers, such as the mandatory implementation of ILO maritime labour standards and the IMO standards on training, certification and watchkeeping (STCW).13 Other measures – by raising the level of maritime safety in general – also bring benefits to those employed in the sector. All in all, EU law and policy on the social dimension of the maritime sector can be structured as follows: – The realisation of a single maritime labour market based on free circulation of seafarers; – the setting of minimum standards for living and working conditions, in particular, as regards the protection of seafarers’ economic interests; equal treatment and non-discrimination; and health and safety, taking into account the specific characteristics and risks of employment at sea; – employee information, consultation, social dialogue and collective bargaining; – recognition and development of the international framework for employee relations, particularly in the ILO and the IMO; and – the promotion of maritime employment. 2. A Single Maritime Labour Market 12

Formal regulatory barriers to the proper functioning of a maritime labour market were already addressed early. As long ago as 1974, the CJEU ruled that nationality requirements could not be opposed to citizens from other Member States seeking employment on EU-flagged vessels.14 Even the fact that the Treaty in Articles 58 and 90 TFEU (ex 51 and 80) made provision for the Council to adopt measures for the development of a common transport policy and this

12 OJ C 13/3 of 17 January 2004. 13 Directive 2001/25/EC, OJ L136/17 of 18 May 2001. 14 Commission v. French Republic, 167/73; ECR 1974, p. 359.

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action had not yet begun, the interdiction in Article 18 TFEU (ex 12) on all discrimination on grounds of nationality was a “general provision” having direct effect in all economic sectors. The CJEU has more recently confirmed that the interdiction applies even to 13 the master and first officer unless they exercise functions of a public authority regularly and to substantial degree in accordance with the settled interpretation of Article 45 (4) TFEU (ex 39).15 This is normally not the case. According to settled case law, the other fundamental provisions of the TFEU on free movement of workers also apply to the maritime sector. Even if activities are carried out outside the territory of the EU, the provisions continue to apply, provided that the legal employment relationship can be located within the territory or retains a sufficiently close relationship with it.16 Important legislation was adopted in the 1960s and last updated in 2004,17 the 14 CJEU again playing an important role. The principle of equality of treatment formed the basis for an extensive assimilation of the conditions of employment for workers from other Member States to those of nationals, subject only to limited and well-defined exceptions. But the elimination of formal restrictions and discriminatory provisions was of course only a first step in the creation of a cross-frontier labour market. Measures of a more positive character were needed to make it in practice possible for persons educated, trained and initially established in one EU State to find employment with enterprises governed by the laws of another or established there. Such measures have been taken in the maritime sector as regards recognition of professional qualifications and social security.18 In 2005, building on the mandatory implementation of the IMO’s STCW,19 15 undertaken initially for safety reasons, a Directive was adopted to ensure mutual recognition of seafarers’ certificates issued by Member States in conformity with those standards.20 The Council resolution on safe seas of 199321 set the objective of removing sub-standard crews and gave priority to action aimed at enhancing training and education by developing common standards for minimum training levels for key personnel, including a common language on board Community vessels.

15 Colegio de Oficiales de la Marina Mercante Espanola, 405/1; ECR 2003, I-10391 and Anker e.a., 47/2, ECR 2003, I-10447. 16 Mario Lopes da Veiga, 9/98; ECR 1989, 2989, para. 15. 17 Directive 2004/38/EC on the right of citizens of the Union and members of their families to circulate and stay on the territory of the Member States, modifying Regulation 1612/68 and replacing Directive 68/630 and other earlier measures, OJ L158/77 and 30 April 2004. 18 Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), p. 53. 19 Lorenzon, Safety and Compliance, pp. 352, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 20 Directive 2005/45/EC, OJ L255/160 of 30 September 2005; see generally Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), p. 53. 21 OJ C 271/1 of 7 October 1993.

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In 1994, a first Council Directive was adopted on the minimum level of training of seafarers incorporating into EU law the standards of the 1978 IMO STCW Convention.22 In 1998, a second Directive updated the legislation to reflect the 1995 revision of the STCW Convention.23 Further up-dating took place in 2001, 2003 and 2005 to reflect subsequent changes in the Convention and other developments.24 All of these Directives were later consolidated in a single instrument, Directive 2008/16/EC (itself updated in 2012) to reflect the 2010 Manila amendments to the STCW agreed in the IMO.25 17 The adoption of these measures had a substantial effect on mutual recognition of seafarers’ qualifications since Directives 89/48/EEC and 92/51/EEC on the general system for the recognition of professional education and training applied to maritime occupations. By creating a common minimum level of training, the 1994 and 1998 Directives based on the IMO’s STCW Convention ensured that the general recognition system would have greater practical effect in the maritime sector. However that general system does not provide for the automatic recognition of qualifications since host Member States may demand socalled “compensation measures” where training programmes lack elements covered by their own qualifications. The mutual recognition Directive 2005/45/EC provides a specific maritime regime finally making it obligatory for EU Members to recognise automatically the seafarers’ qualifications conferred by others, thereby completing the labour market regime in this respect. 18 Moving one’s employment from one national legal system to another can often lead to negative consequences concerning social security entitlements, including pensions. For this reason, and again from an early date, EU legislation provided on the basis of Article 48 TFEU (ex 42) that employees and members of their families do not lose their social security protection when moving within the EU and ensured that the basic principles of equality of treatment and nondiscrimination are respected by the Member States when applying their national social security rules. 19 The relevant legislation was Regulation (EEC) 1408/71 and the implementing Regulation (EEC) 574/72, later replaced by Regulation (EC) 883/200426 and Regulation (EC) 987/2009.27 These legal instruments have coordinated the social security systems of the Member States, including specific rules on the legislation applicable in the case of seafarers. An EU national who is working on board a vessel flying the flag of a Member State is subject to the social security 16

22 Directive 94/58/EC, OJ L319/28 of 12 December 1994. 23 Directive 98/35/EC, OJ L172/1 of 17 June 1998. 24 Directive 2001/25/EC, OJ L136/17 of 18 May 2001, Directive 2003/103/EC, OJ L326/28 of 13 December 2003, Commission Directive 2005/23/EC, OJ 62/14 of 9 March 2005; see generally Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), p. 53. 25 OJ L323/33 of 19 November 2008 and OJ L343/78 of 14 December 2012. 26 OJ L166/1 of 30 April 2004. 27 OJ L284/1 of 30 October 2009.

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legislation of that State. However, if the person concerned is working on board a vessel flying the flag of a Member State and remunerated for such employment by an undertaking that is registered or has its place of business in another Member State, the person is subject to the legislation of the latter provided that he or she is resident in that State. Third-country nationals are also covered provided that they are legally resident in a Member State and their activities are not confined to a single Member State.28 In addition to specifying the social security law to which seafarers are subject, 20 the system applies the same basic principles as apply to other employees. Equality of treatment ensures that seafarers from another Member State are subject to the same obligations and entitled to the same rights as nationals of the State in question. Application of the principle of maintenance of acquired rights ensures that benefits can be exported if the seafarer moves on, though subject to some defined exceptions, for example, as regards unemployment benefits. The principle of maintenance of rights in course of acquisition ensures that these are not lost in case of a move to another Member State but are respected either by all the Member States concerned on a pro rata basis or the State of last employment. This system deals with many but not all of the problems arising. It only ap- 21 plies to the social security systems of countries within the EU and the EEA and Switzerland and no measures have yet been taken to extend the system by agreement to other third country systems. Moreover, even within its territorial scope, third country nationals on a vessel flying the flag of a Member State who are not legally resident in a Member State or, even if they are, have not had a cross-border history involving different Member States are not covered. Their social security entitlement is a matter for the individual Member States concerned. Given the large number of third country seafarers employed on EU flagged vessels or by EU shipping companies, this is regarded by some as an important limitation. Even as regards EU nationals, the system applies only to the traditional cat- 22 egories of State social security, such as the entitlement to benefits for sickness and maternity, old age and survivors, accidents at work and work-related sickness, death, unemployment and family benefits. Social and medical assistance, early retirement and war related benefits are excluded, as are complementary pension schemes, and non-compulsory special schemes for self-employed persons or under collective agreements. In shipping, social security coverage is often part of employment contracts and delivered by international private insurance schemes. As a result, seafarers may still face gaps in their rights, particularly as regards pensions. Scope for completion of a single market for maritime employment in the field of social security thus still exists.

28 EEA States and Switzerland are included in the system on the same basis as Member States.

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3. Minimum Standards on Living and Working Conditions

The creation of a liberalised market in which the factors of production may circulate freely has an important corollary under the TFEU: This possibility of setting standards at EU level to ensure that the choices of economic actors are not distorted by differences in the rules applicable in different States and that interests affected by their conduct are adequately protected. In its absence, a clear risk exists of the conditions of competition being distorted to the advantage of firms in States with less strict standards, imposing lower costs on them. 24 Already, the Treaty of Rome contained a number of provisions to this end including those on the coordination of company laws, e.g. Article 50 TFEU (ex 44), and a provision general in scope, Article 114 TFEU (ex 94), providing for the “approximation of laws to the extent required for the functioning of the common market”. The measures on company law were to be adopted by qualified majority, but the more general provision required a unanimous decision of the Council. As a result, it proved very difficult for the Commission to develop proposals for legislation protecting the interests of employees with a reasonable chance of rapid adoption. This changed with the adoption of the Single European Act in 1986, the main purpose of which was to facilitate the completion of a single market in all domains. It included provisions allowing legislation on health, safety and working conditions to be adopted by qualified majority, Article 151 TFEU (ex 137) and 154 TFEU (ex 138). 23

4. Health and Safety at Work

As a result, over the next two decades a considerable body of legislation was adopted on health and safety at work, much of which applies to the maritime sector. Nearly thirty such Directives were adopted, including the basic framework Directive on the introduction of measures to encourage improvements in the safety and health at work.29 Only two of those Directives do not apply to the sector.30 These were considered as not adapted to its particular characteristics which would be better served by specific legislation. And indeed such sector specific provisions have been adopted and regularly updated. 26 The process began with the 1994 Directive on the minimum level of training for seafarers, based on the IMO’s STCW Convention and Article 100 TFEU (ex 80) on a common policy for maritime transport. The regime prescribes the minimum levels of proficiency to be achieved for the proper performance of their functions on board ships by different categories of seafarers from the master to certain categories of rating, including special requirements for particular categories of ships, such as tankers and ro-ro passenger ships. Language require25

29 Directive 89/391/EEC, OJ L183/1 of 29 June 1989. 30 Directive 89/654/EEC concerning the minimum safety and health requirements for the workplace, OJ L393/1 OF 30 December 1989 and Directive 90/270/EEC on the minimum safety and health requirements for work with display screen equipment, OJ L156/14 of 21 June 1990.

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ments are included. Standards are included for all crew members concerning emergencies, occupational safety, medical care and survival functions. Compliance by shipping companies is made subject to port State control.31 EMSA has been given an important mandate to assist the Commission in verifying that Member States comply with their obligations in the field.32 Both the Commission, a majority in the Council, and, ultimately, the CJEU 27 favoured a broad interpretation of Article 151 and 154 TFEU, for example, to permit the adoption of legislation on working time and related matters. The EU has accordingly given binding legal effect to minimum standards, agreed collectively between the Federation of Transport Workers’ Unions of the European Union (ETF) and the European Community Shipowners’ Association (ECSA), for seafarers on EU registered vessels.33 It has also taken steps to ensure that all ships entering EU ports are subject to controls to establish whether these standards are being respected and that conditions clearly hazardous to health and safety are rectified.34 5. Economic Interests

The EU has also adopted minimum standards concerning the legal protection 28 to be offered to the economic interests of employees, but some of these do not apply to seafarers or include particular provisions limiting or modifying their application. The process began in the 1970s with legislation on collective redundancies35 29 and on corporate restructuring having implications for employees such as mergers,36 de-mergers37 and transfers of undertakings.38 These instruments expressly excluded sea-going vessels or their crews. The Commission has recently questioned the justification for the exclusions, especially as regards provisions maintaining employees’ rights taking into account a longer phase of restructuring.39 The Commission has noted that a considerable number of States have chosen not to exclude seagoing vessels or seafarers from their legislation. Thus, it has instituted consultations on whether to propose the elimination of the exclusions or possibly to limit the scope for derogation to the adoption of other forms of guarantee giving equivalent protection. The Directive on protection of employees in the event of insolvency of their 30 employer allows Member States to exclude certain categories of employees from 31 32 33 34 35 36 37 38

Article 22 of Directive 2008/106/EC, OJ L323/33 of 3 December 2008. Ibid., Article 25. Directive 1999/63/EC, OJ L167/33 of 2 July 1999. Directive 1999/95/EC, OJ L14/29 of 20 January 2000. Directive 75/129/EEC, since replaced by Directive 98/59/EC, OJ L225/16 of 12 August 1998. Directive 78/855/EC, OJ L295/36 of 20 October 1978. Directive 82/891/EEC, OJ L378/47 of 31 December 1982. Directive 77/187/EEC, OJ L61/26 of 5 March 1977, since replaced by Directive 2001/23/EC, OJ L82/16 of 22 March 2001. 39 Reassessing the regulatory social framework for more and better seafaring jobs in the EU, COM(2007)591 final of 10 October 2007, especially pp. 6 and 7.

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its scope to the extent that other forms of guarantees exist which provide adequate protection for them.40 These guarantees concern in particular the payment of salaries and other benefits legally due to employees, former employees and dependants, if necessary by organisations set up for this particular purpose. While the derogation provision does not make specific reference to seafarers, EU Members are able to use this possibility in their regard. The Commission has also assessed whether there are justifiable exclusions concerning seafarers under this provision and whether other forms of protection afforded in such cases have indeed proved equivalent.41 31 Finally, as regards derogations in this area, Article 1 (2) of Directive 96/71/EC on the posting of workers provides that its provisions shall not apply to merchant navy undertakings as regards seagoing personnel. Posted workers are those who, for a limited period, carry out work in the territory of a Member State other than the one in which they normally work. The Directive is based on the principle that for the period of their secondment such employees should benefit from the social protection provisions in force in the State where they are working temporarily, while not preventing them to rely on more favourable provisions in their State of normal employment. This concept has been considered inapplicable to work on ships where the law of the flag State, subject to the Rome I Regulation,42 based on the older Rome Convention43 and as discussed further below, determines the legal conditions applicable to the employment relationship of those working on board. The Commission has indicated that in its view the exclusion should continue.44 Indeed given the frequency with which ships can pass from one territorial jurisdiction to another within the EU, successive changes of the social protection provisions applicable to seafarers on board would be an anomaly involving considerable practical difficulties. Subject to the above exceptions, EU legislation protecting the economic interests of employees applies to seafarers, covering issues as varied as information to be made available concerning the employment contracts; temporary, part time and fixed term employment; and protection of young persons. 6. Equal Treatment and Discrimination 32

Treaty provisions on equal treatment of men and women and legislation based on them also apply fully45 as do those on other types of discrimination including those based on nationality as well as on gender, racial or ethnic origin, religion 40 Directive 80/987/EEC as amended by Directive 2002/74/EC, OJ L270/10 of 8 October 2002. 41 COM(2007)591 final, p. 5. 42 Regulation EC/593/2008, OJ L177/61 of 4 July 2008 which applies to contracts concluded after 17 December 2009. 43 Convention on the law applicable to contractual obligations of 1980 and its consolidated version of 2005, OJ L334/1 of 30 December 2005. The convention has been converted into directly applicable EU law by Regulation EC/593/2008. 44 COM(2007)591 final, p. 7. 45 Article 157 TFEU (ex 141).

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or belief, disability, age or sexual orientation.46 An issue which has received considerable attention in this area is the legality of EU seafarers being employed on a vessel flying the flag of Member State other than the one of their nationality or residence under employment conditions less favourable than those applicable to the State’s own nationals or residents. This is causing particular concern as regards employees on regular passenger and other ferry services operated between Member States. The labour intensive and competitive character of these services is said to lead to substitution of certain EU seafarers by cheaper labour from third countries and even from other lower cost Member States. Under the Rome I Regulation on the law applicable to contractual obliga- 33 tions and the CJEU’s case law,47 the law applicable to a seafarer's contract of employment is not invariably and unequivocally the law of the flag State. Where the contract provides for the application of the law of the State in which the seafarer is resident at the time of the contract's conclusion, a court will have to assess the circumstances of the contract's conclusion and its execution to determine the law of the contract. It may decide that it is not the law of the flag State. Furthermore EU labour legislation does not regulate explicitly the content of the Member States' national laws as regards differences in remuneration of seafarers based on their State of residence when the contract is concluded. Only the Treaty interdiction on discrimination based on nationality applies and it is often far from clear that a differentiation in remuneration based on residence is a disguised discrimination based on nationality and therefore illegal. In order to address the problem of the employment of low paid third country 34 nationals on vessels engaged in intra-EU passenger transport and the broader problem of competition from third-country vessels in those trades, the Commission presented a legislative proposal in 1998 to require third-country nationals to be granted comparable terms and conditions to EU citizens.48 However, it rapidly became clear that there was no prospect of the proposal being adopted and so it was withdrawn, the Commission advocating that a solution be found by negotiation between the social partners. This has not so far proved possible. The Commission has accordingly continued to study the problem. 7. Employee Information, Consultation and Social Dialogue

The promotion of dialogue between employers and employees at different 35 levels of the economy is one of the express objectives of EU social policy, see Article 151 to 153 TFEU (ex 136 and 137). Unsurprisingly it has developed as one of the major themes of the policy, including for the maritime sector. However, once again, seafarers have been the object of specific rules and derogations.

46 Article 18 and 19 TFEU (ex 6 and 6a). 47 Mario Lopes da Veiga, 9/98; ECR 1989, 2989, para. 15. 48 COM(98)251 final, 29 April 1998, as amended by COM(2000)437 final, 13 July 2000.

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One of the techniques generally used by the EU to protect the economic interests of employees when enterprises are being restructured is obligatory information and consultation of their representatives. But a number of key instruments in the field contain or permit derogations as regards seafarers which have been under review by the Commission. The same applies to Directive 94/45/EC49 on the establishment of European Works Councils or information and consultation procedures in Community-scale undertakings and groups. Member States may provide that the provisions of the Directive do not apply to merchant navy crews. This has been justified on the ground that crews work at great distance from one another and from management, thus making it very difficult to organise their consultation. For similar reasons, Directive 2002/14/EC50 establishing a general framework for employee information and consultation provides that Member States may derogate from the Directive through the adoption of provisions applicable to the crews of vessels plying the high seas. Only a minority of Member States have chosen to take advantage of these possibilities for derogation and the Commission is reviewing the justifications for them as well as the adequacy of the particular provisions for seafarers adopted by certain States under the framework Directive.51 37 At the level of the maritime sector as a whole, the mechanisms for social dialogue have developed much as they have for many other sectors, in transport and more generally. The key features of the system in the maritime sector include the work of a sectoral committee the members of which are drawn from organisations representative of employers and employees. Additionally, collective consultations and negotiations under Article 154 and 155 TFEU (ex 138 and 139) have led to agreements between the ETF and ECSA to be given binding legal effect for the sector as a whole through the adoption of measures by the Council on a proposal from the Commission. For its part, as regards collective bargaining at national level, the CJEU has recently handed down a judgement in a case involving “Viking Line”52 which confirmed the right of labour organisations to take collective action to protect the work or conditions of employment of employees in one Member State when a ship is flagged out by an undertaking governed by the law of that Member State to another. At the same time, the CJEU has also established that such collective action constitutes an unlawful restriction on the freedom of establishment of the undertaking concerned unless it is suitable for ensuring the legitimate objective pursued and does not go beyond what is necessary to achieve that objective.53 This has recently been confirmed by the CJEU in the case of the “Sava Star” which also made the concept applicable in 36

49 50 51 52

Directive 94/45/EC, OJ L254/64 of 30 September 1994. Directive 2002/14/EC, OJ L80/29 of 23 March 2002. COM(2007)591 final, pp. 5 and 6. Case 438/05; ECR 2007, I-10777; following the Court's judgement, the case was settled by agreement between the parties. 53 See also Laval (Vaxholm Case), 341/05; ECR 2007, I-11767.

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EU-EEA relations (e.g., for example in relation to Norway or Iceland).54 Whether the criteria itself are satisfied always has to be appreciated by national tribunals having jurisdiction concerning the case, though in the “Viking Line” case itself the issues were finally resolved by agreement between the parties. B. Promotion of Maritime Employment Within and By the EU

The extent, to which the EU acts in its own right within international organi- 38 sations, as opposed to informally, varies depending on the context and is still evolving, especially within the IMO. It is likely to remain the subject of some controversy. But whatever the particular merits, limits or disadvantages of the measures adopted so far at regional and international levels, it is undeniable that employment as a seafarer is still not proving attractive to young Europeans. A 2006 study on employment trends in all sectors related to the sea,55 com- 39 missioned by the Commission and published in September 2006, confirmed that the general trend in seafaring employment has been that of decline, though the trend for the maritime cluster as a whole is less negative. In the case of some Member States the decline in seafaring employment has been quite dramatic in recent years (notably in Estonia, Germany, Greece and Poland). But some States which experienced significant employment declines in the past have in the last decade stabilised (Belgium, Denmark) and more recently even shown slight increases (Italy and the UK). Also, there have been some notable increases in the employment of officers, though much of that, though not all, is attributable to the newer Member States which have acceded in 2004. A growing percentage of seafarers, especially ratings, are nationals of non-EU States though the recent arrival of new Member States is for the time being reducing the severity of that trend. The age profile of EU seafarers is deteriorating and young Europeans are not taking up many of the education and training opportunities available to enter the sector. The study shows a correlation, though a weak one, between the uses made by 40 Member States of State aid measures available under the Commission guidelines and success in stabilising, or even expanding, maritime employment. Those Member States showing most success have all resorted to authorised support measures, for example, Denmark and the UK. On the other hand, some other Member States that have also resorted to such measures have not had similar success, notably Germany. Possibly their measures are less well adapted in technique or intensity to employment promotion, or other factors are at work, or possibly both explanations have some validity. Scope for research clearly exists to try to establish the probable causes of different rates of success and failure. 54 C-83/13, Judgement of 8 July 2014 (Fonnship A/S v. Svenska Transportarbetareförbundet and Facket för Service och Kommunikation (SEKO) and Svenska Transportarbetareförbundet v. Fonnship A/S. 55 ECOTEC for the European Commission, September 2006.

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Against this background, it is not surprising that policy concerning seafarers has remained one of the principal focuses of debate about how EU and Member State maritime policies should develop. The European Commission has continued to stress the importance of appropriate actions to raise awareness of the problem and to address its many different components. It has also sought within its own field of responsibilities, such as the enforcement of relevant EU labour standards, research and control of State aids, to take appropriate action. The Council has also endorsed the need for such action in conclusions adopted in 2003 and 2005. 41 More recently, the Commission’s mid-term review of the 2001 transport White Paper,56 its Green and Blue Papers on an integrated maritime policy for the EU57 and its Communication on a strategy for maritime transport to 2018,58 all stressed the continuing problem of attracting and retaining young persons in the seafaring professions. Industry organisations representing shipowners and seafarers have consistently indicated their concern about the issue and sought to address the problem by themselves and jointly. Key ideas that have been discussed in this context have included the objective of improving education, certification and training programmes, including their financing. However, these steps seem likely to figure largely. Possible initiatives include the use of EU funds and the involvement of the maritime cluster to broaden both the sources of funding and the scope and content of the programmes so as to equip recruits better for careers which will include both sea-going experience and subsequent employment in maritime related activities. This would build on the current joint project of ECSA and the ETF on maritime career mapping. 42 Possibilities for improving living and working conditions at sea are also likely to receive attention. The difficulty here is to imagine concrete initiatives which do not involve a substantial risk of creating a further incentive for shipowners to employ non-EU personnel or simply flag out. Emphasis is thus likely to be based on continuing efforts, in cooperation with the social partners, to monitor and support an effective enforcement of the provisions of the MLC 2006.59 Similarly, the EU is likely to continue its support for the IMO’s comprehensive review of its requirements concerning education, training and certification with a view to adapting to the needs of modern technologies and ship management. 56 Keep Europe moving – Sustainable mobility for our continent: Mid-term review of the European Commission’s 2001 Transport White Paper, COM(2006) 314 final, 22 June 2006. 57 Towards a future Maritime Policy for the Union: A European vision for the oceans and seas, COM(2006) 275 final, Volume II-Annex, 7 June 2006; An Integrated Maritime Policy for the European Union, COM(2007)575, 10 October 2007. 58 Strategic goals and recommendations for the EU’s maritime transport policy until 2018, COM(2009)8, 20 January 2009. 59 In the past, this also related to the ratification of the ILO’s Convention 185 on the seafarer’s identity document, see Council Decision 2005/367/EC of 14 April 2005 authorising Member States to ratify, in the interests of the European Community, the Seafarers’ Identity Documents Convention of the International Labour Organisation (Convention 185), OJ L136/ of 30 May 2005.

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The European Commission has consulted on whether to bring to an end or 43 modify the exclusion of maritime transport from certain pieces of long-standing EU labour legislation such as the Directives on collective redundancies and transfer of undertakings.60 These provide notably for the mandatory prior information and consultation of employee representatives in the event of the operations to which they relate. Maritime transport was excluded due to the widely perceived difficulty of organising such mechanisms and procedures in the global shipping industry. The Commission has always been careful to specify that the reconsideration of these exclusions will be completed in close cooperation with the social partners. Finally, recent developments on strengthening maritime safety laws and their 44 enforcement, especially those on pollution of the sea, have produced the unintended consequence of a number of cases in which those in the industry have strongly criticised the way in which enforcement authorities have treated seafarers involved in incidents, especially pre-trial arrest and imprisonment.61 Some have extended this criticism to all attempts to introduce or generalise laws imposing criminal penalties on seafarers found responsible for discharges at sea as addressed within the EU legal order itself by Directive 2005/35/EC.62 This problem is generally known as “criminalization of seafarers” while the IMO has adopted soft law instruments (guidelines) to achieve “fair treatment of seafarers”. The issues surrounding these cases are complex, deriving in part from fundamental limitations of the legal system applicable to international maritime transport. The further development of policy to promote maritime employment in the EU may well involve consideration of whether action is needed to ensure that pollution control measures and their enforcement, while fit for this purpose, do not create unjustifiable disincentives to seeking employment at sea. The challenge facing EU policy makers is not a simple one. On the one hand, 45 a large consensus exists as to the continuing difficulty of maintaining and expanding employment at sea, for its own sake and to provide the experienced personnel who are needed in associated activities on shore. On the other hand, the problem is of long standing and considerable efforts have already been made to solve it. Are there new policy alternatives available that will do better? To help answer this question, the European Commission in 2010 appointed a broadly representative task force to re-examine the whole question of maritime employment in the context of EU shipping’s competitiveness and make policy recommendations. It reported in July 2011.63 60 Council Directives 98/59/EC, OJ L225 of 12 July 1998, and 2001/23/EC, OJ L82 of 22 March 2001. 61 See, with further references, Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/Pawlik/Neumann (eds.), The Human Element in Container Shipping (2012). 62 See the respective commentary and discussion of Directive 2005/35/EC in Chapter 4, VI. 63 Report of the Task Force on Maritime Employment and Competitiveness and Policy Recommendations to the European Commission, 9 June 2011.

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The task force encountered considerable difficulty in establishing a clear picture of the State of Europe’s maritime labour market and its likely future development. Available information was disparate, incomplete and often contested. Accordingly the task force attached great importance to improved information and monitoring and made recommendations both on coordinated data collection and development of a comprehensive system to provide comparable information on maritime employment trends and issues in the EU. Indeed, in the absence of such a system, it is hard to see how sufficient consensus can be formed to support any serious policy reform. 47 Despite the analytical difficulties, the task force was able to conclude that a trend towards recruitment of non-EU seafarers for long distance trades was clear, especially at the expense of ratings. While in some Member States recent improvements in cadet entry and officer recruitment were noticeable, probably linked to improvements in the attractiveness of their registers, significant reductions have continued in Western Europe compensated for the time being by use of personnel from the newer Member States. 48 The task force made over twenty policy recommendations, including a flexible network approach to promoting convergent systems for initial training, entry into the profession, further education and career development both in shipping and the broader maritime cluster. In the field of living and working conditions, it considered that the social partners had a crucial role to play, while the Member States should make their contribution by addressing the way in which the regulatory framework negatively impacts life at sea, for example, through excessive bureaucracy and unjustifiable constraints on seafarers. The task force did not favour new legislative initiatives on manning which could only provoke controversy damaging to the social and political climate. Clarification of the legal framework applicable to services to offshore installations should be examined given current uncertainties. Finally, the task force emphasised the importance of measures for the early and effective application and enforcement of the new provisions in the IMO’s STCW 2010 Convention (the “Manila amendments”) and the joint ILO/IMO MLC 2006. 46

C. Linking the Labour Contract Statute in International Maritime Labour Law 49

The objective linking of employment contracts for seafarers in international shipping traffic raises special problems. Because there is no fixed place of employment in a particular country, it is difficult to assign the employment relationship to a specific legal system. This problem results from the fact that not only does the seafarer himself move across national boundaries, but so does his place of employment. Seafarers work not only more or less regularly in different countries, but also on the High Seas and, thus, in areas outside national sovereignty.

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Despite warnings from legal scholars,64 Article 8 of Regulation EC/593/2008 of 17 June 2008 (Rome I-Regulation)65 – the conflict of laws rules of the new European International Employment Contract Law – contains no clarifying special regulations for relationships concerning maritime labour. However, as with all employment relationships having a foreign dimension, maritime employment relationships must also be bound to a national legal system; that is, they must be “linked” to a feature that points to a particular country. This analysis shows how the employment contracts for seafarers working in international maritime transport are to be fitted into the system of Article 8 Rome I-Regulation. D. The Legal Foundations of International Maritime Labour Law 1. Regulation EC/593/2008 (Rome I-Regulation)

Up to this point, the law applicable to contractual obligations having a foreign 50 dimension was regulated in national laws, based on the Rome Agreement of 19 June 1980 (Rome Convention)66 concerning the law applicable to contractual obligations. Since 17 December 2009, the principal basis of international contract law has been the Rome I-Regulation on the law applicable to contractual obligations. For employment contracts concluded before 17 December 2009, the old law remained in effect. However, Article 6 Rome Convention and Article 8 Rome I-Regulation are to be interpreted uniformly.67 Rome I-Regulation is a loi uniforme; i.e., it is applicable regardless of whether the other countries connected to the case by virtue of the legal facts are bound by the Rome I-Regulation.68 It is therefore valid for cases relating to both France and Denmark, EU Members to which the Rome I-Regulation does not apply due to a special protocol, or to the United States or other third countries.

64 A relevant suggestion from the Max Planck Institute for Comparative and International Private Law, RabelsZ 68 (2004) 1 (65) und RabelsZ 71 (2007) 225 (283 and 297). Article 6 II Rome I-Proposal: “in case of seaman by the law of the flag the ship flies.”. 65 Regulation EC/593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), Official Journal L 177, 4.7.2008, pp. 6-16. 66 80/934/EEC: Rome Convention on the law applicable to contractual obligations, opened for signature in Rome on 19 June 1980, Official Journal L 266, 9.10.1980, pp. 1-19. 67 CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (para. 46). 68 Deinert, JbArbR 50 (2013) 77 (78).

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a) Linking Principles for Individual Employment Contracts According to Article 8 Rome I-Regulation aa) Purpose of the Rule 51

As Article 6 Rome Convention did previously, Article 8 Rome I-Regulation establishes links for individual employment relationships.69 Even at the “conflict of lawss level”, the Regulation takes into account the employee’s particular need for protection, since he or she is generally the socially and economically weaker of the parties involved.70 bb) Structure of the Rule

Nevertheless, European rules on conflict of laws in employment contracts is also based principally on the autonomy of the parties, as made clear by the reference in Article 8(1), first sentence Rome I-Regulation to Article 3 Rome I-Regulation.71 This choice of law is a conflict of laws reference: The chosen law is applicable to the contract.72 This is generally held to be justified, since one can assume that the national employment law regulations consistently guarantee a minimum standard for employee protection.73 Consequently, this gurantee cannot be denied to the detriment of the employee by means of the choice of law. In the interests of the weaker contractual party, the autonomy of the parties is restricted in a number of ways, however.74 53 There are three regulatory links in Article 8(2) and (3) Rome I-Regulation for “objective linking”. Each of which, however, is conditional upon a still closer link to another country, according to paragraph 4: The determining factor is primarily the legal order of the country in which or, alternatively, from which the employee normally conducts his work;75 temporary dispatch to another country is not relevant here76 (Article 8(2) Rome I-Regulation). 77 In cases where neither a link to the normal workplace nor to the “…from which…” clause applies, the relevant law is that of the country in which the business that hired the 52

69 Continuity with the predecessor regulation is emphasised by Mankowski, Employment Contracts, pp. 171, 175; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 2. 70 Cf. grounds for consideration (23) Rome I-VO. – Henceforth, expressly CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (paras 35, 40, 46). 71 V. Hein, in: Rauscher EuZPR/EuIPR (2011), Article 8 Rome I-VO para. 12. 72 Deinert, Inter. ArbR § 9 para. 2. 73 Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 2. 74 For more about choice of law and its limitations, see Winkler v. Mohrenfels/Block, EAS B 3000 (2010) paras 40, 67 et seq.; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO paras 5-7. 75 Also Block, Symposium Winkler v. Mohrenfels (2013), pp. 45 et seq. 76 The term “temporary dispatch” is more clearly specified by means of Recital (36) Rome IVO, insofar as the employee is to resume his activities in his country of origin after completing his work abroad; cf. here Mankowski, Employment Contracts, pp. 171, 185. 77 Concerning the customary workplace, according to Article 6 Rome Convention: CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (paras 35, 40, 46).

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employee is located, Article 8(3) Rome I-Regulation.78 If the evaluation of all circumstances results in a closer link to another country, then the objective linkage according to paragraphs 2 and 3 is superseded by the law of this other country, Article 8(4) Rome I-Regulation.79 b) Application of Article 8 Rome I-Regulation to Maritime Employment Relationships

A separate link for maritime employment relationships is absent in the Rome 54 I-Regulation, just as it was absent in the Rome Convention. According to a widely prevailing view, Article 6 Rome Convention, in its old version, was therefore also applicable to these employment relationships.80 The introduction of the Rome I-Regulation has done nothing to change this situation: For maritime employment relationships, Article 8 Rome I-Regulation applies.81 Along with the question about the general validity of Article 8 Rome I-Regu- 55 lation to maritime employment relationships, the contractual relationship in question must also fit in each case to the term “individual employment contract,” in the sense of Article 8 Rome I-Regulation. However, the term “individual employment contract” is not legally defined in the Rome I-Regulation. Due to the necessary uniformity of interpretation82 the term “individual employment contract” is to be autonomously interpreted in the light of the jurisprudence of the CJEU concerning Article 45 TFEU83 (ex Article 39 EC-Treaty).84 Accordingly, the essential characteristic of the employment relationship is that one person performs tasks for another over a particular period of time according to the latter’s instructions and receives compensation in return.85 The principle of autonomous European interpretation is alsosignificant for the qualification, that is, for the interpretation of the reference term “individual employment contract,” in 78 Concerning the hiring establishment, according to Article 6 Rome Convention: CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (paras 43 et seq.); also Winkler v. Mohrenfels, EuZA (2012) 368 (377). 79 Concerning the closer link according to Article 6 Rome Convention: CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6; also Lüttringhaus, EuZW (2013) 821. 80 As an example concerning the old law: Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 459. 81 Cf., for example, Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 74; Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 129; Gräf, ZfA (2012) 557 (567). 82 For more details, see Würdinger, RabelsZ 75 (2011) 103 (113). 83 Lisbon Treaty from 13 December 2007, concerning changing the treaty of the European Union and the Treaty on the Founding of the European Community, ABl. EU 2007 C 306/1, effective starting 1 December 2009. 84 Mankowski, Employment Contracts (2009), pp. 171, 201; Deinert, RdA (2009) 144 (154); Wurmnest, EuZA (2009) 481 (484); Oetker, in: MünchArbR (2009), § 11 para. 8; Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 17; Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 52; v. Hein, in: Rauscher EuZPR/EuIPR (2011), Article 8 Rome I-VO para. 18; Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 35; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 10; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 4. 85 CJEU 3 July 1986, Case C- 66/85 (Lawrie-Blum), ECR 1986, p. I-2121 (paras 16-17).

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the context of the terms typical for the qualification, which in contrast to national conflict of laws provisions is to also take place autonomously, i.e. uncoupled from each lex fori (or lex causae).86 56 Most activities at sea fit under the aforementioned designation of “individual employment contracts” easily. For crews on board ships, in light of the criteria “bound byprofessional orders” and “lack of a personal entrepreneurial risk,” there are no differences from land-bound employees.87 The CJEU has also used the employee-like character of a ship’s crew as a basis for its rulings.88 However, characterising the captain as an employee, given his legal position as a representative of the employer (shipowner), could raise some doubts. He is authorised to both enforce discipline and to take some degree of commercial decisions.89 For this reason, the criteria “bound by professional orders” might be missing, according to the autonomous definition of an employee under EU law. On the other hand, a comparison of the legal position of the captain with that of other officers who, like the captain himself, exercise the right to issue orders to others90 points in favour of qualifyfying the captain as an employee.91 Finally, this is qualification explicitly confirmed by the MLC 2006 which generally treats the master as an employee with special professional competencies. 2. The Interplay of the Maritime Labour Convention and Directive 2009/13/EC 57

As already indicated above, along with these changes in European maritime labour law, international maritime labour law – has also continued to evolve significantly at the level of public international law and the law of the EU.

86 Disputed, as here CJEU 8 November 2005, Case C-443/03 (Leffler), ECR 2005, p. I-9611 (para. 45); Mankowski, Employment Contracts (2009), pp. 171, 201; Wurmnest EuZA (2009) 481 (484); Martiny, in: MünchKommBGB (2010), Vor. Article 1 Rome I-VO para. 15; Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 53; Block, Anknüpfung im staatsfreien Raum (2012), pp. 98 et seq.; Deinert, Inter. ArbR § 9 para. 14; for another view (lex fori qualification) Knöfel, IPRax (2006) 552 (554) – For a qualification acc. to the lex causae, see the English literature concerning Article 6 Rome Convention Morse, in: North, Contract Conflicts (1982), pp. 143, 148; Morse, in: Dicey/Morris/Collins (2006) para. 33-065/33-065; Plender/ Wilderspin, The European Contracts Convention (2001) para. 8-09-10 and moreover, for Article 8 Rome I-VO Plender/Wilderspin, The European Private International Law of Obligations (2009) para. 11-017. 87 Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 124. 88 CJEU 27 February 2002, Case C-37/00 (Weber), ECR 2002, p. I-2013 (para. 27 et seq.). 89 For an overview of the authority vested in the captain, see Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 125. 90 Mankowski, RIW (2004) 167 (169). 91 For details on the comparison of the captain´s position with that of the officers, see Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 126 et seq.

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a) The Maritime Labour Convention of 2006

On 23 February 2006, the ILO approved the Maritime Labour Convention 58 (MLC 2006),92 in order to create a single, internally-consistent instrument that contains, according to its Preamble “as far as possible” , all of the current norms and recommendations of existing international maritime labour conventions, as well as the fundamental principles contained in other international labour conventions.93 The MLC 2006 establishes global minimum standards for the working and living conditions of seafarers on merchant ships. For some 1.2 million seafarers on more than 65,000 merchant ships worldwide it is now a charter for their rights as employees.94 The minimum standards placed on employment contracts, working hours, minimum wage and ship crew size shall guarantee a level playing field for shipowners in all nations. 95 Moreover, ratifying nations are obligated to enforce the minimum standards.96 They must verify that ships flying their flag adhere to the international standards.97 This monitoring of working and living conditions of crews on ships that enter the port of a party98 is mandatory not only for ships flying the flag of a party but also for ships flying the flag of a nation that has not (yet) ratified the MLC 2006.99 The MLC 2006 enteredinto force on 20 August 2013.As a treaty under inter- 59 national law, the MLC 2006 is not directly applied in the ILO member nations; it requires instead a national legislative act for its implementation.100 It is open to debate whether the MLC 2006 represents an overriding national 60 conflict of laws treaty for the linking of maritime labour relationships that is of interest here. The applicability of Article 8 Rome I-Regulation to maritime labour relationships would not be justified if, at the time of approval of the Rome I-Regulation, there were conflict of laws provisions under international law for maritime labour relationships. (Article 25 Rome I-Regulation).101 A prerequisite for establishing priority is that the competing international treaty contains conflict of laws rules for contractual obligations.102 The conflict of laws rules must consist of regulations that establish the applicable law. Treaty rules

92 The text of the Maritime Labour Convention (MLC) can be accessed athttp://www.ilo.org/ global/standards/maritime-labour-convention/text/lang--en/index.htm. 93 A list can be found in Article X MLC. 94 BT-Drucks. 17/10959, p. 1. 95 Cf., for details, Christodoulou-Varotsi/Penstow, Maritime Work Law Fundamentals (2008), p. 303 et seq. 96 Here, Maul-Satori, NZA (2013) 821 (826). 97 Cf. Article V para. 1 and para. 4 MLC. 98 Cf. Rule 5.2.1. 99 Cf. Article V para. 7 MLC. 100 For example, Germany harmonised its maritime labour law to the new requirements by means of the maritime labour statute (SeeArbG) that went into force on 1 August 2013; cf. Article 1 of the statute, concerning the implementation of the maritime labour treaty 2006 of the International Labour Organisation, dated 20 April 2013, BGBl, I 2013, 868. 101 Cf. here Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO paras 9 et seq. 102 Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 3.

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merely indicating that conflict of laws rules come into play for particular questions do not fall into this category.103 61 Although regulation 2.1 MLC does indeed contain rules concerning “employment contracts for seafarers,” this rule says nothing about determining the applicable law for maritime labour relationships. This is made clear by Rule A2.1 No. 4 Sentence 1, according to which, each member is to stipulate in its statutory provisions the information that must be included in those seafarer employment contracts that are subject to its domestic law. The question which seafarer employment contracts are subject to domestic law is therefore not to be answered directly by the MLC 2006. Instead, it remains in the purview of international private law. Consequently, the regulations on employment conditions in the sense of the MLC 2006 are not concerned with the overriding national rules on conflict of laws, but “merely” with the substantive labour laws in international treaties, which, in this respect, do not precede the general conflict of laws rules. Accordingly, the MLC 2006 creates no conflict of laws rules that supersede the Rome I-Regulation.104 62 The Convention does not stipulate that the national implementation law of a ratifying State should be applied to all employees working on a ship flying the flag of this State.105 Nor can an obligation of the ratifying States to stipulate a link to the flag in their conflict of laws rules be inferred from the reference in the preamble of the MLC to Article 94 of the United Nations Law of theSea Convention (UNCLOS),106 which establishes the obligations and duties of the flag State relating to the working conditions on ships flying its flag.107 Instead, all that can be inferred from this reference are indications of how the relevant national conflict of laws rules are to be interpreted.108 b) Directive 2009/13/EC 63

EU law contains further requirements for maritime labour law. In addition to the general EU labour law, EU maritime labour law must be considered. The most important instrument here is Directive 2009/13/EC.109 This Directive is 103 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 11. 104 Because the MLC was not yet in force at the time of the adoption of Rome I-Regulation, it would have resulted in an application of Rome I-Regulation, even if conflict of laws rules for maritime labour contracts had been included, since concluding authority for international contracts in the sphere governed by the regulation (in this case: individual labour contracts and therefore also maritime labour contracts) was transferred to the EU. 105 Gräf, ZfA (2012) 557 (569). 106 United Nations Convention on the Law of the Sea (Law of the Sea Convention) from 10 December 1982, ILM 21 (1982), p. 1261; Seerechtsübereinkommen der Vereinten Nationen from 10 December 1982 (SRÜ), ABl. EC from 23 June 1998, L 179/3 (DE). 107 Deinert, Inter. ArbR § 9 para. 158. 108 Cf. Mankowski, RabelsZ 53 (1989) 487 (504). 109 Council Directive 2009/13/EC of 16 February 2009 implementing the Agreement concluded by the European Community Shipowners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) on the Maritime Labour Convention, 2006, and amending Directive 1999/63/EC, Official Journal L 124, 20.5.2009, pp. 30-50.

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the result of a social dialogue. It executes a treaty concluded by the European social partners of the merchant shipowners, according to the procedure specified in Article 155 II TFEU.110 The social partners treaty adopts important minimum standards from the MLC.111 This results in broad parallelsbetween international maritime labour law and EU maritime labour law.112 Directive 2009/13/EC went into effect on 20 August 2013, contemporaneous- 64 ly with the MLC (cf. Article 7 Directive 2009/13/EC). As of February 2014, individual national implementation measures regarding Directive 2009/13/EC had been enacted by the Czech Republic,113 Germany,114 France,115 Croatia,116 Lithuania,117 Finland,118 and Sweden.119 The other EU Members did follow as well. Similarly, no conflict of laws provisions can be inferred from Directive 2009/13/EC that would take precedence over the Rome I-Regulation, according to Article 23 Rome I-Regulation. Indeed, Recital (6) of Directive 2009/13/EC clarifies that the social partner agreement applies to “seafarers on ships that are registered in a member State and/or that fly the flag of a member State.” Here, 110 Overview of the Directive 2009/13/EC from Schäffer/Kapljic, ZESAR (2009) 170 et seq. 111 The stipulations about the responsibilities of the flag and port States are omitted. Here, separate guideline proposals are currently being discussed; cf. Proposal for a Directive of the European Parliament and of the Council concerning flag State responsibilities for the enforcement of Council Directive 2009/13/EC implementing the Agreement concluded by the European Community Shipowners’ Associations (ECSA) and the European Transport Workers’ Federation (ETF) on the Maritime Labour Convention, 2006, and amending Directive 1999/63/EC, COM (2012)134 final and Directive of the European Parliament and of the Council amending Directive 2009/16/EC on port State control, COM (2012)129 final. 112 Maul-Satori, NZA (2013) 821 (822). 113 Zákon č. 373/2011 Sb., o specifických zdravotních službách; Legal act: Zákon, number: 373/2011; Official Journal: Sbirka Zakonu CR, number: 08/12/2011; Reference: (MNE(2012)50096). 114 Law concerning the implementation of the Maritime Labour Convention 2006 of the International Labour Organisation; Legal act: Gesetz; Official Journal: Bundesgesetzblatt Teil 1 (BGB 1), number: 19, Publication date: 24/04/2013, Page: 00868-00916, Entry into force: 01/08/2013; Reference: (MNE(2013)53142). 115 LOI no 2013-619 du 16 juillet 2013 portant diverses dispositions d’adaptationau droit de l’Union européenne dans le domaine du développement durable; Legal act: Loi; Official Journal: Journal Officiel de la République Française (JORF), Publication date: 17/07/2013; Reference: (MNE(2013)56862). 116 Pravilnik o utvrđivanju uvjeta zdravstvene sposobnosti članova posade pomorskih brodova, brodica i jahti; Legal act: Pravilnik, number: 2812; Official Journal: Narodne Novine, number: 93/07; Reference: (MNE(2013)54971). 117 Papildymo ir Įstatymo papildymo 89, 90 straipsniais įstatymas Nr. XII-438; Legal act: Įstatymas, number: XII-438/2013; Official Journal: Valstybės žinios, number: 75, Publication date: 13/07/2013, Entry into force: 20/08/2013; Reference: (MNE(2013)57958). 118 Valtioneuvoston asetus laivaväen asuinympäristöstä aluksella/Statsrådets förordning om fartygspersonalens boendemiljö ombord på fartyg (825/2012) 13/12/2012; Legal act: Valtioneuvoston asetus, number: 825/2012; Official Journal: Suomen Saadoskokoelma (SK), number: 825/2012, Publication date: 20/12/2012, Entry into force: 01/01/2013; Reference: (MNE(2013)50254). 119 Regleringsbrev för budgetåret 2013 avseende Arbetsförmedlingen; Legal act: Administrative measures; Official Journal: Administrative measures, Publication date: 20/12/2012; Reference: (MNE(2013)58188).

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the idea is more to draw a substantive legal baseline around the scope of application of the Directive than to offer conflict of laws rules for contractual obligations pursuant to Article 23 Rome I-Regulation.120 3. Intermediate Result 65

The determinative conflict of laws rules for international maritime labour law conform withthe Rome I-Regulation. In this respect, the MLC 2006 and Directive 2009/13/EC contain no conflict of laws rules that must be viewed as having priority. However, the assessments of the MLC 2006 and of Directive 2009/13/EC are to be kept in mind when interpreting Article 8 Rome I-Regulation. E. Linking Maritime Employment Relationships pursuant to Article 8 Rome I‑Regulation 1. ”Subjective” Factors for Linking a) Permissibility of Contractual Choice of Law

66

On the basis of the applicability of Article 8 Rome I-Regulation to maritime employment relationships, it follows that the principle of contractual freedom also applies to international maritime labour law, under the same conditions as in general international labour law. Therefore, according to Article 8 I Rome IRegulation, a choice of law for maritime employment relationships is possiblea.121 Here, the choice of law can be effected explicitly; likewise, a tacit choice of law according to Article 8(1), first sentence Rome I-Regulation in conjunction with Article 3 I 2 Var. 2 Rome I-Regulation is also possible.122 An important indication for a tacit choice of law is, for example, a reference in the maritime labour contract to the national (maritime) statutory provisions of a member State.123 b) Limitations of the Choice of Law

67

According to Article 8(1), first sentence in conjunction with Article 3 Rome I-Regulation, maritime employment relationships in a cross-border context are therefore subject to the law chosen by the parties. However, the protective provisions of the employment contract statute that has been identified on the basis of

120 Gräf, ZfA (2012) 557 (570). 121 Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 75; Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 142; Block, Anknüpfung im staatsfreien Raum (2012), p. 228; Gräf, ZfA (2012) 557 (597). 122 Winkler v. Mohrenfels/Block, EAS B 3000 (2010) paras 72 et seq. 123 A reference in the maritime labour contract to the German “Seearbeitsgesetz” (abbr.: SeeArbG) of 20 April 2015 (BGBl. I 868) thus results in the tacit agreement on German law for the entirety of maritime employment relationships.

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objective factors also form limitations in maritime labour law.124 Therefore, the chosen law may not (according to Article 8(1), second sentence Rome I-Regulation) lead to a foreign crew member or captain being denied of the legal protection under labour law warranted by the compulsory provisions of that law, which, in the absence of a choice of law, would be applicable to him.125 According to the legal definition of Article 8(1), second sentence Rome I-Regulation, a provision is deemed compulsory when it may not be deviated from to the detriment of the seafarer as employee by means of legal transactions. Here, the national implementation acts of the member States regarding the MLC and/or Directive 2009/13/EC could be significant as limiting factors on the choice of law.126 Limitations on the choice of law that could result (according to Article 8(1), 68 second sentence in conjunction with Article 3 Rome I-Regulation, for purely domestic (Para. 3) and/or internal market cases (Para. 4)) are of subordinated significance in international maritime labour law,127 since an objective relationship to another country is already established via the calling at ports of different nations and the sailing of the ship along international routes.128 c) Comparison of the Most Favourable Outcome

Therefore, the contractual choice of law has only a limited effect for maritime 69 labour relationships. It cannot displace the compulsory, more favourable (to the seafarer) law of the objective, definitive legal order, as determined by Article 8(2) through IV Rome I-Regulation. This favourability principle represents the dominant thinking of the special regulation for (maritime) labour employment and serves to protect the seafarer as employee.129 A choice of law may not deprive the seafarer as the socially and economically weaker party of the minimum protection of legally guaranteed rights.130 In order to determine whether the protection of the objectively applicable law is being taken from an employee or whether he might very possibly benefit from a choice of law, the chosen law must be compared with the law that would be applied barring a choice of law. 124 Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 75. 125 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 145. 126 To give one national example: In Germany, § 1 SeeArbG in conjunction with § 9 SeeArbG qualify the rules of the SeeArbG as compulsory provisions pursuant to Art 8(1), second sentence Rome I-VO, that is, as employee protection provisions that are always valid whenever German law, according to Article 8(2), III or IV Rome I-VO, is invoked as the objective contract statute. Among these, for example, are the special regulations concerning the termination of the employment relationship (§§ 65 ff. SeeArbG) and the material provisions of the SeeArbG regarding the pay level (§§ 37 ff. SeeArbG) or vacation pay (§ 56 SeeArbG). 127 Concerning the restriction of party autonomy through Article 8(1), second sentence in conj. with Article 3 III, IV Rome I-VO cf. Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 143; Block, Anknüpfung im staatsfreien Raum (2012), p. 230. 128 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 504. 129 Cf. CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (paras 35, 40, 46). 130 Cf. Recital (35) Rome I-VO.

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The regulation that better protects the employee and which is most likely to do justice to his concerns is more favourable. How the comparison of the most favourable outcome is to be conducted is not stipulated in Article 8(1), second sentence Rome I-Regulation either. Pursuant to the prevailing opinion, a combined comparison is to be undertaken in which the relevant individual provisions are viewed, not in isolation, but in the context of their “environment” with which they form a set of norms and/or a comparison or subject group.131 2. ”Objective” Factors for Linking 70

In the absence of a choice of law, the maritime labour relationship must be “objectively linked”. The “objective linking” of the maritime labour relationship is still controversial. Indeed, in 2011, the CJEU had an opportunity to take a position regarding international European maritime labour law. In the legal matter of Voogsgeerd, from 15 December 2011,132 the Court considered the linking of the labour contract statute of a Dutch seafarer, who was employed as a machinist on ships in the North Sea. Unfortunately, no Statements from the CJEU concerning the significance of the flag on the conflict of laws can be inferred from the ruling. However, this cannot be taken to imply a tacit rejection by the Court of a flag linkage.133 The question of the objective factors for linking maritime labour contracts for work on the high seas therefore remains unsettled.134 a) Current State of Opinions

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The current State of opinions135 can be summarised as follows: The continuing dominating view takes the ship to be the customary workplace (Article 8(2), first sentence, first alternative Rome I-Regulation). Thus, the law of the flag State shall aplly,136 at least in cases where the ship does not habitually and regu-

131 Cf. Winkler v. Mohrenfels/Block, EAS B 3000 (201) para. 73; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 14. 132 CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275; see also Carballo Piñeiro, International Maritime Labour Law, p. 114. 133 In detail, Gräf, juris-ArbR 41/2013 Anm. 2 sub. C. 134 Likewise, the opinion of Winkler von Mohrenfels, EuZA (2012) 368 (376). 135 In detail, concerning the status of the debate, Block, Anknüpfung im staatsfreien Raum (2012), pp. 233 et seq.; concerning the opinions in the other European member States, cf. the overview from Taschner, Arbeitsvertragsstatut und zwingende Bestimmungen nach dem EVÜ (2003), pp. 130 et seq. 136 Magnus, IPRax (1990) 141 (144); id., IPRax (2010) 27 (41); Junker, Internationales Arbeitsrecht im Konzern (1992), p. 188; id., FS 50 Jahre Bundesarbeitsgericht (2004), pp. 1197, 1208; id., FS Heldrich (2005), pp. 719, 730; Wurmnest, EuZA (2009) 481 (497); Mankowski, Employment Contracts (2009), pp. 171, 199 et seq.; v. Hein, in: Rauscher EuZPR/EuIPR (2011), Article 8 Rome I-VO para. 43; Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 132; Winkler v. Mohrenfels, EuZA (2012) 368 (373); Block, Anknüpfung im staatsfreien Raum (2012), p. 311; id., Symposium Winkler v. Mohrenfels (2013), p. 55; Gräf, ZfA (2012) 557 (587); Schönbohm, in: BeckOK-Arb (2013), Article 8 para. 25; for the essentials concerning Article 30 EGBGB a.F. Mankowski, RabelsZ 53 (1989) 487 (510).

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larly return to a particular location.137 According to another view, failing a definable work location within the sovereign territory of a country, the business location responsible for concluding the employment contract (Article 8(3) Rome IRegulation) should always be the decisive objective factor for maritime employment relationships. 138 Some lone voices consider both ruling links to be inapplicable to the interests at stake and therefore resort directly to the opt-out clause (Article 8(4) Rome I-Regulation).139 Finally, for ships frequenting international waters that regularly return to a particular location, the “from which” link (Article 8(2) ,first sentence, second alternative Rome I-Regulation) is proposed.140 b) Commentary

It seems preferable to join the dominant view and link maritime employment 72 relationships to the flag, as a sub-case of linking to the place of employment according to Article 8(2), first sentence, first alternative Rome I-Regulation. Instead of repeating all the arguments for and against such objective factors for linking only the primary arguments will be presented. aa) No direct Application of the Opt-Out Clause (Article 8(4) Rome I‑Regulation)

For systematic reasons alone, resorting directly to the opt-out clause in deter- 73 mining the objective contract statute is incomprehensible. There is a misjudgement of the whole system of Article 8(2)-(4) Rome I-Regulation if one directly resorts to Article 8(4) Rome I-Regulation.141 This view ignores the structure with its two extensive alternatives and treats maritime labour relationships as if there were cases of labour relationships that could remain outside of Article 8(2) and III Rome I-Regulation. This, however, is not possible in a “logically selfcontained system.”142 It follows from the design of Article 8 Rome I-Regu137 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 149; id., FS Posch (2011), pp. 443, 450. 138 Deinert, RdA (2009) 144 (148); Spickhoff, in: BeckOK-BGB (2013), Article 8 Rome I-VO para. 26; Thorn, in: Palandt Kommentar (2014), Article 8 Rome I-VO para. 12; id., in: Begegnungen im Recht (2011), pp. 131, 150; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 21; emphatically for linking to the business location Deinert, Inter. ArbR § 9 para. 165; likewise in the English literature Kaye, International Law of Contract (1993), p. 235; in this direction also, concerning the Rome Convention report Giuliano/ Lagarde, BT-Drucks. 10/503, p. 58. 139 Oetker, in: MünchArbR (2009), § 11 para. 29; Ludewig, Kollektives Arbeitsrecht auf Schiffen (2012), pp. 97 et seq.; likewise concerning the old law Puttfarken, See-Arbeitsrecht (1988), pp. 10 et seq.; id., RIW (1995) 617 (623); Drobnig/Puttfarken, Arbeitskampf auf Schiffen fremder Flagge (1989), pp. 14 et seq. 140 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 148; Magnus, FS Posch, pp. 443, 450; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 12; likewise concerning Article 19 Nr. 2 lit. a) EuGVVO Landesarbeitsgericht Mecklenburg-Vorpommern (Germany) 18.3.2008 – 1 Sa 28/07, HambSchRZ 2009, 9 (para. 76). 141 Block, Anknüpfung im staatsfreien Raum (2012), p. 239; Gräf, ZfA (2012) 557 (574). 142 Cf. Mankowski, RabelsZ 53 (1989) 487 (497); id., Seerechtliche Vertragsverhältnisse (1995), p. 470.

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lation that maritime labour relationships must also be initially assigned to one of the two linking rules. After that a further examination can take place as to whether a closer tie to another State exists, according to the sum of all circumstances. The opt-out clause in Article 8(4) Rome I-Regulation therefore serves only to correct (in exceptional cases) the linking rules, and is not itself an original linking approach.143 This interpretation has now been explicitly confirmed by the CJEU ruling in Schlecker.144 Before the opt-out clause can be applied, it must always be determined which of the two linking rules in paragraphs 2 and 3 is relevant.145 Accordingly, dogmatic considerations rule out the direct application of the opt-out clause to maritime labour relationships.146 bb) The Ship as the Customary Workplace of the Seafarer 74

Thus it is clear that maritime labour relationships are encompassed either by Article 8(2) 1 Rome I-Regulation or by Article 8(3) Rome I-Regulation. The crucial distinguishing criterion between these two matters of fact is whether a customary workplace exists “in” a State or not. Accordingly, the question concerning the linking of a maritime labour relationship can be formulated as follows:147 Is the workplace of the seafarer on a ship a workplace “in” a State, or is it not? In order to derive a flag linkage from Article 8(2), first sentence, first alternative Rome I-Regulation, it must be possible, firstly, to assign the ship to the flag State. Because Rome I-Regulation remains silent on this question, the specifications of public international law are determinative. Secondly, it must be possible to define the ship as the seafarer’s customary workplace; this question is purely related to conflict of laws since it concerns the interpretation of Article 8(2) 1 Rome I-Regulation. (1) Assignment of Ships to a State under Public International Law

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According to conventional wisdom, ships belong to the State whose flag they are entitled to fly and, when sailing on the high seas,148 are subject to the sovereignty of the flag State.149 This principle is acknowledged in common law 143 Magnus, in: Staudinger Kommentar (2011), Article 8 Rom I-VO para. 96; Spickhoff, in: BeckOK-BGB (2013), Article 8 Rome I-VO para. 20; Deinert, Inter. ArbR § 9 para. 126; Block, Symposium Winkler v. Mohrenfels (2013), p. 55. 144 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 35). 145 Now explicity CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 35). 146 Block, Anknüpfung im staatsfreien Raum (2012), p. 240; id., Symposium Winkler v. Mohrenfels (2013), p. 55; Gräf, ZfA (2012) 557 (574). 147 Cf. Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 481; Block, Anknüpfung im staatsfreien Raum (2012), p. 240; Gräf, ZfA (2012) 557 (577). 148 Article 86 UNCLOS reads as follows: „The provisions of this Part apply to all parts of the sea that are not included in the exclusive economic zone, in the territorial sea or in the internal waters of a State, or in the archipelagic waters of an archipelagic State.”. 149 Concerning the development, cf. Núnez-Müller, Die Staatszugehörigkeit von Handelsschiffen (1994), pp. 73 et seq.; Yang, Jurisdiction of the Coastal State (2006), pp.16 et seq.

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and has its normative basis in Article 91(1), 92(1) UNCLOS.150 Thus, flag State sovereignty as jurisdiction leads in international law to a clear assignment of the ship to the flag State. In ports and in the territorial sea,the sovereignty of the flag State is – to some extent – restricted by the territorial sovereignty of the coastal State.151 Depending on the maritime zone the territorial sovereignty of the coastal 76 State continuously decreases if a vessel leaves the internal waters or the territorial sea and, consequently, flag State sovereignty over ships continuously emerges to become exclusive.152 In contrast, if a vessel sails exclusively or predominantly within the territorial sea (“12 nautical miles zone, Article 2, 3 UNCLOS) of a particular State, then the territorial sovereignty of the coastal State generates a number of rights.153 A differentiated judgment is to be made for the situation where the ship sails exclusively or predominantly in the area of an exclusive economic zone (Article 55 et seq UNCLOS) of a particular State. This zone form a “functional sovereignty zone” in which the littoral State has functionally limited sovereign rights (Arts. 56(1), 77 UNCLOS). If the activities of the employee are connected with exploring and exploiting natural resources, then the sovereignty of the littoral State might still prevail over flag State sovereignty.154 If, in contrast, the work on the ship serves other purposes (such as transport or ferry traffic), then exclusive flag State sovereignty applies; the work in the area of the exclusive economic zone is equivalent, in this case, to work on the high seas (cf. Arts. 58(1), 87 UNCLOS).155 (2) Implications for Conflict of Laws (a) Binding the European Concept on Conflict of Laws to the Requirements of International Law

The requirements of public international law are binding for the European le- 77 gislative bodies and practitioners. It has to be kept in mind that the EU ratified UNCLOS already in 1988 and the flag State principle as codified by Article 91(1) UNCLOS is recognized under customary international law. Due to the hierarchy of norms, the organs of the EU and its Courts are obliged to apply and adhere to international treaty law and customary international law.156 This link-

150 Article 91(1), second sentence UNCLOS reads as follows: „Ships have the nationality of the State whose flag they are entitled to fly.” Article 92(1), first sentence UNCLOS: „Ships shall sail under the flag of one State only and […] shall be subject to its exclusive jurisdiction on the high seas.”. 151 Cf. Graf Vitzthum, in: Handbuch des Seerechts (2006), para. 75. 152 For details about flag sovereignty in the various oceanic zones Block, Anknüpfung im staatsfreien Raum (2012), p. 251 ff. 153 Cf. Block, Anknüpfung im staatsfreien Raum (2012), p. 251; Gräf, ZfA (2012) 557 (578). 154 Cf. Concerning the linking of employment contracts on offshore installations cf. Block, EuZA (2013) 21 (31). 155 Gräf, ZfA (2012) 557 (580). 156 Cf. Article 218 TFEU.

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age to the recognised core area of public international law is to be adhered to under EU law. Thus, it is also relevant in the area of European conflict of laws, and consequently, also when applying European conflict of laws rules to individual maritime employment contracts. (b) The Ship as the “Customary” Workplace

According to the jurispridence of the CJEU,157 the customary workplace is the one in which, or from which, an employee fulfils to a significant extent his obligations to his employer, taking into account the entirety of factors that distinguish these activities. According to the linkage to the workplace, the labour law of the State in which the employment relationship typically has its main focus is to be applied. This is the customary place of activity and operation.158 79 Initially, therefore, the seafarer must perform his duties “customarily” on the ship. On international routes, the seafarer performs the substantial part of his work on the ship. What is more, the ship forms the focus of the seafarer’s activities like a “self-contained” business division does as well. On board the ship, the seafarer is therefore customarily integrated into the “business organisation.”159 Applying this definition of the customary workplace, the ship can be viewed as the seafarer’s “customary” workplace.160 78

(c) The Ship as a Workplace “in a State” 80

According to the wording of Article 8(2) , first sentence, first alternative Rome I-Regulation, the customary workplace must be located “in a particular State.” If it is located on a ship on the high seas, and thus in a maritime zone not incorporated within a State, then there is no explicit rule. In such cases, it is doubtful whether international European private law follows public international law regarding national boundaries or whether such activities can still be viewed as work within a State – even when the work is technically performed outside of a national territory in the sense of public international law but within a zone that can be assigned to one State under public international law.161 Only when the latter is true can the maritime employment relationship be subjected to the workplace linkage.

157 CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (para. 43); 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (para. 35); also Article 19 EuGVVO CJEU 15 February 1989, Case C-32/88 (Six Construction), ECR 1989, p. I-341 (paras 15 et seq.); 13 July 1993, Case C- 125/92 (Mulox IBC), ECR 1993, p. I-4075 (paras 15 et seq.); 9 January 1997, Case C- 383/95 (Rutten), ECR 1997, p. I-57 (paras 10 et seq.); 27 February 2002, Case C-37/00 (Weber), ECR 2002, p. I-2013 (paras 37 et seq.). 158 CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (para. 50). 159 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 470. 160 Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 131; Gräf, ZfA (2012) 557 (577). 161 For details, Block, Anknüpfung im staatsfreien Raum (2012), pp. 258 et seq.; id., Symposium Winkler v. Mohrenfels (2013), pp. 75 et seq.; Gräf, ZfA (2012) 557 (580).

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(aa) Wording

The wording of Article 8(2), first sentence Rome I-Regulation might be one 81 factor that would speak against the determination of the customary workplace on the basis of other assignment criteria of public international law besides territoriality. Here, “[…] the law of the State in which the employee […] customarily performs his work” is to be applied. This strict territorial limitation of the “customary workplace” in Article 8(2), first sentence Rome I-Regulation which focuses exclusively on the subjugation under the sovereignty of a State, might be too narrow, however. It is based solely on the word “in.” This certainly denotes initially the normal case of localising the workplace in or on the territorial area of a State. Then again, it is also just as clear that “in a State” means: “in the domain of a State.” 162 This opens the way to having recourse to the specifications of international law.163 However, the domain of a State encompasses both the areas under its territorial sovereignty and those that are subject to its sovereignty on the basis of other forms of assignments under public international law – such as flag State sovereignty.164 Accordingly, the wording of the provision does not stand in opposition to an extension of the territoriality principle through adjoining assignment criteria of public international law.165 The locally describable domain and assignment areas of a State are thus the decisive objective factors.166 As a criterion for the cases to fall under Article 8(2) , first sentence, first alternative Rome I-Regulation, one thus gains the subjugation of a localisable place to the jurisdiction, i.e. the domain of a State. Flag State sovereignty167 satisfies this criterion in any case.168 Flag State sovereignty may not represent territorial sovereignty, but under public international law, it assigns the ship unambiguously to one State. The subjugation of a localisable work (place) under the jurisdiction and/or the political control of a State is equivalent to the territorial assignment of this workplace to the extent that the work in a State can be equated to the work in the domain of a State. For the purposes of European conflict of laws, the formulation “in a State” is therefore to be read as in the “sovereign territory of a State.”

162 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 482. 163 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 482; Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 188. 164 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 482. 165 Block, Symposium Winkler v. Mohrenfels (2013), p. 76 f. 166 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 482; id., Employment Contracts (2009), pp. 171, 181 et seq.; Junker, FS Heldrich (2005), pp. 719, 728; Behr, FS Buchner (2009), pp. 81, 91; Wurmnest, EuZA (2009) 481 (497); Block, Anknüpfung im staatsfreien Raum (2012), p. 260. 167 Sovereignty of the flag State over ships, therefore, according to the proper interpretation, refers to a third, independent form of State sovereignty, along with territorial sovereignty and sovereignty over personnel cf. Núnez-Müller, Die Staatszugehörigkeit von Handelsschiffen (1994), pp. 86 et seq.; Yang, Jurisdiction of the Coastal State (2006), p. 26. 168 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 482.

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Consequently, Article 8(2) , first sentence, first alternative Rome I-Regulation (in contrast to the wording of the provision) deals with the exercise of sovereignty. Thus, flag State sovereignty can be equated with a form of occurrence of national sovereignty for the purposes of the linking of territorial sovereignty. (bb) Comparison with the Jurisprudence of the CJEU

In Koelzsch, the CJEU decided in favour of the priority of workplace linkage over business location linkage and confirmed this linkage hierarchy in Voogsgeerd. Accordingly, linkage to the customary workplace in the interests of employee protection (favor laboratoris) is to be broadly interpreted, whereas the business location linkage is only to be applied when a customary workplace cannot be determined.169 This is in line with the intention of the European legislator to repress this linkage, which is typically unfavourable to the employee.170This priority of the customary workplace is also to be adhered to in international maritime labour law.171 These considerations also speak for a broad interpretation of Article 8(2) Rome I-Regulation, also as it pertains to the characteristic “in which” to make a linkage to a particular flag generally possible.172 84 Moreover, in the legal matter Weber/Universal Ogden Services Ltd.,173 the CJEU already ruled against a strict territorial limitation of the customary workplace for work on a drilling ship on the high seas over the continental shelf, and resorted to other assignment criteria under public international law besides territoriality for the determination of the customary workplace.174 This ruling was picked up by the CJEU in the legal matter of Salemink.175 For the question of the applicability of EU law to employees working on offshore oil and gas platforms located on the outer continental shelf of a coastal State, the CJEU refers explicitly to the rules of public international law.176 Because the outer continental shelf of a EU Member State is subject to that State’s sovereignty according to the provisions of the UNCLOS, even though this sovereignty is functional and limited, an activity performed by an employee aboard fixed or floating installations on or over the continental shelf bordering on a treaty State in connection with the ex83

169 CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (para. 43); CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (para. 35). 170 European Commission, Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I) from 15 December 2005, KOM (2005) 650, 8 (Justification), as well as recital (23) Rome I-VO. 171 CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (paras 26 et seq.). 172 Gräf, ZfA (2012) 557 (584). 173 CJEU 27 February 2002, Case C-37/00 (Weber), ECR 2002, p. I-2013 (paras 27-36). 174 More details, Block, Anknüpfung im staatsfreien Raum (2012), pp. 267-271. 175 CJEU 17 January 2012, Case C-347/10 (Salemink), ABl. EU 2012, Nr. C 73, p. 3 (paras 33 et seq.). 176 CJEU 17 January 2012, Case C-347/10 (Salemink), ABl. EU 2012, Nr. C 73, p. 3 (para. 31); cf. also Opinion of Advocate General Cruz Villalón 8 September 2011 Case, C-347/10 (Salemink), downloadable at http://curia.europa.eu (para. 43 et seq.).

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ploration and/or exploitation of its natural resources is to be viewed as an employment activity performed in the sovereign territory of this State for the application of EU law.177 Here too, the CJEU focuses on other assignment criteria of public international law besides territoriality for linking offshore oil and gas installations located on the continental shelf to the coastal State.178 (d) Further Arguments in Favour of Flag State Linkage (aa) On the same Level as Public Maritime Labour Law and the MLC 2006

Moreover, a comparison with public maritime labour law and the MLC 2006 85 and Directive 2009/13/EC strengthens the flag State linkage argued in favour of here.179 The flag State already qua State sovereignty has the legislative competence 86 for (national) public maritime labour law.180 Its public maritime labour law is thus, in any case, applicable. By granting the right to fly its flag, the State exercises flag State sovereignty over the ship, i.e., the ship possesses its nationality and is linked to this State under the law of the sea and international maritime law. Granting the right to fly a flag also results in obligations for the flag State.181 According to Article 94(1) UNCLOS,182 each flag State is obliged to effectively exercise its sovereignty and control over ships flying its flag in administrative, technical and social matters. According to Article 94(3) lit. b) UNCLOS,183 this also includes resorting to measures necessary to maintain safety on the high seas, relative to employment conditions (public maritime labour law). The maritime labour law of the flag State applies continuously during the entire journey, on the basis of the flag link pursuant to Article 94(1) UNCLOS.184 Therefore, it is preferable to link the law of the maritime labour contract to the flag of the ship if the ship represents the customary workplace of the seafarer affected.185 Linking maritime labour contracts to the flag of the ship thus leads to a parallel approach under private maritime law and public maritime law.186 177 CJEU 17 January 2012, Case C-347/10 (Salemink), ABl. EU 2012, Nr. C 73, p. 3 (para. 35). 178 Clearly in this direction, Opinion of Advocate General Cruz Villalón 8 September 2011 Case, C-347/10 (Salemink) (para. 38). 179 See Block, Anknüpfung im staatsfreien Raum (2012), pp. 290 et seq.; Gräf, ZfA (2012) 557 (582). 180 Cf. Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 485. 181 Cf. Churchill/Lowe, Law of the Sea (1999), pp. 208 et seq. 182 Article 94 I UNCLOS reads as follows: „Every State shall effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag.”. 183 Article 94 III lit. b) Law of the Sea Convention reads as follows: „Every State shall take such measures for ships flying its flag as are necessary to ensure safety at sea with regard, inter alia, to: (b) the manning of ships, labour conditions and the training of crews, taking into account the applicable international instruments …”. 184 Cf. Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 485. 185 Junker, RIW (2006) 401 (407). 186 Mankowski, Seerechtliche Vertragsverhältnisse (1995), p. 485; id., AP H. 1/2011 Nr. 1 to Article 18 EuGVVO, Bl. 108R, Bl. 109R.

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This relationship between maritime labour law and flag State linkage is more clearly expressed in the MLC 2006 and – linked to this – in the social partner agreement executed under Directive 2009/13/EC: Although neither of these legal acts contains, in fact, conflict of laws norms that explicitly call for a flag State linkage, numerous provisions187 do show that both the MLC 2006 and the Directive act on the assumption of a flag State linkage. These assessments must be relevant when interpreting the Rome I-Regulation188 Both the EU Members and the European Commission cooperated closely during the negotiations on the MLC 2006.189 The Commission’s suggestion for a Directive covering the responsibilities of flag States also makes clear that the flag State exercises jurisdiction and control over its ships and their crews on the high seas in administrative, technical and social matters.190 In private maritime labour law, the EU thus cannot endorse anything other than the flag State linkage.191 (bb) Scrutinising European International Civil Procedure Law

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Supporting further the conflict of laws linkage of maritime labour contracts to the flag one could add general international jurisdiction in labour matters: In determining the “customary workplace” pursuant to Article 19 No. 2 lit. a) Brussels I-Regulation192 for employment relationships on ships operating internationally, the dominant opinion193 assumes that the flag under which the ship sails is decisive for determining the customary workplace pursuant to Article 19 No. 2 lit. a) Brussels I-Regulation. Linking maritime labour contracts to the law of the State whose flag the ship is flying thus leads to the (desired) equivalency between forum and applicable law. (cc) Case Law and Doctrine in the Member States of the Rome I-Regulation

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Applying the rule of autonomous interpretation, it is also significant that the law of the flag State as the maritime labour contract statute is broadly ac187 See Article V para. 1 MLC: „Each Member shall implement and enforce laws or regulations or other measures that it has adopted to fulfil its commitments under this Convention with respect to ships and seafarers under its jurisdiction“; Article V para. 2 MLC: „Each Member shall effectively exercise its jurisdiction and control over ships that fly its flag by establishing a system for ensuring compliance with the requirements of this Convention, including regular inspections, reporting, monitoring and legal proceedings under the applicable laws.”; Rule 5.1.1 para. 1 MLC: „Each Member is responsible for ensuring implementation of its obligations under this Convention on ships that fly its flag.”. 188 Gräf, ZfA (2012) 557 (583). 189 COM(2012) 134 final, p. 2. 190 COM(2012) 134 final, p. 7. 191 Likewise Junker, Objektive Anknüpfung (2007), pp.111, 125. 192 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I-Regulation), Official Journal L 12, 16.1.2001, p. 1. 193 See for example Bundesarbeitsgericht (Germany) 24 September 2009, BAGE 132, 182 (paras 46 et seq.): Mankowski, in: Rauscher EuZPR/EuIPR (2011) Article 19 Brussels I-VO para. 9; Mankowski, AP Nr. 3 concerning regulation Nr. 44/2001/EG sub. V. 1; Egler, Seeprivatrechtliche Streitigkeiten (2011), pp. 188 et seq.; Garber, FS für Kaissis (2012), p. 230.

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knowledged in the member States of the Rome I-Regulation, both in doctrine and case law.194 Most member States of the EU apply this traditional rule. In a comparative perspective, the flag is the most frequently used linkage in international maritime labour law in Europe.195 cc) Arguments against Using the “from which” Linkage (Article 8(2), first Sentence, second Alternative Rome I-Regulation)

A standard linkage of maritime employment relationships via the “from 90 which” clause according to Article 8(2) , first sentence, second alternative Rome I-Regulation can be ruled out for the following reasons: (1) Systematic Reasons

The two linkage alternatives in Article 8(2), first sentence Rome I-Regu- 91 lation, “at which” and “from which,” are connected to one another by an “or.” This in itself clearly expresses the existing subsidiarity relationship.196 Initially, the decisive location was the one “at which” the employee performs his work. The location “from which” the employee sets out for the purposes of fulfilling his contract is to be applied subsidiary..197 If there is a location “at which” the work is customarily performed then the linkage is certain: When it can be specified in a particular case, “at which” has systematic priority.198 The “from which” clause is only applied when there is no place “at which” the work is customarily performed. In this respect, the “from which” clause represents a functional extension of the linkage to the workplace.199 As a rule, maritime labour relationships are to be linked to the flag State as a 92 sub-case of the “in which” linkage according to Article 8(2) , first sentence, first alternative Rome I-Regulation. This allows a customary workplace for the seafarer to be specifically determined. Therefore, due to the existing customary workplace the second alternative of paragraph 2 does not even apply.200 Thus,

194 Concerning the Rome Convention, cf. the evidence in Magnus, IPRax (1990) 141 (144); Taschner, Arbeitsvertragsstatut und zwingende Bestimmungen nach dem EVÜ (2003), p. 141 et seq.; Max Planck Institute for Comparative and International Privat Law, RabelsZ 68 (2004) 1 (64) und RabelsZ 71 (2007) 225 (294); Block, Anknüpfung im staatsfreien Raum (2012), p. 278. 195 Cf. Max Planck Institute for Comparative and International Private Law, RabelsZ 68 (2004) 1 (65). 196 Knöfel, RdA (2006) 269 (274); Mankowski/Knöfel, EuZA (2011) 521 (528); Mankowski, AP Nr. 3 about regulation Nr. 44/2001/EG sub. V. 7; Deinert, Inter. ArbR § 9 para. 89. 197 Mankowski/Knöfel, EuZA (2011) 521 (587). 198 Mankowski, AP Nr. 3 about regulation Nr. 44/2001/EG sub. V. 7. 199 Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 101; Mankowski, AP Nr. 3 about regulation Nr. 44/2001/EG sub. V. 7. 200 As to the result, likewise Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 101; Mankowski/Knöfel, EuZA (2011) 521 (530).

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there is no cause to prematurely switch to a link to the “location where the work commenced.”201 (2) Reasoning Behind the “from which” Linkage

Opinions202 which qualify the location “from which” the seafarer boards a ship as a customary workplace also contradict the case law of the CJEU.203 According to this case law (in the absence of other criteria) the location “at which” the employee spends or has spent the majority of his working time is to be qualified as the customary workplace.204 The CJEU, in its judgments concerning the relevance of a fixed point of departure for the determination of the customary workplace, has continuously demanded that the employee regularly returns to this location from the places of his other activities and prepare his activities there as well.205Accordingly, the employee must actually be active at the departure location, that is, must perform work there.206 94 Because the mere commencement of work in the port of departure does not yet represent part of the work to be performed by the seafarer, the port of departure in which the seafarer boards the ship cannot, according to the case law of the CJEU, be qualified as the seafarer’s customary workplace.207 Thus, the regular application of the “from which” clause to maritime employment relationships is ruled out.208 93

(3) Remaining Cases 95

In contrast, a regular linkage according to Article 8(2) , first sentence, second alternative Rome I-Regulation could be considered for seafarers in international ferry traffic who continuously and regularly return to a particular location

201 Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 101; Mankowski, AP Nr. 3 about regulation Nr. 44/2001/EG sub. V. 1. 202 Cf. Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 12; Landesarbeitsgericht Mecklenburg-Vorpommern (Germany) 18 March 2008 – 1 Sa 28/07, HambSchRZ 2009, 9 (para. 12). 203 So, lastly CJEU 27 February 2002, Case C-37/00 (Weber), ECR 2002, p. I-2013 (paras 31-35). 204 Concerning the dispute of whether the location where work is merely commenced can qualify a workplace pursuant to the “from which” clause, cf. Block, Symposium Winkler v. Mohrenfels (2013), pp. 69 et seq. 205 CJEU 13 July 1993, Case C- 125/92 (Mulox IBC), ECR 1993, p. I-4075 (para. 25); CJEU 9 January 1997, Case C- 383/95 (Rutten), ECR 1997, p. I-57 (para. 25); Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 216. 206 Concerning European international labour procedural law Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 216; Lüttringhaus, IPRax (2011) 554 (556). 207 Likewise, Bundesarbeitsgericht (Germany) 24 September 2009, BAGE 132, 182 (para. 46); Mankowski/Knöfel, EuZA (2011) 521 (530 et seq.); Block, Symposium Winkler v. Mohrenfels (2013), p. 72. 208 Block, Anknüpfung im staatsfreien Raum (2012), p. 301.

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from which the ships and their crews are put into service.209 In this case, the crew members on the ships could be said to perform their work from a base in a particular State.210 However, this can only apply under the further condition that the crew members are also to carry out further employment duties at the departure and return location, such as maintenance work, accounting activities, etc.211 The employee must also actually be active on behalf of the employer at the departure location. That is, he/she must perform work activities there.212 Here, it should be further noted that, from an evaluative standpoint, a fixed departure location can only be viewed as the customary workplace pursuant to the “from which” linkage if the working shifts that start and end at the departure location are sufficiently short.213 dd) Arguments Against Linking to the Business Location Responsible for Hiring (Article 8(3) Rome I-Regulation)

Regular linking of a maritime labour relationship to the law of the State 96 where the business is physically located that hired the employee is ruled out for the following reasons: (1) Systematic Reasons

Article 8(3) Rome I-Regulation is a subsidiary (replacement) linkage,214 not 97 an (equally-entitled) alternative linkage.215 Therefore, due to the existing customary workplace in the flag State, the scope of application of Article 8(3) Rome I-Regulation for maritime labour relationships does not even come under consideration. A regular linkage of the maritime labour relationship to the hiring business location must consequently be ruled out. To negate regular linkage to the flag State as a sub-case of the workplace linkage would elevate the exception to the rule. Such a procedure would be in violation of linkage hierarchy specified in international private law and must therefore be rejected.

209 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 148; Magnus, FS Posch, pp. 443, 450; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 21; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 12. 210 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 148. 211 Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 148; id., FS Posch (2011), p. 443, 450; Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 216; Block, Anknüpfung im staatsfreien Raum (2012), p. 303; id., Symposium Winkler v. Mohrenfels (2013), p. 73. 212 Block, Symposium Winkler v. Mohrenfels (2013), p. 72. 213 Egler, Seeprivatrechtliche Streitigkeiten (2011), p. 216. 214 Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 12; Deinert, Inter. ArbR § 9 para. 119; id., RdA (2009) 144 (146 et seq.); Block, Symposium Winkler v. Mohrenfels (2013), p. 50 et seq. 215 CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (para. 40); CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (para. 32); Junker, RIW (2006) 401 (407); Deinert, RdA (2009) 144 (145); Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 96; Mankowski/Knöfel, EuZA (2011) 521 (526).

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(2) Employee Protection Arguments 98

Another argument against linking to the business location where the employee has been hired is the principle laid down in Article 8(1), second sentence Rome I-Regulation aiming to protect the employee even at the conflict of laws level.216 A business location pursuant to Article 8(3) Rome I-Regulation is any organisational unit set up for a certain period and outfitted with certain minimum personnel and equipment that carries out business activities for the employer and undertakes effective hiring procedures.217 Any permanent structure of an enterprise is sufficient, even if it is only in the form of an office.218 Provided there is a personnel recruitment office having a certain degree of permanency in the recruiting State for maritime employment relationships, this would be a hiring office for the employer. Consequently, this place can qualify as a business location. If, in the case law of the CJEU, “hiring” is understood to mean signing a contract,219 then it mus follow for maritime labour contracts that the “hiring business office” is not the office of the shipowner, but, e.g., a crewing agency in another State.220 The law of the hiring business location, which is specifically supposed to protect seafarers from the labour laws of States with “convenient” shipping registration,221 often leads directly to a substantive labour law offering a lower degree of protection.222 This can be prevented by linking to the law of the flag State (if it is not itself a so-called “flag of convenience”).223 As a factbased criterion, the customary workplace is remarkably resistant to manipulation.224Thus, the flag State linkage in maritime labour law does justice to the principle of favor laboratoris.

216 Recitals (23) Rome I-VO. – Concerning employee protection at the conflict of laws level, cf. CJEU 15 March 2011, Case C-29/10 (Koelzsch), ECR 2011, p. I-1595 (paras 40, 46). 217 CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (paras 53 et seq.); Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 16; Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 108. 218 CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (paras 53 et seq.). 219 CJEU 15 December 2011, Case C- 384/10 (Voogsgeerd), ECR 2011, p. I-13275 (paras 43-52); left open Bundesarbeitsgericht (Germany) 12 December 2001, BAGE 100, 130 (para. 33); concerning the status of the dispute, cf. Block, Anknüpfung im staatsfreien Raum (2012), p. 199 et seq.; for the location of the administrative management of personnel Winkler von Mohrenfels, EuZA (2012) 368 (378); Deinert, JbArbR 50 (2013) 77 (84). 220 Cf. to Article 30 EGBGB a.F.: Bundesarbeitsgericht (Germany) 26 September 1996, BAGE 84, 209 (para. 21): Hiring of personnel through a “crewing agency” on the Carribean Island of Antigua. 221 Thorn, in: Palandt Kommentar (2014), Article 8 Rome I-VO para. 12. 222 Mankowski, IPRax (2003) 21 (27); Junker, FS Heldrich (2005), pp. 719, 731. 223 Cf. Magnus, in: Staudinger Kommentar (2011), Article 8 Rome I-VO para. 149. 224 Thus, for the jurisdiction question, Mankowski, AP H. 1/2011 Nr. 1 to Article 18 EuGVVO, Bl. 108R, Bl. 109R.

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(3) Remaining Cases

In the (frequent) cases of the seafarers working in “alternating shifts” on ships 99 flying different flags, there is, in fact, room for linkage to the hiring business location, provided it is not possible to find a customary workplace.225 3. Closer Connection

Linkage to the law of the flag State as a sub-case of workplace linkage merely 100 represents a standard linkage. Exceptions to the flag linkage according to Article 8(2) , first sentence, first alternative Rome I-Regulation supported here for maritime employment relationships must be possible, just as they are from the linkage according to Article 8(2) , first sentence, second alternative or Article 8(3) Rome I-Regulation. The opt-out clause of Article 8(4) Rome I-Regulation offers, in general, the instrument for correcting extreme cases of manipulation of the flag linkage via labour conflict of laws norms.226 In the Schlecker decision,227 the CJEU sketched out for the first time the 101 framework of the “closer connection” pursuant to Article 8(4) Rome I-Regulation. In the interests of a restrictive application of the opt-out clause, the CJEU seeksto restrict the factors serving as evidence for a closer connection according to Article 8(4) Rome I-Regulation to those “characterising the employment relationship.”228 The CJEU emphasises that the application of the opt-out clause to individual cases and, particularly, the investigation and weighting of the criteria, is still incumbent upon the national judges.229 Thus, a great deal of discretionis applicable for national courts with regard to the opt-out clause in Article 8(4) Rome I-Regulation.230 The application of the opt-out clause to maritime labour contracts is deter- 102 mined according to the same rules as the general focus linkage according to Article 8(4) Rome I-Regulation.231 The closer connection is based on the focus of the employment relationship and is measured according to a (non-exclusive) criteria catalogue. Reference is to be made preferentially to the primary linking

225 Junker, FS Heldrich (2005), pp. 719, 729; Mankowski, AP H. 1/2011 Nr. 1 to Article 18 EuGVVO, Bl. 108R, Bl. 111. 226 Block, Anknüpfung im staatsfreien Raum (2012), p. 312. 227 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6. 228 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 40). 229 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 40). 230 Possible specifications for the interpretation of the opt-out clause for Gräf, BB (2013) 2008. 231 Concerning the “closer connection” according to Article 6 II Rome Convention cf. CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6.

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criteria,232 such as the nationality of the contract parties,233 the headquarters of the employer, the residency of the employee, the subjugation of the contract to a national social security system,234 the payment location for taxes and fees on income,235 and, most of all, the workplace, as the economic core of the employment relationship. For maritime employment relationships, the workplace is represented by the flag, provided the prerequisites for flag State linkage according to Article 8(2) , first sentence, first alternative Rome I-Regulation are given. Thus, the flag belongs to the criteria that are to be primarily considered.236 103 Complementary reference can also be made to further contract-related criteria, such as the contract language, as well as to parameters that relate to the determination of salary and to the working conditions,237 such as the currency in which wages are paid out.238 These criteria are not given determinative significance. The circumstances merely have an evidentiary function within the framework of an overall assessment of the matter.239 If these factors exist the regular route of the ship or the location from which the employment relationship is in fact governed can also serve as complementary reference points.240 104 In any case, however, it must be noted that the criteria used within the framework of an overall assessment must possess such weight that they clearly ex-

232 Cf. here Martiny, in: MünchKommBGB (2010), Article 8 Rome I-VO para. 68 et seq.; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 27; Deinert, Inter. ArbR § 9 para. 135 et seq.; cf. to Article 30 EGBGB a.F. Bundesarbeitsgericht (Germany) 24 August 1989, BAGE 63, 17 (para. 45); 12 December 2001, BAGE 100, 130 (paras 32, 33); 9 July 2003, AP Nr. 7 to Article 27 EGBGB n.F. (paras 21, 23); 11 December 2003, AP Nr. 6 to Article 27 EGBGB n.F. (paras 43, 47); 13 November 2007, BAGE 125, 24 (para. 50). 233 The CJEU does not view nationality as one of the “important linking criteria” that can signify a closer connection pursuant to Article 8(4) Rome I-VO; cf. CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6. In view of the CJEU’s eloquent silence regarding the Schlecker decision, the nationality of the parties to the employment contract should no longer be granted decisive significance; Lüttringhaus, EuZW (2013) 821 (822). 234 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 41); for a critical view Lüttringhaus, EuZW (2013) 821 (822 et seq.). 235 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 41); for a critical view Lüttringhaus, EuZW (2013) 821 (822 et seq. 236 Disputed, as here Block, Anknüpfung im staatsfreien Raum (2012), p. 315 f.; Gräf, ZfA (2012) 557 (593); for another view Bundesarbeitsgericht (Germany) 3 Mai 1995, BAGE 80, 84 (para. 32); Deinert, Inter. ArbR § 9 paras 171, 177. 237 CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 41). 238 Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 27; Deinert, Inter. ArbR § 9 para. 135 et seq. 239 Deinert, Inter. ArbR § 9 para. 136. 240 Cf. Thorn, in: Palandt Kommentar (2014), Article 8 Rome I-VO para. 13. – Thus, to Article 30 EGBGB a.F.: BAG Bundesarbeitsgericht (Germany) 24 August 1989, BAGE 63, 17 (para. 45); Mankowski, Seerechtliche Vertragsverhältnisse (1995), pp. 501 et seq.; cf. also Opinion of Advocate General Darmon 17 March 1992, Case C-72/91 (Solman Neptun), ECR 1991, p. I-926.

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ceed the weight of the elements used in the standard linking.241 Therefore, to achieve a closer connection, several of these criteria must cumulatively point to one and the same legal order. In sum, they must predominate as opposed to the standard linkage to the flag State.242 Therefore, along with the perspective of the flag, other aspects can allow for a judgment that deviates from the principle of the law of the flag, provided they only appear in an objectified form and “permit a reasonable weighing of interests on the basis of objective principles.” 243 The criteria named here must generate a significantly closer connection between the maritime labour contract and a particular legal order than the connection represented by the standard linkage, i.e., through the flag as a particular example of the workplace.244 It should be further noted that the legal order most favourable to the employee in a specific case is not automatically to be applied.245 4. Extent of the Maritime Labour Contract Statute

The substantial law determined according to the above-mentioned principles 105 applies pursuant to Article 10(1) Rome I-Regulation to the conclusion and validity of the maritime labour contract and, inter alia it also applies in accordance with Article 12 Rome I-Regulation to the interpretation and execution of the contract, as well as to the consequences of non-fulfilment and the expiry of obligations.246 Thus, essentially all legal questions concerning the rationale, the content, the execution and the termination of maritime labour relationships are determined by the labour contract statute.247 In contrast, tortious liability between the labour contract parties is judged according to Article 4 Rome II-VO.248 For extra-contractual obligations resulting from labour dispute actions, Article 9 Rome II-VO contains a special linkage.249 241 Bundesarbeitsgericht (Germany) 24 August 1989, BAGE 63, 17 (para. 43); 29 October 1992, BAGE 71, 297 (para. 67). 242 Mankowski, RabelsZ 53 (1989) 487 (511). 243 Cf. for the old law preceding the IPR-Reform 1986 LAG Baden-Württemberg 17.7.1980, RIW (1981) 272 (273). 244 Block, Anknüpfung im staatsfreien Raum (2012), p. 318; Gräf, ZfA (2012) 557 (593 et seq.). 245 Cf. CJEU 12 September 2013, Case C-64/12 (Schlecker), ABl. EU 2013, Nr. C 325, p. 6 (para. 34). 246 Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome I-VO para. 28; Thorn, in: Palandt Kommentar (2014), Article 8 Rome I-VO para. 4; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 27. 247 For details concerning the extent of the labour contract statute, cf. Winkler v. Mohrenfels/ Block, EAS B 3000 (2010) paras 191 et seq. 248 Law applicable to non-contractual obligations (Rome II) European Parliament resolution of 10 May 2012 with recommendations to the Commission on the amendment of Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II), Official Journal C 261 E, 10.9.2013, pp. 17-21. – Concerning the linkage of forbidden activities on ocean-going vessels, cf. Block, Anknüpfung im staatsfreien Raum (2012), p. 279. 249 Concerning the determination of the labour dispute statute on ocean-going vessels, cf. Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 207; Block, Anknüpfung im staatsfreien Raum (2012), p. 283 et seq., Ludewig, Kollektives Arbeitsrecht auf Schiffen (2012), pp. 204 et seq.

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5. Correction of the Applicable Law 106

The Rome I-Regulation takes into consideration that, generally, the EU Members seek to apply their domestic legal order in every conflict of laws situation. Thus, the law that is per se applicable also according to the subjective choice of law only steps aside to the extent that it is opposed by overriding mandatory rules (Article 9 Rome I-Regulation)250 or the ordre public (Article 21 Rome IRegulation).251 F. Conclusion

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Under EU law, the law applicable to maritime labour contracts is determined according to the Rome I-Regulation. Accordingly, maritime labour contracts are primarily subject to the law that the parties have chosen. However, the choice of law cannot supplant those compulsory provisions of the applicable employment statute, as determined by Article 8(2) – IV Rome I-Regulation, that are more favourable to the employee. It could be questioned which law applies to maritime labour contracts in the absence of a choice of law. According to the dominant opinion, maritime labour relationships on ships are subject to linkage to the customary workplace according to Article 8(2) ,first sentence, first alternative Rome I-Regulation. They are to be linked to the law of the State under whose flag the ship is sailing according to Article 92(1), first sentence UNCLOS. Here, Article 8(2) ,first sentence, first alternative Rome I-Regulation is to be interpreted in a way that the work on a ship subject to the flag State sovereignty of a particular State is to be carried out “in” the same flag State. Thus, for the purposes of European international private law, flag State sovereignty is equivalent to territorial sovereignty. This approach guarantees(completely in agreement with the purposes of the workplace linkage) continuity of the labour relationships on which the determination of a specific customary workplace ultimately rests. For dogmatic reasons, the existence of a customary workplace for maritime labour contracts prevents a linkage to the “from which” clause and also a linkage to the law of the State in which the business office is located that hired the seafarer. In individual cases, a correction of the standard linkage to the flag State is accomplished by means of the opt-out clause of Article 8(4) Rome I-Regulation. 250 Recital (37) Rom I-VO; cf. in general, to Article 9 Rome I-VO Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 141 et seq.; Schlachter, in: Erfurter Kommentar (2014), Article 3, 8, 9 Rome I-VO para. 21; Staudinger, in: Ferrari Inter. VertragsR (2012), Article 8 Rome IVO paras 4 et seq.; specifically to the mandatory rules of German maritime law, Block, Anknüpfung im staatsfreien Raum (2012), pp. 229 et seq Gräf, ZfA (2012) 557 (609) et seq. 251 Resorting to the ordre public in labour contract law is only necessary in rare cases due to the special linkage in Article 8(1), second sentence Rome I-VO und Article 9 Rome I-VO; here, Winkler v. Mohrenfels/Block, EAS B 3000 (2010) para. 190; Oetker, in: MünchArbR (2009), § 11 para. 54.

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport

Jessen

Coleman/Henning

Robert

I. Introduction A Liberalised and Competitive EU Market for Maritime Transport . . . . 1. Treaty Objectives and Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The Application of Article 101 and 102 TFEU to Maritime Transport since 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Mechanisms and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Key Legal Issues for Maritime Transport and Other Services Within the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Restrictive Agreements, Decisions and Concerted Practices . . . . b) Technical Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Information Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Pool Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Marine Insurance Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Mergers and Concentrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Abuses of a Dominant Position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h) Public Undertakings and Services of General Interest . . . . . . . . . . . i) State Aids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . j) Public service contracts and obligations . . . . . . . . . . . . . . . . . . . . . . . . . .

1 3 8 10 16 17 29 30 36 40 41 43 47 51 70

Literature: Chuah, Liner Conferences in the EU and the Proposed Review of EC Regulation 4056/86, LMCLQ 2005, pp. 207; Chuah, Extension of the Block Exemption for Liner Shipping Consortia, Journal of International Maritime Law 2014, pp. 143; Finger/Holvad (eds.), Regulating Transport in Europe (2013); Haralambides, The Economics of Bulk Shipping Pools, Maritime Policy and Management 1996, pp. 221; van Hooydonk, The European Port Services Directive: The Good or the Last Try?, Journal of International Maritime Law 2005, pp. 188; van Hooydonk, Prospects after the Rejection of the European Port Services Directive, Il Diritto Marittimo 2004, pp. 851; Koliousis/Koliousis/Papadimitriou, Estimating the Impact of Road Transport Deregulation in Short Sea Shipping: Experience from Deregulation in the European Union, International Journal of Shipping and Transport Logistics 2013, pp. 500; Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 449, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Liu, Access to the Market of Port Services – the European Port Package II, pp. 247, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Ng/Sauri/Turro, Short Sea Shipping in Europe: Issues, Policies and Challenges, pp. 196, in: Finger/Holvad (eds.), Regulating Transport in Europe (2013); Packard, Shipping Pools (1989); Power, EC Shipping Law (2nd ed., 1998); Power, The Historical Evolution of European Union Shipping Law, Tulane Maritime Law Journal 2014, pp. 313. Please also refer to the list of literature in the general introduction to the commentary.

A Liberalised and Competitive EU Market for Maritime Transport

The EU adopted the instruments to create a liberalised market in maritime 1 services in the period up to and shortly after the 1992 deadline for the general

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single market programme. Regulation 4055/86 gave Member State nationals the right to carry passengers or goods by sea between any port of a Member State and any port or off-shore installation of another Member State or of a country not a member of the EU.1 2 Cabotage was progressively liberalised under Regulation EEC/3577/92, the process being completed in 2004.2 Remaining limits on access to the market are limited in number and scope. Early problems of adaptation to the new liberalised environment appear to have been solved without undue difficulty or delay. As for other economic sectors, maritime transport has to function without constraints on or distortions of the conditions of competition among transport enterprises. 1. Treaty Objectives and Provisions

Indeed the development of a system ensuring that competition in the internal market is not distorted is one of the activities which, from the beginning, the EU (and the European Community before it) have had as their central tasks.3 The specific provisions governing this activity are to be found in Articles 101 to 109 TFEU (ex 81 to 89). 4 Article 101 TFEU (ex 81) concerns undertakings’ anti-competitive agreements and similar practices, while Article 102 TFEU (ex 82) prohibits abuses of a dominant position.4 Article 103 TFEU (ex 83) provides for the adoption of Regulations and Directives to give effect to the principles in those provisions, while Article 104 TFEU requires the Member States to rule on the admissibility of relevant arrangements and practices until those instruments enter into force. Article 105 TFEU requires the Commission to ensure the application of Article 101 and 102 TFEU, empowering it to investigate possible infringements, in cooperation with the Member States, and to propose remedial measures. 5 Certain mergers and other concentrations fall within the scope of Article 102 TFEU (and therefore also of Article 103 TFEU) but some do not. A merger control Regulation has been adopted to cover all such operations affecting the functioning of the common market which is not only based on Article 103 TFEU. It is also based on Article 352 TFEU (ex 308). Initially, this provided a catch-all basis for action found necessary in the course of the operation of the common market to achieve Community objectives.5 6 Article 106 TFEU (ex 86) limits the possibilities for Member States to favour public undertakings, those to which they grant special or exclusive rights, those 3

1 Power, EC Shipping Law (2nd ed., 1998), pp. 210. 2 Id., pp. 223; see further details in Chapter 3, II. of the commentary. 3 See EC Treaty prior to the modifications of the Lisbon Treaty, Preamble para. 4 and Article 3(1) and 4(1). 4 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 500 and 514, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 5 The provision has been modified by the Lisbon Treaty to refer to all actions necessary, within the framework of the policies defined in the Treaties, to attain one of their objectives.

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entrusted with the operation of services of general interest and revenue producing monopolies. Article 106 to 107 TFEU (ex 87) constitute a framework to discipline Member States’ provision of aid in any form favouring certain undertakings, the Commission being given substantial enforcement powers. Alongside these generally applicable Treaty provisions, Article 90 TFEU (ex 7 70) in the specific Title V on transport provides that the objectives of the Treaties are to be pursued in the transport field within the framework of a common transport policy. The scope of this policy, certain of its basic features and the conditions and the procedures for its further development are further defined in Article 91-100 TFEU (ex 71 to 80). Beginning in the 1970s, the CJEU ruled that the existence of the transport Title did not prevent the general provisions, including those on competition and State aids from applying to the transport sector. 2. The Application of Article 101 and 102 TFEU to Maritime Transport since 2008

The application of Article 101 and 102 TFEU on anti-competitive agreements 8 and practices to maritime transport entered a new era in 2008. For more than 25 years from 1979, the EU focussed primarily on the functioning of the freight liner conferences, beginning with the implementation of the UNCTAD code of conduct on liner conferences trading with developing countries6 and continuing from the middle of the 1980s with the adoption and application of a block exemption allowing the operation of conferences complying with certain conditions designed to ensure that they brought benefits to shippers and were not abused.7 The latter proved a continuing source of friction between the Commission and the liner industry, generating a considerable amount of complaints from shippers, enforcement decisions and litigation, mostly concerning the exact scope of the exemption. The decisions have lost much of their interest but it cannot be excluded that some of their reasoning may still prove relevant in the future. But in 2003, the Commission began a process of study and consultation 9 which culminated in 2006 in the abolition of the block exemption8 and the application from October 2008 of the modernised general enforcement regime applicable to all sectors of the economy.9 This Regulation applies to all maritime transport services, including the tramp market and cabotage, allowing the Commission for the first time to use the full array of investigation and enforcement measures in relation to the whole sector. The Commission in July 2008 pub6 Regulation 954/79, OJ L121/1 of 17 May 1979. 7 Regulation 4056/86, OJ L378/4 of 27 April 1986; see for the status until 2006: Chuah, Liner Conferences in the EU and the Proposed Review of EC Regulation 4056/86, LMCLQ 2005, pp. 207. 8 Regulation 1419/2006, OJ L269/1 of 28 September 2006. 9 Regulation 1/2003, OJ L1/1 of 4 January 2003 and Commission Regulation 773/2004, OJ L123/18 of 27 April 2004.

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lished guidelines to assist the industry by setting out the principles that it will follow when defining markets and assessing cooperation arrangements.10 3. Mechanisms and Procedures

First, as regards mechanisms and procedures, the Commission will follow the well established practice developed since the adoption in 1962 of Regulation 17/62 and familiar to all competition lawyers, as modernised in 2003, notably to make the system more efficient.11 The main features of the system as modified are the following. 11 Restrictive agreements and practices as defined by Article 101 (1) TFEU, not satisfying the conditions of Article 81 (3) TFEU, and all abuses of dominant position under Article 102 TFEU are prohibited without any decision to that effect being necessary, whether by the Commission or a national competition authority or court. Any such restrictive agreements or decisions are in any case automatically void under Article 101 (2) TFEU. Restrictive agreements and practices which on balance have certain economic advantages as defined by Article 101 (3) TFEU are nevertheless not prohibited by Article 101 (1) TFEU.12 Such agreements no longer have to be approved in advance through a centralised exemption procedure managed exclusively by the Commission. Instead Article 81 (3) TFEU is given direct effect by Article 1 of Regulation 1/2003 and may be applied not only by the Commission but by national competition authorities and courts. Enterprises have to assess for themselves whether Article 101 (1) TFEU applies and whether any arrangement is justifiable under Article 101 (3) TFEU. The burden of proving an infringement of Article 101 (1) TFEU rests with the party or authority making the allegation, while undertakings or associations claiming the benefit of Article 101 (3) TFEU bear the burden of proving that the conditions of that paragraph are fulfilled. 12 Where national competition authorities and courts apply national law to practices falling within the scope and objectives of Article 101 and 102 TFEU, they are also obliged to apply the provisions of those Articles and not to be 10

10 Guidelines on the application of Article 81 of the EC Treaty to maritime transport services, OJ C245/2 of 26 September 2008. In May 2012, the Commission opened a consultation on whether these sector specific guidelines still served a useful purpose, suggesting that they were designed to facilitate the transition of the shipping industry to the regime following the abolition of the block exemption. That transition being accomplished, the guidelines served no useful purpose and indeed overlapped with other non-sectoral guidelines. Their withdrawal would also serve the Commission’s general objective of eliminating sector specific provisions in transport. 11 Regulation 1/2003, OJ L1/1 of 4 January 2003. See also Commission Regulation 773/2004, OJ L123/18 of 27 April 2004. In January 2010, the Commission published on its web site three documents designed to improve the application of the practice of antitrust and merger procedures, i.e., best practices for antitrust proceedings, best practices on the submission of economic evidence in both antitrust and merger procedures and guidance on the role of hearing officers in antitrust proceedings. 12 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 509, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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stricter in their approach to restrictive agreements and practices than the Treaty. EU rules are to be given effect as broadly as possible throughout the EU in a way which ensures the coherent development of the system. By contrast, this does not apply to unilateral action by individual enterprises and therefore to abuses of a dominant position under Article 102 TFEU.13 The Member States can enforce stricter measures concerning the behaviour of single firms over which they have jurisdiction. As regards the Commission, it will focus on the most serious infringements 13 and is endowed with a broad range of powers to investigate by requesting information, taking statements, and conducting inspections; to make findings; to impose remedies, including interim measures; to make commitments of undertakings legally binding; and to impose financial penalties, including periodic penalties to encourage compliance. In exceptional cases, where the public interest so requires, it may also make formal findings of a declaratory nature as to the application of Article 101 (1) and (3) TFEU to particular arrangements. Its powers are subject to limitation periods and to hearing, notice and publication requirements. Provision is made for the Commission and the competition authorities of 14 Member States to form a network for ensuring the application of EU competition rules in close cooperation, notably through information exchange and authority for its use in proceedings. In this context, the functioning of the Advisory Committee on Restrictive Practices and Dominant Positions, composed of representatives of the Commission and Member States, originally set up by Regulation (EEC) 17/62, has been reinforced. The Commission is also given a power to adopt implementing provisions 15 concerning the application of the Regulation, after consulting interested parties on a published draft. The Advisory Committee is to be consulted before both publication of the drafts and final adoption of the measures. Finally, in 1989, a Council Regulation was adopted to set up a broadly based regime to control mergers and other concentrations which might have a negative effect on the functioning of the common market through a reduction in the number of competitors.14 This regime, modernised in 2004,15 applies to the economy in general, including maritime transport to which it has been regularly applied.16 4. Key Legal Issues for Maritime Transport and Other Services Within the EU

Turning to substantive legal issues, since 2008, all maritime transport services 16 are subject to the generally applicable procedural framework and freight confer13 14 15 16

Ibid., pp. 514. Regulation 4064/89, OJ L395/1 of 30 December 1989. Regulation 139/2004, OJ L24/1 of 29 January 2004. Maersk Safmarine, OJ C176/9 of 22 June 1999; CMA/CGM Delmas, OJ C273/5 of 4 November 2005.

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ences no longer benefit from a block exemption. Accordingly, the question of whether a service is to be considered as maritime transport or something else as in the case of dredging, cable laying or ship broking has lost much of its significance. The substantive and procedural rules will normally be the same. However, there is still a block exemption concerning freight liner shipping consortia. For that purpose, it remains necessary to have in mind that Regulation 823/2000 only benefits undertakings engaged in supplying a particular kind of maritime transport service, namely “international liner shipping services exclusively for the carriage of cargo, chiefly by container”.17 a) Restrictive Agreements, Decisions and Concerted Practices

To fall within the scope of Article 101 TFEU and therefore of Regulation 1/2003, arrangements must be capable of affecting trade between Member States. Maritime transport services linking ports in different Member States or ports in the EU with third countries will in most cases have such an effect because of their impact on EU transport markets and those for associated activities such as port services and indeed other economic activities in their hinterlands, including trade in goods.18 18 Cabotage services, taking place within a single Member State, may also do so, though this is probably less likely. Arrangements concerning services between ports entirely outside the EU could also still have such effects, even if unintended, and large scale arrangements in particular will need careful analysis on a case by case basis. They may have spill over effects, for example, where price sensitive information is shared and is relevant to transactions in trades to or from EU ports. On all these issues it may be useful to refer to the Commission's general guidelines on applicable under Article 101 and 102 TFEU.19 19 The essence of the prohibition in Article 101 TFEU is collective action by enterprises having as its object or effect the prevention, restriction or distortion of competition.20 The collective action need not be based on or implemented through any formal agreement or decision. For while economic operators have the right to adapt their operations to the existing and anticipated conduct of their competitors and other relevant operators, such as the suppliers of inputs to their production processes, they must do so independently. They must not base their decisions on any contact, direct or indirect, with competitors having as its object 17

17 Regulation 823/2000, OJ L100/24 of 20 April 2000, as amended by Commission Regulation 463/2004, OJ L101/10 of 21 April 2005. 18 See decisions and judgements concerning CEWAL, OJ L34/20 of 10 February 1993; TAA, ECR 2002, II-875; and TACA, ECR 2003, II-3275. 19 OJ C 101/81 of 27 April 2004. 20 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 500, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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or effect influencing the market behaviour of competitors, actual or potential.21 Thus, e.g., surcharges to address currency weaknesses or fuel price rises are not in themselves objectionable but will be if competitors impose them in an orchestrated fashion. Ultimately this could depend on circumstantial evidence such as the timing and uniformity of pricing changes, though direct evidence of communication will obviously be very influential. Where collective action has the object of affecting competition, it is not nec- 20 essary to prove that it succeeded and achieved the intended effect. The intention to achieve the proscribed result is enough.22 The assessment of the effects on competition of collective action depends in the first place on a definition of the relevant product and geographical market affected by the action in question. This is to identify the competitors of the undertakings concerned, that is, undertakings not involved in the action capable of constraining the formers’ behaviour and preventing them from behaving without regard to competitive pressure. The relevant product market consists of all those products or services which by their nature may reasonably substitute for those offered by the undertakings concerned. The relevant geographical market identifies the areas in which the conditions of competition are sufficiently homogeneous and distinguishable from other areas where conditions are appreciably different. In shipping, containerised liner services have been consistently treated as a 21 distinct product market for many years, even decades. This is because a substantial proportion of goods so transported often cannot in practice be switched to other forms of transport or other forms of shipping. Also the historical record suggests that once a particular type of cargo becomes regularly containerised, it is unlikely to be transported ever again as break bulk. The converse is not true, however. The liner sector has been conventionally distinguished from unscheduled tramp services which break down into different product markets depending, in particular, on the nature and size of the cargo which limits the type of vessel that can be used.23 Good examples are the liquid and dry bulk markets for ships with different technical characteristics that cannot readily be changed. Also vessels are usually classified into a number of standard industrial sizes and this may affect their substitutability due to economies of scale and technical limitations concerning accessibility of ports and canals. These factors may need to be assessed in particular cases, including possibilities for “chain substitution” between vessels of different sizes. More specialised markets, some of which could concern either liner and tramp shipping or indeed both, have also been identified such as vehicle and gas transport and perishable goods requiring refrigeration.

21 See ICI, ECR 1972, 619; Suiker Unie, ECR 1975,1663; Adriatica, ECR 2003, II-5439; Minoan Lines, ECR 2003, II-05515; Ferry Operators, OJ L26/23 of 29 January 1997; Polypropylene (Anic), ECR 1999, I-4125. 22 Ferry Operators, OJ L26/23 of 29 January 1997. 23 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 505, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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In general, geographic markets have been identified by the port ranges served in Europe and in third countries. As liner services from and to Mediterranean in the 1990s were only marginally substitutable for northern European ports, these were identified as separate geographical markets.24 Substitutability of ports may also be limited by physical or technical considerations such as draught limits and weather, including ice, or terminal specifications. Because of their greater flexibility as to the ports that can be served, tramp services are likely to more readily substitutable than liner services. The anti-competitive character of collective arrangements is very broadly drawn including, but not being limited to, the specific arrangements listed in Article 101 (1) TFEU: – the fixing of prices or other trading conditions; – limits or controls on production, markets, technical development or investment; – sharing of markets and supply; – applying dissimilar conditions to equivalent transactions to the disadvantage of some trading parties; – and making the conclusion of contracts subject to the acceptance of extraneous obligations. 23 More recent case law puts more emphasis on the need for economic analysis of the actual and potential effects of an arrangement on the relevant market rather than presumptions that limitations on a particular undertaking’s freedom of action will necessarily have an adverse effect on competition.25 The main types of agreements that can be found in the shipping sector are – conferences, in the EU no longer benefiting from a block exemption; – consortia; – technical agreements; – exchanges of information; and – pools. 24 Freight liner conferences provide regular service on given routes and are intended to ensure greater stability in the market by establishing common tariffs to be respected by all member shipping companies. Accordingly, they are contrary to Article 101 (1) (a) TFEU as they “directly [...] fix [...] selling prices” and can only operate if saved by Article 101 (3) TFEU because they bring economic or technical benefits, in which consumers participate, and do not impose unnecessary restrictions on participants nor permit them to eliminate competition in respect of a substantial part of the product market concerned. 25 The 1986 block exemption was intended to provide a legal framework which by further defining the limits which conferences should respect would provide them with greater legal certainty and their customers with more explicit guarantees of the benefits to them and of continued competition in a substantial part of 22

24 TACA, ECR 2003, II-3275. 25 Delimitis, ECR 1991, I-935; cf. Consten and Grundig, ECR 1966, 299.

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the market. But the proposal was extremely controversial and as a result the drafting did not clearly resolve many issues and left the way open for continued contestation. This culminated in the so-called “Transatlantic saga”26 which lasted for around a decade until 2003. By that time, conferences serving Europe were subject to many restrictive conditions deriving from the cumulation of EU and US competition laws and the industry had been subject to considerable change, notably through the generalisation of container use and the consolidation of many shipping undertakings into fewer, larger ones, some of them referred to as “mega-carriers”. Against that background, the Commission concluded that the conference system as embodied in the block exemption no longer served a useful purpose and proposed its abolition from 2008 which the Council rapidly and unanimously accepted.27 As to the future, whether some shipping undertakings trading to Europe will 26 again operate as conferences with set tariffs as in the past or under more limited forms of co-operation remains to be seen. At the moment, the industry seems to be focussing more on the possibility of contenting itself with arrangements less obviously problematic from a competition point of view including information exchange through trade associations. The Commission decisions and case law generated by the block exemption may still prove relevant to the assessment of particular arrangements under Article 101 (1) and (3) TFEU. Consortia of liner shipping undertakings engaged in international freight 27 transport benefit from a separate block exemption. The block exemption for consortia has applied since 1995 and the 2009 Regulation was based on an evaluation of its functioning including a market survey as part of the Commission’s monitoring of the market and a consultation on possible changes to the existing Regulation.28 Unlike conferences, consortia are not authorised to fix rates jointly.29 They are authorised to co-operate in the joint operation of freight liner transport, including timetabling, ports served, sharing and management of capacity on vessels, pooling of vessels and port installations; in the joint management of operations, the provision and procurement of containers and other equipment; in the use of computerised data exchange; in temporary capacity adjustment in response to fluctuations in supply and demand; and in joint management of port terminals and related services. Where necessary, members can be obliged to use the consortium’s vessels and refrain from chartering space on third party vessels or assigning or chartering the consortium’s space to others without the consent of its other members. Limitations of capacity or sales, ex26 The Transatlantic Conference Agreement, preceded by the Transatlantic Agreement. 27 Regulation 1419/2006, OJ L269/1 of 28 September 2006. 28 Council Regulation (EC) 246/2009, OJ L79/1 of 26 March 2009 and Commission Regulation (EC) 906/2009, OJ L256/31 of 29 September 2009; see also Commission Services Document, Technical Paper on the Revision of Commission Regulation (EC) No 823/2000, October 2008. 29 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 512, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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cept for the adjustments responding to fluctuations in supply and demand, are not authorised. There was interest in the shipping industry in maintaining the exemption and even a successful plea to extend it to liner shipping activities other than containerised cargo, including specialised services such as vehicle transport. Most shippers also seemed to recognize the benefits of continuing the exemption though subject to some amendments to safeguard a sufficient level of competition. Most discussion centred on the limit for a consortium’s market share and its reduction to 30%, the figure applicable in other sectors of the economy. 28 The exemption was last up-dated in 2014 extending the liner consortia block exemption until April 2020.30 Cooperation of this kind is considered to improve the productivity and quality of liner services through rationalisation, economies of scale and more efficient use of containers and vessel capacity. Moreover shippers are held to share in their benefits, but only on condition that the trades in which consortia operate are sufficiently competitive, even where a consortium operated within a conference. For this reason, consortia can only benefit from the exemption if the total market shares of their members in relevant trades is less than 30%. Also, other conditions are designed to preserve a certain independence for members as regards their ability to offer individual service arrangements, to engage in independent marketing and their right to leave a consortium without penalty or restriction on their subsequent activities, subject to rules designed to protect for a certain time investments made to sustain or develop the consortium’s business. Even when a consortium does not meet the criteria of the block exemption, it may still be possible for the participants to show that it meets the basic competitive criteria of Article 101 TFEU. b) Technical Agreements 29

Certain technical agreements may not fall under Article 101 (1) TFEU as they might not restrict competition. This applies, for example, to agreements having as their sole object and effect the implementation of technical improvements or to realise technical cooperation. An example might be agreements to reduce or improve the efficiency of the movement of empty containers. However, the exception is a narrow one and any element of an agreement affecting competitive conditions, such as the setting of prices or limits on capacity, will fall outside this category and will require justification under Article 101 (3) TFEU.31 c) Information Exchange

30

In many industries, undertakings arrange for information on the markets in which they operate to be exchanged or collected, processed and made available 30 Press Release of the Commission IP/14/717 of 24 June 2014, also referring to Commission Regulation 906/2009, OJ L256/31 of 29 September 2009; Chuah, Extension of the Block Exemption for Liner Shipping Consortia, Journal of International Maritime Law 2014, pp. 143. 31 FETTSCA, OJ L281/1 of 20 October 2000; Deutsche Bahn AG, ECR 1997, II-1689.

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to themselves or even published. Such published market information can increase market transparency and may well be pro-competitive.32 However, the exchange of commercially sensitive information can have the opposite effect when it reduces or even eliminates the uncertainty of current market movements and so negates the autonomous decision making of market participants.33 Accordingly, the actual or potential effects of each arrangement for informa- 31 tion exchange must be analysed in the light of a number of factors, in particular, the market structure, the characteristics of the information exchanged and the mechanism by which it is made available. Both the level of concentration and the structure of supply and demand in the 32 relevant market are important considerations. On highly concentrated, oligopolistic markets, where competition is already reduced, restrictive effects of information are more likely to occur. For example, exchanges of precise information on individual sales at short intervals between the main competitors, to the exclusion of others and of consumers, are particularly likely to impair competition. The number of competing operators, the symmetry and stability of their market shares, the existence of any structural links, such as consortium membership, and the homogeneity of the product market are all likely to be relevant factors. As to the nature of the information, current or recent information on matters 33 central to market transactions like prices, capacity or costs are likely to be considered commercially sensitive and therefore illegitimate. Data as to undertakings’ forecasts of market developments or their marketing intentions are also likely to be inadmissible for the same reason. Information on individual undertakings is more likely to be problematic than aggregated information on the market as a whole, though the level of aggregation and the possibility for users to disaggregate it have to be taken into account. Exchange of information about the past when it is no longer relevant to an undertaking’s current and future commercial behaviour is not contrary to Article 101 (1) TFEU. In previous cases, the Commission has considered information more than one year old to be historic, while information less than a year old has been considered recent.34 The assessment must take account of the speed with which information becomes obsolete in the relevant market as well as the frequency of the data collection. The more frequently information is made available, the more quickly competitors can react. The more information is made available to customers, the less likely it is to pose a problem. Information limited to members of an industrial association or carriers in a particular trade is more likely to be found illicit. Since an exchange of information between carriers that restricts competition may nevertheless cre32 A. Ahlstrom Osakeyhtiö, ECR 1993, I-1307. 33 John Deere, ECR 1998, I-3111; Thyssen Stahl, ECR 2003, 10821; Asnef-Equifax, ECR 2006, I-11125; Polypropylene (Anic), ECR 1999, I-4125. 34 UK Agricultural Tractor Registration Exchange, OJ L68/19 of 13 March 1992; Wirtschaftsvereinigung Stahl, OJ L1/10 of 3 January 1998.

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ate efficiencies such as better use of capacity, it may be possible, though not necessarily easy, to justify it under the four conditions of Article 101 (3) TFEU. 34 The European Liner Affairs Association (ELAA) was set up in 2003 to represent the liner industry, notably in relation to the European Commission, and to address issues arising out of its competition law review. In 2008 it began running, through an independent data warehouse company, an information exchange on the cargo liner sector. The members were the main liner companies trading to and from Europe. The system gathered, processed and made available data that had been appropriately aggregated or historical to avoid dissemination of individual carriers’ sensitive commercial information. Information has been publicly available on the web on a segmented basis concerning the main trade routes to and from Europe, including both volumes and price indices referring to changes since the preceding year. The system was carefully assessed for its compatibility with competition law and has so far not attracted criticism from shippers or enforcement authorities. 35 In 2010 the ELAA was considered to have achieved its objectives and has been wound up, the information exchange system continuing to function under the management of Container Trade Statistics Ltd (CTS). Regulatory matters are now handled by the World Council of Shipping (WCS). d) Pool Agreements

Much of the international shipping industry, notably irregular or “tramp” transport of dry and liquid bulk, operated outside the scope of Regulation 4056/86. As a consequence, under Article 104 TFEU, for the last half century responsibility for enforcing Article 101 and 102 TFEU lay with the authorities of the Member States. However, there is no history of them identifying and prosecuting anti-competitive activities, no doubt in large part because of the absence of complaints from shippers. The tramp sector is accordingly not yet well understood by competition authorities, though the Commission in 2007 published a lengthy study commissioned by it which brings a considerable amount of information into the public domain for the first time.35 37 Much of the sector operates through a form of horizontal cooperation known as shipping pools.36 While there is no universal model for pools, they do share many common features.37 A shipping pool is a joint venture in which a number of vessels capable of carrying certain cargos but under different ownership are operated under single management as regards commercial relations and operations, while the technical operation of the vessels remains the responsibility of 36

35 Fearnley Consultants, Legal and Economic Analysis of Tramp Maritime Services, 22 February 2007. 36 In 2010, reports have circulated of pools being organised to provide container ship capacity to liner operators. 37 See generally: Packard, Shipping Pools, Lloyd´s of London Press Ltd, (London 1989); Haralambides, The Economics of Bulk Shipping Pools, Maritime Policy and Management (23) 1996, pp. 221.

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each owner. The pool manager often acts under the supervision of an executive committee representing the vessel owners. Accordingly, pools combine features of joint commercialisation and joint production as defined by the Commission in its general guidelines on the application of Article 101 TFEU to horizontal cooperation agreements.38 The hybrid nature of shipping pools and the variation in their precise characteristics calls for a careful case-by-case analysis, particularly in the initial period of the Commission’s application of competition law to this sector of the industry. Pools not having a negative effect on competition do not fall under the prohi- 38 bition of Article 101 (1) TFEU but since a central function of the pool manager is to make available transport services at a given price on behalf of a group of shipowners, the burden of persuasion tends to shift automatically to the pools. They may well seek to show that the services in question could not be provided in the absence of the pool and that in commercial reality the pool creates or increases competition rather than the opposite. This will inevitably lead to an analysis of the effects of the pool in the market which is also necessary when pools are considered likely to constrain competition. The question is whether and to what extent the pool is likely to have adverse 39 effects on prices, costs, service differentiation, quality and innovation due to an appreciable reduction in rivalry in the relevant market and neighbouring markets, taking into account the nature of the agreement, the parties’ combined market power and other structural factors in the market. Effects of the pool agreement outside the pool itself through restrictions on its members, commercially sensitive information shared among them and links between pools will need assessment. As to structural factors, low market shares will make it unlikely that a pool will have restrictive effects. Other factors to be taken into account are market concentration, the stability of market shares, multiple pool membership, market entry barriers and potential, market transparency, countervailing buying power of the shippers and the more or less specialised nature of the service offered. Even where pools are caught by Article 101 (1) TFEU, they may be able to demonstrate that they fulfil the cumulative conditions of Article 101 (3) TFEU, notably efficiency gains in which shippers participate, for example, through lower rates or improvements in service lowering shippers’ costs. e) Marine Insurance Agreements

From time to time competition issues concerning agreements for marine insu- 40 rance, notably the functioning of Protection and Indemnity Clubs (P&I), have arisen. The P&I Clubs have been subject to three antitrust investigations over the past 30 years. In the last of those, in 2010, the Commission opened a formal investigation into the 13 mutual clubs as organised in the “International Group of P&I Clubs” to establish whether its provisions on claim sharing and joint 38 OJ C3/2 of 6 January 2001.

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reinsurance in the marine insurance sector might harm ship owners and insurers who are not members of the group.39 The members of the “International Group” provide P&I insurance to about 93% of the world’s ocean-going tonnage. The investigation, opened on the Commission’s own initiative, was abandoned in 2012 but resulted in some amendments to the International Group’s internal rules.40 f) Mergers and Concentrations

The merger control regime has been applied to the shipping sector as it has to others without giving rise to major problems particular to the sector.41 A number of transactions have been approved without change or condition under the simplified procedure. Others of greater importance have been approved only subject to commitments modifying the operations of the resulting undertaking to eliminate potential negative effects on the market.42 42 A notable feature of assessments of competition in the maritime service market is the interaction, actual and potential, between the different types of relationship that can exist between undertakings. Major shipping firms seeking to develop their service networks are quite likely to be already involved in conferences, consortia, pools, other joint ventures, information exchanges, professional associations and other activities involving other shipping undertakings. A major merger or other concentration is likely to involve an assessment of many, possibly all, of these and modifications to some of them. For example, it may be necessary in a merger for some affiliates to withdraw from conferences or consortia of which they have been members. Conversely, and somewhat paradoxically, it may well be that constraints on some forms of horizontal cooperation like conferences have acted as a stimulus to other more intense forms of consolidation such as full mergers. It will be interesting to see if the changes to the treatment of conferences and pools appear to have a similar effect. 41

g) Abuses of a Dominant Position 43

If mergers and concentrations are now dealt with under Regulation 139/2004,43 abuses of dominant position having a different character fall under Regulation 1/2003 like horizontal arrangements. Under Article 8(1) of Regulation 4056/86, abuses of dominant position by undertakings providing international maritime transport services other than tramp services were prohibited and,

39 Case No. 39.741, P&I Clubs, Press Release IP/10/1072, 26 August 2010. 40 See Lloyd’s List of 2 August 2012, p. 2 (“Brussels closes its IG antitrust investigation”). 41 See Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 525, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 42 Maersk/PONL, OJ C207/81 of 24 August 2005, Wallenius/WilhemsenASA/Hyundai, OJ C30/31 of 8 February 2003 and DFDS/Norfolk, OJ C241/1 of 8 September 2010. 43 OJ L24 of 29 January 2004, p. 1-22.

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unlike horizontal arrangements, not capable of benefiting from an exemption.44 As a result, a limited amount of experience has been acquired of the application of the concept to maritime services in addition to relevant decisions and cases from other sectors. The meaning of “dominant position” has been elucidated by the CJEU in a 44 number of cases, notably Europembellage and Continental Can45 and United Brands.46 In essence, it is a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers. The first step in the analysis is to establish what is the relevant market and the market share of the undertaking concerned. Large shares of the market are not the only factor but are in themselves evidence of the existence of a dominant position, while groups of linked undertakings adopting the same conduct on the market, such as those in conferences or other associations, may be in a position of collective dominance.47 A market share of 50% or more gives rise to a dominant position, while lesser shares may do so, for example, where the other shares are substantially smaller.48 The holding of a dominant position is not in itself prohibited, though taking 45 steps to reinforce it by further limiting or reducing the presence of competitors in the market will be.49 The list of abuses in Article 82 TFEU is non-exclusive and there is an extensive jurisprudence concerning its application in different economic sectors potentially applicable to maritime services. These include the use of discriminatory pricing or other trading conditions, limiting capacity, or the imposition of unrelated supplementary obligations. But the burden of proof is on the authority alleging the abuse and the evidence must be sufficient to negate any objective justification to the effect that the undertakings concerned are engaged in a rational pursuit of their own interests as competitors. In the TACA case in 2003,50 the Tribunal accepted that conduct by conference members having the effect of inciting other carriers to enter the trade only through the conference and not as independents would be abusive. But it considered that the actions incriminated had not been demonstrated to have had that effect being equally explicable as legitimate features of the conference under the block exemption or as not relevant to outsiders’ decisions to join the conference.

44 See Chuah, Liner Conferences in the EU and the Proposed Review of EC Regulation 4056/86, LMCLQ 2005, pp. 207; Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 501, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 45 ECR 1973, 215. See also Compagnie Maritime Belge Transports, ECR 2000, I-1365. 46 ECR 1978, 207. 47 CEWAL and Compagnie Maritime Belge Transports, cited above. 48 AKZO, ECR 1991, I -3359. 49 Europembellage and Continental Can, cited above. 50 TACA ECR 2003, II-3275.

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Carriers who own or control port or terminal facilities and who seek to impose conditions for access on competing carriers that would make their operations impossible or uneconomic may find that they have abused a dominant position when there is no practical alternative access to the trade in question.51 This derives from the tendency to oligopoly of terminal infrastructure. Once a major investment has been made in a particular terminal and its hinterland connections, the development of competitive rivals can become a practical impossibility placing the operator in a dominant position in relation to trades using the facility. h) Public Undertakings and Services of General Interest

Article 106 TFEU recognises the legitimacy of States’ creating, owning or using undertakings to perform in the general interest certain functions having an economic character. In this connection, it is worth recalling that Article 345 TFEU (ex 295) specifies that nothing in the Treaty in any way prejudices the rules in the Member States governing the system of property ownership. At the same time, Article 106 TFEU seeks to ensure that to the maximum extent possible that these undertakings operate in conformity with relevant Treaty provisions, notably those on competition. From the outset, the Commission was charged with the application of this provision. 48 The application of Article 106 TFEU has given rise to problems – not only in the maritime transport sector. The provision has caused also problems in the port and port services sector rather than as regards carriers themselves. In large part this was due to the liberalisation of the freight shipping market in the middle of the 1980s. The CJEU has confirmed that Member States may consider certain port functions like mooring to be of general economic interest, such an interest having special characteristics in relation to those of other economic activities and therefore capable of bringing them within the scope of Article 106 (2) TFEU.52 A decisive consideration was the need, and therefore the obligation on the mooring operator, for safety reasons, to provide, at any time and to any user, a universal mooring service in port waters. 49 Similar considerations are likely to apply to other safety related services like pilotage and towage. In contrast, in a case concerning the unloading of steel,53 the CJEU has held that the ordinary dock work of loading and unloading ships had not been shown to be a service of general economic interest exhibiting sufficiently special characteristics to differentiate it from other activities. Even if it were, the application of the normal Treaty rules, in particular those relating to competition and free movement would not be such as to obstruct the performance of such a task. Accordingly, the granting of a monopoly to a dock work 47

51 Sea Containers/Stena Sealink (Holyhead), OJ L15/8 of 18 January 1994; cf. Irish Continental Group/CCI Morlaix (Roscoff), Commission Decision on interim measures of 16 May 1995, Press Release IP/95/492. 52 Corsica Ferries/Gruppo Antichi Ormeggiatori (Genova, La Spezia), ECR 1998, I-3949. 53 Merci Convenzionali Porto di Genova/Siderurgica Gabrielli (Genova), ECR 1991, I-5889.

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company in a port could not be justified under Article 106 TFEU. Moreover, while the resulting dominant position is not in itself a Treaty violation, a Member State will violate Article 102 TFEU and Article 106 TFEU where the mere exercise of the exclusive right will lead to abuse or where the existence of the right is liable to lead the undertaking concerned to commit such abuses. Accordingly, where the undertaking is required or induced to demand payment for services which have not been requested, to charge disproportionate prices, to refuse modern technology or to discriminate between users, violations will occur. The Commission has made three attempts to secure the adoption of legislation 50 to clarify and further liberalise the provision of port services.54 All have foundered in the European Parliament. The latest steps resulted in shifting the emphasis of its activity to improving the transparency of the financing of ports; ensuring that the attribution of port concessions is subject to the publicity, fairness and review requirements of existing EU law; and applying the requirements of Article 102 and 106 TFEU to port services. i) State Aids

From the early days of the liberalisation process, State aids have been a major 51 pre-occupation.55 On the one hand, the Commission was concerned that Member States would be tempted to support national operators, directly or indirectly, as they were increasingly exposed to competition from operators from other Member States. On the other hand, all EU operators were also facing increasing competition from third country operators, particularly from those using “flags of convenience”, allowing them to operate with lower cost and tax bases. A first attempt to address this double problem was made by the Commission in 1989 when it adopted a first set of guidelines on the examination of State aids to Community maritime operators.56 While these guidelines produced some valuable experience in the field, they 52 did not prove sufficient to redress the continued erosion in the competitiveness of EU operators and the associated decline in maritime employment. A new set of guidelines was accordingly published in 1996 which sought to generalise the most successful forms of aid regime that had been tried by some Member States, notably, the flat rate tonnage tax, while at the same time not encouraging unacceptable distortions of competition among EU operators.

54 See for the first two attempts, e.g., COM(2007)616 final, 18 October 2007; van Hooydonk, The European Port Services Directive: The Good or the Last Try?, Journal of International Maritime Law 2005, pp. 188; van Hooydonk, Prospects after the Rejection of the European Port Services Directive, Il Diritto Marittimo 2004, pp. 851; Liu, Access to the Market of Port Services – the European Port Package II, pp. 247, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008). 55 See generally Lista, The Application of the EU Competition Rules to the Maritime Sector, pp. 521, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 56 Guidelines for the examination of State aids in favour of Community shipping companies, SEC(89)921 final, 4 September 1989.

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54

55

56

57

In the Commission’s communication of January 2004,57 in which it revised the guidelines again, this approach was maintained. The Commission was able to show that the structural decline of both EU registers and the EU controlled fleet appeared to have been halted, though employment of EU seafarers had continued to decline due to a number of factors in addition to the relative costs of EU and third-country seafarers. As regards the fifteen Member States prior to the following enlargements, in the period 1997 to 2001, the number of EU registered vessels increased by 0.4% on average each year, tonnage by 1.5% and container ships by 12.4%. Subsequently, the Annual Reports of the European Community Shipowners’ Associations (ECSA) have shown continuing increases in the tonnage of the EEA registered fleet, including Norway’s and Iceland’s, as well as the EU’s. For a number of years these increases matched those of the world fleet. The EEA registered fleet still amounts to about 22% of the world total, the EU’s to about 20%, with a slight recent shift by EU owners in favour of third country flags. The EEA controlled fleet amounts to 41%.58 The fleet controlled by ship operators in the EU, under all flags, remains at around one third of the world total, despite the growth at the world level. Moreover, the average age of the EU-flagged fleet has gone down significantly with 35% of the fleet in service on 1 January 2001 having been built in the period 1996 to 2000. Finally, these trends look stable. For example, in July 2009, the average age of the EEA fleet was 9.7 years and around a third of the world-wide order book for new buildings consisted of orders from EEA owners. Of course the sharp downturn in the world economy which began in 2008 had another negative impact on these trends as reduced traffic leads to unused capacity just as a substantial amount of new buildings were scheduled for delivery. As regards seafaring employment, the effects of the guidelines are more difficult to establish due to the poor quality of the information available. It seems likely that in the “older” Member States, while there have been some positive effects; a general improvement cannot be established. The arrival of the newer Member States has in some cases led to a significant increase in the available labour force but whether this a lasting asset is unclear. The ageing of the officer corps is of concern to many. But in 2004, the Commission remained of the view that the approach of the 1997 guidelines had proved sound and should be continued. Tonnage tax has been adopted by Belgium, Bulgaria, Cyprus, Denmark, Germany, Greece, Finland, France, Ireland, Italy, Latvia, Lithuania, Malta, the Netherlands, Norway, Poland, Slovenia, Spain and the United Kingdom.59 Sweden had been deliberat57 Community guidelines for State aids to maritime transport, C(2004) 43, OJ C13/03 of 17. January 2004. 58 ECSA Annual Report 2009-2010, p.7. 59 Choosing a profitable course, European tonnage tax regimes for the shipping industry. PricewaterhouseCoopers, 2007.

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ing on whether to do so but had difficulties in generating sufficient political support for the necessary legislation. However, in September 2015, the Swedish government successfully proposed a national tonnage tax system resulting in Swedish shipping companies to operate under competitive conditions similar to other shipping companies in other EU countries. Monitoring by the Commission of the functioning of the regime and of market conditions will continue to verify the continuing need for it and to identify any unjustifiable distortions of competition between Member States. The EU’s regulatory regime for State aids applies to all economic activities but its development has taken account of the particular characteristics of certain sectors, including those of maritime transport. Accordingly, as with anti-competitive arrangements and abuses of dominant position, it is necessary to be familiar with both the main features of the system in general and the sector specific features of its application to maritime activities. As regards the system in general, a comprehensive reform known as the “State Aid Action Plan” had been under way for some years and was largely completed by 2009.60 The Commission sought to adapt the system to focus better on the strategic objectives of improving industrial competitiveness in accordance with the Lisbon strategy, creating sustainable jobs, ensuring social and regional cohesion and improving public services. It is also seeking to make the relevant procedures more efficient. The point of departure is still as laid down in the Treaty:State aid is, in principle, incompatible with the common market but may be justified if it meets certain specified criteria. Under Article 108 TFEU, the Commission was given the task of controlling State aid, the Member States being required to inform the Commission in advance of any plan to grant or alter aid and the Commission being charged with keeping all aids under review. The Commission is still the sole body competent to rule on the compatibility of aids with the Treaty, though subject to review by the CJEU, and national courts may play a role in the enforcement of Commission decisions and in ensuring that aids are properly notified. Where aids have not been properly notified, concerned individuals will be entitled to seek redress in national courts which may include repayment of the aid by the beneficiaries, payment of damages, or a refund of taxes or charges to which they have been subject but to which the aid beneficiaries have not.61 In order to make the regime more efficient and less bureaucratic, the prior notification requirement is being addressed and in certain cases replaced by Commission block exemption Regulations declaring in advance that aids meeting certain conditions are compatible with the Treaty and therefore do not need to be 60 Less and better targeted State aid: a roadmap for State aid reform, 2005-2009, COM(20050107 of 7 June 2005). 61 Lorenz, ECR 1973, 1471; Federation Nationale du Commerce Exterieur des Produits Alimentaires (French Salmon), ECR 1991, I-5505; Factortame, ECR 1996, I-1029; Pape, ECR 2005, I-127; Streekgewest Brabant, ECR 2005, I-85.

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58

59

60

61

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62

63

64

65

notified to and approved by the Commission. Council Regulation 994/98, as amended by Council Regulation 733/2013,62 provides the legal basis for such exemptions, the Treaty itself providing in Article 109 TFEU that such implementing legislation may determine the conditions under which the prior notification procedure shall apply and the categories of aid which may be exempted from it. The derogations adopted so far apply to the maritime sector but in some cases subject to specific provisions or limits. The Regulation on the de minimis rule applies a lower threshold if the aided undertaking is engaged in road haulage, the purchase of road freight transport vehicles being excluded altogether. The derogation on training contains an exceptional provision permitting 100% subsidies for training cadets at sea provided that they are supernumerary to the crews. Much of the employment exemption is not applicable, except in the case of disadvantaged workers, given the importance of these regimes to the specific policy on maritime aids considered further below. The exemptions on regional aids and small and medium-sized enterprises apply and include standard provisions to prevent the cumulation of aids under different schemes violating the limits on the permissible maximum percentages, that is, the so-called intensity of the aid. Measures covered by the State aid rules are defined by Article 107 (1) TFEU. Their key features are the use of State resources to provide an economic advantage to particular enterprises in a way which has an actual or potential distorting effect on competition and on trade between Member States. The definition is broad, embracing financial techniques such as privileged access to infrastructure and obtaining financing at a lower cost than that available in the market. It covers measures taken by the State’s central administration itself or through regional or local authorities or even through other entities such as public undertakings, provided that an analysis of their relationship with the State in the context of particular operations constitutes a reasonable basis for concluding that the State was involved.63 However, it is not so broad as to cover measures which benefit certain undertakings by relieving them of obligations which others must respect, for example, by allowing ships under a particular register, flying the national flag but employing non-EU crew, not to respect certain labour laws.64 The grounds for finding aids compatible with the common market fall into two categories: – those which oblige the Commission to decide in favour of the aid (see Article 107 (2) and Article 93 TFEU (ex 73) and – those which empower it to do so (see Article 107 (3) TFEU). The mandatory grounds concern social, non-discriminatory aid to individual consumers; aid to make good damage caused by natural disasters and exception-

62 OJ L204 of 31 July 2013, pp. 11. 63 Stardust Marine, ECR 2002, I-4397. 64 Sloman Neptun, ECR 1993, I-887.

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al occurrences; and aid granted to areas of Germany affected by its post-war division.65 The provision on social aid might justify subsidies to disadvantaged passengers or those in isolated regions but the aid must be non-discriminatory (a travel voucher scheme was condemned when it violated this condition).66 The limits of “exceptional occurences” have yet to be clearly established but are probably broad enough to cover acts of war or aggression, terrorist activity and major accidents, including those causing marine pollution. Article 93 TFEU (ex 73) of the transport Title of the Treaty deems compatible 66 with the Treaty aids for the coordination of transport, for example, to promote a shift of traffic from one mode to another and to reimburse public service obligations. Of the discretionary exceptions, most relevant to the maritime sector are aid to activities in seriously disadvantaged regions; aid to promote an important project of common European interest; and aid to promote the development of certain economic activities or regions, where it does not adversely affect trading interests contrary to the common interest. The latter is the most general and important of the discretionary exceptions and is the legal basis for much of the Commission’s current aids policy in the maritime sector as set out in its 2004 guidelines. The most important features of the guidelines are as follows: To allow EU 67 shipowners to compete on an equal basis with those from third countries, including those hosting flags of convenience, Member States may grant them tax relief in relation to the operations of ships flying both EU and third country flags. In the latter case, however, it must be demonstrated that the strategic and commercial management of all the ships concerned is carried out from within the EU and contributes substantially to economic activity and employment there, for example, on shore. The ship owners must be subject to corporation tax in the EU and show that all their vessels comply with international and EU safety standards, including those related to on board working conditions. Also, unless at least 60% of their tonnage operates under Member States’ flags, they must commit themselves to increasing or at least maintaining their share. Ship management companies may benefit from similar fiscal treatment. Because similar economic conditions can affect the operations of vessels engaged in deep sea towing, cable laying and dredging, they also may benefit from treatment similar to maritime transport though subject to some special rules reflecting their particular character.67

65 The provision on Germany’s division has lost much of its significance following reunification in 1990, not least because the CJEU has supported the Commission in view that the exception does not extend to measures to address the continuing economic adaptation of undertakings to a market economy following reunification. The discretionary grounds are considered in any case adequate to address these problems, see, e.g., Freistaat Sachsen/Volkswagen, ECR 1999, II-3663; Germany/Commission, ECR 2000, I-6857. 66 P&O Ferries (Vizcaya), ECR 2003, II-2957. 67 Commission Decision C22/07, OJ L119/23 of 14 May 2009.

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In order to ensure that these tax relief schemes do not create unacceptable distortions of competition within the EU, the Commission only approves schemes which produce a similar tax load to those already approved. Tax relief is also allowed to lower the burden of employment related taxes and charges on shipowners and on seafarers themselves through reduced social security contributions and income tax rates for “EUseafarers” on board ships registered in Member States. EU seafarers are defined as EU or EEA citizens in the case of vessels, including ro-ro ferries, providing scheduled passenger services between EU ports and as all seafarers liable to taxation and/or social security contributions in a Member State in all other cases. The former limitation is designed to protect employment within the EU since it is in the scheduled passenger sector that EU citizens are largely employed in both percentage terms and in numbers. The broader category applies for the most part to international freight transport where the objective is to improve the competitiveness of shipowners by allowing them access to the international labour market at a cost similar to that of their competitors from outside the EU. 69 An important feature of the common transport policy is the objective of promoting transport modes and solutions which are more sustainable and place less pressure on infrastructure and the environment. Short sea shipping as an alternative to road freight is accordingly supported in a number of ways, including the authorisation of aid for new services provided they are launched in a transparent, non-discriminatory way.68 In recent years, steps have also been taken to facilitate shipping within the internal market and to support EU inland waterway transport by simplifying administrative and other formalities applying to crossfrontier operations within the EU.69 In the past, these were still frequently treated in the same way as international rather than internal voyages by customs and other authorities. The main objective is to reduce the administrative burden and costs so that short sea shipping can compete more effectively with road haulage thereby reducing pressure on road infrastructure and the environment.70 68

j) Public service contracts and obligations 70

More generally, the market alone may not provide a maritime transport service which governments deem necessary. In those circumstances, rather than provide the service themselves, public authorities may wish to contract for the provision of a service or impose obligations on those providing some services to ensure better coverage or regularity. The cabotage Regulation EEC/3577/9271 68 See further: Koliousis/Koliousis/Papadimitriou, Estimating the Impact of Road Transport Deregulation in Short Sea Shipping: Experience from Deregulation in the European Union, International Journal of Shipping and Transport Logistics 2013, pp. 500. 69 See generally Finger/Holvad (eds.), Regulating Transport in Europe (2013), see also Chapter 1, II. on EU inland waterway shipping. 70 Ng/Sauri/Turro, Short Sea Shipping in Europe: Issues, Policies and Challenges, pp. 196, in: Finger/Holvad (eds.), Regulating Transport in Europe (2013). 71 OJ L364/7 of 12 December 1992.

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specifically permits such contracts and obligations in the case of services to, from or between islands, but not between mainland ports. The Commission recognises in the State aid guidelines that such arrangements may also be necessary in international trade. In both cases, the authorities must respect relevant rules on equal treatment and transparency. Reasonable compensation for obligations imposed on operators in such circumstances is compatible with the Treaty in accordance with Article 93 TFEU.

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Paschke

Marian

II. Commentary on Regulation EEC/3577/92/EC Applying the Principle of Freedom to Provide Services to Maritime Transport within Member States A. Aim and Purpose of the Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Historical Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

C. Personal-Material Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

D. Territorial Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

E. Application of the Regulation (EC) No. 1370/2007 to Maritime Cabotage Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

F. Maritime Cabotage, Art. 2(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Carriage by Sea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Feeder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Cruise Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 16 18 19

G. Community Shipowner, Art. 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Interpretation of the Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Special Conditions in the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 20 25

H. Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26

I. Serious Disturbance of the Internal Transport Market. . . . . . . . . . . . . . . . . . . .

30

J. Aim and Purpose of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

K. Geographical Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42

L. Preconditions of Public Service Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43

M. Obligations that may be imposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The Principle of Non-Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Manning conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49 49 53 56

N. The Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57

Literature: Aussant, Jill, Cabotage and the Liberalisation of the Maritime Sector, ETL 1993, 347; Aussant, Jill, Freedom to provide Services in Shipping in the EU, ETL 1994, 556; Basedow, Jürgen, Europäische Seeverkehrspolitik, Dienstleistungsfreiheit und Seekabotage, TranspR 1994, 85; Callies/Ruffert/Jung, EUV/AEUV, 4. Aufl. 2011, Art. 100 AEUV; Erdmenger, Jürgen, Die Anwendung des EWG-Vertrages auf die Seeschifffahrt und Luftfahrt, 1962; European Commission, Communication from the Commission on the interpretation of Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage), COM(2014) 237 final; European Commission, Report from the Commission to the Council, Fifth report on the implementation of Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime cabotage (2001-2010), SWD(2014) 143 final; Grabitz/Hilf/ Nettesheim/Boeing/Rusche, Das Recht der Europäischen Union, 52. EL 2017, Art. 100 AEUV; Greaves, Rosa, EC Maritime Transport Policy and Regulation, Duke Journal of Comparative & International Law Vol. 3 (1992), 119; Milbrath, Claudia, Liberalisierung der Seekabotage unter völkerrechtlichen und europarechtlichen Aspekten, 1998; Riccomagno, Mario, The Liberalization in Access to Maritime Transport Markets in the EU, ETL 1997, 538; Stöcker, Hans Jürgen, Kommentar – Dienstleistungs- und Kabotagefreiheit im Rahmen von Transportketten, AVR 32 (1994), 467; Streinz/Schaefer, EUV/AEUV, 2. Aufl. 2012, Art. 100; Volz, Ehm, Die EU-Verordnung zur Liberalisierung der Seekabotage, TranspR 2009, 393.

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Commentary on Regulation EEC/3577/92/EC Applying the Principle of Freedom THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 84 (2) thereof, Having regard to the amended proposal of the Commission, Having regard to the opinions of the European Parliament, Having regard to the opinion of the Economic and Social Committee, Whereas on 12 June 1992, the European Parliament adopted its Resolution on the liberalization of maritime cabotage and its economic and social consequences; Whereas in accordance with Article 61 of the Treaty freedom to provide services in the field of maritime transport is to be governed by the provisions of the Title relating to transport; Whereas the abolition of restrictions on the provision of maritime transport services within Member States is necessary for the establishment of the internal market; whereas the internal market will comprise an area in which the free movement of goods, persons, services and capital is ensured; Whereas therefore freedom to provide services should be applied to maritime transport within Member States; Whereas the beneficiaries of this freedom should be Community shipowners operating vessels registered in and flying the flag of a Member State whether or not it has a coastline; Whereas this freedom will be extended to vessels also registered in Euros once that register is approved; Whereas in order to avoid distortion of competition, Community shipowners exercising the freedom to provide cabotage services should comply with all the conditions for carrying out cabotage in the Member State in which their vessels are registered; whereas Community shipowners operating ships registered in a Member State who do not have the right to carry out cabotage in that State should nevertheless be beneficiaries of this Regulation during a transitional period; Whereas the implementation of this freedom should be gradual and not necessarily provided for in a uniform way for all services concerned, taking into account the nature of certain specific services and the extent of the effort that certain economies in the Community showing differences in development will have to sustain; Whereas the introduction of public services entailing certain rights and obligations for the shipowners concerned may be justified in order to ensure the adequacy of regular transport services to, from and between islands, provided that there is no distinction on the grounds of nationality or residence; Whereas provisions should be adopted so that safeguard measures can be taken as regards maritime transport markets affected by a serious disturbance or in the event of an emergency; whereas, for this purpose, suitable decision-making procedures should be introduced; Whereas, in view of the need to ensure the proper functioning of the internal market and of possible adaptations in the light of experience, the Commission should report on the implementation of this Regulation and if necessary submit additional proposals, HAS ADOPTED THIS REGULATION:

Article 1 1.

As from 1 January 1993, freedom to provide maritime transport services within a Member State (maritime cabotage) shall apply to Community shipowners who have their ships registered in, and flying the flag of a Member State, provided that these ships comply with all con-

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ditions for carrying out cabotage in that Member State, including ships registered in Euros, once that Register is approved by the Council. By way of derogation, the application of the provision of paragraph 1 requiring that ships fulfil all conditions for carrying out cabotage in the Member State in which they are registered at that time shall be temporarily suspended until 31 December 1996.

A. Aim and Purpose of the Regulation

Since 1986, the Regulation belongs to the adopted legislation concerning the liberalization of maritime transport services. The Regulation (EEC) No 3577/92 pursues the liberalization of maritime cabotage besides the liberalization of ocean trade by the Regulation 4056/86, the exemption of liner conferences from cartel prohibition by the Regulation 2056/86, the Regulation 2057/86 allowing non-commercial practices of price fixing in maritime transport with the Community to be subject to a countervailing charge and by Regulation 4058/86 providing coordination of measures for Member States in order to meet up with protectionist trade measures. 2 The Regulation puts into effect the principle of freedom to provide services to national maritime transport.1 The object of the Regulation is maritime cabotage and herewith the provision of maritime transport services by EU-members in another member state. The Regulation includes a range of exceptions; these exceptions ended at the latest in 2004 as laid down in Article 6 (3) by the effective abolition of the exception for domestic passenger transport services in Greece. 3 The liberalization of maritime cabotage as established by the Regulation shall not be applied without imposing conditions but is bound to comply with particular requirements of personal and factual nature. The freedom of carrying out cabotage only applies to determined shipowners, determined vessels (for further details, see C.) and in a geographical scope of application (for further details, see D.). 4 The traffic developments, including the general trends in cargo and passenger cabotage, the market shares of the first and second registers and foreign flag penetration is reported in the Fifth Report on the implementation of Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime cabotage (2001-2010) of the European Commission.2 1

1 Aussant, ETL 1993, pp. 347 et seqq.; Riccomagno, ETL 1997, pp. 538 et seqq; Basedow, TranspR 1994. pp. 85 et seqq . 2 European Commission, Fifth Report on the implementation of Council Regulation (EEC) No 3577/92, COM(2014) 231 final, p. 7.

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B. Historical Development

As from 1 January 1993, the Regulation under Article 1 paragraph 1 provided 5 freedom to carry out maritime cabotage applying to Community shipowners. However, a range of exceptions were applied and herewith, the practical effectiveness and relevance of the Regulation was limited. Finally, the comprehensive liberalization of maritime cabotage was fulfilled on 1 January 2004 after an ongoing process which lasted eleven years. Herewith, the formerly discussed issue concerning the direct application of the freedom to provide services regarding the primary Community Law3 has accordingly been settled. Article 6 paragraph 2 provided that the whole island cabotage in the Mediter- 6 ranean region and other areas shall be carried out not before 1 January 1999. The Resolution established under Article 6 (3) a deadline until 1 January 2004 for Greece for regular passenger and ferry services and services provided by vessels less than 650 gt. For the area of mainland cabotage carried out in southern EU countries 7 cruise liners have been liberalized on 1 January 1995. The transport of strategic goods (oil, oil products and drinking water) has been liberalized on 1 January 1997, services by ships smaller than 650 gt on 1 January 1998 and regular passenger and ferry services on 1 January 1998. C. Personal-Material Scope

In accordance with Article 1 (1) freedom to provide cabotage in maritime 8 transport services within a Community Member State shall apply to “Community shipowners”. The personal scope of application of the Regulation regulated by the term “Community shipowners” is defined in Article 2(2).4 The term “Community shipowners” covering the personal scope of applica- 9 tion of the Regulation (EEC) No 4055/865 shows however the factual peculiar feature and supplement that maritime cabotage shall only apply to shipowners who have their ships registered in, and flying the flag of a Member State“. The "off-shore" registers of Member States are not beneficiaries of the Regulation (e.g. the Dutch Antilles Register, the Isle of Man Register, the Bermuda and Cayman Islands Registers) as EU law does not apply to these territories.6 Besides, freedom of maritime cabotage does not apply to all vessels regis- 10 tered in the Community. It is necessary that the ships may pursue cabotage activities in the state in whose register the ships are registered. This restriction refers to the so-called second register by means of which some states try to limit the flagging-out of their tonnage. According to Danish Law, passenger ships which 3 4 5 6

Vgl. Basedow, TranspR 1994, p. 87. Cf. explanations to Art. 2 recital 20. Cf. explanations to that Regulation (Chapter ###). European Commission, Fifth Report on the implementation of Council Regulation (EEC) No 3577/92, COM(2014) 231 final. p. 4 fn. 10.

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are registered in a secondary register are not entitled to pursue cabotage activities within Denmark.7 These vessels are also not authorized to carry out cabotage in other Member States; this applies according to Article 1 (2) since 1 January 1997. Offshore-register of Member States (e.g. register of the Netherlands, the Antilles, the Isle of Man, the Bermudas and Cayman Islands) are not subject to the Regulation. 11 The situation concerning vessels registered in second registers is summarized in the Fifth Report on the implementation of Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime cabotage (2001-2010)8 as follows: – “vessels registered in the Spanish Special Register of ships and shipping companies of the Canary Islands (REC), in the Portuguese Madeira register (MAR) and in Gibraltar have unrestricted access; – cargo vessels registered in the Danish International Ship Register (DIS) have unrestricted access, passenger vessels in DIS do not have access to cabotage; – vessels registered in the German International Register (ISR) and in the Finnish List of cargo vessels in foreign traffic have limited access on a caseby-case basis but have no access to regular cabotage; – France and Italy granted within the period of reference a limited access to cabotage to the vessels registered in their respective second registers: • in Italy, the second register, which was originally excluded from access to cabotage, has been allowed to provide cabotage only on a case-bycase basis andup to 6 cabotage journeys per month (Law 27, 12/2002 no. 289); Law no. 326 of 24 November 2003 allowed, as an alternative to the 6 journeys per month, to carry out unlimited cabotage journeys provided that these are over 100 nautical miles; • in France, the French Southern and Antarctic Territories' Register (TAAF) that did not provide access to cabotage has been replaced by the French International Register (RIF) by Law n° 2005-412 of 3 May 2005; vessels registered in RIF have a limited access to cabotage of goods provided they are not solely exploited on cabotage routes.” D. Territorial Scope 12

As a matter of principle, the territorial scope of application of the Regulation according to Article 1 of the Regulation refers to maritime transport services within a Member State. With a narrow interpretation this formulation which is more precisely defined in Article 2 (1)9 could lead to a significant restriction of 7 § 4 Lov om Dansk Internationalt Skibsregister 1988 Nr. 408, Lovtidende 1988 A, 1389. 8 European Commission, Fifth Report on the implementation of Council Regulation (EEC) No 3577/92, COM(2014) 231 final, p. 4, 5. 9 Cf. explanations to Art. 2 recital 1 et seq.

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the scope of application of the Regulation. For example, only such routes completely passing through the territorial waters of the Member State concerned could fall within the scope of application of the Regulation; both routes leading to high seas and routes involving the territorial waters of another Member State may be exempted. Resulting from Article 6 (2), the Regulation shall basically apply to transport relations which include the use of high seas. Therefore, a vessel passing through foreign territorial waters is accordingly not exempted from the territorial scope of application of the Regulation.10 E. Application of the Regulation (EC) No. 1370/2007 to Maritime Cabotage Services

Regulation (EC) No 1370/2007 is not automatically applicable to public pas- 13 senger transport by national sea waters, but applies only in those cases where a Member State makes it expressly applicable.11 As the majority of public service contracts and obligations in maritime cabotage cover transport of both passengers and freight carried out by means of mixed passenger/cargo ferries, while Regulation (EC) No 1370/2007 may be applied only to public transport of passengers and not freight. Member States may not apply Regulation (EC) No 1370/2007 to such mixed public service contracts involving transport of freight.12 In case of a conflict of provisions of these two regulations Regulation (EEC) 14 No 3577/92 should supersede the conflicting provision of Regulation (EC) No 1370/2007. Member States may apply Regulation (EC) No 1370/2007 to public transport of passengers by national sea waters to the extent that it does not prejudice the application of Regulation (EEC) No 3577/92.13 Article 2 1.

For the purposes of this Regulation: 'maritime transport services within a Member State (maritime cabotage)' shall mean services normally provided for remuneration and shall in particular include: (a) mainland cabotage: the carriage of passengers or goods by sea between ports situated on the mainland or the main territory of one and the same Member State without calls at islands; (b) off-shore supply services: the carriage of passengers or goods by sea between any port in a Member State and installations or structures situated on the continental shelf of that Member State;

10 Cf. explanations to Art. 2 recital 16. 11 Cf. explanations to Art. 2 reciotal 26 et seqq. 12 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 22. 13 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 22.

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2.

3.

4.

5.

island cabotage: the carriage of passengers or goods by sea between: – ports situated on the mainland and on one or more of the islands of one and the same Member State, – -orts situated on the islands of one and the same Member State; Ceuta and Melilla shall be treated in the same way as island ports. 'Community shipowner' shall mean: (a) nationals of a Member State established in a Member State in accordance with the legislation of that Member State and pursuing shipping activities; (b) shipping companies established in accordance with the legislation of a Member State and whose principal place of business is situated, and effective control exercised, in a Member State; or (c) nationals of a Member State established outside the Community or shipping companies established outside the Community and controlled by nationals of a Member State, if their ships are registered in and fly the flag of a Member State in accordance with its legislation; 'a public service contract' shall mean a contract concluded between the competent authorities of a Member State and a Community shipowner in order to provide the public with adequate transport services. A public service contract may cover notably: – transport services satisfying fixed standards of continuity, regularity, capacity and quality, – additional transport services, – transport services at specified rates and subject to specified conditions, in particular for certain categories of passengers or on certain routes, – adjustments of services to actual requirements; 'public service obligations' shall mean obligations which the Community shipowner in question, if he were considering his own commercial interest, would not assume or would not assume to the same extent or under the same conditions; 'a serious disturbance of the internal transport market' shall mean the appearance on the market of problems specific to that market and which: – are likely to lead to a serious and potentially lasting excess of supply over demand, – are due to, or aggravated by, maritime cabotage operations, and – pose a serious threat to the financial stability and survival of a significant number of Community shipowners, provided that the short-term and medium-term forecasts for the market in question do not indicate any substantial and lasting improvements.

F. Maritime Cabotage, Art. 2(1) 15

The Regulation applies to maritime transport services, including the carriage of passengers or goods by sea, within a Member State.14 Art. 2(1) provides an indicative list of the types of cabotage services covered by the Regulation. The list has a non-exhaustive nature.15 According to the Court, the services falling within its scope are, firstly, normally provided for remuneration, and secondly, as the essential characteristics of the examples in that article illustrate, serve the

14 Cf. explanations to Art. 1 recital 8 et seqq. 15 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 6.

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purpose of transporting passengers or goods by sea between two places in the territory of a single Member State.16 1. Carriage by Sea

As the Regulation does not define the term 'carriage by sea' the questions has 16 been raised what do the terms 'carriage by sea' and 'between ports' mean. The Court does not consider the distinction between the 'internal waters' and 'territorial sea' in terms of the United Nations Convention on the Law of the Sea of 10 December 1982 as relevant for the purpose of defining 'sea' under the Regulation.17 As a consequence, the term 'carriage by sea' includes also transport services that operate on the sea waters on the landward side of the baseline of the territorial sea ('internal waters').18 Accordingly, for the purpose of applying the Regulation not only cabotage transport services carried out through open sea but also those operated in sea areas such as bays, estuaries (i.e. river valley inundated by the sea), fjords and inlets are to be considered as the 'carriage by sea'.19 The term 'port' encompasses any infrastructure, even not permanent, which 17 serves the purposes of sea transport by allowing goods to be loaded and unloaded or passengers embarked or disembarked.20 This interpretation stands in line with the Court´s case-law which understands the term 'port' as any infrastructure, albeit small-scale, the function of which is to enable goods to be loaded and unloaded or passengers to be embarked and disembarked for conveyance by sea.21 The carriage of passengers by boat by sea is subject to the Regulation even if the service takes place within a single 'port system' (e.g. the crossing of an estuary by sea).22 The remunerated carriage of passengers by boat by sea for touristic purposes starting and ending in the same port (with the same passengers) is also covered by the Regulation.23

16 Case C-251/04, Commission of the European Communities v Hellenic Republic [2007] ECR I-67, paragraphs 28-29. 17 Case C-323/03, Commission of the European Communities v Kingdom of Spain [2006] ECR I-2161, paragraph 25. 18 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 6. 19 Opinion of Advocate General Tizzano delivered on 10 November 2005 in Case C-323/03 (Fn. 15); European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 7. 20 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 7. 21 Case C-323/03, Commission of the European Communities v Kingdom of Spain [2006] ECR I-2161, paragraph 33. 22 Case C-323/03, Commission of the European Communities v Kingdom of Spain [2006] ECR I-2161, paragraph 34. 23 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 7.

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2. Feeder Services 18

Feeder services (also known as relay of international cargo) are services by which a carrier unloads goods from a vessel that has sailed from a point of departure in order to transfer the same goods on to another vessel which continues the journey to a port of destination. The service is normally carried out under a through bill of lading. In all the Member States where cabotage services are reserved for Union flagged vessels in accordance with the Regulation, feeder services are considered to be cabotage services (with the exception of France24 and Portugal), whereas in the rest of the Member States, feedering is free.25 However, the Commission takes the view that this issue requires further examination in cooperation with Member States with regard to the fact, that allowing a company to perform feeder services for the carriage of international cargo following or preceding an international voyage may lead to substantial savings in the cost of transport and contribute to a better efficiency of services offered.26 3. Cruise Services

19

According to the Court a maritime transport service consisting of a cruise which starts and ends, with the same passengers, in the same port of the Member State in which it takes place, is covered by the term ‘maritime cabotage’ within the meaning of the Regulation.27 The Court´s decision grounds on the following argument: “When such a cruise starts and ends, with the same passengers, in the same port, the fact that the departure and arrival ports are one and the same and that the passengers are the same throughout the itinerary – according to the Court – cannot render Regulation inapplicable. It is true that the transport services listed in Article 2(1)(a) to (c) of Regulation No 3577/92 are described as having different departure and arrival ports. However, that list, which is introduced by the term ‘in particular’, is not exhaustive and cannot have the effect of excluding from the scope of that regulation transport services having all the essential characteristics of maritime cabotage contained in the above-mentioned phrase ‘maritime transport services within a Member State’”.28

24 Administrative note of 9 February 2007 on the interpretation of Article 257 of the French Customs Code. 25 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 8. 26 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 8. 27 Case C-17/13, Request for a preliminary ruling from the Consiglio di Stato (Italy) in the proceedings Alpina River Cruises GmbH, Nicko Tours GmbH v Ministero delle infrastrutture e dei trasporti — Capitaneria di Porto di Chioggia,. 28 Case C-17/13, paragraph 27, 28; (see also Case C-251/04 Commission v Greece EU:C: 2007:5, paragraphs 28 and 32).

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G. Community Shipowner, Art. 2(2) 1. Interpretation of the Regulation

Article 2(2) of the Regulation distinguishes three types of 'Community 20 shipowners': '(a) (b)

(c)

nationals of a Member State established in a Member State in accordance with the legislation of that Member State and pursuing shipping activities; shipping companies established in accordance with the legislation of a Member State and whose principal place of business is situated, and effective control exercised, in a Member State; or nationals of a Member State established outside the Community or shipping companies established outside the Community and controlled by nationals of a Member State, if their ships are registered in and fly the flag of a Member State in accordance with its legislation.'

Concerning the term 'effective control in a Member State' the Commission 21 considers that the concept of 'effective control in a Member State' means in this context that the major decisions are taken and the day-to-day management performed from a place in the Union territory and that management board meetings are held in the territory of the Union. Furthermore, the term 'Community shipowners' includes 'nationals of a Mem- 22 ber State established outside the Community or shipping companies established outside the Community and controlled by nationals of a Member State, if their ships are registered in and fly the flag of a Member State in accordance with its legislation' (Article 2(2)(c)). The Commission considers that the concept of 'control by nationals of a Member State' referred to in that Article means “that the Union nationals have the possibility of exercising decisive influence on the shipping company, for example, if the majority of the company's capital or the majority of the voting rights is held by Union nationals, or if the Union nationals can appoint more than half of the members of that shipping company's administrative, management or supervisory body”.29 The Regulation does not list the Member State registers for which the con- 23 ditions of registration and of access to national cabotage are met. Such a list would in any event be liable to change over time. The condition of registration in a Member State assumes in the view of the Commission “that the register in question is located in a territory in which the Treaty and the laws deriving from it apply. Accordingly, ships entered in the registers of the Dutch Antilles, the Isle of Man, Bermuda or the Cayman Islands are not among the beneficiaries of the Regulation.30 By contrast, ships registered in Gibraltar are among the Regu-

29 For more guidance see also the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01), OJ C 95, 16.4.2008, p. 1. 30 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 5; these territories form part of the overseas countries and territories subject, by virtue of Article 355 of the Treaty, to special arrangements for association with the Member States.

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lation's beneficiaries as the Treaty applies to that territory.31 Therefore, ships registered in Gibraltar are entitled to have access to maritime cabotage under the same conditions as any ship registered in a Member State. 24 Furthermore, the Regulation provides that for a ship from a Member State to be able to carry out cabotage in another Member State it must first comply with all the conditions for carrying out cabotage in the Member State in which it is registered. This requirement is also applicable to vessels registered in and flying the flag of a land-locked Member State. Accordingly, ships which do not enjoy access to national cabotage are not entitled to access to the markets of the other Member States either; similarly, ships which enjoy conditional access to the national market may have similar conditions placed upon them if they wish to operate in another Member State.32 2. Special Conditions in the Member States 25

Several Member States have opened up their markets more fully than the Regulation requires, whether erga omnes or by means of wavers and individual authorizations. Such practices do not infringe Union law.33 Certain Member States with so called 'open coast' policies allow that also vessels registered in and flying the flag of a third country provide maritime cabotage between the ports located in their territory. In addition, some Member States foresee individual authorizations to carry out maritime cabotage for vessels which are not among the beneficiaries of the Regulation or general waivers from the requirements laid down by the Regulation for vessels registered in and flying the flag of a third country in case no vessels registered in a Union Member State are available.34 H. Public Services

The maritime transport of passengers and goods is vital for the inhabitants of Europe's islands. That is why a special set of rules – especially in Art. 4 of the Regulation – was drawn up to protect some of these maritime links not adequately served by the market. In Art. 2 of the Regulation a distinction is made between 'public service contracts' (see Article 2(3)) and 'public service obligations' (see Article 2(4). 27 Article 2(3) of the Regulation provides only an indication of the scope of public service contracts; Member States may go further. Quality requirements 26

31 Article 355(3) of the Treaty. 32 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 5. 33 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 5, 6. 34 For an overview of national regimes on maritime cabotage see Annex III of the Commission staff working document accompanying the fifth report on the implementation of the Regulation, COM(2014) 231 final.

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are often part of public service contracts; they cannot be introduced as part of public service obligations.35 With regard to public service obligations, the requirement relating to the 28 shipowners' 'capacity to provide the service' the Commission takes the view that the obligation to use a fast ferry may fall within this category. According to the Courts´ decision in the Case C-205/99 an obligation related to their solvency as well as the requirement that they have no outstanding tax and social security debts may be included.36 Public service contracts are the instrument normally used to enshrine public 29 service obligations where a horizontal approach applying to all shipowners intending to serve a given route may not be sufficient to meet the essential transport needs; they contain in particular general conditions concerning the quality of a given service.37 An exhaustive list of requirements that may be introduced when public service obligations are imposed is set out in Article 4(2) of the Regulation. I. Serious Disturbance of the Internal Transport Market

Article 5 of the Regulation stipulates that Member States may request the 30 Commission to adopt safeguard measures 'in the event of a serious disturbance of the internal transport market due to cabotage liberalization'. Article 2(5) provides that such measures may be applied where problems appear on the market which 'are likely to lead to a serious and potentially lasting excess of supply over demand, are due to, or aggravated by, maritime cabotage operations, and pose a serious threat to the financial stability and survival of a significant number of Community shipowners. It is provided that the short-term and medium-term forecasts for the market in question do not indicate any substantial and lasting improvements'. Individual instances of shipowners on a given route going bankrupt are not 31 sufficient to warrant the application of this clause.38 Article 3 1.

2.

For vessels carrying out mainland cabotage and for cruise liners, all matters relating to manning shall be the responsibility of the State in which the vessel is registered (flag state), except for ships smaller than 650 gt, where host State conditions may be applied. For vessels carrying out island cabotage, all matters relating to manning shall be the responsibility of the State in which the vessel is performing a maritime transport service (host State).

35 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12. 36 Case C-205/99, cited above, paragraphs 45 to 51. 37 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12. 38 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 20.

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However, from 1 January 1999, for cargo vessels over 650 gt carrying out island cabotage, when the voyage concerned follows or precedes a voyage to or from another State, all matters relating to manning shall be the responsibility of the State in which the vessel is registered (flag State). The Commission shall make an in-depth examination of the economic and social impact of the liberalization of island cabotage and shall submit a report to the Council before 1 January 1997 at the latest. On the basis of this report, the Commission shall submit a proposal to the Council which may include adjustments to the manning nationality provisions laid down in paragraphs 2 and 3 so that the definitive system shall be approved by the Council in due time and before 1 January 1999.

Article 3 of the Regulation allows the application of the host State rules with regard to the manning of vessels smaller than 650 gt, Art. 3(1). The same legal position is fixed in Art. 3(2) for vessels carrying out cabotage with islands, except in the case of cargo vessels over 650 gt, when the voyage concerned follows or precedes a voyage to or from another State, Art. 3(3). 33 According to the Court, all matters relating to manning of cruise ships exceeding 650 gt, irrespective whether they carry out mainland or island cabotage, are the responsibility of the flag State. The host State rules might be applied only to cruise ships smaller than 650 gt.39 In 2006 the Court provided also a clarification on the definition of the 'voyage which follows or precedes the cabotage voyage' in the sense of Art. 3(3); this voyage means any voyage to or from another State, whether or not the vessel has cargo on board.40 The Court considered that flag State rules apply not only where goods actually are carried during the international leg of the voyage which follows or precedes the cabotage leg of the voyage but also when this voyage is made in ballast (without cargo on board). As a consequence, the Commission does not accept that Member States continue to apply the host State's rules where the international voyage which follows or precedes the island cabotage is in ballast.41 However, shipowners are not allowed to set up a fictious international voyage without cargo on board in order to avoid the application of Article 3(2) in favor of Article 3(3), thus circumventing the Regulation.42 34 The flag State rules are applicable for: – vessels over 650 gt carrying mainland cabotage – cruise liners over 650 gt 32

39 Case C-288/02, Commission of the European Communities v Hellenic Republic, [2004] ECR I-10071. 40 Case C-456/04, Agip Petroli SpA v Capitaneria di porto di Siracusa and Others, [2006] ECR I-03395, paragraph 15 – 25. 41 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 10. 42 Case C-456/04, Agip Petroli SpA v Capitaneria di porto di Siracusa and Others, [2006] ECR I-03395, paragraph 23.

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–

cargo vessels over 650 gt carrying island cabotage, when the cabotage voyage follows or precedes a voyage to or from another State. 35 The host State rules are applicable for: – vessels smaller than 650 gt – vessels carrying island cabotage, with the exception of cargo vessels over 650 gt carrying island cabotage, when the cabotage voyage follows or precedes a voyage to or from another State. The lack of an easy access by the shipowners to the legislation of the host 36 State on manning requirements may impede the further development of island cabotage. In order to remedy this problem, the Commission has encouraged Member States which apply Article 3(2) of the Regulation to appoint a focal point that shipowners can contact in order to obtain information on the applicable host State rules relating to manning.43 The Regulation does not specify which 'matters relating to manning' are 37 the responsibility of the host State. The Commission considers “that host States are, among others, competent to specify the required proportion of Union nationals on board ships carrying out island cabotage (and ships smaller than 650 gt). A Member State may therefore require the crews of such ships to be composed entirely of Union nationals. Member States may also require the seafarers on board to have social insurance cover in the European Union. In terms of working conditions, they may impose the minimum wage rules in force in the country. As regards the rules on safety and training (including the languages spoken on board), the Commission considers that Member States may do no more than require compliance with the Union or international rules in force (STCW and SOLAS Conventions), without disproportionately restricting the freedom to provide services.”44 Article 4 1.

2.

3.

A Member State may conclude public service contracts with or impose public service obligations as a condition for the provision of cabotage services, on shipping companies participating in regular services to, from and between islands. Whenever a Member State concludes public service contracts or imposes public service obligations, it shall do so on a non-discriminatory basis in respect of all Community shipowners. In imposing public service obligations, Member States shall be limited to requirements concerning ports to be served, regularity, continuity, frequency, capacity to provide the service, rates to be charged and manning of the vessel. Where applicable, any compensation for public service obligations must be available to all Community shipowners. Existing public service contracts may remain in force up to the expiry date of the relevant contract.

43 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 10. 44 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 9.

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J. Aim and Purpose of Public Services

The Regulation offers Member States a framework to organize in a compatible way market intervention through restrictions on market access relating to public service obligations on maritime services. In addition, the provision of public funding to compensate for the costs of providing public service must comply with the EU State aid rules. Article 4 authorizes Member States to 'conclude public service contracts with or impose public service obligations as a condition for the provision of cabotage services, on shipping companies participating in regular services to, from and between islands', provided that these obligations are imposed on a non-discriminatory basis in respect of all Union shipowners. Article 4 stands in line with recital 9 of the Regulation providing that the introduction of public services entailing certain rights and obligations for the shipowners concerned may be justified in order to ensure the adequacy of regular transport services to, from and between islands, provided that there is no distinction on the grounds of nationality or residence. 39 A judgment of the Court of 2001 clarified that Article 4(1) is to be interpreted as permitting a Member State to impose public service obligations (PSO)45 on some shipping companies and, at the same time, to conclude public service contracts (PSC)46 with others for the same line or route in order to ensure the regular traffic to, from or between islands.47 40 In 2006 the Court judged unlawful the Spanish legislation which: (1) allowed a concession for cabotage services to a single operator for a period of 20 years; (2) included as a criterion for the award experience in transport acquired on that route; and (3) allowed the imposition of a PSO on regular transport services between mainland ports.48 41 The situation concerning PSO and PSC in the Member States is recapitulated in Table 3 of the Commission Staff Working Document accompanying the fifth report on the implementation of the Regulation, COM(2014) 231 final. 38

K. Geographical Scope 42

According to the wording of Article 4(1) of the Regulation, public service links have to serve routes to, from or between islands. The Regulation does not contain a definition of an 'island'. The Commission considers that application of Article 4 should be limited to those islands that can be reached only by sea or air and which have no permanent land links with the European mainland.49 Accord45 46 47 48

Cf. explanations to Art. 2 recital 26 et seqq. Cf. explanations to Art. 2 recital 27. Case C-205/99, Analir v Administración General del Estado, [2001] ECR I-1271. Case C-323/03, Commission of the European Communities v Kingdom of Spain, [2006] ECR I-2161. 49 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 11.

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ingly, a peninsula which remains permanently linked to the mainland by road or rail (such as Peloponnese) cannot be considered as an 'island'.50 The possibility of applying Article 4(1) can be extended to services provided between places in an analogous situation to that of islands (e.g. banks of long fjords or estuaries with which there are no direct road links) where there is the same need of ensuring the adequacy of maritime transport services.51 As long estuaries or fjords which lead to a detour of about 100 km by road may cause a similar problem by isolating conurbations from each other, they may be treated as islands for the purposes of this section.52 L. Preconditions of Public Service Obligations

Public service obligations may be envisaged for regular (scheduled) island 43 cabotage services in the event of market failure to provide adequate services. It is for the Member States and not the shipowners to determine which routes require public service obligations. Member States may impose public service obligations in order to 'ensure the adequacy' of regular maritime transport services to a given island (or in relation to an estuary), where Union shipowners, if they were considering their own commercial interest, would not provide services of an adequate level or under the same conditions.53 Member States must limit their intervention to the essential requirements 44 referred to in Article 4(2) and fulfill the requirement of non-discrimination as laid down by Article 4(1) of the Regulation in respect of all Union shipowners interested in serving the route.54 This requirement must be strictly observed when deciding on the content of the obligations to be fulfilled and during the administrative procedure resulting in the selection of an operator of a given service or establishing the amount of compensation.55 Any intervention in relation to a public service obligation should remain pro- 45 portionate to the aim pursued. Should it go beyond what is strictly needed, it would unnecessarily restrict the freedom of services which is essential for the proper functioning of the internal market. Granting exclusivity to a shipowner on a public service route may be considered the only adequate instrument to

50 Case C-282/ 02, Commission of the European Communities v Hellenic Republic, [2004] ECR I-10071, paragraph 42. 51 Opinion of Advocate General Tizzano delivered on 10 November 2005 in Case C-323/03, points 39-45. 52 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 11 referring to the Study on Small Islands and Estuaries (2002), ICF Consulting. 53 See Recital 9 and Article 2(4) of the Regulation; see also the judgement in Case C-205/99, Analir v Administración General del Estado, [2001] ECR I-1271, paragraphs 31et seq. 54 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12. 55 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12.

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meet the essential transport needs, when granted for a limited period of time and on the basis of an open, fair and non-discriminatory Union-wide award procedure.56 The Commission considers, however, that light public service obligations may be imposed on all operators of the same route in parallel to a public service contract concluded with one operator.57 46 The Regulation does not set any maximum duration for public service contracts. However, it follows from Article 1 and Article 4 of the Regulation that public service contracts should have a limited duration in order to allow regular and open prospecting of the market. The Commission has declared that public service contracts lasting more than five (in case the contract is a concession in the meaning of Concessions Directive) or six years can meet the proportionality requirement provided that (1) they are justified by objective criteria, such as the need to recoup the investments made in operating the maritime cabotage service under normal operating conditions (e.g. investments in vessels or infrastructure) (2) and they do not lead to the market foreclosure.58 According to the Commission's experience and the information provided by the public authorities, contracts of a maximum duration of 12 years could be justified in order to enable the depreciation of a significant part of costs of an average new ferry, while allowing the proper functioning of the market.59 In the Commission's opinion contracts of a significantly longer duration (e.g. that would allow the full amortization of a new vessel with a return on the invested capital) could hamper the benefits of competitive pressure on the cabotage market.60 47 Member States often wish to group public service routes to and from different islands into a single bundle in order to generate economies of scale and attract operators. Bundles as such are not contrary to Union law provided that bundling does not lead to discrimination and does not lead to undue market distortions.61 48 The Regulation applies in the same way whether subsidies are granted or not. However, when compensation for public service obligations and contracts is granted, this must be done in compliance with the Treaty State aid rules as interpreted by the Court of Justice and with the rules contained in the Commission's 56 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 17. 57 On the possibility for a Member State to impose public service obligations in parallel to a public service contract, see also CJEU, Case C-205/99, Analir v Administración General del Estado, [2001] ECR I-1271, paragraphs 60-71. 58 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 18. 59 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 18. 60 In Case C-323/03 Commission of the European Communities v Kingdom of Spain [2006] ECR I-2161 the Court ruled that a national measure which reserves maritime transport services to a single undertaking by a means of an administrative concession for duration of 20 years, renewable for the period of 10 years constitutes a restriction on freedom to provide services (paragraph 44). 61 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 18.

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package of instruments governing State aid for the provision of Services of General Economic Interest (SGEI).62 M. Obligations that may be imposed 1. Fundamentals

Article 4(2) of the Regulation sets out an exhaustive list of requirements that may be introduced when public service obligations are imposed. Article 2(3) of the Regulation provides only an indication of the scope of public service contracts. Member States can impose public service obligations and conclude public service contracts only if they have determined, for each route in question, that the regular transport services would be inadequate (i.e. they would not be provided to the extent or under the conditions defined by the public authorities as appropriate) if their provision was left to market forces alone.63 Moreover, the public service obligation or contract must be necessary and proportionate to the aim of ensuring the adequacy of regular transport services to and from the islands.64 Member States may not subject to public service obligations and public service contracts services which are already provided satisfactorily65 and under conditions, such as price, continuity and access to the service, consistent with the public interest, as defined by the State, by the undertakings operating under normal market conditions.66 Although Member States have a wide margin of discretion in defining the need of public service and the extent of such service, the decision of Member States in this respect is subject to the Commission's control of manifest error of assessment.67

62 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 18. 63 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12. 64 Joined Cases C-128/10 and C-129/10, Naftiliaki Etaireia Thasou, [2011] ECR I-1887, paragraph 54. 65 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 12. 66 Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest, OJ C 8, 11.1.2012, p. 4, point 48. 67 Case T-17/02, Fred Olsen [2005] ECR II-2031, paragraph 216 and Commission Decision 2013/435/EU of 2 May 2013 on State aid SA.22843 (2012/C) (ex 2012/NN) implemented by France in favour of Société Nationale Maritime Corse-Méditerranée, OJ L 220, 17.8.2013, p. 20–45.

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2. The Principle of Non-Discrimination

Pursuant to the principle of non-discrimination laid down by the Regulation, Member States must not set obligations that are tailor-made for a given shipping company and that would prevent other Union shipowners from entering the market or apply obligations with that effect. 54 Member State, when putting a public service contract out to tender, cannot require the successful bidder to take over vessels and crews from the previous operator.68 Such an obligation would infringe the Regulation as it would be discriminatory; it would prevent Union shipowners from bidding with their own vessels and would give an advantage to the incumbent operator should the latter be a candidate for its own succession.69 55 However, the Commission accepts an exception when serving an island requires the use of a vessel with a design so special that it cannot be easily found or sold on the market or used for another purpose, it will be less restrictive of the freedom to provide services for there to be a requirement that that vessel be taken over than for the service to be awarded to a single shipowner with a contract that would be long enough to allow the full amortization of a purpose-built vessel.70 In such cases, the vessel could be leased – under very clear conditions set out in detail in the tender documents – by successive operators from a vesselowning company set up for that purpose.71 An obligation for the new service provider to take the ship over directly from its predecessor would also be conceivable.72 53

3. Manning conditions 56

The Commission notes that Member States may decide to impose under public service obligations and contracts the same rules73 as those imposed by host Member States on any vessel participating in an island cabotage service (Article 3(2) of the Regulation).74

68 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 13. 69 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 13. 70 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 13. 71 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 13. 72 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 13. 73 Cf. explanations to Art. 3(2) recital 32 et seqq. 74 European Commission, Communication on the No 3577/92, COM(2014) 232 final, p. 14.

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N. The Procedure

Member States may provide different administrative means at their disposal for imposing 'public service obligations', applied to all operators of a given route, such as a declaration regime, a licensing system or an authorization system. Member States may also impose public service obligations by concluding public service contracts with one or a limited number of operators. The procedure as restrictive as an authorization procedure is acceptable provided that it is necessary, proportionate to the aim pursued and based on objective, nondiscriminatory criteria which are known in advance to the undertakings concerned.75 A Member State concluding a public service contract has to respect the applicable procurement rules, i.e. the Directive 2014/23/EU (Concessions Directive)76 and the Directives 2014/24/EU and 2014/25/EU (Public Procurement Directives).77 For the award of public service contracts falling within the scope of Concessions Directive the competent authority must treat all shipowners equally and without discrimination and is required to act in a transparent and proportionate manner in order to ensure genuine competition (Art. 3, 30), to publish the concession notice and the relevant contract award notice in the Official Journal of the European Union (art. 31-33) and the Concessions Directive establishes a number of obligations with respect to the selection and award criteria and sets out procedural guarantees aimed at ensuring transparency and equal treatment, notably during negotiations between the competent authority and tenderers. Under the new Public Procurement Directives the award of public service contracts falling within the scope of these Directives is in principle subject to all requirements established therein. In cases of contracts below the thresholds for application of Concessions Directive or Public Procurement Directives a selection and award procedure is nonetheless required to meet the Treaty requirements of non-discrimination and equal treatment that imply an obligation of transparency;78 according to the Court of Justice, the latter consists in ensuring, for the benefit of any potential tenderer a degree of advertising sufficient to enable the services market to be

75 Case C-205/99, Analir v Administración General del Estado, [2001] ECR I-1271; see also Joined Cases C-128/10 and C-129/10 Naftiliaki Etaireia Thasou, [2011] ECR I-1887, paragraphs 52 et seq. 76 Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, OJ L 94, 28.3.2014, p. 1. 77 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, OJ L 94, 28.3.2014, p. 65; Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC OJ L, 28.3.2014, p. 243. 78 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 15.

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opened up to competition and the impartiality of the procedures to be reviewed.79 61 The Commission considers that a direct award fails to respect the principle of non-discrimination and transparency enshrined in Article 4 of the Regulation.80 Likewise, any tender procedure which is designed in such a way as to unduly restrict the number of potential bidders does not comply with the principles of nondiscrimination and transparency.81 62 The easiest (and most appropriate) way to ensure non-discrimination is launching an open tender procedure.82 An award procedure involving negotiation with the potential bidders may comply with the principle of non-discrimination provided that the negotiations between the adjudicating authority and companies having submitted bids in the tender are impartial, fair and transparent.83 63 The selection of a suitable operator entrusted to serve a small island could be carried out following a simple call for expressions of interest without launching a formal tender, provided that a Union-wide announcement of the service is maintained.84 The Commission took the view that a longer duration of contracts, of 12 years, might be acceptable.85 'Small islands' could be understood to mean islands where the total annual number of passengers carried by sea to and from the island is around 300 000 or fewer. The threshold of 300 000 passengers refers to a one-way count, i.e. a passenger travelling to the island and back counts twice. As far as outermost regions are concerned, this threshold only applies to trade within the region (and not trade between an outermost island and the mainland).86 Article 5 1.

In the event of a serious disturbance of the internal transport market due to cabotage liberalization, a Member State may request the Commission to adopt safeguard measures. After consulting the other Member States, the Commission shall decide where appropriate on the necessary safeguard measures, within 30 working days of receipt of the relevant request

79 Case C-324/98, Teleaustria and Telefonadress v Telekom Austria [2000] ECR I – 10745, paragraph 60. 80 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 16. 81 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 16. 82 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 16. 83 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 16; see also point 66 of the Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest (OJ C 8, 11.1.2012, p. 4). 84 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 20. 85 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 20. 86 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 20.

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2.

from a Member State. Such measures may involve the temporary exclusion, not exceeding 12 months, of the area concerned from the scope of this Regulation. The Commission shall communicate to the Council and the Member States any decision on its safeguard measures. If after the period of 30 working days the Commission has taken no decision on the subject, the Member State concerned shall be entitled to apply the measures requested until the Commission has taken its decision. However, in the event of an emergency, Member States may unilaterally adopt the appropriate provisional measures which may remain in force for no more than three months. In such an event, Member States must immediately inform the Commission of the adoption of such measures. The Commission may abrogate the measures or confirm them with or without modification until it takes its final decision in accordance with the second subparagraph. The Commission may also adopt safeguard measures on its own initiative, after consulting the Member States.

Article 5 of the Regulation stipulates that Member States may request the 64 Commission to adopt safeguard measures 'in the event of a serious disturbance of the internal transport market due to cabotage liberalization', as defined in Art. 2(5). Article 2(5) provides that such measures may be applied for a maximum of 65 one year. This provision has been applied only once, in Spain, when the Regulation 66 first entered into force.87 Article 6 1.

2.

3.

By way of derogation, the following maritime transport services carried out in the Mediterranean and along the coast of Spain, Portugal and France shall be temporarily exempted from the implementation of this Regulation: – cruise services, until 1 January 1995, – transport of strategic goods (oil, oil products and drinking water), until 1 January 1997, – services by ships smaller than 650 gt, until 1 January 1998, – regular passenger and ferry services, until 1 January 1999. By way of derogation, island cabotage in the Mediterranean and cabotage with regard to the Canary, Azores and Madeira archipelagoes, Ceuta and Melilla, the French islands along the Atlantic coast and the French overseas departments shall be temporarily exempted from the implementation of this Regulation until 1 January 1999. For reasons of socio-economic cohesion, the derogation provided for in paragraph 2 shall be extended for Greece until 1 January 2004 for regular passenger and ferry services and services provided by vessels less than 650 gt.

Article 6 of the Regulation lays down a number of temporary derogations 67 from the implementation of this Regulation. The derogations set out by this Article expired in 2004. Upon the accession of Croatia, which became an EU Member State on 1 July 68 2013, Article 6 of the Regulation was amended in order to ensure some temporary derogation for Croatia. In line with the new Article 6(4) public service con87 Commission Decision 93/396/EEC of 13 July 1993, OJ L 173, 16.7.1993, p. 33.

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tracts to and between Croatian islands concluded before the date of Croatia's accession may continue to apply until 31 December 2016. Article 7 Article 62 of the Treaty shall apply to the matters covered by this Regulation.

69

Article 62 (former version) of the EC Treaty laid down in a standstill clause that the Member States should not be subject to further restrictions regarding maritime transport services. Article 62 (former version) of the EC Treaty has been abolished by the Treaty of Amsterdam once restrictions of the freedom to provide maritime transport services within the European Union have been banned by Art. 56, 57 TFEU. Hence, Article 7 of the Regulation has lost its significance. Article 8 Without prejudice to the provisions of the Treaty relating to the right of establishment and to this Regulation, a person providing a maritime transport service may, in order to do so, temporarily pursue his activity in the Member States where the service is provided, under the same conditions as are imposed by that State on its own nationals.

70

The provision is reflected in the so-called active freedom to provide services. The Regulation is in line with the guarantee in accordance to Article 57 sentence 3 TFEU. The freedom also comprises preparation and proposal such as advertising and offer of services.88 Article 9 Before adopting laws, regulations or administrative provisions in implementation of this Regulation, Member States shall consult the Commission. They shall inform the latter of any measures thus adopted.

71

The provision has importance especially for the implementation of manning conditions under the responsibility of the Member states according to art. 3. In line with Article 9 of the Regulation any Member State wishing to avail itself of the possibility to apply its own rules to matters relating to manning should consult the Commission. The scope and content of envisaged measures will be subject to a case-by-case analysis in the light of the principles of necessity and proportionality.89

88 Case C-384/93, Alpine, [1995] ECR I – 1141, paragraph 28. 89 European Commission, Communication on the interpretation of Council Regulation (EEC) No 3577/92, COM(2014) 232 final, p. 9.

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Article 10 The Commission shall submit to the Council, before 1 January 1995, and thereafter every two any necessary proposals.

72 The Commission has so far published five reports: – 1993 - 1994: COM(95)383final – 1995 - 1996, not published in the Official Journal – 1997 - 1998: COM(2000) 99 final – 1999 - 2000: COM (02) 203 – 2001 - 2010: COM(2014) 231 final. The Fifth Report finishes with the following statement: “Given that the avail- 73 able statistical information on maritime cabotage has become scarce and as the liberalization has now been completed and the market is stabilized, the Commission proposes to report on the economic and legal progress of liberalization only in the case of significant developments in this field and in any case not later than by 2018, in order to fully assess the impact of liberalization of maritime cabotage in Croatia, which benefits from the temporary derogation from certain provisions of the Regulation until 31 December 2014.”

Article 11 This Regulation shall enter into force on 1 January 1993. This Regulation shall be binding in its entirety and directly applicable in all Member States.

Council Regulation (EEC) No 3577/92 applying the principle of freedom to 74 provide services to maritime transport within Member States (maritime cabotage) was adopted on 7 December 1992, entering into force on 1 January 1993.

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Werner

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III. Application of EU Competition Rules to Maritime Sector – Commentary on the Liner Shipping Consortium Block Exemption Regulation No. 697/2014 (Regulation 906/2009) A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

C. Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Regulation 1/2003 serves as a general Competition Enforcement Regime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The Need for a Block Exemption Regulation in Liner Shipping Consortia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Block Exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Justification for a Block Exemption for Liner Shipping Consortia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Commentary on the Block Exemption Regulation . . . . . . . . . . . . . . . . . . .

11 11 13 13 15 16

Literature: EU Legal Acts Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport, OJ 1986 L 378/4. Council Regulation (EC) No 1419/2006 of 25 September 2006 repealing Regulation (EEC) No 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport, and amending Regulation (EC) No 1/2003 as regards the extension of its scope to include cabotage and international tramp services, OJ 2006 L269/1. Council Regulation (EC) No 246/2009 of 26 February 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) (Codified version), OJ 2009 L 79/1. Commission Regulation (EC) No 870/95 of 20 April 1995 on the application of Article 85 (3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) pursuant to Council Regulation (EEC) No 479/92, OJ 1995 L 89/7. Commission Regulation (EC) No 823/2000 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2000 L100/24. Commission Regulation (EC) No 611/2005 of 20 April 2005 amending Regulation (EC) No 823/2000 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2005 L101/10. Commission Regulation (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2009, L 256/31. Commission Regulation (EU) No 697/2014 of 24 June 2014 amending Regulation (EC) No 906/2009 as regards its period of application, OJ 2014 L 184/3. EU Institutions’ Documents Report on the possibility of a group exemption for consortia agreements in liner shipping, COM (90) 260 final. Working Paper of DGIV: Report on Commission Regulation No. 870/95 (28 January 1999), http://ec.europa.eu/competition/sectors/transport/report_comm_reg_870_95_en.pdf Technical paper on the revision of Commission Regulation (EC) No 823/2000 on the application of Article 81 (3) of the Treaty to certain categories of agreements, decisions and concert-

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Application of EU Competition Rules to Maritime Sector ed practices between liner shipping companies (consortia) as last amended by Commission Regulation (EC) No 611/2005 of 20 April 2005 (October 2008), http://ec.europa.eu/competition/consultations/2008_consortia/technical_paper.pdf Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101/97. Guidelines on the application of Art. 81 of the EC Treaty to Maritime Transport services OJ 2008 C 245/2. EU Case Law: ECJ Judgment of the Court (Fifth Chamber) of 19 November 1998, Case C-162/97, Criminal Proceedings against Nilsson, Hagelgren & Arrborn, 1998 E.C.R. I-07477. Books: Alla Pozdnakova, Liner Shipping & EU Competition Law, 2008; Bellamy/Child, European Union Law of Competition, 7th ed., 2013; Jan Busche/Andreas Röhling (Eds.) Kölner Kommentar zum Kartellrecht, Vol. 4, 2013; Langen/Bunte, Kartellrecht/Kommentar, Vol. 2, Europäisches Kartellrecht, 12th ed. 2014; Münchener Kommentar Europäisches und Deutsches Wettbewerbsrecht, Band 1 (Vol. 1), Europäisches Wettbewerbsrecht, 2nd ed.; Schröter/Jakob/Klotz/Mederer (Eds.), Europäisches Wettbewerbsrecht, Großkommentar, 2nd ed, 2014. Journal Articles: Athanassiou, L.; The New Liner Shipping Regulation, Journal of European Competition Law & Practice, 2010, 1(2), 129-132; Levitt, M./Ziegler, C., The European Commission‘s Extension of the Liner Shipping Consortia Block Exemption Regulation until April 2020, Journal of European Competition Law & Practice, 2014, 5(10): 696-697; Pozdnakova, A., New liner consortia block exemption: a legislative commentary, European Competition Law Review, 2010, 31(10), 415-420.

A. Introduction

Within the European Union (“EU”), also the maritime sector is regulated by 1 the general competition enforcement regime under Council Regulation No 1/2003 on the implementation of the rules on competition laid down in Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). (Regulation 1/2003). Regulation 1/2003 applies to all maritime transport services, i.e., liner shipping, cabotage and international tramp shipping services.1 Further, Council Regulation No. 246/2009 on the application of Article 101 2 (3) TFEU to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) (Regulation 246/2009) sets out the legal base for the liner shipping block exemptions. Through Regulation 246/2009, the Council empowered the European Commission (the “Commission”) to apply the liner-consortia block exemption regulation 906/2009.2 Through Commission Regulation (EU) No 697/2014 (the “Regulation”), the 3 Commission has extended regulation 906/2009 on the application of Article 81(3) [now Article 101(3) TFEU] of the Treaty to certain categories of agree-

1 Bunte, in: Kartellrecht – Kommentar, Langen/Bunte,. Vol. 2 Syst VI, Verkehr (Transport), Seeverkehr III (Sea Transport), para. 56. 2 In 2008, the Commission has issued Guidelines on the application of Article 101 TFEU to maritime transport services, which lapsed on 26 September 2013. The guidelines explain the approach the Commission adopts to maritime transport services.

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ments, decisions and concerted practices between liner shipping companies (consortia) for another five years until 25 April 2020. Regulation 906/2009 came into effect on 26 April 2010 and should last originally until 25 April 2015. Following a public consultation in February 2014,3 the Commission concluded that the current market conditions warrant an extension of the regime.4 B. Background

At the time of its adoption in 2003, Regulation 1/2003 contained originally an Article 32, which excluded the application of the regulation to: (a) international tramp vessel services as defined in Article 1(3)(a) of Regulation (EEC) No 4056/86; (b) a maritime transport service that takes place exclusively between ports in one and the same Member State as foreseen in Article 1(2) of Regulation (EEC) No 4056/86; (c) air transport between Community airports and third countries. 5 Article 32 of Regulation 1/2003 was later removed through the adoption of Council Regulation No 1419/2006, following which the scope of Regulation 1/2003 has been extended as to include cabotage and international tramp services.5 6 As from 18 October 2008, the EU competition law regime has been applicable to the entire maritime transport sector.6 7 With respect to the block exemption regulation beginning in 1995 with Commission Regulation No 870/95 on the application of Article 85(3) of the Treaty (now Art. [101](3) TFEU) to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), which was adopted by the Commission pursuant to the power granted to it by Council Regulation No 479/92, the Commission has adopted a series of consortia block exemption regulations, Regulation 823/2000,7 Regulation 611/2005,8 Regulation 4

3 See http://europa.eu/rapid/press-release_IP-14-196_en.htm. 4 See http://europa.eu/rapid/press-release_IP-14-717_en.htm. 5 Schröter, in: Münchener Kommentar Europäisches und Deutsches Wettbewerbsrecht, Vol. 1, SB Verkehr (Transport), III Seeverkehr (Sea Transport), para. 35. 6 Although Regulation 1419/2006 entered into force on 18 October 2006, it allowed for a transitional period of two years for liner conferences which met the conditions of Regulation 4056/86. 7 Commission Regulation (EC) 823/2000 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) OJ 2000L100/24. 8 Commission Regulation (EC) 611/2005 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2005 L101/10.

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906/20099 and the current Regulation 697/2014,10 each effective for a period of five years. In December 1986, the Council adopted Council Regulation (EEC) No 8 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport (“Regulation 4056/86”). Regulation 4056/86 also granted a block exemption for certain practices of liner conferences. At the time of adopting the Regulation 4056/86, the Council invited the Commission to study liner shipping consortia and consider whether it was necessary to submit new proposals in this field. The Commission presented a communication and report to the Council in June 1990 favouring the adoption of a new block exemption for consortia agreements (“1990 Commission Report”).11 On 20 April 1995, the Commission adopted Commission Regulation No 870/95 which came into force on 22 April 1995 and is valid for a period of five years starting from the day following its publication in the Official Journal. In April 2000, in view of the expiry of the Regulation 870/95, the Commis- 9 sion adopted a new Regulation 823/2000 renewing the block exemption. In October 2008 the Commission issued a Technical paper on the revision of Commission Regulation 823/2000 (the “Technical Paper”).12 The Technical Paper was published alongside a preliminary draft Regulation designed to replace Regulation 823/2000 after its lapse and initiated the review process. Through Commission Regulation 611/2005, Regulation 823/2000 was extended for another five years with a few amendments. In 2009, the Council issued a new Regulation 246/2009 on the application of 10 Article 101 (3) to liner consortia13 following the repeal of Regulation 4056/8614 (by Regulation 1419/2006),15 as the exemption previously extended to members of liner conferences no longer applied which had rendered some of the existing block exemption provisions obsolete. Through Council Regulation 246/2009, the Council empowered the Commission to grant a new block exemption for a period of five years. In September 2009, the Commission adopted the new liner-

9 Commission Regulation (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2009, L 256/31. 10 Commission Regulation (EU) No 697/2014 of 24 June 2014 amending Regulation (EC) No 906/2009 as regards its period of application, OJ 2014 L 184/3. 11 Report on the possibility of a group exemption for consortia agreements in liner shipping, COM (90) 260 final. 12 See Technical paper on the revision of Commission Regulation (EC) No 823/2000. 13 Council Regulation (EC) No 246/2009 of 26 February 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) (Codified version), OJ 2009 L 79/1. 14 Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport, OJ 1986 L378/4. 15 Council Regulation (EC) No 1419/2006 of 25 September 2006 repealing Regulation (EEC) No 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport, and amending Regulation (EC) No 1/2003 as regards the extension of its scope to include cabotage and international tramp services, OJ 2006 L269/1.

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consortia block exemption regulation 906/2009, which is now extended by Commission Regulation 697/2014 without any modification. C. Comments 1. Regulation 1/2003 serves as a general Competition Enforcement Regime

As Article 1 of Regulation 1/2003 provides, agreements, decisions and concerted practices caught by Article 101(1) of the TFEU, which do not satisfy the conditions of Article 101(3) of the TFEU shall be prohibited. Likewise, the abuse of a dominant position referred to in Article 102 of the TFEU shall be prohibited, no prior decision to that effect being required. Conversely, agreements, decisions and concerted practices caught by Article 101(1) which satisfy the conditions of Article 101(3) of the TFEU shall not be prohibited. 12 Regulation 1/2003 thus serves as a general competition regime regulating the maritime sector, among others. More specifically, as noted above, it applies to all areas of the maritime sector. 11

2. The Need for a Block Exemption Regulation in Liner Shipping Consortia a) Block Exemptions

Article 101(3) TFEU provides for the possibility to exempt not only individual agreements, but also categories of agreements from the prohibition of Article 101(1) TFEU. When an agreement falls within a block exemption adopted by the Council or the Commission, the prohibition in Article 101 (1) does not apply. Agreements that comply with the terms and conditions of the block exemption do not need to prove applicability of the criteria of Article 101(3) TFEU on an individual basis but need only conform to the requirements of the block exemption. 14 Notably, the parties to an agreement which does not satisfy the conditions laid down by a particular block exemption may nonetheless argue that Article 101 (3) TFEU applies on an individual basis. 13

b) Justification for a Block Exemption for Liner Shipping Consortia 15

Liner consortia were initially granted a block exemption by the Commission because it was recognised that liner consortia were co-operative arrangements that generally produced beneficial effects and complied with the requirements of Article 101(3) TFEU. A block exemption was considered appropriate because applying Article 101 (3) TFEU on an individual basis would have been too complicated and provided less legal certainty than a block exemption due to the diversity of consortia arrangements.16 It was considered that the block exemption 16 Report on the possibility of a group exemption for consortia agreements in liner shipping, COM (90) 260 final.

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must also provide a sufficient guarantee that consortia are able to realise their advantages to the fullest extent and that users get a fair share of the resulting rationalisation and reduction in costs. Therefore, certain conditions are attached to the block exemption. 3. Commentary on the Block Exemption Regulation

The principal substantive content of the Regulation is the block exemption for 16 certain agreements between liner shipping companies laid down in Article 3. It further provides for a “black-list” of prohibited agreements (or “hardcore restrictions”) in Article 4 which precludes the application of exemptions. The block exemption also attaches conditions that liner shipping companies need to fulfil in order to benefit automatically from an exemption from the prohibition set out in Article 101 (1) TFEU. If the conditions contained in the Regulation are not fulfilled, liner shipping companies that enter into joint operation activities do not benefit from the block exemption. However, such consortia are not automatically prohibited pursuant to Article 101 TFEU, but the consortium members must self-assess in order to determine whether their agreements fall within the scope of Article 101 (1) TFEU and in the affirmative, fulfil the four cumulative conditions of Article 101 (3) TFEU. Since Regulation 697/2014 extended the application of Regulation 906/2009 17 without any modification, the current commentary is based on the text of Regulation 906/2009. It has to be noted that the EU Commission issued in 2008 sector-specific guidelines on the application of EU competition rules to maritime transport services.17 These guidelines were applicable until 26 September 2013. As of this date, these sector specific guidelines are superseded by the general, non-sector-specific guidelines, for example, the guidelines on the applicability of Article 101(3) TFEU.18

COMMISSION REGULATION (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) (Text with EEA relevance) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community,

17 Guidelines on the application of Art. 81 of the EC Treaty to Maritime Transport services OJ 2008 C 245/2. 18 OJ 2004 C 101/97.

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Chapter 3, III. Having regard to Council Regulation (EC) No 246/2009 of 26 February 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia),19 and in particular Article 1 thereof, Having published a draft of this Regulation,20 After consulting the Advisory Committee on Restrictive Practices and Dominant Positions, Whereas: (1) Regulation (EC) No 246/2009 empowers the Commission to apply Article 81(3) of the Treaty by regulation to certain categories of agreements, decisions and concerted practices between shipping companies relating to the joint operation of liner shipping services (consortia), which, through the cooperation they bring about between the shipping companies that are parties thereto, are liable to restrict competition within the common market and to affect trade between Member States and may therefore be caught by the prohibition contained in Article 81(1) of the Treaty. (2) The Commission has made use of its power by adopting Commission Regulation (EC) No 823/2000 of 19 April 2000 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia),21 which will expire on 25 April 2010. On the basis of the Commission’s experience to date it can be concluded that the justifications for a block exemption for liner consortia are still valid. However, certain changes are necessary in order to remove references to Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport22 which allowed liner shipping lines to fix prices and capacity, but has now been repealed. Modifications are also necessary to ensure a greater convergence with other block exemption regulations for horizontal cooperation in force whilst taking into account current market practices in the liner industry. (3) Consortium agreements vary significantly ranging from those that are highly integrated, requiring a high level of investment for example due to the purchase or charter by their members of vessels specifically for the purpose of setting up the consortium and the setting up of joint operations centres, to flexible slot exchange agreements. For the purposes of this Regulation a consortium agreement consists of one or a set of separate but interrelated agreements between liner shipping companies under which the parties operate the joint service. The legal form of the arrangements is less important than the underlying economic reality that the parties provide a joint service. (4) The benefit of the block exemption should be limited to those agreements for which it can be assumed with a sufficient degree of certainty that they satisfy the conditions of Article 81(3) of the Treaty. However, there is no presumption that consortia which do not benefit from this Regulation fall within the scope of Article 81(1) of the Treaty or, if they do, that they do not satisfy the conditions of Article 81(3) of the Treaty. When conducting a self-assessment of the compatibility of their agreement with Article 81 of the Treaty, parties to such consortia may consider the specific features of markets with small volumes carried or situations where the market share threshold is exceeded as a result of the presence in the consortium of a small carrier without important resources and whose increment to the overall market share of the consortium is only insignificant. (5) Consortia, as defined in this Regulation, generally help to improve the productivity and quality of available liner shipping services by reason of the rationalisation they bring to the activities of member companies and through the economies of scale they allow in the operation of vessels and utilisation of port facilities. They also help to promote technical and economic

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Application of EU Competition Rules to Maritime Sector progress by facilitating and encouraging greater utilisation of containers and more efficient use of vessel capacity. For the purpose of establishing and running a joint service, an essential feature inherent in consortia is the ability to make capacity adjustments in response to fluctuations in supply and demand. By contrast, unjustified limitation of capacity and sales as well as the joint fixing of freight rates or market and customer allocation are unlikely to bring any efficiency. Therefore, the exemption provided for in this Regulation should not apply to consortium agreements that involve such activities, irrespective of the market power of the parties. (6) A fair share of the benefits resulting from the efficiencies should be passed on to transport users. Users of the shipping services provided by consortia may benefit from the improvements in productivity which consortia can bring about. Those benefits may also take the form of an improvement in the frequency of sailings and port calls, or an improvement in scheduling as well as better quality and personalised services through the use of more modern vessels and other equipment, including port facilities. (7) Users can benefit effectively from consortia only if there is sufficient competition in the relevant markets in which the consortia operate. This condition should be regarded as being met when a consortium remains below a given market share threshold and can therefore be presumed to be subject to effective actual or potential competition from carriers that are not members of that consortium. In order to assess the relevant market, account should be taken not only of direct trade between the ports served by a consortium but also of any competition from other liner services sailing from ports which may be substituted for those served by the consortium and, where appropriate, of other modes of transport. (8) This Regulation should not exempt agreements containing restrictions of competition which are not indispensable to the attainment of the objectives justifying the grant of the exemption. To that end, severely anti-competitive restraints (hardcore restrictions) relating to the fixing of prices charged to third parties, the limitation of capacity or sales and the allocation of markets or customers should be excluded from the benefit of this Regulation. Other than the activities which are expressly exempted by this Regulation, only ancillary activities which are directly related to the operation of the consortium, necessary for its implementation and proportionate to it should be covered by this Regulation. (9) The market share threshold and the other conditions set out in this Regulation, as well as the exclusion of certain conduct from its benefit, should normally ensure that the agreements to which the block exemption applies do not give the companies concerned the possibility of eliminating competition in a substantial part of the relevant market in question. (10) For the assessment of whether a consortium fulfils the market share condition, the overall market shares of the consortium members should be added up. The market share of each member should take into account the overall volumes it carries within and outside the consortium. In the latter case account should be taken of all volumes carried by a member within another consortium or in relation to any service provided individually by the member, be it on its own vessels or on third party vessels pursuant to contractual arrangements such as slot charters. (11) In addition, the benefit of the block exemption should be subject to the right of each consortium member to withdraw from the consortium provided that it gives reasonable notice. However, provision should be made for a longer notice period and a longer initial lock-in period in the case of highly integrated consortia in order to take account of the higher investments undertaken to set them up and the more extensive reorganisation entailed in the event of a member leaving. (12) In particular cases in which the agreements falling under this Regulation nevertheless have effects incompatible with Article 81(3) of the Treaty, the Commission may withdraw the benefit of the block exemption, on the basis of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and

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Chapter 3, III. 82 of the Treaty.23 In that respect, the negative effects that may derive from the existence of links between the consortium and/or its members and other consortia and/or liner carriers on the same relevant market are of particular importance. (13) Furthermore, where agreements have effects which are incompatible with Article 81(3) of the Treaty in the territory of a Member State, or in a part thereof, which has all the characteristics of a distinct geographic market, the competition authority of that Member State may withdraw the benefit of the block exemption in respect of that territory pursuant to Regulation (EC) No 1/2003. (14) This Regulation is without prejudice to the application of Article 82 of the Treaty. (15) In view of the expiry of Regulation (EC) No 823/2000, it is appropriate to adopt a new Regulation renewing the block exemption, HAS ADOPTED THIS REGULATION:

In the context of the EU legislation, the purpose of using recitals is to set out concise reasons for the chief provisions of the enacting terms, without reproducing or paraphrasing them.24 Concerning recitals’ legal effect, a statement that recitals have no legal value as such has been made by the European Court of Justice (“ECJ”).25 It is further claimed that they “cannot be relied on as a ground for derogating from the actual provisions of the act in question,”26 yet, it is affirmed that recitals are often used in interpretation by the courts.27 Therefore, if a recital is irredeemably inconsistent with the operative text then the ECJ will ignore the recital and give effect to the text of the operative provisions. 19 Recital 1 states that the Council through the adoption of Regulation 246/2009 empowers the Commission to adopt Regulation 906/2009. This is a reference to the legal basis and the empowerment by the Council within the framework of Regulation 246/2009. 20 Recital 2 refers to the earlier block exemption Regulation 823/2000, which expired on 25 April 2010. Changes have been made in Regulation 906/2009 to remove references to the repealed Regulation 4056/86 on liner shipping conferences, which allowed liner shipping lines even to fix prices and capacity.28 The repealed Regulation 4056/86 as regards shipping conferences gave – from a practical point of view – market participants the opportunity to agree on hardcore pricing cartels. This era of antitrust immunity ended. In contrast to liner conferences, consortia are formed predominantly to respond to legitimate ratio18

23 OJ L 1, 4.1.2003, p. 1. 24 Joint Practical Guide for persons involved in the drafting of European Union legislation, p.20. http://eur-lex.europa.eu/content/techleg/KB0213228ENN.pdf. 25 ECJ Judgment of the Court (Fifth Chamber) of 19 November 1998, Case C-162/97, Criminal Proceedings against Nilsson, Hagelgren & Arrborn, 1998 E.C.R. I-07477 para.54. 26 Ibid. 27 Manual of precedents for acts established within the Council of the European Union, 2012 edition. (“The Court often refers to the recitals in order to interpret the enabling provision of an act.”). 28 E.g., Recital 9 of Regulation 823/2000 refers to “Consortium members that wish to fix rates jointly and do not satisfy the criteria of Regulation (EFC) No 4056/86 must apply for individual exemption”.

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nalisation needs. Further, like the earlier block-exemption established in Regulation 823/2000, the new current block-exemption is subject to a set of conditions imposed on liner consortia wishing to benefit from it. However, Regulation 906/2009 no longer contains reference to obligations of liner consortia attached to the block exemption.29 In this context, recital 15 then echoes that in view of the expiry of Regulation 823/2000, the Commission adopts a new Regulation 906/2009. Recital 3 states that the legal form of the consortia arrangements is less important than their underlying economic reality, namely the fact that the parties operate a joint service. This provides the market participants with more commercial flexibility to structure their legal arrangement. Recital 4 specifies that there is no presumption that consortia which do not benefit from this Regulation fall within the scope of Article 101(1) of TFEU. Likewise, there is no presumption that if they do fall within the scope of Article 101(1) TFEU, they do not satisfy the conditions of Article 101 (3) TFEU. Therefore, the parties to an agreement which does not satisfy the conditions laid down by the Regulation may nonetheless argue that Article 101(3) applies on an individual basis. As a result, an agreement not fulfilling the conditions contained in the Consortia Block Exemption Regulation is not automatically illegal and void as long as the fulfilment of the conditions set in Art. 101(3) TFEU can be proven. Therefore, the parties to any consortium agreement are obliged (in their own interest) to access the compatibility either with the Consortia Block Exemption Regulation or Art. 101(3) TFEU. Recitals 5, 6 and 7 discuss the benefits of the consortia arrangements, including benefits to the transport users. Effective benefits are secured when there is sufficient competition in the relevant market. Notably, Recital 7 refers to the assessment of relevant market to take account of both direct trade between the ports served by a consortium but also of any competition from other liner services sailing from ports which may be substituted for those served by the consortium, and of other modes of transport. Recital 8 refers to the hardcore restrictions that are per se illegal and preclude the application of the block exemption. These hardcore restrictions are specified in Article 4 of the Regulation. Recitals 9 and 10 clarify that the conditions provided in the Regulation serve as guarantee that the agreements to which the block exemption applies do not give the companies concerned the possibility of eliminating competition in a substantial part of the relevant market in question. Although certain guidance has been given on the assessment of whether a consortium fulfils the market share condition, this does not expand what has been discussed within Article 5 of the Regulation.

29 See Chapter IV “Obligations” of Regulation 823/2000.

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Recitals 11, 12 and 13 refer to withdrawal by consortium members from the consortium and the withdrawal of benefits of the block exemption under certain conditions. Both the Commission and the Member State’s competition authority have the power to withdraw the benefits of the block exemption. The benefits of the block exemption may be withdrawn when the agreements are subject to the Regulation but have effects incompatible with Article 101(3) TFEU. It is, however, interesting to note that the Regulation itself does not expressly provide for a provision as regards the right of the Commission to withdraw the block exemption in individual cases of non-compliance. 27 Finally, Recital 14 ensures that Article 102 TFEU on abuse of dominance should be respected. 26

CHAPTER I SCOPE AND DEFINITIONS

Article 1 Scope This Regulation shall apply to consortia only in so far as they provide international liner shipping services from or to one or more Community ports.

Article 1 sets out the scope and states that the Regulation only applies to consortia insofar as they provide international liner shipping services from or to one or more EU ports. The word “international” does not preclude the coverage of consortia which offer services between two or more EU Member States’ ports, but excludes services within the same Member State. Also, the Regulation extends to all liner shipping services, regardless of whether they are containerised or not. 29 The tramp shipping services are not included within the scope of this Regulation by virtue of Article 1. Tramp shipping involves the transport of non-containerised (bulk) cargo in a time- or voyage-chartered vessel.30 In contrast to liner shipping, the tramp transport is unscheduled, not taking the form of a regular service.31 The Commission’s 2008 Technical Paper revealed that during the review leading to the repeal of Regulation 4056/86, some parties raised the issue of the inclusion of tramp vessel services and in particular specialised services such as car carriage within the scope of the consortia block exemption but this suggestion was not taken up. The Commission at the time explained that the Commission and Member States competition authorities lack experience in applying Article 101 TFEU to such services and would, therefore, be difficult to identify those agreements that can be assumed with sufficient certainty to satisfy the conditions of Article 101(3) TFEU.32 Nevertheless, the Commission had provided guidelines in its application of Article 101 TFEU to the tramp shipping 28

30 Raiman, in: Kölner Kommentar zum Kartellrecht, Vol. 4, Seeverkehr (Sea Transport), para. 132. 31 Pozdnakova, E.C.L.R. 2010, 415, 416. 32 Technical paper on the revision of Commission Regulation (EC) No 823/2000, para. 37.

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sector,33 which have been superseded by the general, non-sector-specific guidelines as of 26 September 2013. Article 2 Definitions 1.

2.

3.

4.

For the purposes of this Regulation the following definitions shall apply: ‘consortium’ means an agreement or a set of interrelated agreements between two or more vessel-operating carriers which provide international liner shipping services exclusively for the carriage of cargo relating to one or more trades, the object of which is to bring about cooperation in the joint operation of a maritime transport service, and which improves the service that would be offered individually by each of its members in the absence of the consortium, in order to rationalise their operations by means of technical, operational and/or commercial arrangements; ‘liner shipping’ means the transport of goods on a regular basis on a particular route or routes between ports and in accordance with timetables and sailing dates advertised in advance and available, even on an occasional basis, to any transport user against payment; ‘transport user’ means any undertaking (such as shipper, consignee or forwarder) which has entered into, or intends to enter into, a contractual agreement with a consortium member for the shipment of goods; ‘commencement of the service’ means the date on which the first vessel sails on the service.

30 Article 2 contains the definitions of key terms in the Regulation. The definition of a liner consortium in this provision is the key to understand- 31 ing the scope of the consortia block exemption since a detailed description of a liner consortium excludes from the block exemption those arrangements which do not comply with the definition.34 The definition of “consortium” clarifies that a consortium may be comprised 32 of not just a single agreement but also a set of interrelated agreements between multiple carriers. The important aspect is not the legal framework of the consortium as such but the commercial and economical background of the activities in question. This demonstrates a certain flexibility.35 Consortia are, however, more than purely technical agreements whose sole objective is to achieve technical improvements or technical co-operation. Nor are they mergers as the parties remain free to join other consortia or act independently on other routes.36 The Regulation applies only to agreements concluded between the members of a consortium. Therefore, the Regulation does not cover restrictive agreements concluded between, on the one hand, consortia or one or more of their members, and on the other hand, other shipping companies. Nor does it apply to restrictive agreements between different consortia operating in the same trade or between the members of different consortia.37

33 Commission Guidelines on the application of Article 81 of the EC Treaty to maritime transport services,OJ 2008 C 245/2. 34 Pozdnakova, Liner Shipping & EU Competition Law, p. 204. 35 Janutta/Stehmann, in: Schröter/Jakob/Klotz/Mederer, Europäisches Wirtschaftsrecht, 3 Seeverkehr (Sea Transport), para. 106. 36 Report on Commission Regulation no. 870/95, para. 15. 37 Technical paper on the revision of Commission Regulation (EC) No 823/2000, para. 41.

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Rationalisation in the context of the “consortium” definition is to be understood in the light of Recital 5 which states that the rationalisation they bring to the activities of member companies and through the economies of scale in the context of the operation of vessels and utilisation of port facilities. Further, the definition of “consortium” focuses on the establishment of a joint service between the participating companies. Hence co-operative arrangements not establishing a joint service, such as a slot charter agreement by which a shipowner unilaterally purchases space on the vessel of another ship-owner without any further cooperation is in general not considered to be a consortium.38 Arrangements falling outside the scope of the block exemption need to be assessed under Article 101(3) TFEU individually or may fall outside of Article 101(1) TFEU altogether if they do not restrict competition by object or effect.39 Although, a large number of consortia carry containerised cargo, the block exemption is not focussing exclusively on container shipping. All liner shipping services are, in general, subjectto the Regulation as long as the service is concentrating on goods and not on persons. The Regulation does not encompass services for passengers (this is concretised by the express reference to cargo, therefore, passenger services are not exempted). Furthermore, agreements between carriers offering tramp services are not exempted by the Regulation, Tramp shipping is characterised as unscheduled, not taking the form of a regular service.40 Time-or-voyage chartered vessel services have to be evaluated, therefore, in accordance with Art. 101(3) TFEU because the element of a scheduled service is missing by definition. With regard to the geographic scope, the definition in Article 2 (1) refers to a consortium that operates on one or more trades so that a consortium can operate a joint service on a single or several different trades, including a global alliance. Since one trade may encompass more than one relevant market, a consortium of one or more trades must, therefore, be assessed on each relevant market on which it operates.41 The definition of “commencement of the service” in Article 2 (4) relates to the right of withdraw from the consortium and is necessary for the understanding of the conditions attached to the consortia block exemption in Article 6 below.42 CHAPTER II EXEMPTIONS

Article 3 Exempted agreements Pursuant to Article 81(3) of the Treaty and subject to the conditions laid down in this Regulation, it is hereby declared that Article 81(1) of the Treaty shall not apply to the following activities of a consortium:

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2. 3. 4.

the joint operation of liner shipping services including any of the following activities: (a) the coordination and/or joint fixing of sailing timetables and the determination of ports of call; (b) the exchange, sale or cross-chartering of space or slots on vessels; (c) the pooling of vessels and/or port installations; (d) the use of one or more joint operations offices; (e) the provision of containers, chassis and other equipment and/or the rental, leasing or purchase contracts for such equipment; capacity adjustments in response to fluctuations in supply and demand; the joint operation or use of port terminals and related services (such as lighterage or stevedoring services); any other activity ancillary to those referred to in points 1, 2 and 3 which is necessary for their implementation, such as: (a) the use of a computerised data exchange system; (b) an obligation on members of a consortium to use in the relevant market or markets vessels allocated to the consortium and to refrain from chartering space on vessels belonging to third parties; (c) an obligation on members of a consortium not to assign or charter space to other vesseloperating carriers in the relevant market or markets except with the prior consent of the other members of the consortium.

Article 3 regulates exempted activities whereas Article 4 contains the “black 38 listed” hardcore restrictions which are not subject to the scope of this Regulation. Subject to conditions and obligations laid down in the Regulation, Articles 101(1) TFEU does not apply to the listed activities. In other words, the block exemption in Article 3 does not apply to activities that are not expressly prescribed. On the other hand, however, Article 3(4) provides an open list of examples of ancillary agreements. Since it refers to “any other activity”, Article 3(4) may potentially cover a broad range of activities not expressly mentioned in the concrete wording (“… such as …”). Article 3 is the central provision of the Regulation and contains the essence of 39 the block exemption as such: Those agreements which encompass activities mentioned in Art. 3 are exempted from the severe prohibition of Art. 101(1) TFEU. This is expressly highlighted by the heading “exempted agreements”. According to Articles 3(1), 3(2) and 3(3), the list of activities that are exempt- 40 ed from the prohibition of Article 101(1) TFEU is exhaustive43 and comprises the following activities: the joint operation of liner shipping services, capacity adjustments in response to fluctuations in supply and demand and the joint operation or use of port terminals and related services. The joint operation of liner shipping services includes five specific types described under Article 3(1). Article 3(2) permits capacity adjustments which do not constitute capacity limitation under Article 4 “hardcore restrictions”. The use of “joint operation” in Article 3(3) indicates that consortia members are allowed to run jointly at least some land-related port terminals operations44 and the wording “joint use” of such ser43 Pozdnakova, E.C.L.R. 2010, 31(10), p. 417. 44 Pozdnakova, Liner Shipping & EU Competition Law, p. 208.

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vices suggests that the block exemption covers the rights of a consortium to purchase these services to the extent that joint buying falls within the scope of Article 101(1) TFEU.45 41 According to Article 3(4), any other activities ancillary to those referred to in Articles 3(1), 3(2) and 3(3)that are necessary for their implementation are also exempted. Therefore, what is “ancillary” within the meaning of Article 3(4) can be analysed by reference to what is necessary for the joint operation of a maritime transport service in a consortium.46 Since as a general principle the block exemption is to be applied narrowly, not all additional services can be considered “ancillary”. In the Commission’s view, for example, joint purchase of feeder vessel services is not necessary for the joint operation of a maritime service by a consortium and is, therefore, not exempted.47 The ancillary activities in Article 3(4), in particular, include an obligation on consortium members to refrain from chartering space on vessels belonging to third parties and an obligation on members of a consortium not to assign or charter space to other vessel operating carriers except with the prior consent of the other members. These provisions guarantee that the parties to the consortium will bring all available cargo to the joint service and will thus maximise the capacity utilisation. 42 A major point for the day-to-day practice are the “capacity adjustments”, which constitute an essential part of the rationalising impact of the consortia (Art. 3(2). This is expressly mentioned in Recital 5 of the Regulation as well.48 Unfortunately, the wording of Art. 3(2) is “opaque” as the provision speaks of capacity adjustments in response to “fluctuations in supply and demand”. Having in view the black listed activity in Art. 4(2) of the Regulation and the lack of a clear definition, the situation can be characterised as legally uncertainbecause it is not clear where the exemption of Art. 3(2) ends and where the prohibition of capacity restraints in accordance with Art. 4(2) starts. The outcome of the dilemmadepends on the factual background: as long as there is an objective reasoning for a capacity adjustment based on circumstances outside the control of the consortium members and as far as such situation can be underlined by facts, the likelihood to be subject to the exemption of Art. 3(2) is high. 43 A further point of unclarity is the divergence between the wording of Art. 3(1) lit. c) (“the pooling of … and/or port installations”) and of Art. 3(3) (“the joint operation or use of port terminals …”): There is a certain overlap of activities. It remains unclear why the Regulation uses a different terminology. From a systematic point of view, Art. 3(1) lit. c) is concentrating on the use of the port installations as such, whereas Art. 3(3) is focussing on the operational side, e.g. the services connected with port terminals. Therefore, one can conclude that

45 46 47 48

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Art. 3 in its entirety exempts both the common use/operation of port installations/infrastructure as well as the connected services to the infrastructure.49 Article 4 Hardcore restrictions

1. 2. 3.

The exemption provided for in Article 3 shall not apply to a consortium which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, has as its object: the fixing of prices when selling liner shipping services to third parties; the limitation of capacity or sales except for the capacity adjustments referred to in Article 3(2); the allocation of markets or customers.

Article 4 enumerates the hardcore restrictions that exclude an exemption. The 44 Commission has said that “hardcore restrictions” listed in block exemption regulations are generally considered to constitute restrictions by object.50 As referred to in Article 4, hardcore restrictions in the case of horizontal agreements typically encompass price fixing, capacity/sales limitation and the allocation/sharing of markets or customers. This is a clear testimony that hardware restrictions within the shipping industry are nottolerated any longer.51 Restrictions whichhave detrimental effects on the competitive situation of the market cannot be subject of a “modern” block exemption regulation because they have neither a positive impact on the market as such nor on the situation of transport services customers.52 The rational of this provision may also be analysedwith respect to the benefits 45 for consortia. Consortia, as defined in Article 2, generally help to improve the productivity and quality of available liner shipping services by the rationalisation they bring to the activities of member companies and through the economies of scale they allow in the operation of vessels and utilisation of port facilities. Consortia help to promote, for instance, technical and economic progress by facilitating and encouraging greater utilisation of containers and more efficient use of vessels capacity. Therefore, an essential feature inherent in consortia is the ability to make capacity adjustments in response to fluctuations in supply and demand, as is prescribed in Article 3. By contrast, unjustified limitation of capacity and sales as well as the joint fixing of freight rates or market and customer allocation are unlikely to bring any efficiency. Thus, the exemption provided for in the Regulation should not apply to consortium agreements that involve such activities, irrespective of the market power of the parties. The wording of Art. 4 is unfortunately, however, not very precise; this is 46 mainly true for Art. 4(2). It does not give the exact scope of prohibited capacity 49 See also Raimann, in: Kölner Kommentar zum Kartellrecht, Vol. 4, Syst III, Seeverkehr (Seetransport), para. 143. 50 Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101/97, para. 23. 51 Athanassiou, Journal of European Competition Law & Practice, 2010, pp. 129, 131. 52 Schröter, in: Münchener Kommentar Europäisches und Deutsches Wettbewerbsrecht, Vol. 1, SB Verkehr Transport), para. 55.

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limitations in contrast to those mentioned in Art. 3(2). There is a grey area of limitations which might be reasonable and justified by circumstances (like accidents, strikes, etc.). As a rule of thumb: Those limitations caused by circumstances outside the control of the consortium members should not be subject to Art. 4(2). CHAPTER III CONDITIONS FOR EXEMPTION

Article 5 Conditions relating to market share 1.

2.

3.

4.

In order for a consortium to qualify for the exemption provided for in Article 3, the combined market share of the consortium members in the relevant market upon which the consortium operates shall not exceed 30 % calculated by reference to the total volume of goods carried in freight tonnes or 20-foot equivalent units. For the purpose of establishing the market share of a consortium member the total volumes of goods carried by it in the relevant market shall be taken into account irrespective of whether those volumes are carried: (a) within the consortium in question; (b) within another consortium to which the member is a party; or (c) outside a consortium on the member’s own or on third party vessels. The exemption provided for in Article 3 shall continue to apply if the market share referred to in paragraph 1 of this Article is exceeded during any period of two consecutive calendar years by not more than one tenth. Where one of the limits specified in paragraphs 1 and 3 of this Article is exceeded, the exemption provided for in Article 3 shall continue to apply for a period of six months following the end of the calendar year during which it was exceeded. That period shall be extended to 12 months if the excess is due to the withdrawal from the market of a carrier which is not a member of the consortium.

Under Articles 5 and 6 of the Regulation, conditions attached to the consortium block exemption ensure that consortia fulfil the conditions set by Article 101(3) TFEU.53 The violation of a condition renders the block exemption automatically inapplicable, save for the situation where continued temporary application may still be possible as set out in Articles 5.3 and 5.4 of the Regulation. 48 Article 5 sets out a 30% market share threshold condition. As explained in Recital 7, for users, the consortia can only bring benefits if there is sufficient competition provided in the relevant markets in which the consortia operates. Accordingly, this condition is regarded as met when a consortium does not exceed a 30% market share threshold and so it can be assumed that there will be effective “control” by (actual or potential) competitors that are not members of the consortium. 49 However, even if the aggregate market share of consortia exceeds the 30% threshold, it does not automatically render the consortium arrangements illegal. Consortium members have to self-assess if their joint activities restrict competition and, if so, satisfiy the conditions of Article 101(3) TFEU.54 Article 5(3) permits that the exemption shall continue to apply if the market share threshold is 47

53 Technical paper on the revision of Commission Regulation (EC) No 823/2000, para. 31. 54 Idem, para. 68.

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exceeded during any period of two consecutive calendar years as long as the exceeded amount is not more than one tenth. Article 5(4) further permits that where one of the limits specified in Article 5(1) or Article 5(3) is exceeded, the exemption shall continue to apply for a certain period. With respect to the calculation of market share, Article 5(1) provides that the 50 total volume of goods carried in freight tonnes or 20-foot equivalent units should be referred to. The setting of the market share to 30 % going in is the direction of the general market share thresholds, especially to provide a safeguard against the possibility that consortia will give rise to vertical restraints.55 Therefore, interlinkage and cross participations of consortia members justify the taking into consideration of those criteria when calculating the 30 % threshold. It has to be noted that it is not relevant whether or not the vessels used by the 51 consortium members are their property or chartered. Is is also not relevant whether the transport services are connected with container traffic or other transport modes (like for instance RoRo Services). In addition, Article 5(2) provides that the volumes of goods carried by a con- 52 sortium member shall be aggregated on the basis of those within the consortium, those within another consortium to which the member is a party, or outside a consortium on the member’s own or on third party vessels.56 Article 6 Other conditions In order to qualify for the exemption provided for in Article 3, the consortium must give members the right to withdraw without financial or other penalty such as, in particular, an obligation to cease all transport activity in the relevant market or markets in question, whether or not coupled with the condition that such activity may be resumed after a certain period has elapsed. That right shall be subject to a maximum period of notice of six months. The consortium may, however, stipulate that such notice can only be given after an initial period of a maximum of 24 months starting from the date of entry into force of the agreement or, if later, from the commencement of the service. In the case of a highly integrated consortium the maximum period of notice may be extended to 12 months and the consortium may stipulate that such notice can only be given after an initial period of a maximum of 36 months starting from the date of entry into force of the agreement or, if later, from the commencement of the service.

Article 6 prescribes that the benefit of the block exemption should be subject 53 to the right of each consortium member to withdraw from the consortium provided that it gives reasonable notice. There is a maximum period of notice of six months and in the case of a “highly integrated” consortium that period may be extended to 12 months. The consortium may set up a limitation to such notice, by requiring that such notice be given after the expiration of an initial period of up to 24 months and in the case of a highly integrated consortium 36 months, starting from the date of entry into force of the agreement or from the com55 Pozdnakova, E.C.L.R. 2010, 31(10), p. 419. 56 Pozdnakova, E.C.L.R. 2010, 31(10), p. 419.

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mencement of the service, whichever is later. A longer notice period is required in the case of highly integrated consortia is because higher investments were made to set the consortium up and more extensive re-organisation would berequired in the event of a member leaving.57 54 The phrase “highly integrated” is not defined in the Regulation.58 From the previous block exemption regulation, it could be inferred that such a consortium needed a high level of investment due to the purchase or charter of vessels specifically for the purpose of setting up a consortium.59 The term high level of investment is rather vague which does not help legal certainty. What is definitely nota “highly integrated” consortium is a cooperation only based on insignificant services levels. Only those consortia which force the participants to invest in the establishment of the consortium structure can be justified as “highly integrated”. 55 Shorter notice periods are feasible without any further preconditions, whereas longer notice periods other than foreseen in Article 6require a detailed self-assessment (especially regarding the market conditions) based on the conditions of Art. [101] (3) TFEU; they cannot be subject to the BER.60 CHAPTER IV FINAL PROVISIONS

Article 7 Entry into force This Regulation shall enter into force on 26 April 2010. It shall apply until 25 April 2015.

The Regulation has extended the application of Regulation 906/2009 for another five years until 25 April 2020, and there are no other modifications. Regulation 906/2009 need to be amended accordingly by Regulation 697/2014.61 57 As noted above, Regulation 906/2009 came into effect on 26 April 2010 and should last originally until 25 April 2015. Following a public consultation, the Commission has concluded that the existing block exemption “has worked well, providing legal certainty to agreements which bring benefits to customers and do not unduly distort competition, and that current market circumstances warrant a prolongation”.62 Through the extension of the exemption until 25 April 2020, the Commission expects legal certainty to be provided to liner shipping companies as regards the compatibility of their agreements with EU competition rules. Although, the Commission obviously accepts the benefits of the block exemption, it will closely monitor the development of the market and the conduct 56

57 58 59 60

Recital 11 of the Regulation. Pozdnakova, ECLR 2010, p. 415. See, e.g., Regulation 823/2000, Article 8. Raimann, in: Kölner Kommentar zum Kartellrecht, Vol. 4, Syst III, Seeverkehr (Sea Transport), para. 158. 61 Commission Regulation (EC) No. 697/2014 of June 2014 amending Regulatory (EC) No. 906/2009 as regards its period of application, OJ 2014 L 184/3. 62 See http://europa.eu/rapid/press-release_IP-14-717_en.htm.

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of the participants in order to ensure an open and competitive situation.63 It also has to be taken into consideration that the Commission pursues, in general, the policy to reduce sector specific competition rules in order to give more space to the general rules. In this precise industry, however, the Commission realized the necessity to allow the market participants to rely on a specific block exemption. This will allow cooperation in relation to joint cargo transport services in form of consortia especially by smaller and medium sized shipping companies – which are under significant pressure through the general market conditions – and rationalisation as well as better economies of scale (as regards improved frequencies, coverage and service finality by the use of modern ships, etc.).

63 Levitt/Ziegler, Journal of European Competition Law & Practice 2014, p. 696-697.

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Werner

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Michael

IV. Commentary on the Community Guidelines on State Aid to Maritime Transport and Regulation 3094/95 on Aid to Shipbuilding Part I.

..........................................................................

1

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Maritime Guidelines and the Tonnage Tax . . . . . . . . . . . . . . . . . . . . . . 2. Regulation 3094/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Information on the Results of Research and Development shall be published promptly, at least once a Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part II. State Aid Developments; Maritime & Shipping. . . . . . . . . . . . . . . . . . . . . Spotlight on the Tonnage Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5

C. State Aid Developments in the Maritime and Shipping Sectors . . . . . . . . . 1. February 2013, Judgment of the European Court of Justice in Case C-246/12 P Ellinika Nafpigia AE v European Commission. . . . . . . . . 2. March 2013, Judgment of the European Court of Justice in Case C‑613/11 European Commission vs. Republic of Italy . . . . . . . . . . . . . . 3. July 2013, State aid case SA.21233 – Spain, Tax Regime applicable to certain Finance Lease Agreements also known as the Spanish Tax Lease System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. September 2014, Judgment of the European Court of Justice in Cases C‑533/12 P and C‑536/12 P SNCM and France v Corsica Ferries France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. January 2015, Judgment of the General Court in Case T-1/12 France v European Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. May 2015, State Aid case SA.35546 – Portugal, Past Measures in Favour of Estaleiros Navais de Viana do Castelo S.A. . . . . . . . . . . . . . . D. Analysis of the Tonnage Tax and its State Aid Compatibility . . . . . . . . . . . 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. EU State Aid Assessment of the Tonnage Tax . . . . . . . . . . . . . . . . . . . . . . . a) Article 107 (1) TFEU. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Article 107 (3) TFEU. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Community Guidelines on State Aid to Maritime Transport & Ship Management Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Objectives to be fulfilled by the notified Schemes . . . . . . . (2) Qualifying Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ship-Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ship Management Companies . . . . . . . . . . . . . . . . . . . . . . . Grey Area – Operators that may qualify as Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Qualifying Operators. . . . . . . . . . . . . . . . . . . . . . . . . . . (3) Qualifying Ships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) Qualifying Shipping Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maritime Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ancillary Activities to Maritime Transport . . . . . . . . . Towage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dredging Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non qualifying Shipping Activities . . . . . . . . . . . . . . . . . . (5) Flag Link . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) Ring-Fencing Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) Calculation of the Tonnage Tax Rate . . . . . . . . . . . . . . . . . . . . . bb) Direct Application of Article 107 (3) (c) TFEU . . . . . . . . . . . . . .

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Commentary on Regulation 3094/95 on Aid to Shipbuilding

Part I. A. Introduction

In 2004, the European Commission (the Commission) adopted its latest Com- 1 munity Guidelines on State aid to maritime transport (the Maritime Guidelines).1 These guidelines notably specify that they will be reviewed within seven years of their date of application.2 In 2012, the Commission consulted on the review of the Maritime Guidelines3 and subsequently left these guidelines unchanged. According to the Maritime Guidelines, the main objectives of State aid in the maritime transport sector are the promotion of the use of EU flags on Member States vessels, the promotion of the EU maritime industry, the promotion of the sea profession within the EU as well as environmental protection and employment promotion.4 The Maritime Guidelines confirm that State aid to the European shipping in- 2 dustry continues to be justified, and set out the parameters within which State aid to maritime transport will be approved by the Commission under Article 107(3)(c) and Article 106 (2) of the Treaty on the Functioning of the European Union (the TFEU).5 The Maritime Guidelines are applicable to the “transport of goods and persons by sea” but “do not cover aid to shipbuilding”.6 The shipbuilding sector has been the subject of specific EU State aid mea- 3 sures since the 1970s. Back then, the European shipbuilding industry was exposed to a structural crisis marked by overcapacities and a massive increase in capacity in East Asia. In order to ease the situation on the worldwide ship market and to define a set of permissible objectives for the use of State aid in this sector, the Commission and the Council passed several regulations and directives, as well as the Framework on State aid to shipbuilding. For purposes of this commentary, we will mainly discuss Council Regulation No. 3094/95 on aid to shipbuilding (Regulation 3094/95).7

1 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3. 2 Idem, section 13. 3 See http://ec.europa.eu/competition/consultations/2012_maritime_transport/index_en.html#repl ies. 4 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, section 2.2. 5 Idem, section 2. 6 Ibid. 7 Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding, OJ 1995 L332/1.

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B. Commentary 1. The Maritime Guidelines and the Tonnage Tax 4

As acknowledged by the Maritime Guidelines, the major development in recent years concerning support measures from the Member States for maritime transport is the flat rate tonnage taxation systems (tonnage tax). Tonnage tax means that the ship-owner pays an amount of tax linked directly to the tonnage operated which is payable irrespective of the company’s actual profits or losses.8 The Maritime Guidelines confirm that such schemes constitute State aid, but the Commission will generally approve them because of the importance of such activities to the Union’s economy and in view of the objectives of safeguarding high quality employment and stimulating a competitive shipping industry in Member States.9 2. Regulation 3094/95

Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding Official Journal L 332, 30/12/1995, P. 0001 – 0009 COUNCIL REGULATION (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 92 (3) (e), 94, and 113 thereof, Having regard to the proposal from the Commission (1), Having regard to the opinion of the European Parliament (2), Having regard to the opinion of the Economic and Social Committee (3), Whereas Council Directive 90/684/EEC of 21 December 1990 on aid to shipbuilding (4) expires on 31 December 1995; Whereas, within the framework of the Organization for Economic Cooperation and Development (OECD), an Agreement has been concluded between the European Community and certain third countries respecting normal competitive conditions in the commercial shipbuilding and repair industry (5); Whereas the current rules of the Directive will need to be prolonged ad interim if the OECD Agreement does not enter into force by 1 January 1996; Whereas that Agreement should enter into force on 1 January 1996, after all parties to the Agreement have deposited their instruments of ratification, acceptance or approval; Whereas the Agreement provides for the elimination of all direct shipbuilding aids except social aids and authorized aids to research and development within the limit of certain ceilings; Whereas indirect measures of support to shipbuilding in the form of credit facilities and loan guarantees for shipowners are permitted by the aforesaid Agreement provided they are in conformity with the OECD Understanding on Export Credits for Ships;

8 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, section 3.1. 9 Ibid.

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Commentary on Regulation 3094/95 on Aid to Shipbuilding Whereas the OECD Agreement respecting normal competitive conditions in the commercial shipbuilding and repair industry and the Community legislation deriving therefrom are a matter of signal importance; Whereas the Commission's powers under Articles 85, 86, 92 and 93 of the Treaty enable it to act in the event of anticompetitive measures or practices and whereas actions initiated by the Commission in connection with such measures and practices by shipyards would form an integral part of the annual report to be submitted to the Member States; Whereas the abovementioned Agreement can be reviewed three years after it enters into force, HAS ADOPTED THIS REGULATION:

Regulation 3094/95 was the result of an agreement concluded in 1994 within 5 the framework of the Organisation for Economic Cooperation and Development (OECD) regarding the respect of normal competitive conditions in the commercial shipbuilding and repair industry. In December 1994, the European Commission and the Governments of Finland, Japan, the Republic of Korea, Norway, Sweden and the United States signed the Final Act of the “Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry” (the OECD Agreement). The OECD Agreement was scheduled to enter into force on 15 July 1996 after all Parties to it had concluded their national ratification procedures. However, since the United States has still not ratified the Agreement, the OECD Agreement is not yet in force.10 As a consequence, Regulation 3094/95 cannot enter into force. The Council initially adopted Regulation (EC) No 1540/98 (Regulation 1540/98) in its place, but Regulation 1540/98 expired on 31 December 2003. CHAPTER I GENERAL

Article 1 (a)

(b) (c)

For the purposes of this Regulation: 'shipbuilding' shall mean the building, in the Community, of self-propelled seagoing commercial vessels, namely: – vessels of not less than 100 gt used for the transportation of passengers and/or goods; – vessels of not less than 100 gt for the performance of a specialized service (for example dredgers and ice-breakers, excluding floating docks and mobile offshore units); – tugs of not less than 365 kW; – fishing vessels of not less than 100 gt for export outside the Community; and – unfinished shells of the abovementioned vessels that are afloat and mobile. Military vessels and modifications made or features added to other vessels exclusively for military purposes shall be excluded, provided that any measures or practices applied in respect of such vessels, modifications or features are not disguised actions taken in favour of commercial shipbuilding inconsistent with this Regulation; 'ship repair' shall mean the repair or reconditioning in the Community of self-propelled seagoing commercial vessels, as defined in (a); 'ship conversion' shall mean, subject to the provisions of Article 5, the conversion, in the Community, of self-propelled seagoing commercial vessels, as defined in (a), on condition that conversion operations entail radical alterations to the cargo plan, the shell, the propulsion system or the passenger reception infrastructure;

10 See OECD website: http://www.oecd.org/sti/ind/shipbuildingagreement-overview.htm.

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'self-propelled seagoing vessel' shall mean a vessel that, by means of its permanent propulsion and steering, has all the characteristics of self-navigability on the high seas; 'OECD Agreement' shall mean the Agreement respecting normal competitive conditions in the commercial shipbuilding and repair industry; 'aid' shall mean State aid within the meaning of Articles 92 and 93 of the Treaty. This shall include not only aid granted by the State itself but also that granted by regional or local authorities or other public bodies and any aid elements contained in financing measures taken directly or indirectly by Member States in respect of shipbuilding, conversion or repair undertakings which cannot be regarded as a genuine provision of risk capital according to standard investment practice in a market economy; 'related entity' shall mean any natural or legal person who: (i) owns or controls a shipbuilder; or (ii) is owned or controlled by a shipbuilder, directly or indirectly, whether through stock ownership or otherwise. Control shall be presumed to arise once a person or a shipbuilder owns or controls an interest of more than 25 % in the other.

(e) (f)

(g)

6

Article 1 contains definitions for key terms. Paragraph (a) specifies that for the regulation to apply the building activity shall take place within the Union. It is also specified that the regulation applies to “commercial” vessels and therefore non-commercials vessels such as genuine military vessels and vessels exclusively for military purposes are excluded. Article 2 1.

Aid granted specifically, whether directly or indirectly, for shipbuilding, conversion and repair, as defined under this Regulation, financed by Member States or their regional or local authorities or through State resources in any form whatsoever may be considered compatible with the common market only if it complies with the provisions of this Regulation. This applies not only to undertakings engaged in such activities but also to related entities. No aid granted pursuant to this Regulation may be conditional upon discriminatory practices against products originating in other Member States.

2.

7

The scope of application as specified in Paragraph 1 appears to be very broad. It sets out the scope of applying the regulation to aid granted not only to shipbuilding, but also to conversion and repair of ships. The undertakings which receive the aid encompass the related entities of the undertakings engaged in the shipbuilding, ship repair or ship conversion activities. CHAPTER II COMPATIBLE MEASURES

Article 3 Social assistance 1.

2.

346

Aid to cover the cost of measures for the exclusive benefit of workers who lose retirement benefits or who are made redundant or otherwise separated permanently from employment in the respective shipbuilding, conversion or repair enterprise, when such assistance is related to the discontinuance or curtailment of shipyard activities, bankruptcy, or changes in activities other than shipbuilding, conversion or repair may be considered compatible with the common market. The costs eligible for the aid referred to in this Article are, in particular: – payments to workers made redundant or retired before legal retirement age, – the costs of counselling services to workers made or to be made redundant or retired before legal retirement age, including payments made by shipyards to facilitate the creation

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of small enterprises which are independent of the shipyards in question and whose activities are not principally shipbuilding, conversion or repairs, payments to workers for vocational retraining.

Article 3 specifies that social assistance is one type of compatible measures 8 and contains the conditions which must be satisfied for them to be judged compatible. However, the satisfaction of such conditions will only mean that such type of aid “may be considered compatible with the common market”. In Paragraph 2, where the regulation clarified the type of costs that are eligi- 9 ble for the aid, the language of the provision (i.e. “in particular”) indicates that there are other costs to be determined on a case-by-case basis where they are compatible with the common market. Article 4 Research and development aid 1.

2.

3.

Public aid for research and development to the shipbuilding, conversion and repair industry may be considered compatible with the common market where this public assistance relates to: (i) fundamental research; (ii) basic industrial research, provided that the aid intensity is limited to 50 % of eligible costs; (iii) applied research, provided that the aid intensity is limited to 35 % of eligible costs; (iv) development, provided that the aid intensity is limited to 25 % of eligible costs. The maximum permissible aid intensity for research and development carried out by small and medium-sized enterprises (1) shall be 20 points higher than the percentages specified in paragraph 1 (ii), (iii) and (iv). For the purposes of this Article, the following definitions shall apply to research and development aid: (a) eligible costs shall be only those relating to: (i) the costs of instruments, material, land and buildings to the extent that they are used for specific research and development projects; (ii) the costs of researchers, technicians and other staff to the extent that they are engaged in the specific research and development projects; (iii) consultancy and equivalent services including research bought, technical knowledge, patents, etc.; (iv) overhead costs (infrastructure and support services) to the extent that they are related to the research and development projects, on condition that they do not exceed 45 % of the total costs of the project for basic industrial research, 20 % for applied research and 10 % for development; (b) 'fundamental research' shall mean research activities independently conducted by higher education or research establishments for the enlargement of general scientific and technical knowledge, not linked to industrial or commercial objectives; (c) 'basic industrial research' shall mean original theoretical and experimental work whose objective is to achieve better understanding of the laws of science and engineering in general and which might apply to an industrial sector or to the activities of a particular undertaking; (d) 'applied research' shall mean investigation or experimental work on the basis of the results of basic research with a view to facilitating the attainment of specific practical objectives such as the creation of new products, production processes or services. It normally ends with the creation of a first prototype and does not include efforts whose principal aim is the design, development or testing of products or services to be considered for sale;

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(f)

'development' shall mean the systematic use of scientific and technical knowledge in the design, development, testing or evaluation of new products, production processes or services or in the improvement of an existing product or service to meet specific performance requirements and objectives. This stage normally includes pre-production models such as pilot and demonstration projects but does not include industrial application and commercial exploitation; aid for research and development specifically provided to the shipbuilding, conversion or repair industry shall include, but not be limited to, the following: (i) research and development projects carried out by the shipbuilding, conversion or repair industry or by research institutes controlled or financed by that industry; (ii) research and development projects carried out by the shipping industry or by research institutes controlled or financed by that industry where these projects are directly related to the shipbuilding, conversion or repair industry; (iii) research and development projects carried out by universities, public and/or independent private research institutes and other industrial sectors in collaboration with the shipbuilding, conversion or repair industry; (iv) research and development projects carried out by universities, public and/or independent private research institutes and other industrial sectors, when, at the time the project is carried out, it can reasonably be expected that the results will be of substantial specific importance for the shipbuilding, conversion or repair industry.

3. Information on the Results of Research and Development shall be published promptly, at least once a Year

Like Article 3, Article 4 specifies that aid for research and development is a type of compatible measure and contains the conditions which must be satisfied for them to be judged compatible. However, the satisfaction of such conditions will only mean that such type of aid “may be considered compatible with the common market”. 11 In Paragraphs 1 and 2, the regulation clarified the type of research and development projects covered by the aid, and the different levels of aid intensity (aid portion as percentage of total project cost) applicable to them. 12 Paragraph 3 contains definitions of various terms such as “fundamental research”, “basic industrial research” and “applied research”, rendering Article 4 to be relatively detailed. Again, Paragraph 3(f) contains an illustration of research and development projects within the meaning of Article 4 but since these are not exclusive, compatibility of aid granted to other types of projects will be determined on a case-by-case basis. 10

Article 5 Indirect aid 1.

2.

348

Aid for shipbuilding and ship conversion, excluding repair, granted to shipowners or third parties in the form of State loans and guarantees may be considered compatible with the common market if it complies with the OECD Understanding on Export Credits for Ships (1) or with any agreement amending or replacing that Understanding. Aid for shipbuilding and ship conversion granted for genuine reasons as development assistance to a developing country may be deemed compatible with the common market if it complies with the relevant terms of the OECD Understanding or with any agreement amending or replacing that Understanding, as referred to in paragraph 1.

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Aid granted by a Member State to its shipowners or to third parties in that State for the building or conversion of ships may not distort or threaten to distort competition between shipyards in that Member State and shipyards in other Member States in the placing of orders. For the purpose of this Article, 'ship conversion' shall mean the conversion, in the Community, of self-propelled seagoing commercial vessels, as defined in Article 1 (a), of not less than 1 000 g t on condition that conversion operations entail radical alterations to the cargo plan, the shell, the propulsion system or the passenger reception infrastructure.

Exceptionally, the scope of Article 5 excludes aid granted to ship repair. Para- 13 graph 1 provides that aid granted for shipbuilding or ship conversion in the form of State loans and guarantees may be considered compatible with the common market but only if it complies with the specific OECD requirement (i.e. OECD Understanding on Export Credits for Ships).11 In Paragraph 4, the definition of “ship conversion” specifies that the conver- 14 sion shall to limited to vessels of “not less than 1000 gt”, which is more restrictive than the definition of “ship conversion” within Article 1 (a). This combined with the exclusion of “ship repair” and the requirement of complying with OECD requirement indicates that the application of this provision is narrower in scope. Separately the provision refers to “third parties”, the definition of which is not 15 included in the regulation. Article 6 Spain, Portugal, Belgium Reconstruction aid granted in Spain, Portugal and Belgium in the form of investment assistance and any assistance for social measures not covered under Article 3 and paid after 1 January 1996 may be considered compatible with the common market. This aid must be subject to individual notification and prior approval by the Commission by 31 December 1996 at the latest and be subject to the following maximum limits and payments deadlines: Spain: Portugal: Belgium:

Amount of aid Pta 10 billion Esc 5,2 billion Bfrs 1320 million

Payment deadline 31 December 1998 31 December 1998 31 December 1997

Article 6 refers to the application of reconstruction aid granted to three Mem- 16 ber States, Spain, Portugal and Belgium. It applies where the reconstruction aid does not fall under any assistance for social measures covered under Article 3 or in the form of investment assistance, and to those paid after 1 January 1996.

11 Proposal for a Council decision on the conclusion of the agreement respecting normal competitive conditions in the shipbuilding and repair industry, 1994, OJ C 375/1, Understanding on export credits for ships.

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Article 7 Other measures 1.

In exceptional cases, and subject to Article 92 of the Treaty, other aids may be deemed compatible with the Common market. If the Commission considers that this is the case, it shall be empowered, after consulting the special committee set up under Article 113 of the Treaty, to request a derogation from the Parties Group pursuant to Article 5 (5) of the OECD Agreement. For research and development projects related to safety and the environment, and subject to compliance with the conditions set out in Article 92 of the Treaty, a higher aid intensity than provided for in Article 4 (1) (ii), (iii) and (iv) may be deemed compatible with the common market. If the Commission considers that this is the case, it shall be empowered to request the Parties Group to approve the project pursuant to Annex I B 3 (2) to the OECD Agreement. Where aid granted pursuant to this Regulation is the subject of Dispute Panel Proceedings under Article 8 of the OECD Agreement or, in the case of export credits, the subject of consultation mechanisms as laid down in the OECD Understanding on Export credits for Ships, the Community position shall be adopted by the Commission after consultation of the special Committee set up under Article 113 of the Treaty.

2.

3.

17

All the “other measures” are related to the application of the OECD Agreement. Since the agreement is not in force, it does not seem necessary to discuss this provision in detail. It is however worthy noting that due to this provision, the Commission may have a broad discretion in determining which other types of measures may qualify as compatible aid. CHAPTER III MONITORING PROCEDURE

Article 8 1.

Aid to shipbuilding and repair undertakings covered by this Regulation shall be subject to, in addition to the provisions of Article 93 of the Treaty, the special notification rules provided for in paragraph 2. The following shall be notified to the Commission in advance by the Member States and authorized by the Commission before they are put into effect: (a) any aid scheme – new or existing – or any amendment of an existing scheme covered by this Regulation; (b) any decision to apply a generally applicable aid scheme, including generally applicable regional aid schemes, to the undertakings covered by this Regulation in order to verify compatibility with Article 92 of the Treaty; (c) any individual application of aid schemes in the case referred to in Article 5 (2) or when specifically provided for by the Commission in its approval of the aid scheme concerned.

2.

18

Article 8 refers to the notification of aid schemes which are limited to shipbuilding and repair. The regulation however failed to specify what notification rules, if any, the ship conversion undertakings may need to comply with. Article 9 1.

350

To enable the Commission to monitor application of the aid rules contained in Chapter II, Member States shall supply it with: (a) monthly reports on officially supported credit facilities granted for each shipbuilding and conversion contract by the end of the month following the month of signing of each contract, in accordance with the annexed Schedule 1;

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where Member States have schemes providing for official guarantees and insurance for ships, reports to be submitted by 1 April of the year following the year under review, including the results of the schemes, claims paid, income from premiums and fees, income from recoveries and any other appropriate information requested by the Commission; (c) completion reports on each shipbuilding and conversion contract signed before the entry into force of this Regulation by the end of the month following the month of completion, in accordance with the annexed Schedule 2; (d) yearly reports, to be provided by 1 March of the year following the year subject to the report, giving details of the total amount of aid granted to each individual national shipyard during the previous calendar year, in accordance with the annexed Schedule 3; (e) in the case of shipyards able to build merchant ships over 5 000 gt, yearly reports to be provided not later than two months after the annual general meeting has approved the shipyard's yearly report, giving publicly available information on capacity developments and on the structure of ownership, in accordance with the annexed Schedule 4. On the basis of the information communicated to it in accordance with Article 8 and paragraph 1 of this Article, the Commission shall draw up an annual overall report to serve as a basis for discussion with national experts.

Article 9 provides for Member States’ obligations to supply the aid schemes 19 with reporting duties. These reporting duties include submission to the Commission monthly and yearly reports, as well as different timing requirements on such reports. Article 10 This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Communities. It shall apply as from the date of entry into force of the OECD Agreement (1). Should the said Agreement not enter into force on 1 January 1996, the relevant provisions of Directive 90/684/EEC shall apply until the Agreement enters into force and until 1 October 1996 at the latest. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 22 December 1995.12 For the Council The President

As noted above, because the OECD Agreement has not entered into force, the 20 regulation is not currently applicable. When (and if) the regulation becomes applicable, it would provide the most restrictive regime thus far.13

12 For purposes of this commentary, annexes are omitted. 13 Sanchez Rydelski, The EC State Aid Regime: Distortive Effects of State Aid on Competition and Trade, 2006; p.449.

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Part II. State Aid Developments; Maritime & Shipping Spotlight on the Tonnage Tax 21

Over the last years there have been some developments in the State aid soft law – i.e. communications and guidelines – that the European Commission (the Commission) has adopted in the maritime and shipping sectors. Following below is a summary of the most relevant changes and developments in this field. In addition, and due to the particular nature of the tonnage tax and its State aid compatibility, the provisions in the Maritime Guidelines regulating this specific fiscal advantage will be analysed in greater detail. C. State Aid Developments in the Maritime and Shipping Sectors

Regarding the maritime sector, the Commission launched a consultation in 2012 for the amendment of the Maritime Guidelines. However, after a strong lobbying campaign from the industry and the Member States, it refrained from adopting new guidelines. The guidelines of 2004 are still in force. 23 In the shipbuilding sector, the Framework on State aid to shipbuilding was initially supposed to be in force from January 2012 until December 2013.14 However, its validity was extended by six months, until the end of June 2014. 24 Since 1 July 2014 there are the following provisions in force: i. Regional aid to the shipbuilding sector is covered by the Guidelines on regional State aid for 2014-2020.15 ii. The Framework for State aid for research and development and innovation is applicable to R&D&I measures in the shipbuilding sector.16 25 Alongside the new soft-law communications, the decisions of the Commission and rulings of the Court of Justice of the European Union have also shaped the maritime and shipping sector. An overview of some of the most relevant cases of the last years follows: 22

1. February 2013, Judgment of the European Court of Justice in Case C-246/12 P Ellinika Nafpigia AE v European Commission 26

Ellinika Nafpigia AE (Hellenic Shipyards, ‘EN’), is a shipyard in Greece, which, at the time of the Commission decision, was owned by ThyssenKrupp AG. The company has received aid several times since 1992. In 2006 the Commission ordered Greece to recover the aid and the interest from the shipyard.

14 Framework on State aid to shipbuilding, 2011, OJ C 364/9. 15 Guidelines on regional State aid for 2014-2020, 2013, OJ C 209/1. 16 Communication from the Commission – Framework for State aid for research and development and innovation, 2014, OJ C 198/1.

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The decision was challenged before the General Court,17 which rejected the 27 arguments of EN. The undertaking appealed the ruling to the European Court of Justice (the CJEU). Before the CJEU the undertaking argued that the aid was necessary to contin- 28 ue the military production. The rest of the arguments brought forward were also related to the military nature of some of the activities carried out. In this respect, pursuant to Article 346 TFEU: The provisions of the Treaties shall not preclude the application of the following rules: (b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes.

The Court acknowledged the existence of such a principle. However, it held 29 that in the case of non-military goods, the competition rules remain applicable. Moreover, it ruled that only measures concerning military activity are to be considered under Article 348 TFEU. Consequently, commercial measures are not covered by this provision. 30 According to Article 348 TFEU: If measures taken in the circumstances referred to in Articles 346 and 347 have the effect of distorting the conditions of competition in the internal market, the Commission shall, together with the State concerned, examine how these measures can be adjusted to the rules laid down in the Treaties.

2. March 2013, Judgment of the European Court of Justice in Case C‑613/11 European Commission vs. Republic of Italy

In Decision 2008/92/EC concerning an Italian State aid scheme to the Sar- 31 dinian shipping sector the Commission declared incompatible with the common market a scheme in the form of loans and leases that were granted by the region of Sardinia to shipping companies. The Sardinian companies benefited from interest rates more favourable than market rates and a reduction in costs relating to the loans and leases. The Commission demanded the recovery of the aid and ordered Italy to inform it on the measures taken to comply with the decision. A complaint from an undertaking claiming that Italy had not taken the neces- 32 sary steps to recover the aid triggered an investigation by the Commission on this issue. The Commission concluded that Italy had not complied with the decision and referred the case to the CJEU pursuant to Article 108 (2) TFEU in 2011. In March 2013 the CJEU ruled that Italy had failed to comply with the provi- 33 sions of the decision and ordered the immediate recovery of the aid.

17 Judgment of 15 March 2012, Ellinika Nafpigeia v Commission, T-391/08, EU:T:2012:126.

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3. July 2013, State aid case SA.21233 – Spain, Tax Regime applicable to certain Finance Lease Agreements also known as the Spanish Tax Lease System

Almost two years after opening the formal investigation procedure, in July 2013, the Commission adopted a decision on the Spanish tax regime applicable to certain finance lease agreements for ships, also known as the Spanish Tax Lease. The Commission considered it incompatible with the internal market and ordered the recovery of the support granted in favour of the beneficiaries. The decision had high political and economic relevance, as the shipping industry still employs many people in Spain. 35 The scheme consisted in a financial structure of high complexity designed to reduce the tax burden for the purchase of ships. The Commission described the measures at stake in the following manner: 34

Para.8: The Spanish Tax Lease (STL) system is used in the context of transactions involving the construction by shipyards (sellers) and acquisition by maritime shipping companies (buyers) of sea-going vessels as well as the financing of such transactions through an ad hoc legal and financial structure. Para.9: The STL system relies on – an ad-hoc legal and financial structure organised by a bank and interposed between the shipping company and the shipyard, respectively the buyer and the seller of a vessel; – a complex network of contracts between the different parties to the transaction; and – the combined use of several Spanish tax measures. Para.11: A STL operation allows a shipowner to have a new vessel built at a 20%-30% rebate on the price charged by the shipyard. In order to obtain the discounted price (after deduction of the rebate), a shipping company must accept not to buy the vessel directly from the shipyard, but from an Economic Interest Grouping (EIG) incorporated under Spanish law and set up by a bank. Para.12: The STL structure is a tax planning construction generally organised by a bank in order to generate tax benefits at the level of the investors in a tax transparent EIG and to transfer part of these tax benefits to the shipping company in the form of a rebate on the price of the vessel, the rest of the benefits being kept by the investors in the EIG as a remuneration for their investment. Beyond the EIG, a STL operation also involves other intermediaries such as notably a bank and a leasing company (see chart below). Para.13: In practice, the EIG leases the vessel from a leasing company, from the date its construction starts. When the construction is complete, the EIG charters out the vessel to the shipping company, on a bareboat basis, and the shipping company starts operating the vessel. In any case, the EIG commits to buy the vessel at the end of the leasing contract and the shipping company commits to buy the vessel at the end of the bareboat charter contract, by way of reciprocal buy and sell option contracts. The exercise date of the option set by the leasing contract is set a few weeks before the exercise date of the option set by the bareboat charter. Both options are exercised after the entry of the EIG under the tonnage tax system (for a more detailed description, see below 2.2.4 Measure 4: The Tonnage Tax). A framework agreement is signed by the parties involved to make sure they all agree on the legal arrangements and on the functioning of the STL structure.

36

The scheme set up by the Spanish authorities consisted of the following measures: – Accelerated depreciation of leased assets; – Discretionary application of early depreciation of leased assets; – The Tonnage Tax system of taxation; and – Cancellation of the settlement of hidden tax liabilities. 354

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After an assessment of the measures, the Commission concluded that they 37 constituted an advantage for the Economic Interest Groupings and their investors and ordered the recovery of the aid. However, it also held that some elements could lead parties to believe that the tax measures of the STL did not constitute State aid and, consequently, conceded the existence of legitimate expectations during the period 2002 to 2007. Different Spanish shipyards have challenged the decision and the General 38 Court will judge on the compatibility of this measure with the EU rules. Most probably, the case will end up before the CJEU. One year before the final decision, namely in 2012, the Commission approved 39 a new Spanish scheme for the early depreciation of assets acquired via finance leases. This new measure was not selective and, therefore, did not constitute State aid pursuant to Article 107 (1) TFEU.18 4. September 2014, Judgment of the European Court of Justice in Cases C‑533/12 P and C‑536/12 P SNCM and France v Corsica Ferries France

Commission Decision 2009/611/EC declared compatible with the internal market a capital investment of two undertakings controlled by the French state in SNCM, a French company operating different routes from Corsica to continental France. Moreover, the privatisation plan of SNCM was considered to be in line with Article 107 (1) TFEU and, consequently, free from any State aid. The plan consisted of a recapitalisation of the company, an additional capital investment and aid of a social nature. A competitor of SNCM challenged the decision before the General Court. In its ruling, it partially annulled the decision and held that the Commission had committed several errors of assessment regarding the capital contribution and the privatisation plan. SCNM and France appealed the judgment to the CJEU, raising four pleas in law. The first concerned the sale of SCNM at a negative price. The CJEU upheld the General Court’s view that the Commission’s PIT was vitiated by error. For that conclusion, it rejected a claim concerning the role of the global image of a Member State for economic measures. Thus it held that:

40

41

42 43

Para.41: Summary references to the brand image of a Member State, as a global player, are not enough to support a finding that there is no aid, for the purposes of EU law.

Besides it considered that a sale cancellation clause as part of the capital con- 44 tribution had not been sufficiently analysed by the Commission. This could have had effects on the equal treatment of the public and private investments in SNCM, which were not investigated enough by the Commission. Finally, a measure of a social nature, consisting in aid to individuals in an es- 45 crow account, was also considered State aid. 18 State aid SA.34736 – Spain – Early depreciation of certain assets acquired through financial leasing.

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5. January 2015, Judgment of the General Court in Case T-1/12 France v European Commission

The case concerned a series of rescuing and restructuring measures adopted in favour of Sea France, a public undertaking, which were declared incompatible with the internal market. The measures were granted by SNCF, which was controlled by the French state. 47 One of the main contentious points before the General Court was the assessment of the measures for the purposes of the Market Economic Operator (MEO) Test. The French authorities considered that the measures adopted should have been regarded as one for the purposes of the PIT, as they were closely linked to each other (argument based on the ruling of the General Court T-11/95 BP Chemicals). 48 The General Court did not share this view and supported the position taken by the Commission of assessing them separately. In addition, it concluded that they did not comply with the MEO test. The aid scheme was also contrary to the provisions of the rescue and restructuring guidelines issued by the Commission. 46

6. May 2015, State Aid case SA.35546 – Portugal, Past Measures in Favour of Estaleiros Navais de Viana do Castelo S.A. 49

In May 2015 the Commission declared various measures granted to a former operator of shipyards in Portugal, Estaleiros Navais de Viana do Castelo, S.A. (ENVC), non-compatible with the State aid rules. The Commission analysed different measures taking the form of capital increases, loans, comfort letters and guarantees. The measures did not comply with the provisions of the MEOtest and the Commission ordered the recovery of the aid. The assets of ENVC had been sold to a new operator for a market price. The Commission still considered that ENVC was obliged by the recovery order, and not the new purchaser WestSea because there was no economic continuity between ENVC and WestSea. D. Analysis of the Tonnage Tax and its State Aid Compatibility 1. Introduction

50

Contrary to what the name might suggest, the tonnage tax is not a tax but rather a form of calculation of the amount of tax that a company has to pay, based on the tonnage operated by the company instead of on the company’s actual difference between revenues and expenses.19 The Commission has applied the concept in the maritime transport sector.

19 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Section 3.1, Subparagraph 4. See also State aid SA.21233 (ex NN/11, ex CP 137/06) – Spain – Tax scheme applicable to certain finance lease agreements also known as the Spanish Tax Lease System, para. 30.

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The calculation method has mostly a positive effect for undertakings, as it in fact lowers their corporate tax payable. Most Member States have opted for introducing such a scheme, which proves that the advantages outweigh the disadvantages. Nevertheless, during the years of recession a traditional corporate tax profit-losses calculation could have been more beneficial than the tonnage tax schemes.20 In 1989 the Commission adopted the first Maritime Guidelines to the shipping industry,21 which as the Commission itself acknowledges, were ineffective and did not manage to stop the decline in the EU fleet.22 With the aim of reversing this, the Commission issued new Guidelines in 1997, allowing for the first time the introduction of tonnage tax schemes.23 The intention was to create an incentive for companies to re-flag their vessels and avoid corporate relocation. Although the Commission has always been reluctant to accept operating aid to undertakings, the crisis in the industry and the special nature of shipping made it necessary to resort to unconventional measures. In this regard, one of the main features of the shipping industry is its global character. A measure as the tonnage-tax aims at promoting the competitiveness of the EU fleet in such a global market. The provisions of the 1997 guidelines were more effective than the previous ones in attaining the objectives set by the Commission. Most of the Member States have introduced their tonnage schemes under these Guidelines. In 2004 the Commission issued new Maritime Guidelines, maintaining the tonnage tax and, in certain points, easing the conditions for granting aid to companies in the industry.24 Although the Commission launched in 2012 a consultation to revise them, it has decided to keep the current version after strong lobbying from the shipping industry.

51

52

53

54

2. EU State Aid Assessment of the Tonnage Tax a) Article 107 (1) TFEU

Article 107 (1) TFEU establishes a general prohibition of State aid and pro- 55 vides: “Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market”.

20 In 2013 only Portugal, Luxembourg and Sweden had not introduced such a scheme. Luxembourg maintains the corporate tax environment (Source: www.maritimewatch.eu). 21 Financial and fiscal measures concerning shipping operations with ships registered in the Community, SEC(89) 921 final of 3 August 1989. 22 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Section 1 – Introduction. 23 Community guidelines on State aid to maritime transport, 1997, OJ C 205/5. 24 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3.

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In comparison to other State aid cases, when examining tonnage tax schemes, the Commission does not examine in detail the different conditions of Article 107 (1) TFEU. It considers that they are fulfilled without carrying out a detailed analysis. Moreover, the Commission uses a similar argumentation line in every decision. 57 Thus, the Commission holds that lowering the corporate income tax that international shipping companies would otherwise have to bear gives an economic advantage. This advantage is moreover selective, as it favours undertakings active in a specific sector, namely the international maritime transport and it derogates from the rules for the calculation of the corporate tax. There are State resources involved, as the State foregoes tax revenues. Finally, since shipping activities are carried out on a worldwide market, such measures threaten to distort competition and could affect trade between Member States.25 56

b) Article 107 (3) TFEU aa) Community Guidelines on State Aid to Maritime Transport & Ship Management Guidelines

Article 107 (3) (c) TFEU states that aid to facilitate the development of certain economic activities may be considered compatible with the internal market where it does not adversely affect trading conditions to an extent contrary to the common interest. The Commission has the right to adopt guidelines designed to decide on the compatibility of specific measures of the Member States with this provision. These guidelines have, in most of the cases, a strong policy component and are adopted under the great discretion that the Commission enjoys under this article. 59 From a legal perspective, the Maritime and the Ship Management Guidelines are binding on the Commission. However, they are not a legal act of the EU. One of their advantages is the fact that they give greater legal security and predictability, as they allow to ascertain how the Commission will decide in an individual case. On the other side, as it will be explained below, on certain occasions and due to their nature of mere soft-law, the Commission does not apply them rigorously. 60 The Maritime Guidelines cover aid granted by Member States or through State resources in favour of maritime transport. They foresee different fiscal and social measures to improve competitiveness among them the tonnage tax. Section 3.1 of the guidelines is of particular relevance for this calculation method. 61 The Maritime Guidelines should be read in conjunction with the Ship Management Guidelines, which were published in 2009 and complete the former. Thus, they set the conditions for ship management companies to qualify for the 58

25 State aid – N 188/2010 – Slovenia – Budget modification of the tonnage tax scheme in favour of international maritime transport, para.23-27. The Commission repeats a similar argumentation in the other tonnage tax decisions cited in this document.

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tonnage tax or other tax arrangements for shipping companies. As stated in its Section 2.1, “eligibility is limited to the joint provision of both technical and crew management for a same vessel (‘full management’), while those activities are not eligible to the tonnage tax or other tax arrangements when provided individually”.26 (1) Objectives to be fulfilled by the notified Schemes

Due to the exceptional nature of the tonnage tax – as was explained above it 62 is operating aid – the Commission attaches great importance to the fact that tax schemes notified by the Member States comply with at least one of the objectives set out in Section 2 of the Maritime Guidelines: Pursuant to the Maritime Guidelines, notified schemes must have the aim of: 63 a) improving a safe, efficient, secure and environment friendly maritime transport, b) encouraging the flagging or re-flagging to Member States' registers, c) contributing to the consolidation of the maritime cluster established in the Member States while maintaining an overall competitive fleet on world markets, d) maintaining and improving maritime know-how and protecting and promoting employment for European seafarers, and e) contributing to the promotion of new services in the field of short sea shipping following the White Paper on Community transport policy. In exceptional cases the Maritime Guidelines permit State aid to ships regis- 64 tered in Member States in registers not considered as a first register of that Member State as long as they are from one of the registers under point 3 of the Annex to the Guidelines and the following conditions are met: a) they comply with the international standards and Community law, including those relating to security, safety, environmental performance and on-board working conditions, b) they are operated from the Community; and c) their ship-owner is established in the Community and the Member State concerned demonstrates that the register contributes directly to the objectives mentioned above. Additionally, flag-neutral aid measures may be approved in certain exceptional cases where a benefit to the Community is clearly demonstrated.

26 Communication from the Commission providing guidance on State aid to ship management companies, 2009, OJ C 132/6.

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(2) Qualifying Beneficiaries 65

The Maritime Guidelines consider the following as qualified beneficiaries of the tonnage tax scheme: Ship-Owners

66

The Maritime Guidelines do not define the concept of ship-owner. For the concept of “maritime transport” (see below) they refer to Regulation (EEC) No 4055/86 and Regulation (EEC) No 3577/92. Although Regulation 3577/92 gives a definition that is only suitable for the purposes of that Regulation, it could still be used to have a general idea in this case. Thus, it defines them as: a) nationals of a Member State established in a Member State in accordance with the legislation of that Member State and pursuing shipping activities; b) shipping companies established in accordance with the legislation of a Member State and whose principal place of business is situated, and effective control exercised, in a Member State; or c) nationals of a Member State established outside the Community or shipping companies established outside the Community and controlled by nationals of a Member State, if their ships are registered in and fly the flag of a Member State in accordance with its legislation. Ship Management Companies

67

The Ship Management Guidelines extend the application of Section 3.1. of the Maritime Guidelines to joint or separate crew and technical management of ships27 if they contribute to one of the objectives laid down in 2.2 of the Maritime Guidelines and fulfil the following cumulative conditions for eligibility, which are applicable to both technical and crew managers: a) A Contribution to the EU Economy.28 This criterion is fulfilled when the ship management is carried out in the territory of one or more Member States and companies employ ashore EU/EEA citizens representing at least 51% of the total number of employees.29 b) Economic Link between the managed Ships and the Community.30 This requirement will be deemed fulfilled as long as at least 2/3 of the total tonnage of the ship manager's fleet in a given fiscal year is managed from the EU/EEA c) Compliance with International and Community Standards: The Commission has considered whether the Member State is a party to all relevant 27 Idem, Section 4. 28 Idem, Section 5.1. 29 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para.77. 30 Communication from the Commission providing guidance on State aid to ship management companies, 2009, OJ C 132/6, Section 5.2.

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international conventions and has incorporated them in its national legislation. Moreover, compliance by the Member State with all the relevant provisions of EU law is mandatory.31 In the case of non-EU/EEA ships this requirement is fulfilled when they are classed with an inspection and survey organisation which is approved by the EU in accordance with the relevant EU legislation in force and the ships are certified in accordance with the international Conventions regulating maritime safety, security and protection of the environment and are manned by seafarers who are duly certified in accordance with the STCW.32 Ship managers carrying out technical management comply with this requirement when they are certified under the ISM Code (Document of Compliance) by the competent authority of the Flag States of the vessels under their management and are mentioned as the management company on the relevant Safety Management Certificates (SMC) of those vessels.33 d) Flag-Share Requirements (Flag Link): The Ship Management Guidelines declare the flag-share requirements of Section 3.1 of the Maritime Guidelines applicable to ship management companies.34 The share of EU flags to be considered as the benchmark is that of 12 June 2009. In its decision practice, the Commission has considered this criterion fulfilled when a tax scheme requires ship managers to manage ships flying exclusively under the flag of a Member State.35 68 Moreover, the Guidelines set additional requirements for crew managers: a) Training of Sea Farers: This condition is met when all seafarers working on-board of managed ships are educated, trained and hold a certificate of competency in accordance with STCW and have successfully completed training for personal safety on board a ship. Crew managers will be only eligible when they fulfil the STCW and EU law requirements regarding responsibilities of companies.36 b) Social Conditions for Crew Members: The Ship Management Guidelines state that compliance with the provisions of the Maritime Labour Convention (MLC) is ensured by requiring that appropriate private contractual arrangements are concluded between the crew manager and the ship-owner,

31 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para.79; State aid C 34/07 (ex N 93/06) – Poland – Introduction of a tonnage tax scheme in favour of international maritime transport, para.99. 32 Convention of the International Maritime Organisation on Standards of Training, Certification and Watch-keeping for Seafarers (STCW), 1978. 33 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para.19. 34 See para.64 below. 35 State aid C 34/07 (ex N 93/06) – Poland – Introduction of a tonnage tax scheme in favour of international maritime transport in Poland, para. 100. 36 Communication from the Commission providing guidance on State aid to ship management companies, 2009, OJ C 132/6, Section 6.1.

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and that such arrangements are expressly reflected in the individual contracts of employment of the seafarers under crew management.37 Grey Area – Operators that may qualify as Beneficiaries 69

On some occasions the Commission has accepted that certain operators that are neither ship-owners nor ship management companies may still be qualifying beneficiaries. This is the case for the following operators: a) Genuine shipping companies that charter out their vessels on a bare-boat basis in the context of temporary over-capacity.38 This is subject to certain conditions, which have been set with the aim of ensuring that only companies performing maritime transport activities are eligible for support under the Guidelines.39 Thus, the Commission accepts it when there is a temporary excess of capacity due to the fluctuation in demand for its own shipping services. Furthermore, the Commission has regarded positively that the proportion of bare-boat chartered out ships does not exceed 20% of the company’s fleet under the tonnage tax and that the tonnage tax beneficiary will have to operate itself at least 20% of the fleet under the tonnage tax scheme.40 b) Time chartered tonnage-vessels when they contribute to one of the objectives established in Section 2.2 of the Guidelines. More specifically, the Commission requires a minimum ratio between chartered-in vessels and owned vessels of at least 10:1. This ratio should prevent tonnage tax companies from becoming pure maritime brokers and avoiding responsibility for the technical management of vessels that they operate. This contributes to maintaining and improving maritime know-how, one of the objectives of section 2.2 of the Guidelines. Furthermore, according to the Commission, such ratio should also facilitate that national fiscal authorities control that on-shore activities related to the vessels under tonnage tax are located within the EU/EEA. That is in line with a further objective of the same section, namely, the contribution to the consolidation of the maritime cluster established in the Member States.41 In case there is not such a ratio, chartered-in vessels must contribute to the objective of encouraging the flagging or re-flagging to the Member States registers.42 This objective is met if at least one of the two following condi37 Idem, Section 6.2. 38 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para.55 with reference to State aid SA.30515 – N 448/2010 – Finland – Amendments to the tonnage taxation aid scheme. 39 State aid SA.30515 – N 448/2010 – Finland – Amendments to the tonnage taxation aid scheme. 40 Idem, para.32. 41 State aid C 2/2008 (ex N 572/07) – Ireland – Amendment to the maritime tonnage tax system which Ireland is planning to implement, para. 19-21. 42 This objective is also laid down in Section 2.2 of the Community guidelines on State aid to maritime transport, 2004, OJ C 13/3.

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tions is fulfilled: (a) the chartered-in vessel is registered in a Community or EEA maritime register; or (b) its crew management and its technical management are carried out on the territory of the Community or the EEA.43 In a more recent decision the Commission has declared incompatible with EU law a French tax tonnage scheme not providing the necessary guarantees to ensure that the beneficiary companies operating such time-chartered vessels make a sufficient contribution to the objectives of the 2004 Guidelines.44 c) Natural persons: Individuals are eligible when no distinction in the treatment of natural and legal persons exists. Consequently, the tax base must be the same and the same rate shall be applicable to all entities. Moreover, natural persons must not be able to deduct social security and health insurance contributions from respectively their tonnage tax and tonnage tax base.45 Non-Qualifying Operators

The Commission has considered that the following operators cannot be re- 70 garded as qualifying beneficiaries: a) Pure ship lessors: they do not provide maritime transport services; and b) Pure commercial managers of ships: The Commission considers that pure maritime brokers should not benefit from tonnage tax schemes.46 Economic Interest Grouping (EIG): In the case concerning the Spanish tax 71 lease system, the Commission considered an EIG an intermediary providing rental or leasing services, not transport services. The EIG only puts a vessel at the disposal of a third party shipping company that exploits it.47 (3) Qualifying Ships

In its decision practice the Commission has not given detail on which ships 72 qualify for the tax tonnage advantage. Nevertheless, it has questioned to what extent certain ships are suitable for the qualifying shipping activities. Thus, it has raised doubts as to the admissibility of the following ships.48 The Commission has considered that the following operators cannot be re- 73 garded as qualifying beneficiaries: 43 State aid C 2/2008 (ex N 572/07) – Ireland – Amendment to the maritime tonnage tax system which Ireland is planning to implement, para. 22-23. 44 State aid SA.14551 – France – Change to the conditions for aid granted to time charterers under the tonnage tax scheme, para.40. 45 State aid C 34/07 (ex N 93/06) – Poland – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 83 to 86. 46 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta – Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para.57, referring to State aid N 504/2002 – Ireland – Introduction of a tonnage tax in maritime transport. 47 State aid SA.21233 C/11 (ex NN/11, ex CP 137/06) – Spain – Tax scheme applicable to certain finance lease agreements also known as the Spanish Tax Lease System, para. 181. 48 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta – Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 50.

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a) Yachts and pontoons: as they are hardly suitable for navigation at open/deep sea; b) Non-propelled barges; c) Fishing vessels; d) Oil rigs; and e) Cruise ships: The Commission has raised doubts because they not only offer transport services, but also other commercial services that do not qualify for the Maritime Guidelines, such as: casino, spa, entertaining services, hotel services while staying in ports. 74 Moreover, the Commission has admitted not having enough information to decide on the following vessels: cable repair vessels, diving support vessels, oil well stimulation vessels, pilot vessels, survey vessels, hydrographical surveying and construction in a marine environment vessels providing off shore services and mobile platforms. 75 The Commission is due to decide on all these vessels in the decision closing the formal investigation procedure of the Malta Tonnage tax scheme. At the current time there is no information on when this will happen. In any case, the Commission will adopt its decision having regard to technical and legal factors, the extent of the global competition that the vessels face and evidence that such vessels suffer from a competitive pressure.49 (4) Qualifying Shipping Activities 76

As stated in Section 2 of the Guidelines, they cover State aid in favour of maritime transport. The following activities are eligible for State aid: Maritime Transport

77

The Maritime Guidelines are applicable to ‘maritime transport’ activities. These are defined as the ‘transport of goods and persons by sea’.50 Ancillary Activities to Maritime Transport

78

The Commission considers that certain activities are ancillary to transport and that, therefore, they also should be included for the purposes of the tax tonnage advantage: a) All hotel, catering, entertainment and retailing activities on board of a qualifying ship.51

49 Idem, para.51. 50 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Section 2, subparagraph 3 with reference to Regulation (EEC) No 4055/86 and in Regulation (EEC) No 3577/92. 51 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 85.

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b) The provision of loading and unloading of cargo to a qualifying ship operated by the qualifying owner or the qualifying charter, including the moving of containers within a port area immediately before or after the voyage.52 c) Renting out of containers.53 d) Operation of ticketing facilities and passenger terminals as long as it is carried out in relation to eligible shipping activities included in the tonnage tax.54 e) Operation of office facilities as long as it is carried out in relation to eligible shipping activities included in the tonnage tax.55 f) Storage and customs clearance, operation of ticketing facilities and passenger terminals, and operation of office facilities in relation to shipping activities subject to the tonnage tax regime.56 g) Sea rescue operations.57 Towage

The CJEU has defined towage as “a service normally provided for remunera- 79 tion, that does not in principle entail a straightforward carriage of goods or passengers by sea. Rather, it involves assisting the movement of a vessel, rig, platform or buoy. A towing vessel that is assisting another vessel to manoeuvre, or supplementing that vessel’s own propulsive machinery, or substituting for it in cases of failure or breakdown, is assisting the vessel by which the passengers or goods are transported but is not itself the transporting vessel”.58 The Maritime Guidelines are applicable to towage when more than 50% of 80 the yearly activity of a tug constitutes transport. However, in the event that the activities are carried out in ports or consist in assisting a self-propelled vessel to reach the port, there is no “maritime transport”. The Guidelines do not admit derogations from the flag link in the case of towage.59

52 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 85. 53 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta – Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 61. 54 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para.86. 55 idem, para. 86. 56 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta – Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 61. 57 State aid C 34/07 (ex N 93/06) – Poland – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 89. 58 Judgment of the Court of 11 January 2007, Commission of the European Communities vs. Hellenic Republic, Case C-251/04. ECLI:EU:C:2007:5, para. 31. 59 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Subparagraph 14 of section 3.1.

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Dredging Vessels60 81

In the case of dredging vessels, the same assessment as with towage is applicable.61 Non qualifying Shipping Activities

The Commission considers that certain activities shall not qualify as maritime transport and, therefore, the Maritime Guidelines are not applicable to them. The aim is to avoid a too extensive interpretation of the tonnage tax advantage. Some of these activities are: 83 Commercial activities carried out on board of passenger vessels with no direct link to maritime transport. This includes profits arising from gambling, casinos, the sale of luxury goods and of excursions for passengers as eligible to the tonnage tax regime.62 a) Sale and distribution of shipping supplies;63 b) Cable-lying activities;64 c) Pipeline-laying activities;65 d) Activities carried out by research vessels;66 e) Activities carried out by crane vessels; and67 f) Acquisition of a ship through a financial leasing.68 82

(5) Flag Link 84

The Maritime Guidelines require a link with the flag of one of the Member States to declare a tax relief scheme compatible. However, they also foresee a derogation from this general rule, i.e. aid to fleets with vessels flying other flags, if the beneficiary companies commit themselves to increasing or at least maintaining the share of tonnage that they will be operating under the flag of one of the Member States on 17 January 2004. The Guidelines also specify that the reference share of tonnage in the case of operating companies within the meaning of the Seventh Council Directive 83/349/EEC applies to the parent company and 60 Judgment of the Court of 11 January 2007, Commission of the European Communities vs. Hellenic Republic, Case C-251/04. ECLI:EU:C:2007:5, para. 31. 61 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Subparagraph 15 and 16 of section 3.1. 62 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta Tonnage tax scheme and other State measures in favour of shipping companies, para.61. This must be read in contrast with the activities listed as qualifying to the Maritime Guidelines. 63 State Aid N 37/2010 Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport para.87. 64 State aid N 714/2009 – The Netherlands – Extension of the tonnage tax scheme to cable layers, pipeline layers, research vessels and crane vessels, para.32. 65 Idem, para. 33. 66 Idem, para. 34. 67 Idem, para. 35. 68 State aid SA.21233 C/11 (ex NN/11, ex CP 137/06) – Spain – Tax scheme applicable to certain finance lease agreements also known as the Spanish Tax Lease System, para. 177.

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subsidiary companies taken together on a consolidated basis. The EU-tonnage share requirements do not apply to undertakings operating at least 60% of their tonnage under an EU flag.69 In its decision practice the Commission has considered a national measure to 85 be in line with the EU objective of encouraging re-flagging to the EU/EEA flags when a tax scheme imposes the calculation of the flag ratio separately for each of the eligible activities (ship-owners, charterers and ship managers). Moreover, applying more favourable tax rates to EU/EEA than to non- EU/EEA ships also contributes to such objective.70 In the case of time-chartered vessels, the legislation setting up the tax scheme shall establish specific obligations ensuring that the beneficiary companies operating them make a sufficient contribution to the objectives of the 2004 Guidelines.71 (6) Ring-Fencing Measures

Subparagraph 19 of Section 3.1 of the Maritime Guidelines prohibits cross- 86 subsidization from shipping to non-shipping activities within a company. This aims to ensure that no activity other than maritime transport, regardless of whether it takes place in a Member State or a third country, benefits from the scheme.72 In its decision practice the Commission has accepted the following measures as precluding spill-over effects: a) When the tax scheme applies the arm’s length principle to transactions between the tonnage tax trade and a connected person and to notional transactions between the tonnage tax trade and the non-tonnage tax trade of the shipping company.73 b) The fact that the legislation passing the tax scheme requires separate accounting between those activities eligible to the tax scheme and those that are not eligible.74 c) The fact that the tax deduction on capital expenditure on assets used both in tonnage tax activities and non-tonnage tax activities, as well as interest expenses, exchange rate differences and other expenses attributable to both tonnage tax activities and non-tonnage tax activities is divided proportional69 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, subparagraph 9 of Section 3.1. 70 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 100. 71 State aid SA.14551 – France – Change to the conditions for aid granted to time charterers under the tonnage tax scheme, para. 40. 72 State aid C 5/07 (ex N 469/05) – Denmark – Alleviation of information obligations imposed on maritime companies entered into the Danish tonnage tax regime, para. 47. 73 State Aid N 37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para.103, State aid C 5/07 (ex N 469/05) – Denmark – Alleviation of information obligations imposed on maritime companies entered into the Danish tonnage tax regime, para. 46. 74 State Aid N-37/2010 – Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 107.

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ly between the tonnage tax and non-tonnage tax activities, based on the share of the respective gross income of the two kinds of activities.75 d) All or nothing options: they require all companies that are part of a group of undertakings to make the choice of entering jointly the notified scheme for all their eligible activities or staying outside the benefits from the scheme.76 The aim of this is to avoid that ship-owners or ship-managers choose the vessels based on their profitability. e) Obligations to beneficiaries to remain under the tonnage tax rules for a long period (at least 10 years). This prevents companies from switching from the general corporate income taxation and the tonnage tax regime on the basis of the profitability.77 f) Applying the same standards to transactions of a tonnage tax company with a foreign affiliate as those it applies to transactions with a national non-tonnage tax affiliate.78 g) The existence of a sanctions system for cases of deviation from the general rules of the tonnage tax regime.79 (7) Calculation of the Tonnage Tax Rate

The Commission deals with the issue of the calculation of the tonnage rate in the three final subparagraphs of section 3.1. of its Maritime Guidelines.80 Subparagraph 17 states that the tonnage tax systems notified up to now have consisted of the following steps: a virtual profit for ship owners has been calculated by applying a notional profit rate to their tonnage; national corporate tax has been applied to the amount so determined. The resulting amount is the ‘tonnage tax’ to be paid. 88 Pursuant to subparagraph 18, the Commission aims at keeping an equitable balance in the national profit rates. For that purpose it will be bound by its previous decision practice and will try to avoid great differences in the tonnage tax to be paid in the different Member States. This should be regarded as an harmonization attempt of the Commission in an area as taxation, which is considered a remain of sovereignty of the Member States. 89 In the implementation of a tax scheme, most of the Member States have opted for fixing the tax on an annual basis, whereas in others it is often fixed on a daily 87

75 Idem, para. 108. 76 Idem, para. 109. 77 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 81. 78 State aid C 5/07 (ex N 469/05) – Denmark – Alleviation of information obligations imposed on maritime companies entered into the Danish tonnage tax regime, para. 54. 79 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 81. 80 Community guidelines on State aid to maritime transport, 2004, OJ C 13/3, Subparagraphs 17 to 19 of Section 3.1.

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basis.81 The Commission has allowed a reduction of 75% of the tonnage tax rate for ships with an EU/EEA flag in case they are laid-up or inoperative for a period of at least three months. It has accepted this on the basis of the similitude of a tax scheme with other tonnage schemes which exempt ships from paying tonnage tax for the time during which they are not operational.82 The principles established in the Maritime Guidelines concerning the calcula- 90 tion of the tonnage tax rate apply also in the case of ship management companies.83 In such cases, the Commission has established that the tax-base of the ship management companies should be approximately 25% of that which would apply to the ship-owner for the same ship or tonnage. Moreover, the section of the calculation of the tonnage tax rate should be read 91 in conjunction with Section 11 of the Maritime Guidelines, which states that a reduction of corporate taxation of shipping activities to the limits described in point 3.1 is the maximum level of aid which may be permitted. bb) Direct Application of Article 107 (3) (c) TFEU

As was explained above, the Maritime Guidelines are only applicable to mar- 92 itime transport and to certain ancillary activities. This means that there are certain activities that do not qualify as maritime transport and to which the guidelines are not applicable. In certain cases the Commission has declared aid granted to such activities in the form of the tonnage tax schemes compatible with the internal market after receiving notification from the Member State. It has done so by applying the requirements of Section 3.1 of the Maritime Guidelines by analogy to the activities in question and on the basis of a direct application of Article 107 (3) (c) TFEU. Hence, the Commission has considered the measures in light of the requirements established in the Maritime Guidelines, even though the activities are not maritime transport.84 Seen from a legal perspective, the direct application of Article 107 (3) (c) 93 TFEU to certain activities not covered by the Maritime Guidelines does not contribute to legal certainty and gives a certain impression of arbitrariness in the application of the EU State aid rules. As the CJEU has held, Guidelines indicate how the Commission intends to exercise its discretion with regard to new aid or existing systems of aid.85 If certain categories are not covered by them, it may adopt new guidelines. Yet, deviating from the rules adopted depending on the 81 State aid SA.33829 (2012/C, ex-2012/NN, ex- 2011/CP) – Malta Tonnage tax scheme and other State measures in favour of shipping companies in Malta, para. 66. 82 State Aid N 37/2010 Cyprus – Introduction of a tonnage tax scheme in favour of international maritime transport para.96 with reference to State aid N 325/2007 – Slovenia – Introduction of a tonnage tax scheme in favour of international maritime transport, para. 17. 83 See Communication from the Commission providing guidance on State aid to ship management companies, 2009, OJ C 132/6, Section 7. 84 State aid N 714/2009 – The Netherlands – Extension of the tonnage tax scheme to cable layers, pipeline layers, research vessels and crane vessels, para. 37. 85 Judgment of 18 June 2002, Federal Republic of Germany v. Commission, Case C-242/00, ECLI:EU:C:2002:380, para. 27.

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circumstances of the particular case leads to bias in the competition enforcement. A new version of the Guidelines should tackle this issue.

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Regulation (EC) No 789/2004 on the transfer of cargo and passenger ships

Noftz

Timo

V. Regulation (EC) No 789/2004 on the transfer of cargo and passenger ships between registers within the Community A. Introduction and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Ship Registers in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Purpose of the Regulation 789/2004/EC (hereinafter the “Regulation”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) International Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1

B. The Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

2 6 7 9

Literature: EU legal acts: Regulation (EC) No 789/2004 of the European Parliament and of the Council of 21 April 2004 on the transfer of cargo and passenger ships between registers within the Community and repealing Council Regulation (EEC) No 613/91, OJ 2004 L 138/19. Council Regulation (EEC) No 613/91 of 4 March 1991 on the transfer of ships from one register to another within the Community, OJ 1991 L 68/1. Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries, OJ 1986 L 378/1. Council Directive 98/18/EC on safety rules and standards for passenger ships, OJ 1998 L 144/1. Council Directive 94/57/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administration, OJ 1994 L 319/20. Council Directive 95/21/ EC of 19 June 1995 concerning the enforcement, in respect of shipping using Community ports and sailing in the waters under the jurisdiction of the Member States, of international standards for ship safety, pollution prevention and shipboard living and working conditions (port State control), OJ 1995 L 157/1. Regulation (EC) No 2099/2002 of the European Parliament and of the Council of 5 November 2002 establishing a Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) and amending the Regulations on maritime safety and the prevention of pollution from ships, OJ 2002 L 324/1. Regulation (EC) No 219/2009 of the European Parliament and of the Council of 11 March 2009 adapting a number of instruments subject to the procedure referred to in Article 251 of the Treaty to Council Decision 1999/468/EC with regard to the regulatory procedure with scrutiny, OJ 2009 L 87/109. EU institutions’ documents: Report of the European Parliament on the proposal for a Regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community (Committee on Regional Policy, Transport and Tourism), A5-0413/2003.

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Chapter 3, V. Opinion of the European Economic and Social Committee on the "Proposal for a regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community" (COM(2003) 478 final — 2003/0180 (COD)), OJ 2004 C 80/88. Books Norbert Krause, Praxishandbuch Schiffsregister, 2012. Schulze/Beljin/Zuleeg/Kadelbach, Europarecht: Handbuch für die deutsche Rechtspraxis, 3rd ed. 2015. Grabitz/ Hilf/ Nettesheim, Das Recht der Europäischen Union, 2011.

A. Introduction and Overview 1. Ship Registers in the EU 1

Ship registers play an important role in the shipping world. While originally their creation had in particular geopolitical and commercial reasons, namely to restrict access to maritime trade (e.g. by only permitting English registered vessels to import certain products by sea) and also to obtain financing for vessels (e.g. to be able to register mortgages against these vessels), these days the ship registers satisfy a number of functions from public to private law (e.g. to identify the nationality of a ship, to identify the supervising authorities for the ship, to give guidance to private persons like buyers, creditors or mortgagees of a ship, to register encumbrances against the ship)..1 The first modern national sea ship register in Europe was established in the United Kingdom in 1854 by the Merchant Shipping Act.2 Since then nearly all Member States have established ship registers. Every merchant ship has to be registered in a national ship register and will usually fly the flag of the country concerned. For operational or tax and financial reasons shipowners may wish to re-flag their ships, transferring them to another register. Where shipowners wish to transfer their ship to the register of another country, that country is not required, under international rules, automatically to recognize the certificate issued by the original flag state and it may impose additional requirements and carry out various inspections,3 which create technical barriers for the transfer of ships from one register to another.

1 Norbert Krause, Praxishandbuch Schiffsregister, p.3 and p.8. 2 Ibid. 3 Report of the European Parliament on the proposal for a Regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community (Committee on Regional Policy, Transport and Tourism), A5-0413/2003, p.7.

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2. Purpose of the Regulation 789/2004/EC (hereinafter the “Regulation”)

By Council Regulation 4055/86/EEC,4 the European legislator has codified 2 the general freedom to provide maritime transport services between Member States and between Member States and third countries. In order to establish a functioning and efficient internal market as one of the main goals of the European Union, barriers of any kind between the Member States’ markets need to be minimised and rules and requirements harmonised. This goal shall also be realised with regard to European ship registers.5 In March 1991, the European Council therefore adopted Regulation 613/91/EEC on the transfer of ships from one register to another within the Community, which seeks to reduce costs and administrative procedures in case of a transfer of cargo ships between registers within the Community, thereby improving the competitiveness of Community shipping, whilst safeguarding maritime safety in accordance with international conventions.6 Already in accordance with the Regulation 613/91/EEC Member States forfeited the right to withhold from registration, for technical reasons arising from requirements set forth in three IMO Conventions (1974 SOLAS, LL66 and MARPOL 73/78 (as further specified below)) cargo ships registered in other Member States complying with the requirements set out in these IMO Conventions and carrying valid certificates and approved equipment. The Regulation 613/91/EEC entered into force on 1 January 1992, and more 3 than ten years later the European legislator found it appropriate to improve the Community rules on the transfer of ships by the Regulation, mainly due to the following three reasons: – firstly, the substantial international and Community regulatory developments that occurred since the Regulation 613/91/EEC was adopted, including amendments to the IMO Conventions mentioned above and, in particular, also a large body of Community acquis in maritime safety (like Council Directive 98/18/EC on safety rules and standards for passenger ships,7 Council Directive 94/57/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administration,8 Council Directive 95/21/EC concerning the enforcement, in respect of shipping using community ports and sailing in the waters under the jurisdiction of the Member States, of international standards for ship 4 Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries, OJ 1986 L 378/1. 5 Sendmeyer in Schulze/Beljin/Zuleeg/Kadelbach, § 34 para. 112; Boeing/Maxian Rusche, in: Grabitz/Hilf/Nettesheim, Art. 100 para. 62. 6 Report of the European Parliament on the proposal for a Regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community (Committee on Regional Policy, Transport and Tourism), A5-0413/2003, page 2. 7 Council Directive 98/18/EC on safety rules and standards for passenger ships, OJ 1998 L 144/1. 8 Council Directive 94/57/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administration, OJ 1994 L 319/20.

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safety, pollution prevention and shipboard living and working conditions (port State control);9 – secondly, experience gathered in the implementation of Regulation 613/91/ EEC, in particular, complaints from operators and European Community Shipowners, who highlighted issues such as the subsistence of divergent interpretations of the IMO Conventions and called for the extension of the scope of such regulation to cover passenger ships; and – finally, difficulties expected from the enlargement of the Union at the relevant time, leading to considerable quantitative and qualitative impacts on the European Community fleet and accordingly the probability of a growing number of requests for transfer of ships which was expected to increase the difficulties already incurred with the Regulation 613/91/EEC. 4 Following these considerations, the Regulation was implemented to introduce improvements in these three main areas: – enlargement of the scope of the Regulation to cover passenger ships; – better alignment with other Community maritime safety instruments; and – reinforcement of the co-operation between national maritime administrations. Regulation 613/91/EEC was at the same time replaced and repealed. 5 The Regulation shall continue on the path of creating an internal market of national ship registers (and possibly a competition between the national registers) and at the same time of finding an adequate balance between a free and competitive market and to keep or even enhance the high standards for European ship registers, in particular as regards safety and environmental matters. The analysis of the different regimes in the Member States found that since there are many international standards like the Conventions10 that already ensure a high level of safety requirements, there is not nor will be a “race to the bottom” as regards the applicable maritime safety standards. a) International Standards 6

As already mentioned above for Regulation 613/91/EEC and as further developed since, there are a number of generally applicable international requirements and standards that ships have to meet to be eligible for registration in a register within the European Union, in particular, the 1974 International Convention for the Safety of Life at Sea (1974 SOLAS), as amended by the International Maritime Organisation (IMO) from time to time, the 1966 International Convention on Load Lines (LL 66), the 1973 International Convention for the Prevention of Pollution from Ships, as amended by the 1978 Protocol (MARPOL 73/78), which provide for a high level of ship safety and environmental protection and, in addition, the International Convention on Tonnage Measure9 Council Directive 95/21/EC on port state control, OJ 1995 L 157/1. 10 See below at a).

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ment of Ships, 1969, which provides for a uniform system for the measurement of the tonnage of merchant ships.11 b) Harmonisation

These Conventions provide for a certain harmonisation of the prescribed con- 7 ditions of ships registered within the European registers. Already by the Directive 94/57/EC the Member States were obliged to ensure that ships under their flag fulfill the international standards referred to therein. However, the international conventions leave certain important points of interpretation of the requirements to the discretion of the parties. Besides that, national technical regulations that contain provisions different from the international standards may exist in some Member States. In case of the transfer of ships from one Member State register to another the 8 losing register shall provide the receiving register with all relevant information on the relevant ship’s condition and her equipment.12 With regard to possible diverging interpretations of the international conventions an appropriate procedure to deal with such divergences has been established by the Regulation. 3. Amendments

The Regulation has been amended once by the Regulation 219/2009/EC of 9 the European Parliament and of the Council of 11 March 2009 when, in particular, Articles 7 and 9 were replaced. The amendments were, however, of a more technical nature rather than regarding the content of the Regulation. B. The Regulation

REGULATION (EC) No 789/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 April 2004 on the transfer of cargo and passenger ships between registers within the Community and repealing Council Regulation (EEC) No 613/91 (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 80(2) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Economic and Social Committee, After consulting the Committee of the Regions,

11 See Recital 3. 12 See Recital 7.

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Chapter 3, V. Acting in accordance with the procedure laid down in Article 251 of the Treaty, Whereas: (1) The establishment and functioning of the internal market involve the elimination of technical barriers to the transfer of cargo and passenger ships between the registers of Member States. Measures to facilitate the transfer of cargo and passenger ships within the Community are also required to reduce the costs and administrative procedures involved in a change of register within the Community, thereby improving the operating conditions and the competitive position of Community shipping. (2) It is necessary, at the same time, to safeguard a high level of ship safety and environmental protection, in compliance with International Conventions. (3) The requirements set out in the 1974 International Convention for the Safety of life at Sea (1974 SOLAS), the 1966 International Convention on Load Lines (LL 1966) and the 1973 International Convention for the Prevention of Pollution from Ships, as amended by the 1978 Protocol (MARPOL 73/78) provide for a high level of ship safety and environmental protection. The International Convention on Tonnage Measurement of Ships, 1969 provides for a uniform system for the measurement of the tonnage of merchant ships. (4) The international regime applicable to passenger ships has been strengthened and refined through the adoption of a considerable number of amendments to 1974 SOLAS by the International Maritime Organisation (IMO) and an increased convergence of the interpretations of the 1974 SOLAS rules and standards. (5) The transfer of cargo and passenger ships flying the flag of a Member State between the registers of Member States should not be impeded by technical barriers, provided that the ships have been certified as complying with the provisions of relevant international Conventions by Member States or, on their behalf, by the organisations recognised under Council Directive 94/57/EC of 22 November 1994, on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations (1). (6) A Member State receiving a ship should however remain able to apply rules which differ in scope and nature from those referred to in the Conventions listed in Article 2(a). (7) In order to ensure a prompt and informed decision by the Member State of the receiving register, the Member State of the losing register should provide it with all relevant available information on the ship's condition and equipment. The Member State of the receiving register should, nevertheless, be able to subject the ship to an inspection to confirm its condition and equipment. (8) Ships which have been refused access to Member States' ports under Council Directive 95/21/EC of 19 June 1995, concerning the enforcement, in respect of shipping using Community ports and sailing in the waters under the jurisdiction of the Member States, of international standards for ship safety, pollution prevention and shipboard living and working conditions (port State control) (2) or which have been detained more than once following an inspection in the port during the three years preceding the application for registration should not be able to benefit from the possibility of being transferred under the simplified system to another register within the Community. (9) Relevant International Conventions leave important points of interpretation of the requirements to the discretion of the Parties. On the basis of their own interpretation, Member States issue to all ships flying their flags, that are subject to the provisions of relevant International Conventions, certificates certifying their compliance with these provisions. Member States enforce national technical regulations, some provisions of which contain requirements other than those in the Conventions and in associated technical standards. An appropriate procedure should therefore be established in order to reconcile divergences in the interpretation of existing requirements which may occur upon a request for transfer of register.

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Regulation (EC) No 789/2004 on the transfer of cargo and passenger ships (10) In order to enable the implementation of this Regulation to be monitored, Member States should provide the Commission with succinct yearly reports. In the first yearly report Member States should identify any measures taken to facilitate the implementation of this Regulation. (11) The provisions of Council Regulation (EEC) No 613/91 of 4 March 1991 on the transfer of ships from one register to another within the Community (3), are significantly reinforced and extended by this Regulation. Regulation (EEC) No 613/91 should therefore be repealed. (12) The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the commission (4), HAVE ADOPTED THIS REGULATION:

Article 1 Purpose The purpose of this Regulation is to eliminate technical barriers to the transfer of cargo and passenger ships flying the flag of a Member State between the registers of the Member States while, at the same time, ensuring a high level of ship safety and environmental protection, in accordance with International Conventions.

This article sums up the two main objectives of the Regulation: 1. Elimination of technical barriers to the transfer of ships between Member State registers. 2. Ensuring a high level of safety with regard to the ship and the environment, in accordance with the International Conventions: This first article makes clear that the objective of the Regulation is to strike an adequate balance between internal market considerations (free transfer of ships) and maritime safety imperatives (high level of safety and environmental protection).13 It is not further specified in this Article what technical barriers are meant but looking at the Regulation as a whole it is clear that the intention is to minimise costs and expenses for European shipowners who want to re-flag within the Union and to avoid a different interpretation of the requirements under the Conventions that a ship has to satisfy by way of a general mutual recognition of Certificates issued by other Member States in such respect, all of this with a view to ensuring the smooth functioning of the internal market. The term “International Conventions” is not defined. However, as the whole Regulation refers to the various International Conventions mentioned in the preamble and defines the same in Art. 2 (a) of the Regulation as “Conventions” for this Regulation, these will be the “Conventions” as defined in Art. 2 (a).

13 Report of the European Parliament on the proposal for a Regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community (Committee on Regional Policy, Transport and Tourism), A5-0413/2003, p. 5.

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Article 2 Definitions (a)

(b)

(c)

(d) (e)

(f) (g) (h) (i)

14

For the purposes of this Regulation: ‘Conventions’ means the 1974 International Convention for the Safety of Life at Sea (1974 SOLAS), the 1966 International Convention on Load Lines (LL 66), the 1969 International Convention on Tonnage Measurement of Ships, and the 1973 International Convention for the Prevention of Pollution from Ships, as amended by the 1978 Protocol relating thereto (MARPOL 73/78), in their up-to-date versions, and related codes of mandatory status adopted in the framework of the International Maritime Organisation (IMO), together with Protocols and amendments thereto in their up-to-date versions; ‘Requirements’ means the safety, security and pollution-prevention requirements relating to the construction and equipment of ships laid down in the Conventions and, for passenger ships engaged on domestic voyages, those set out in Council Directive 98/18/EC of 17March 1998 on safety rules and standards for passenger ships (1); ‘Certificates’ means certificates, documents and statements of compliance issued by a Member State or by a recognised organization on its behalf in accordance with the Conventions, and for passenger ships engaged on domestic voyages, those issued in accordance with Article 11 of Directive 98/18/EC; ‘Passenger ship’ means a ship carrying more than twelve passengers; ‘Passenger’ means every person other than: (i) the master and the members of the crew or other persons employed or engaged in any capacity on board a ship on the business of that ship; and (ii) a child under one year of age; ‘Domestic voyage’ means a voyage in sea areas from a port of a Member State to the same or another port within that Member State; ‘International voyage’ means a voyage by sea from a port of a Member State to a port outside that Member State, or conversely; ‘Cargo ship’ means a ship which is not a passenger ship; ‘Recognised organisation’ means an organisation recognised in accordance with Article 4 of Directive 94/57/EC.

The definitions are generally based on the 1974 SOLAS while definitions relating to passenger ships, which became necessary given the extension of the scope of the Regulation (compared to its predecessor), are also in line with those under Directive 98/18/EC of March 1998 on safety rules and standards for passenger ships.14 (a) The term “Conventions” means the listed International Conventions in their up-to-date versions. In detail these are: i) The 1974 SOLAS which contains ship requirements and rules with regard to, inter alia • construction (Chapter II-1 – Construction – Subdivision and stability, machinery and electrical installations) • fire protection (Chapter II-2 – Fire protection, fire detection and fire extinction) • life-saving appliances (Chapter III – Life-saving appliances and arrangements) • communication rules (Chapter IV – Radiocommunications) 14 Ibid.

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• • • • •

navigation (Chapter V – Safety of navigation) cargo (Chapter VI – Carriage of Cargoes) dangerous cargo (Chapter VII -Carriage of dangerous goods) nuclear ships (Chapter VIII – Nuclear ships) ship management (Chapter IX – Management for the Safe Operation of Ships) • other safety measures such as surveys and inspections (Chapter XI-1 – Special measures to enhance maritime safety) ii) The LL 66 provides rules with regard to the loading of ships, such as load lines, marking of the cargo, draught and freeboard and terms of issuance of International Load Lines Certificates. iii) The 1969 International Convention on Tonnage Measurement of Ships introduced a universal tonnage measurement system. iv) The 1973 International Convention for the Prevention of Pollution from Ships, as amended by the 1978 Protocol relating thereto (MARPOL 73/78) covers the prevention of environment pollution by ships. It contains regulations for the prevention and minimisation of pollution from accidents and the regular operation of ships. This convention has been further amended through the years, at the moment it has six annexes covering the following: • oil pollution (Annex I Regulations for the Prevention of Pollution by Oil) • noxious liquids pollution (Annex II Regulations for the Control of Pollution by Noxious Liquid Substances in Bulk) • harmful substances (Annex III Prevention of Pollution by Harmful Substances Carried by Sea in Packaged Form) • pollution by sewage (Annex IV Prevention of Pollution by Sewage from Ships) • pollution by garbage (Annex V Prevention of Pollution by Garbage from Ships) • air pollution (Annex VI Prevention of Air Pollution from Ships) (b) The definition of “Requirements” refers to the Conventions and the safety, security and pollution-prevention requirements relating to a ship with respect to her construction and equipment stipulated therein. In addition the term covers the requirements set out by the Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships. (c) “Certificates”: In this definition reference is made, as in the aforementioned definition, to the Conventions and, in case of passenger ships on domestic voyages, to the Council Directive 98/18/EC of 17March 1998 and the certificates, documents and statements of compliance issued in accordance therewith. (d) The definition of “Passenger Ship” is nearly identical to the definition of “a passenger ship” as set forth in Article 2 (e) of the Council Directive Timo Noftz

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(e)

(f)

(g)

(h)

(i)

98/18/EC of 17March 1998 on safety rules and standards for passenger ships. The exact wording there is “a passenger ship’ means a ship which carries more than 12 passengers”. With regard to content there is no difference between the Regulation and the Directive and the same classification can also be found in the 1974 SOLAS. The definition of “Passenger” is identical to the definition of “a passenger” provided in Art. 2 (i) of the Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships. The definition of “Domestic voyage” is identical to the definition of “domestic voyage ” provided in Article 2 (n) of the Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships. The definition of “International voyage” is identical to the definition of “international voyage” provided in Art. 2 (m) of the Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships. The term “Cargo ship” is defined negatively to the term Passenger Ship. This means that a ship that carries a minimum of thirteen passengers would be defined as passenger ship, even if the primary use is the transport of cargo. At the same time, the definition safeguards, however, that any relevant ship will fall within one of these two categories. Again, you will find the same categorisation in the 1974 SOLAS. The definition “recognised organisation” refers to Article 4 of the Directive 94/57/EC, which itself refers to the Annex where the minimum criteria are set out which an organisation has to fulfill to be recognised.

Article 3 Scope 1.

2.

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This Regulation shall apply to: (a) cargo ships, carrying valid certificates, which: (i) were built on or after 25 May 1980, or (ii) were built before that date, but have been certified by a Member State or by a recognised organisation acting on its behalf as complying with the regulations for new ships defined in 1974 SOLAS, or, in the case of chemical tankers and gas carriers, with the relevant Standard codes for ships built on or after 25 May 1980; (b) passenger ships engaged on domestic and/or international voyages, carrying valid certificates, which: (i) were built on or after 1 July 1998, or (ii) were built before that date, but have been certified by a Member State or by a recognised organisation acting on its behalf as complying with the requirements set out for ships built on or after 1 July 1998: – in Directive 98/18/EC, for ships engaged on domestic voyages, – in 1974 SOLAS, for ships engaged on international voyages. This Regulation shall not apply to: (a) ships following delivery after completion of their construction that do not carry valid full-term certificates from the Member State of the losing register; (b) ships that have been refused access to Member States' ports in accordance with Directive 95/21/EC during the three years preceding application for registration and to ships that have been detained following inspection in the port of a State signatory of the Paris Memorandum of Understanding of 1982 on Port State Control and for reasons relating

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(c) (d) (e)

to the requirements defined in Article 2(b), more than once during the three years preceding application for registration. Member States shall nevertheless give due and timely consideration to applications in respect of such ships; ships of war or troopships, or other ships owned or operated by a Member State and used only on government non-commercial service; ships not propelled by mechanical means, wooden ships of primitive build, pleasure yachts not engaged in trade or a fishing vessel; cargo ships of less than 500 gross tonnage.

As the name of the Article already suggests, Article 3 sets out the scope of the Regulation. Para. 1 states positively to which ships the Regulation shall apply. In any case the ships must carry valid certificates to fall within the Regulation’s scope. Beyond the fact that the requirements depend on the type of ship, there are different criteria for cargo and passenger ships. Para. 1: The Regulation applies to cargo ships that were built on or after the 25 May 1980 (which are the same criteria as already set out in Regulation 613/91/EEC). At the point in time the Regulation entered into force this meant that cargo ships of up to about twenty-four years of age were already covered. An older ship would need a certificate from a recognized organization stating that she complied with the regulations for new ships. Given that as from today’s perspective the Regulation directly applies to cargo ships of up to about thirtyfive years of age, the practical relevance of such additional certifications for older ships should be very low. With regard to passenger ships, the Regulation also directly applies to ships of a certain age. However, in case of passenger ships the relevant construction date is the 01 July 1998, which was also the transposition deadline set for the implementation of Directive 98/18/EC on safety rules and standards for passenger ships. Again, older ships need a certificate on the compliance with the requirements for new ships. In consequence this means that passenger ships are handled stricter than cargo ships due to the fact that the transport of passengers is generally considered to be more dangerous as it bears risks for life and limb of many passengers. Para. 2 contains certain exceptions and clarifications on cases where the Regulation shall not be applicable. In the original proposal for the Regulation made by the Commission, only those ships were meant to be excluded that were refused access to European ports in accordance with Article 7b of Directive 95/21/EC on port State control during the period of their banning from the European ports. However, during the legislative process the exclusions were extended to include those set forth in para. 2 of Article 3 of the Regulation, which are to a great extent self-explanatory and are the same as those excluded from the 1974 SOLAS. In detail: (a) This is the explicit clarification that only ships carrying valid certificates benefit from the Regulation. This paragraph is redundant, since Art. 3 para.

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1 (a) and (b) already state that valid certificates are a condition to the application of the Regulation. (b) Ships that have not complied with certain regulations are excluded from the scope of the Regulation: (i) Ships that were refused access to Member States ports’ according to Directive 95/21/EC are not included in the Regulation’s scope. This could be understood in a way that a refusal must have occurred at least twice and in different ports (“Member states’ ports”). In fact, this should not be the case and one refusal should be sufficient. The directive referred to has been repealed by Art. 37 of Directive 2009/16/EC, which basically replaced it. References to the repealed directive shall be construed as references to the new directive. According to Art. 16 of the Directive 2009/16/EC the Member States shall refuse port access to ships which are flying blacklisted flags and which have been detained more than twice during the previous three years before refusal and to ships flying a grey rated flag and having been retained more than twice. (ii) Ships that have been detained more than once during the three years preceding registration application are also excluded from the Regulation’s scope. (c) – (e) These exceptions are more or less self-explanatory. Non-merchant ships like marine- and governmental ships are excluded as well as wooden ships of primitive build, pleasure yachts not engaged in trade and fishing vessels. In addition, very small cargo ships of less than 500 gross tonnage are excluded, which was already the case for Regulation 613/91/EEC and is also the case in the 1974 SOLAS. Article 4 Transfer of register 1.

2.

3.

382

A Member State shall not withhold from registration, for technical reasons arising from the Conventions, a ship registered in another Member State which complies with the requirements and carries valid certificates and equipment approved or type-approved in accordance with Council Directive 96/98/EC of 20 December 1996 on marine equipment. In order to fulfil their obligations under regional environmental instruments ratified before 1 January 1992, Member States may impose additional rules in accordance with the optional Annexes to the Conventions. This Article shall apply without prejudice, where applicable, to any specific requirements laid down for the operation of a ship under Article 7 of Directive 98/18/EC and Article 6 of Directive 2003/25/EC of the European Parliament and of the Council of 14 April 2003 on specific stability requirements for ro-ro passenger ships. Upon receiving the request for transfer, the Member State of the losing register shall provide the Member State of the receiving register, or make available to the recognised organisation acting on its behalf, all relevant information on the ship, in particular, on her condition and equipment. This information shall contain the history file of the vessel and, if applicable, a list of the improvements required by the losing register for registering the ship or renewing her certificates and of overdue surveys. The information shall include all the certificates and particulars of the ship as required by the Conventions and relevant Community instruments as well as Flag State inspection and Port State control records. The Member States shall cooperate to ensure proper implementation of this paragraph.

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5.

Before registering a ship, the Member State of the receiving register, or the recognised organisation acting on its behalf, may subject the ship to an inspection to confirm that the actual condition of the ship and her equipment correspond to the certificates referred to in Article 3. The inspection shall be performed within a reasonable time frame. If, following the inspection and having given the ship owner a reasonable opportunity to rectify any deficiencies, the Member State of the receiving register, or the recognised organisation acting on its behalf, is unable to confirm correspondence with the certificates, it shall notify the Commission in accordance with Article 6(1).

Article 4 provides the main content of the Regulation and contains the main obligations imposed on the Member States on transfer of registers. Para. 1 stipulates that a ship registered in a Member State register shall not be withheld from a transfer to another Member State register for technical reasons arising from the Conventions. This means that a Member State will generally have to accept the qualification of a ship as compliant with the Conventions by the other Member State. This provides for legal certainty for the ship owners. This paragraph further refers to the “Marine Equipment Directive” 96/98/EC which basically sets out authorised marine equipment (in the “MarED database”) to be installed in European Union flagged vessels. For such authorised equipment an approval from the national authorities is not required. As the requirement for type approval of the marine equipment by the flag state was one of the main obstacles for the unimpeded transfer of ships, the inclusion of Directive 96/98/EC helps to achieve the objective of the Regulation and was accordingly explicitly supported by the European Economic and Social Committee during the legislative process.15 In order to fulfill obligations under regional environmental instruments ratified before 1 January 1992,which was the date when Regulation 613/91/EEC entered into force, Member States may however impose additional rules in accordance with the optional Annexes to the Conventions to safeguard a higher level of protection than the one already foreseen in the Conventions.16 The European Economic and Social Committee proposed in its opinion to the proposal for the Regulation that for the purpose of unhindered achievement of the objective of the Regulation, Member States should not withhold from registration a ship only for technical reasons arising from the Conventions, but also arising from additional national technical requirements. It suggested to add in the second line of paragraph 1 the words “or from any additional national technical requirements” after the word “Conventions”.17 However, this suggestion was not implemented into the Regulation, most likely because there is no European harmonisation existing at such level while at the same time the relevant 15 Opinion of the European Economic and Social Committee on the "Proposal for a regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community" (COM(2003) 478 final — 2003/0180 (COD)), OJ 2004 C 80/88, p. 90. 16 Boeing/Maxian Rusche, in: Grabitz/Hilf/Nettesheim, Art. 100 para. 62. 17 See fn.15.

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26

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Member States will continue to be bound by the additional rules that they have signed up to. Para. 2 clarifies that Article 2 shall apply without prejudice to any specific requirements for certain ship types stipulated by the respective directives. Para. 3 states that upon receiving the request for transfer the Member State of the losing register shall provide the Member State of the receiving register with all relevant information of the ship. Especially all the certificates and particulars of the ship as required by the Conventions and relevant Community instruments as well as Flag State inspection and Port State control records shall be provided. This enables the receiving register to register the ship without a long procedure of asking for the relevant ship information. Para. 4 enables the Member State of the receiving register to arrange a limited ship inspection in order to ensure that the vessel meets the standard of safety and prevention of marine pollution set out in the Conventions and as reflected in the certificates. This means that the receiving register does not have to rely on the provided certificates only. Such inspection shall be performed within a reasonable time frame. The question what seems reasonable depends on the particularities of the case, e. g. on where the ship is located. The wording of this last sentence has undergone various changes during the legislative process. While in the initial proposal of the Regulation by the Commission the Member State was to be obligated to perform such inspection “within a reasonable delay”, the European Economic and Social Committee held in its opinion on such proposal that such inspection should be performed “without undue delay” but did not succeed with such request. Para. 5 refers to the possibility that the inspection referred to in para. 4 above brings up any deficiencies which results in the relevant Member State being unable to confirm correspondence with the Certificates. In such case the procedure described in Article 6 shall be initiated, which would start with a notification to the Commission. Article 5 Certificates 1.

2.

28

Upon the transfer and without prejudice to Directive 94/57/EC, the Member State of the receiving register, or the recognised organization acting on its behalf, shall issue certificates to the ship under the same conditions as those under the flag of the Member State of the losing register, provided the reasons or the grounds on the basis of which the Member State of the losing register imposed any condition or granted any exemption or waiver continue to apply. At the time of renewal, extension or revision of the certificates, the Member State of the receiving register, or the recognised organization acting on its behalf, shall not impose requirements other than those initially prescribed for the full-term certificates insofar as requirements for existing ships and conditions remain unchanged.

This Article completes Article 4 in such a way that – like with the transfer to the new register – certificates shall be issued by the receiving register under the

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same conditions as they were issued by the losing register provided that the reasons or grounds for the decision continue to apply. Para. 1 refers to Directive 94/57/EC on common rules and standards for ship 29 inspection and survey organizations and for the relevant activities of maritime administrations. This Directive sets out measures for the inspection, survey and certification of ships. Since this Directive is binding through the respective national laws and provisions for all Member States, different results on the same ship should generally not occur. However this might still be possible through different interpretation or slightly different implementations. Para. 2 provides a kind of grandfathering. In case certificates are renewed, 30 extended or revised by the receiving register no new requirements shall apply. This means that the transfer to the new register shall not bring disadvantages with regard to the requirements with regard to certificates. The requirements initially prescribed for the full-term certificates shall remain sufficient. Article 6 Refusal of transfer and interpretation 1.

2.

3.

The Member State of the receiving register shall immediately notify the Commission of any refusal to issue, or to authorise the issuing of, new certificates to a ship for reasons based on divergences of interpretation of the requirements or of the provisions which the Conventions or relevant Community instruments leave to the discretion of the Parties. Unless the Commission is informed of an agreement between the Member States concerned within one month, it shall initiate proceedings in order to take a decision in accordance with the procedure referred to in Article 7(2). Where a Member State considers that a ship cannot be registered under Article 4 for reasons relating to serious danger to safety, security or to the environment, other than those referred to in paragraph 1, registration may be suspended. The Member State shall immediately bring the matter to the attention of the Commission, stating the reasons for the suspension of the registration. The decision not to register the ship shall be confirmed or not in accordance with the procedure referred to in Article 7(2). The Commission may consult the Committee referred to in Article 7 on any matter related to the interpretation and implementation of this Regulation, in particular in order to ensure that standards of safety, security and environmental protection are not reduced.

Article 6 para. 1 provides for the role of the Commission in case of refusal of 31 a Member State and refers to the support to be provided by the COSS Committee in matters related to the interpretation and implementation of the Regulation. The procedure in case the receiving register refuses to issue or to authorise the issuance of new certificates is largely the same as in Regulation 613/91/EEC. In consequence of the harmonised requirements for registration and issuance of certificates in general, the reason for any refusal should generally be limited to a different interpretation of the requirements. In such case the receiving register shall immediately notify the Commission. Should the Member States, i. e. the Member State of the receiving register and the Member state of the losing register not agree on the case the Commission will initiate the Committee procedure referred to in Article 7 (2).

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Para. 2 applies if the registration is refused by the receiving register for other reasons than a different interpretation, namely for reasons relating to serious danger to safety, security or to the environment. In this case the Commission shall be notified and the decision will be confirmed or not according to the procedure referred to in Article 7 (2). This safeguard clause in cases of serious danger to safety or the environment is largely the same as in Regulation 613/91/ EEC. 33 Para. 3 clarifies that the Commission may consult the Committee, which is basically also stipulated in Article 7 (1). 32

Article 7 Committee procedure 1.

2.

3.

34

The Commission shall be assisted by the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) set up by Article 3 of Regulation 2099/2002/EC of the European Parliament and of the Council. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at two months. Where reference is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.

Article 7 was replaced by the Regulation 219/2009/EC of the European Parliament and of the Council of 11 March 2009. The original wording of Article 7 of the Regulation was as follows: “Article 7 Committee procedure 1. The Commission shall be assisted by the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) set up by Article 3 of Regulation 2099/2002/EC of the European Parliament and of the Council of 5 November 2002 establishing a Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) and amending the Regulations on maritime safety and the prevention of pollution from ships (Committee). 2. Where reference is made to this paragraph, Articles 5 and 7 of Council Decision 1999/468/EC shall apply having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at two months. 3. The Committee shall adopt its Rules of Procedure.”

35

Article 7 provides for rules on the Committee procedure referred to in Article 6 para. 1 – 3. Article 7 again refers to certain regulations and resolutions which makes this rule rather unhwieldy to read. Reference is made to Article 3 of Regulation 2099/2002/EC by which the COSS was set up. The purpose of Regulation 2099/2002/EC is to improve the implementation of the Community legislation (as further defined in Regulation 2099/2002/EC) on maritime safety, the prevention of pollution from ships and shipboard living and working conditions by centralising the tasks of the existing committees and by accelerating the update of the existing instruments and conventions.18 18 Regulation (EC) No 2099/2002 of the European Parliament and of the Council of 5 November 2002 establishing a Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) and amending the Regulations on maritime safety and the prevention of pollution from ships, OJ 2002 L 324/1, Art. 1.

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Para. 2 refers to Articles 5, 7 and 8 of the Council Decision 1999/468/EC of 36 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission. Article 5 of the decision provides rules on a regulatory procedure (without scrutiny, see Article 5a of the decision), Article 7 of the decision provides general rules on a committee’s rules of procedure and publishing. Article 8 of the decision, which contains rules on implementing powers of the Commission shall also be regarded. Reference to this paragraph is made in Articles 6(2), 6(3) and 9(1) of the Regulation, which means that in these cases the described regulatory procedure shall be passed. The last sentence of para. 2 specifies that the period laid down in Article 5(6) of Decision 1999/468/EC shall be set at two months. This period defines the timeline in which the Council has to take action in accordance with the relevant provisions of the Decision 1999/468/EC and if it has not taken any action within such period, the proposed implementing act will be deemed adopted by the Commission. Para. 3 also refers to the Council Decision 1999/468/EC, in particular to Ar- 37 ticles 5a(1) to (4) and 7 with regard to Article 8. The difference to para. 2 is that Article 5a of the Council Decision provides for a regulatory procedure which foresees a scrutiny and is therefore more complex. Therefore the two months period mentioned in para. 2. for the period laid down in Article 5(6) of Decision 1999/468/EC does not apply in such case. The reference made to Article 5a of the Council Decision was included by an amendment in 2009. Reference to this paragraph is made in Article 9(1) of the Regulation. Article 8 Reporting 1.

2.

Member States shall transmit to the Commission a succinct yearly report on the implementation of this Regulation. The report shall provide statistical data on the transfer of ships carried out in accordance with this Regulation and list any difficulties encountered in its implementation. By 20 May 2008 the Commission shall submit a report to the European Parliament and the Council on the implementation of this Regulation, based in part on the reports submitted by the Member States. In this report, the Commission shall assess, inter alia, whether it is appropriate to amend the Regulation.

Para. 1 contains the obligations of the Member States to provide formal, yet 38 succinct feedback to the Commission on a yearly basis on the implementation, i. e. the application of the Regulation. This submitted data will, among other things, be used by the Commission to 39 report to the European Parliament and the Council by 20 May 2008 as the Commission is obliged to do according to para. 2. Para. 2 was introduced into the Regulation upon explicit request of the Euro- 40 pean Parliament which wanted to ensure that it is able to monitor the implementation and enforcement of the Regulation and the consequences of enlargement

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of the Union for enforcement and for the transfer of ships between registers within the Union.19 Article 9 Amendments 1.

2.

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In order to take account of developments at international level, in particular in the International Maritime Organization (IMO), and to improve the effectiveness of this Regulation in the light of experience and technical progress, the Commission may amend the definitions in Article 2 insofar as such amendments do not broaden the scope of the Regulation. Those measures, designed to amend non-essential elements of this Regulation, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 7(3). Any amendment to the Conventions may be excluded from the scope of this Regulation, pursuant to Article 5 of Regulation (EC) No 2099/2002.

Article 9 was replaced by the Regulation 219/2009/EC of the European Parliament and of the Council of 11 March 2009. The original wording was as follows: “Article 9 Amendments 1. The definitions in Article 2 may be amended in accordance with the procedure referred to in Article 7(2) in order to take account of developments at international level, in particular, in the IMO and to improve the effectiveness of this Regulation in the light of experience and of technical progress, insofar as such amendments do not broaden the scope of this Regulation. 2. Any amendment to the Conventions may be excluded from the scope of this Regulation, pursuant to Article 5 of Regulation 2099/2002/EC.”

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This Article enables the Commission to amend the definitions in Article 2 (or to explicitly exclude amendments to the Conventions from the scope of the Regulation (as set forth in para. 2) and at the same time clarifies that the scope of the Regulation may not be broadened. These amendments shall achieve that the definitions remain up to date and take account of developments at international level and to improve the effectiveness of the Regulation in the light of experience and technical progress.20 This paragraph was amended in 2009. Before, the article had referred to Article 7(2) and the regulatory procedure without scrutiny, since Article 7(3) at that time did not contain a reference to the regulatory procedure with scrutiny.21

19 Report of the European Parliament on the proposal for a Regulation of the European Parliament and of the Council on the transfer of cargo and passenger ships between registers within the Community (Committee on Regional Policy, Transport and Tourism), A5-0413/2003, p. 6. 20 Regulation (EC) No 219/2009 of the European Parliament and of the Council of 11 March 2009 adapting a number of instruments subject to the procedure referred to in Article 251 of the Treaty to Council Decision 1999/468/EC with regard to the regulatory procedure with scrutiny, OJ 2009 L 87/109, Clause 7.9. 21 Ibid.

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Article 10 Repeal Regulation (EEC) No 613/91 is hereby repealed.

The wording is self-explanatory. The content of the repealed Council Regu- 43 lation (EEC) No. 613/91 of 4 March 1991 on the transfer of ships from one register to another within the Community was merged into the Regulation and thereby became superfluous. Article 11 Entry into force This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States.

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A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 1 Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 2 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 4 Tickets and non-discriminatory contract conditions. . . . . . . Article 5 Other performing parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 6 Exclusion of waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 7 Right to transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 8 Exceptions and special conditions . . . . . . . . . . . . . . . . . . . . . . . . . . Article 9 Accessibility and information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 10 Right to assistance in ports and on board ships . . . . . . . . . . Article 11 Conditions under which assistance is provided . . . . . . . . . . Article 12 Reception of notifications and designation of meeting points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 13 Quality standards for assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 14 Training and instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 15 Compensation in respect of mobility equipment or other specific equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 16 Information in the event of cancelled or delayed departures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 17 Assistance in the event of cancelled or delayed departures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 18 Re-routing and reimbursement in the event of cancelled or delayed departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 19 Compensation of the ticket price in the event of delay in arrival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 20 Exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 21 Further claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 22 Right to travel information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 23 Information on passenger rights . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 24 Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 25 National enforcement bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 26 Report on enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 27 Cooperation between enforcement bodies . . . . . . . . . . . . . . . . Article 28 Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 29 Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article 30 Amendment to Regulation (EC) No 2006/2004. . . . . . . . . . Article 31 Entry into force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12 12 15 45 70 77 82 87 94 122 142 151

C. Annex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ANNEX I RIGHT TO REIMBURSEMENT OR RE-ROUTING FOR DISABLED PERSONS AND PERSONS WITH REDUCED MOBILITY AS REFERRED TO IN ARTICLE 8. . . . . . . . . . . . . . . . . . . . . . . . ANNEX II ASSISTANCE IN PORTS, INCLUDING EMBARKATION AND DISEMBARKATION, AS REFERRED TO IN ARTICLES 10 AND 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ANNEX III ASSISTANCE ON BOARD SHIPS AS REFERRED TO IN ARTICLES 10 AND 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ANNEX IV DISABILITY-RELATED TRAINING, INCLUDING INSTRUCTIONS, AS REFERRED TO IN ARTICLE 14 . . . . . . . . . . . . . . .

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Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers Literature: Access to Ferry Travel: Access to Ferry Travel – A guide for passengers with disability and less mobile passengers; brochure published by The Consumer Council, Belfast in Spring 2013, www.consumercouncil.org.uk. A European vision for Passengers: Communication from the Commission to the European Parliament and the Council – A European vision for Passengers: Communication on Passenger Rights in all transport modes; published 19 December 2011. Athens Convention: Athens Convention relating to the Carriage of Passengers and their Luggage by Sea (PAL Convention) 1974; in force: 28 April 1987. Commission/Impact Assessment: Commission staff working document Impact Assessment Accompanying the document on package travel and assisted travel arrangements, amending Regulation (EC) No 2006/20041 and Directive 2001/83/EU and repealing Council Directive 90/314/EEC – SWD (2013) 263 final; published 9 July 2013. Communication from the Commission to the European Parliament pursuant to Article 294(6) of the Treaty on the functioning of the European Union concerning the position of the Council at first reading on the adoption of the Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws; published 29 March 2010. Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours. COREPER: COUNCIL OF THE EUROPEAN UNION Interinstitutional File: 2008/0246 (COD) 13874/09 MAR 132 TRANS 360 CODEC 1145 REPORT – From : COREPER – To : Council No. Cion prop.: 11990/08 MAR 109 TRANS 466 CODEC 995 No. prev.doc.: 13586/09 MAR 125 TRANS 351 CODEC 1112 Subject: Proposal for a Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws- Political agreement; published 5 October 2009 Directive 2009/45/EC: Directive 2009/45/EC on safety rules and standards for passenger ships; OJ L 163, 25/6/2009, P. 1–140. Draft recommendation I: Draft recommendation for second reading Inés Ayala Sender. (PE440.138v 01-00) Proposal for a Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC)N°2006/2004 Council position – amending act (14849/2009 – C7-0076/2010 – 2008/0246(COD)); published 11 May 2010. Draft recommendation II: Draft Recommendation for second reading on the Council position first reading for adopting a regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004; published 14 April 2010.

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Chapter 3, VI. Draft report I: Draft report Michel Teychenné (PE418.200v 01-00) Proposal for a regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws Proposal for a regulation – amending act (COM(2008)0816 – C6-0476/2008 – 2008/0246(COD)) ; published 10 March 2009. Draft report II: Draft Report on the proposal for a regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws. (COM(2008)0816 – C6-0476/2008 – 2008/0246(COD)); published 27 January 2009. Draft Statement: COUNCIL OF THE EUROPEAN UNION – Interinstitutional File: 2008/0246 (COD) 14849/09 ADD 1 MAR 151 TRANS 407 CODEC 1221, Draft Statement of the Council’s Reasons Subject: Common position adopted by the Council with a view to the adoption of a Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004; published 27 November 2009. EESC: Opinion of the European Economic and Social Committee (EESC) on the ”proposal for a Regulation of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws. COM (2008) 816 final – 2008/0246(COD); published 16 July 2009. EP resolution: European Parliament resolution on the functioning and application of established rights of people travelling by air 2011/2150 (INI); published 29 March 2012. IMO: IMO(1996),MSC/Circ.735,"Recommendation on the Design and Operation of Passenger Ships to Respond to Elderly and Disabled Persons' Needs". Lee: Lee, Jong-Gap, Hongtae Kim: Development of the Accessibility Guidelines for Mobility Handicapped Persons in Passenger Ships, Journal of Navigation and Port Research International Edition, Vol 36, No. 9 pp. 763-767. Memo /08/765: Question and answers- Bus and maritime passenger rights proposal; published 4 December 2008. Memo/13/203: Air Passenger Rights Revision – Frequently asked Questions; published 13 March 2013. Minutes: Minutes of Meeting with Stakeholders on the Commission Staff working paper “Strengthening the protection of the rights of passengers travelling by sea or inland waterways in the European Union”; published 28 February 2007. Opinion of the Committee of the Regions on the "Proposal for a Regulation of the European Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway”; published 4 April 2001.

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Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers MOU Assistance Dogs: Ferry and Cruise Operators with a Memorandum of Understanding (MOU) to Carry Assistance Dogs, Department for Environment Food and Rural Affairs, Animal and Plant Health Agency, Pet Travel Scheme, Pet Travel: Traveling with assistance dogs, last, https://www.gov.uk/pet-travel-travellingwith-assistance-dogs#guidance-for-ferry-and-cruise-companies. Proposal for (EC) No 261/2004: Proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delays of flights and Regulation (EC) No 2027/97 on air carrier liability in respect of the carriage of passengers and their baggage by air – COM(2013) 130 final; published 13 March 2013. Proposal for (EC) No 261/2004 / Impact Assessment: Commission staff working document Impact Assessment Accompanying the document Proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delays of flights and Regulation (EC) No 2027/97 on air carrier liability in respect of the carriage of passengers and their baggage by air; published 13 March 2013. Recognised assistance dogs: Guidance for the carriage of recognised assistance dogs (e.g. guide or hearing dogs) when travelling by ship (Guidance Note 4)” at https://www.gov.uk/gov ernment/uploads/system/uploads/attachment_data/file/36772/draft-guidance-note-4.pd. Regulation (EC) No 392/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents. Regulation (EU) No 1177/2010 of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004. Report on Consumer Policy: Commission staff working document Report on Consumer Policy (July 2010 – December 2011) Communication from the Commission to the European Parliament, the council, the European Economic and Social Committee of the Regions A European Consumer Agenda – Boosting confidence and growth – COM (2012) 225 final; published 22 May 2012. Schilling, Johannes, Die Rechte des Passagiers im maritimen Schiffsverkehr, TranspR 2013, 401. Situation in the different Sectors: Commission staff working paper Situation in the different Sectors – Report from the Commission 28th Annual Report on Monitoring the Application of EU Law (2010) – SEC(2011) 1093 final; published 29 September 2011. Summary: Summary of contributions received by the Commission in response to the Commission Staff Working Paper “Strengthening the protection of the rights of passengers travelling by sea or inland waterways in the European Union”; published 6 December 2006. The Proposal: Proposal of the European Parliament and of the Council concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of Christine Wersel

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Chapter 3, VI. consumer protection laws – COM (2008) 816 final (“the Proposal”); published 4 December 2008. Tonner, Die Kreuzfahrt als Pauschalreise, die Haftung nach dem Athener Übereinkommen 2002 und die Fahrgastrechte im Schiffsverkehr, RRa 2013, 206. White Paper: The White Paper on European transport policy for 2010: time to decide. COM(2001) 370; published 12 September 2001.

A. Introduction

With this Regulation concerning the rights of passengers when travelling by sea and inland waterway (the Regulation) the EU-Commission has passed one large missing piece within the complex of passenger rights. Proceeding regulations dealt with Air1 and Train2 traffic. Only shortly after this Regulation the final missing link Bus traffic passenger rights came into force.3 The importance was emphasized by the Commission when pointing out that there are about 300 operators on the European ferry and RoRo markets and approximately 800 passenger ports and over 210 Million passengers a year (2006). The Regulation is applicable from 18 December 2012. 2 It is the long pronounced aim of the commission to ease travelling within the EU, make it more comfortable. This was already established in the White Paper on European transport policy for 2010: time to decide.4 Therefore the Commission drafted for all sectors of traffic the same basic rights and basic principles to improve the quality of all modes of transportation for passengers, to improve the protection of those passengers and to make the European passenger transportation sector more attractive. On the other hand it did not draft one regulation for all sectors because the Commission tried to allow the necessary distinctions due to the specific characteristics of each mode and their markets, related to the industries (company size, revenues or number and frequency of routes) and passengers (length, price and conditions of the trip) to ensure proportionality.5 3 Once the Regulations for Air and Train traffic were worked out the Commission published a proposal for maritime transportation in December 2008 (the Proposal). The Proposal for this Regulation spelled out four main rights that should strengthen the rights of the passengers and are part of the frame work of the passenger rights for all sectors:6 1. Specific measures in favour of persons with reduced mobility (PRMs) 2. Automatic and immediate solutions when travel is interrupted (long delays, cancellation) or refusal of carriage 1

1 2 3 4 5 6

261/2004, OJ 2004 L 46 / 1 (Regulation for Air traffic). 1371/2007, OJ 2007 L 315/ 14 (Regulation for Train traffic). 181/2001, OJ 2013 L 55 / 1 (Regulation for Bus traffic – applicable since 1. March.2013.). See White Paper. A European vision for Passengers, p. 3. Situation in the different sectors, p. 116.

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3. 4.

Passenger information obligations Treatment of complaints and means of redress The Proposal emphasized that maritime passengers are often among the most vulnerable members of Society, who are not accustomed or do not have the means to lodge a complaint or to stand up for their rights.7 In the Commission’s field of view was therefore mainly the ferry passenger, less a cruise vessel passenger. In 2009 and 2010 the Proposal was discussed in various sessions by the Council, the European Parliament and back to the Commission. Several amendments and deletions were made. The important details of those discussions are described on the following pages. Three years later in 2011 the Commission stated those rights more precisely and formulated ten basic passenger rights that form the basis of all four passenger rights regulations: (1) Right to non-discrimination in access to transport (2) Right to mobility: accessibility and assistance at no additional cost for disabled passengers and passengers with reduced mobility (PRM) (3) Right to information before purchase and at the various stages of travel, notably in case of disruption (4) Right to renounce travelling (reimbursement of the full cost of the ticket) when the trip is not carried out as planned (5) Right to the fulfillment of the transport contract in case of disruption (rerouting and rebooking) (6) Right to get assistance in case of long delay at departure or at connecting points (7) Right to compensation under certain circumstances (8) Right to carrier liability towards passengers and their baggage (9) Right to a quick and accessible system of complaint handling (10) Right to full application and effective enforcement of EU law8 The Commission emphasizes that all those rights are minimum protection for citizens when travelling. The EU rules on passenger rights facilitate mobility and social integration, notably by providing equal travel opportunities for disabled persons and persons with reduced mobility.9 When discussing the Proposal the experiences with the Regulation EC 261/2004 for Air Transportation also influenced the changes and discussions of this maritime Regulation. Therefore the Commission’s Proposal for an amendment of that Regulation EC 261/2004 of March 2013 is also considered here. A simple transfer of the details of the Air Regulation is however not advisable. There exist specific and distinctive features of the maritime. Those are: 7 The Proposal, p. 5. 8 A European vision for Passengers p. 3, 4. 9 Report on Consumer Policy, p. 21.

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there are more factors that could result in delays and interruption of journeys (mostly the influence of bad weather, which is greater for maritime transport than for any other mode of transport, or the difficulty of changing ships in the event of a ship breaking down); there are great differences in weather and infrastructure conditions depending on countries and regions within a country; local and regional services play a particular role; some services (e.g. maritime regional transport) are mainly provided by medium sized enterprises with limited financial means; maritime transport is essential for people living on islands and in peripheral regions; maritime passengers tend to be people with less purchasing power than air passengers, who are not accustomed or do not have the means to lodge a complaint or to stand up for their rights. The scope of the definition of maritime transport is subject to discussion, which is not the case for air transport. Regulation (EU) No 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004 (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 91(1) and 100(2) thereof, Having regard to the proposal from the European Commission, Having regard to the opinion of the European Economic and Social Committee [1], After consulting the Committee of the Regions, Acting in accordance with the ordinary legislative procedure [2],

Regulation (EC) No 2006/2004 of the European Parliament and of the Council of 27 October 2004 refers to the cooperation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection cooperation). 11 Article 91(1) gives the European Parliament and the Council, the mandate to implement a common transport policy and 100(2) puts them specifically in charge to lay down appropriate provisions for sea and air transport. The original legal basis is set out in Articles 71 (Transport) and 80 (transport on sea and inland waterways) of the Treaty establishing the European Community effective since 1958. 10

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B. Commentary Whereas: (1) Action by the Union in the field of maritime and inland waterway transport should aim, among other things, at ensuring a high level of protection for passengers that is comparable with other modes of transport. Moreover, full account should be taken of the requirements of consumer protection in general. (2) Since the maritime and inland waterway passenger is the weaker party to the transport contract, all passengers should be granted a minimum level of protection. Nothing should prevent carriers from offering contract conditions more favourable for the passenger than the conditions laid down in this Regulation. At the same time, the aim of this Regulation is not to interfere in commercial business-to-business relationships concerning the transport of goods. In particular, agreements between a road haulier and a carrier should not be construed as transport contracts for the purposes of this Regulation and should therefore not give the road haulier or its employees the right to compensation under this Regulation in the case of delays. (3) The protection of passengers should cover not only passenger services between ports situated in the territory of the Member States, but also passenger services between such ports and ports situated outside the territory of the Member States, taking into account the risk of distortion of competition on the passenger transport market. Therefore the term "Union carrier" should, for the purposes of this Regulation, be interpreted as broadly as possible, but without affecting other legal acts of the Union, such as Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport [3] and Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) [4]. (4) The internal market for maritime and inland waterway passenger services should benefit citizens in general. Consequently, disabled persons and persons with reduced mobility, whether caused by disability, age or any other factor, should have opportunities for using passenger services and cruises that are comparable to those of other citizens. Disabled persons and persons with reduced mobility have the same rights as all other citizens with regard to free movement, freedom of choice and non-discrimination. (5) Member States should promote the use of public transport and the use of integrated tickets in order to optimise the use and interoperability of the various transport modes and operators. (6) In the light of Article 9 of the United Nations Convention on the Rights of Persons with Disabilities and in order to give disabled persons and persons with reduced mobility opportunities for maritime and inland waterway travel comparable to those of other citizens, rules for non-discrimination and assistance during their journey should be established. Those persons should therefore be accepted for carriage and not refused transport, except for reasons which are justified on the grounds of safety and established by the competent authorities. They should enjoy the right to assistance in ports and on board passenger ships. In the interests of social inclusion, the persons concerned should receive this assistance free of charge. Carriers should establish access conditions, preferably using the European standardisation system. (7) In deciding on the design of new ports and terminals, and as part of major refurbishments, the bodies responsible for those facilities should take into account the needs of disabled persons and persons with reduced mobility, in particular with regard to accessibility, paying particular consideration to "design for all" requirements. Carriers should take such needs into account when deciding on the design of new and newly refurbished passenger ships in accordance with Directive 2006/87/EC of the European Parliament and of the Council of 12 December 2006 laying down technical requirements for inland waterway vessels [5] and Directive 2009/45/EC of the European Parliament and of the Council of 6 May 2009 on safety rules and standards for passenger ships [6].

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Chapter 3, VI. (8) Assistance given at ports situated in the territory of a Member State should, among other things, enable disabled persons and persons with reduced mobility to proceed from a designated point of arrival at a port to a passenger ship and from a passenger ship to a designated point of departure at a port, including embarking and disembarking. (9) In organising assistance to disabled persons and persons with reduced mobility, and the training of their personnel, carriers should cooperate with organisations representative of disabled persons or persons with reduced mobility. In that work they should also take into account the relevant provisions of the International Convention and Code on Standards of Training, Certification and Watchkeeping for Seafarers as well as the Recommendation of the International Maritime Organisation (IMO) on the design and operation of passenger ships to respond to elderly and disabled persons’ needs. (10) The provisions governing the embarkation of disabled persons or persons with reduced mobility should be without prejudice to the general provisions applicable to the embarkation of passengers laid down by the international, Union or national rules in force. (11) Legal acts of the Union on passenger rights should take into account the needs of passengers, in particular those of disabled persons and persons with reduced mobility, to use different transport modes and to transfer smoothly between different modes, subject to the applicable safety regulations for the operation of ships. (12) Passengers should be adequately informed in the event of cancellation or delay of any passenger service or cruise. That information should help passengers to make the necessary arrangements and, if needed, to obtain information about alternative connections. (13) Inconvenience experienced by passengers due to the cancellation or long delay of their journey should be reduced. To this end, passengers should be adequately looked after and should be able to cancel their journey and have their tickets reimbursed or to obtain re-routing under satisfactory conditions. Adequate accommodation for passengers may not necessarily consist of hotel rooms but also of any other suitable accommodation that is available, depending in particular on the circumstances relating to each specific situation, the passengers’ vehicles and the characteristics of the ship. In this respect and in duly justified cases of extraordinary and urgent circumstances, carriers should be able to take full advantage of the available relevant facilities, in cooperation with civil authorities. (14) Carriers should provide for the payment of compensation for passengers in the event of the cancellation or delay of a passenger service based on a percentage of the ticket price, except when the cancellation or delay occurs due to weather conditions endangering the safe operation of the ship or to extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. (15) Carriers should, in accordance with generally accepted principles, bear the burden of proving that the cancellation or delay was caused by such weather conditions or extraordinary circumstances. (16) Weather conditions endangering the safe operation of the ship should include, but not be limited to, strong winds, heavy seas, strong currents, difficult ice conditions and extremely high or low water levels, hurricanes, tornados and floods. (17) Extraordinary circumstances should include, but not be limited to, natural disasters such as fires and earthquakes, terrorist attacks, wars and military or civil armed conflicts, uprisings, military or illegal confiscations, labour conflicts, landing any sick, injured or dead person, search and rescue operations at sea or on inland waterways, measures necessary to protect the environment, decisions taken by traffic management bodies or port authorities, or decisions by the competent authorities with regard to public order and safety as well as to cover urgent transport needs. (18) With the involvement of stakeholders, professional associations and associations of customers, passengers, disabled persons and persons with reduced mobility, carriers should coop-

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Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers erate in order to adopt arrangements at national or European level for improving care and assistance offered to passengers whenever their travel is interrupted, notably in the event of long delays or cancellation of travel. National enforcement bodies should be informed of those arrangements. (19) The Court of Justice of the European Union has already ruled that problems leading to cancellations or delays can be covered by the concept of extraordinary circumstances only to the extent that they stem from events which are not inherent in the normal exercise of the activity of the carrier concerned and are beyond its actual control. It should be noted that weather conditions endangering the safe operation of the ship are indeed beyond the actual control of the carrier. (20) This Regulation should not affect the rights of passengers established by Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours [7]. This Regulation should not apply in cases where a package tour is cancelled for reasons other than cancellation of the passenger service or the cruise. (21) Passengers should be fully informed of their rights under this Regulation in formats which are accessible to everybody, so that they can effectively exercise those rights. Rights of passengers should include the receipt of information regarding the passenger service or cruise before and during the journey. All essential information provided to passengers should also be provided in formats accessible to disabled persons and persons with reduced mobility, with such accessible formats allowing passengers to access the same information using, for example, text, Braille, audio, video and/or electronic formats. (22) Passengers should be able to exercise their rights by means of appropriate and accessible complaint procedures implemented by carriers and terminal operators within their respective areas of competence or, as the case may be, by the submission of complaints to the body or bodies designated to that end by the Member State concerned. Carriers and terminal operators should respond to complaints by passengers within a set period of time, bearing in mind that the non-reaction to a complaint could be held against them. (23) Taking into account the procedures established by a Member State for the submission of complaints, a complaint concerning assistance in a port or on board a ship should preferably be addressed to the body or bodies designated for the enforcement of this Regulation in the Member State where the port of embarkation is situated and, for passenger services from a third country, where the port of disembarkation is situated. (24) Member States should ensure compliance with this Regulation and designate a competent body or bodies to carry out supervision and enforcement tasks. This does not affect the rights of passengers to seek legal redress from courts under national law. (25) The body or bodies designated for the enforcement of this Regulation should be independent of commercial interests. Each Member State should appoint at least one body which, when applicable, should have the power and capability to investigate individual complaints and to facilitate dispute settlement. Passengers should be entitled to receive a substantiated reply from the designated body, within a reasonable period of time. Given the importance of reliable statistics for the enforcement of this Regulation, in particular to ensure coherent application throughout the Union, the reports prepared by those bodies should if possible include statistics on complaints and their outcome. (26) Member States should lay down penalties applicable to infringements of this Regulation and ensure that those penalties are applied. Those penalties should be effective, proportionate and dissuasive. (27) Since the objectives of this Regulation, namely to ensure a high level of protection of and assistance to passengers throughout the Member States and to ensure that economic agents operate under harmonised conditions in the internal market, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and effects of the action, be better achieved at Union level, the Union may adopt measures, in accordance with the princi-

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Chapter 3, VI. ple of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives. (28) The enforcement of this Regulation should be based on Regulation (EC) No 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection cooperation) [8]. That Regulation should therefore be amended accordingly. (29) Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data [9] should be strictly respected and enforced in order to guarantee respect for the privacy of natural and legal persons, and to ensure that the information and reports requested serve solely to fulfil the obligations laid down in this Regulation and are not used to the detriment of such persons. (30) This Regulation respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, as referred to in Article 6 of the Treaty on European Union, HAVE ADOPTED THIS REGULATION: CHAPTER I GENERAL PROVISIONS

Article 1 Subject matter

(a) (b) (c) (d) (e) (f)

This Regulation establishes rules for sea and inland waterway transport as regards the following: non-discrimination between passengers with regard to transport conditions offered by carriers; non-discrimination and assistance for disabled persons and persons with reduced mobility; the rights of passengers in cases of cancellation or delay; minimum information to be provided to passengers; the handling of complaints; general rules on enforcement.

Since a regulation is directly applicable law in each member state, the Commission states that a regulation appears to be the most appropriate instrument to ensure coherent application of the rules in all member states. 13 This article shows the Chapters of the Regulation, which are commented in detail on the following pages. 14 In subparagraph c) the Proposal still said “The obligations of carriers towards passengers in cases of cancellation or delay”. This was changed since the rights are addressed not only to the carriers but also to the terminal operator (Article 16.1), the managing body (Article 17.1) or the performing carrier (Article 18.3). 15 Unlike in air transportation in waterborne transportation the problem of denied boarding with no reasonable grounds are almost inexistent. Therefore the Regulation does not contain any provision in this regard. 12

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Article 2 Scope 1.

2.

3.

4.

5.

This Regulation shall apply in respect of passengers travelling: (a) on passenger services where the port of embarkation is situated in the territory of a Member State; (b) on passenger services where the port of embarkation is situated outside the territory of a Member State and the port of disembarkation is situated in the territory of a Member State, provided that the service is operated by a Union carrier as defined in Article 3(e); (c) on a cruise where the port of embarkation is situated in the territory of a Member State. However, Articles 16(2), 18, 19 and 20(1) and (4) shall not apply to those passengers. This Regulation shall not apply in respect of passengers travelling: (a) on ships certified to carry up to 12 passengers; (b) on ships which have a crew responsible for the operation of the ship composed of not more than three persons or where the distance of the overall passenger service is less than 500 metres, one way; (c) on excursion and sightseeing tours other than cruises; or (d) on ships not propelled by mechanical means as well as original, and individual replicas of, historical passenger ships designed before 1965, built predominantly with the original materials, certified to carry up to 36 passengers. Member States may, for a period of 2 years from 18 December 2012, exempt from the application of this Regulation seagoing ships of less than 300 gross tons operated in domestic transport, provided that the rights of passengers under this Regulation are adequately ensured under national law. Member States may exempt from the application of this Regulation passenger services covered by public service obligations, public service contracts or integrated services provided that the rights of passengers under this Regulation are comparably guaranteed under national law. Without prejudice to Directive 2006/87/EC and to Directive 2009/45/EC, nothing in this Regulation shall be understood as constituting technical requirements imposing obligations on carriers, terminal operators or other entities to modify or replace ships, infrastructure, ports or port terminals.

Paragraph 1a)

Passenger Service is defined in Article 3f as a commercial passenger transport service by sea or inland waterways operated according to a published timetable. Whilst the Proposal said “This regulation shall apply to commercial passenger maritime and inland waterway services, including cruises…” this was deleted and clarified. The Article’s main criterion now refers to the port. This subparagraph starts with referring to the port of embarkation. Through the wide definition of port as defined in Article 3j it is obvious that the Regulation covers all domestic and international commercial passenger services, on sea going vessels and inland waterways. The Regulation does not refer to the contract of carriage. Therefore even a contract of carriage underlying the law of a Member State does not lead to the application of the Regulation if the port of embarkation is situated outside the territory of a Member State. On the other hand a carrier offering carriages with contracts of carriage underlying the law of a State outside the European Union, still has to apply the Regulation if the passenger embarks in a port situated inside the territory of a Member State. Also the application of the Regulation is independent of the place of registration of the carrier and independent of the type of transportation. Christine Wersel

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Especially the type of transportation was intensely discussed after publication of the Proposal. Arguments to exclude inland waterway services, coastal routes which tend to be local, regional or urban services and interurban maritime routes where brought forward. 21 For the Commission it was clear that the scope should be as wide as possible. 20

Paragraph 1b) 22

If the port of embarkation is situated outside the territory of a Member State the next step is to look at the port of disembarkation. The Regulation is applicable provided this port is situated within the territory of a Member State and service is operated by a Union Carrier. Union Carrier is defined as a carrier established within the territory of a Member State or offering transport by passenger services operated to or from the territory of a Member State. Therefore a carrier domiciled outside a Member State and operating a passenger service not touching any Member State is not included in the application of this Regulation. Also a carrier domiciled within a Member State but not touching the territory of any Member State is not included in its application. On the other hand a carrier domiciled outside a Member State but touching the territory of a Member State with its passenger service at the port of disembarkation is included in the application. Paragraph 1c)

23 24

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28

This paragraph specifically refers to cruises. The idea to extend this to maritime or inland waterway traveling purely for leisure was not accepted in the cruise industry without disagreement. It was indeed heavily discussed if cruises should be included in the Regulation at all. This even more since cruises are already regulated in detail by the package tours directive 90/314 EEC. The specifics of the cruise sector in comparison to the ferry sector, notably as regards tours on inland waterways, canals and rivers, which differ from transAtlantic and inter-continental cruising, were emphasized. Another argument was that this Regulation as well as the other entire passenger related Regulations refer to commercial transport services, i.e. ferry service to bring passengers from one point to another during their journey. After long discussions following the publication of the Proposal the Commission agreed on several exemptions in favour of cruises but generally still was adamant to include cruises in the scope of this Regulation as well. Now the Regulation does only apply to cruises where the port of embarkation is situated in the territory of a Member State. It does not apply to cruises where the port of disembarkation (this was discussed after the Proposal was published but not agreed) is in the territory of a Member State independently of the domicile of the carrier.

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Exceptions were finally granted in respect of Articles 16(2) (connecting trans- 29 port service), Article 18 (Re-routing and reimbursement in the event of cancelled or delayed departures), 19 (Compensation of the ticket price in the event of delay in arrival), 20(1) (Exemption for passengers with open tickets) and 20(4), which only refers to Article 19. Paragraph 2

This paragraph was not included in the Proposal. The various exemptions 30 were achieved after discussions of the proposal with the various associations and interest groups. It was agreed that a certain size has to be regarded as de minimis. The final criterion agreed was a ship certified to carry up to 12 passengers (a 31 number that can be found in several definitions for passenger vessels). The Council had proposed to take 36 passengers but that was dismissed by the Commission as narrowing the scope too much. The other criterion is a crew responsible for the operation of the ship of not more than three persons. The operation of the ship does not include crew that services the passengers. Also excluded is a service where the distance of the overall passenger service is less than 500 meters, one way. Also excursion and sightseeing tours other than cruise and certain historical 32 ships are excluded from the application of the Regulation. Paragraph 3

This paragraph provided for a new exemption, inserted upon initiative of the 33 Council, which is limited to a period of two years up to 18. December 2014 and only for seagoing ships of less than 300 gross tons operated in domestic transport provided that the rights of passengers under this Regulation are adequately ensured under national law. The meaning of “adequately ensured“ is not defined. The Commission also 34 criticized the wording as being excessive and a significant limitation of the scope. Meanwhile, due to elapse of time, it became irrelevant. Paragraph 4

This paragraph encloses the permission for Member States to exempt passen- 35 ger services covered by public service obligations (urban, regional transport), public service contracts or integrated services (different modes of transport) provided that the rights of passengers under this Regulation are comparably guaranteed under national law. Especially ferry operators operating in urban areas argued that they should 36 not be covered by the Regulation. It was said that urban and suburban services usually form part of local and regional public transport networks (integration of fares and schedules); they are often operated in a larger network with many stops; a substantial proportion of their passengers are daily commuters travelling Christine Wersel

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without baggage and holding fare cards or season tickets (weekly, monthly, yearly) and there is no advanced booking for such service. It was regarded as adequate to exclude such operators from the application of this Regulation.10 This stipulation was criticized by the European Economic and Social Committee (EESC) in its opinion to the Proposal.11 They argued that those are the services that are used most by citizens and potentially needed most by PRMs. There is no similar provision in any other Regulation regarding passenger rights. The Proposal already included a similar provision to exempt services covered by public service contract if such contracts ensure a comparable level of passenger rights (Article 2.2). The Commission’s comment at that time was that if member States can ensure a comparable level of passenger rights through other means, which according to the Commission could be specific legislation or public service contract such an exception would be acceptable.12 The change from “a comparable level” in the Proposal to “comparably guaranteed” in the Regulation did not provide further clarity. It is not clear how this exemption should function if the level of rights is guaranteed. This would only make sense if a comparable guarantee results in a level different to a part or some parts of the Regulation. It has to be seen if the CJEU clarifies the details. Potential problem with this exception to the application will probably be reported in December 2015 when the Commission shall report to the European Parliament (see Article 29). Paragraph 5

The Commission suggested deleting this paragraph since they were concerned that it is being used to create exemptions and it appeared unnecessary as the Regulation does not impose obligations in this way. 43 This cannot be supported. It is an important clarification to know about the width of the obligations of the carriers and terminal operators for technical retrofitting. Indeed still in May 2010 a suggestion for a new recital (8a) with the following wording was suggested: “Member States/port authorities should improve existing infrastructure and carriers should improve their ships, where this is necessary to ensure barrier free access for disabled persons and persons with reduced mobility as well as to provide appropriate assistance.”13 This shows, there would have been room for discussion without it. It also has to be considered that modifying a ship is far more complex than modifying other means of transportation.14 42

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As a clarification it is therefore very important. It clarifies that the limits of 44 providing assistance especially to PRMs are set when it would be necessary for carriers, terminal operators or other entities to modify or replace ships, infrastructure, ports or port terminals. It has to be noted that only technical requirements are exempted. Service related requirements are not mentioned. Article 3 Definitions For the purposes of this Regulation, the following definitions shall apply: "disabled person" or "person with reduced mobility" means any person whose mobility when using transport is reduced as a result of any physical disability (sensory or locomotor, permanent or temporary), intellectual disability or impairment, or any other cause of disability, or as a result of age, and whose situation needs appropriate attention and adaptation to his particular needs of the service made available to all passengers; (b) "territory of a Member State" means a territory to which the Treaty on the Functioning of the European Union applies as referred to in Article 355 thereof, under the conditions set out therein; (c) "access conditions" means relevant standards, guidelines and information on the accessibility of port terminals and ships including their facilities for disabled persons or persons with reduced mobility; (d) "carrier" means a natural or legal person, other than a tour operator, travel agent or ticket vendor, offering transport by passenger services or cruises to the general public; (e) "Union carrier" means a carrier established within the territory of a Member State or offering transport by passenger services operated to or from the territory of a Member State; (f) "passenger service" means a commercial passenger transport service by sea or inland waterways operated according to a published timetable; (g) "integrated services" means interconnected transport services within a determined geographical area with a single information service, ticketing scheme and timetable; (h) "performing carrier" means a person, other than the carrier, who actually performs the carriage wholly or partially; (i) "inland waterway" means a natural or artificial navigable inland body of water, or system of interconnected bodies of water, used for transport, such as lakes, rivers or canals or any combination of these; (j) "port" means a place or a geographical area made up of such improvement works and facilities as to permit the reception of ships from which passengers regularly embark or disembark; (k) "port terminal" means a terminal, staffed by a carrier or a terminal operator, in a port with facilities, such as check-in, ticket counters or lounges, and staff for the embarkation or disembarkation of passengers travelling on passenger services or on a cruise; (l) "ship" means a vessel used for navigation at sea or on inland waterways; (m) "transport contract" means a contract of carriage between a carrier and a passenger for the provision of one or more passenger services or cruises; (n) "ticket" means a valid document or other evidence of a transport contract; (o) "ticket vendor" means any retailer concluding transport contracts on behalf of a carrier; (p) "travel agent" means any retailer acting on behalf of a passenger or a tour operator for the conclusion of transport contracts; (q) "tour operator" means an organiser or retailer, other than a carrier, within the meaning of Article 2(2) and (3) of Directive 90/314/EEC; (r) "reservation" means a booking of a specific departure of a passenger service or a cruise; (s) "terminal operator" means a private or public body in the territory of a Member State responsible for the administration and management of a port terminal; (t) "cruise" means a transport service by sea or inland waterway, operated exclusively for the purpose of pleasure or recreation, supplemented by accommodation and other facilities, exceeding two overnight stays on board; (a)

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"shipping incident" means shipwreck, capsizing, collision or stranding of the ship, explosion or fire in the ship, or defect in the ship.

The Regulation contains 21 definitions in non-alphabetical order. Only 11 of those are similar to the Proposal. In the Regulation the definitions for “cancellation” and “delay” were deleted. Both definitions were still contained in the Proposal. The Proposal’s definition for cancellation was: “cancellation” means the non-operation of a service which was previously scheduled and for which at least one reservation was made. This is very similar to the Air transport regulation EU 261/2004. The Proposal’s definition for delay was: “delay” means a difference between the time the passenger was scheduled to depart or to arrive in accordance with the published timetable and the time of his actual or expected departure or arrival. The deletion of the definitions is interesting. It was felt that the wording of Chapter III “Obligations of Carriers and Terminal Operators in the event of interrupted travel”, Articles 16 to 21 provides for specific and detailed clarity. This will be dealt with under the relevant articles. (a) disabled persons or persons with reduced mobility (PRMs) are defined as widely as possible. The Commission tried to bring each and every kind of disability within the definition. It should include each cause whether by disability, age or any other factor. A proposal to also include psychosocial disabilities (also known as psychiatric or mental disorders) was however refused. (b) The Regulation is applicable in all Member States plus any associated countries as described in Article 355 of the Treaty on the Functioning of the European Union, i.e especially Guadeloupe, French Guiana, Martinique, Réunion, Saint-Barthélemy, Saint-Martin, the Azores, Madeira and the Canary Islands. (c) The access conditions refer to Article 9. This definition was not included in the proposal but as can be seen in recital 6 they belong to the non-discrimination rules accepted worldwide. (d) The definition of “carrier” was clarified materially. In the Proposal the criteria was an unclear mixture of “contract of carriage” and “the performing carrier”. The contract of carriage was deleted completely. Especially in cases where the carrier did not conclude a “contract of carriage” but e.g. a “package travel contract” it would have been doubtful if the contractual carrier would have fallen under the definition of this Regulation because of a missing contract of carriage. Now, in the Regulation the important qualification is “offering transport by passenger services or cruises” without being a tour operator and also newly included without being a travel agent or

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(e)

(f)

(g)

(h)

(i)

(j)

ticket vendor. In the Proposal the travel agent indeed had to fear being included in the definition. The Proposal as well as the final version excludes the tour operator. Obligations that are directed against the carrier will therefore not bind the tour operator unless the tour operator also provides the vessel itself and for that reason is identical to the carrier. The definition for Union Carrier is newly included. With this definition all carriers established in the EU fall under the scope of this Regulation. At the same time all carriers offering transport into or from the EU territory have to apply the Regulation no matter where they are established. This very important step ensures that not only the EU carriers but worldwide carriers traveling into the EU apply the same standards and have to make the efforts. This ensures equal market chances and avoids distortion of competition within the EU. The definition has no effect on other legal acts of the Union, such as Council Regulation (EEC) No. 4056/86 (see recital 3). Passenger Service is defined as a commercial service, i.e. there has to be an exchange of money. Three types of passengers had to be taken into account: • Those who travel to their work or return to their home • Tourists • A large group of users who are dependent on public service because of a disability, financial circumstances or their youth or their old age. Crucial is the existence of a schedule. Whilst in the Proposal also a “nonscheduled route” was included non-scheduled services are not covered under the Regulation. Integrated services are newly incorporated in the Regulation. This comprises different, however, interconnected transport services within a determined geographical area with a single information service, ticketing scheme and timetable. An example would the “Vogelfluglinie”, where you can buy a ticket in Puttgarden for the ferry to Rodby and further on from Helsingore to Helsingborg. Also different modes of transport could be included under the integrated service. Whilst in the Proposal the carrier and tour operator were excluded from the definition of the Performing Carrier, the Regulation now only excludes the carrier. The application of Performing Carrier can be found in Article 5.1 and performing parties in Article 14 a and b. The definition of Inland waterways was newly incorporated into the Regulation. With this it is clarified that all types of inland waterways are meant to be included, natural or artificial and canals, rivers and lakes. Ports in Member States (see recital 8).

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Compared to the Proposal the definition of Port is narrower in the Regulation. Whilst the Proposal also included places, where loading and unloading, storage of goods and the receipt and delivery of such goods were included the definition is now reduced to places where passengers embark and disembark. This was necessary to exclude container ports from the extensive obligations that passenger port now need to fulfill. The service a port should offer is to enable PRMs to proceed from a designated point of arrival at a port to a passenger ship and from a passenger ship to a designated point of departure at a port, including embarking and disembarking. A clear difficulty is that port situations vary depending on the traffic and on the portion of passengers arriving by foot. Throughout Europe the characteristics and variety of ports are different. However, the definition does not take e.g. the size or passenger volume into account. It was also brought forward by port oganisations that some ferry ports (especially those serving domestic services) are nothing more than jetties or ramps with little shoreside infrastructure. Here a clear difference between maritime ports and air ports is visible. Therefore provisions valid for the air transport system cannot be transferred wholesale to ports. Whilst small passenger services are excluded to a certain extent (Article 2.2) there is no such exemption for ports. 60 (k) The definition of Port terminal was newly incorporated into the Regulation. It is the building where the passenger actually checks in. The definition of “Port Authority” was however deleted. It was pointed out by the Commission and other stakeholders that port terminals play a major role in providing service to passengers. It was also argued that standards in many port terminals were not adequate. It is important to note that one provision is that the terminal is only a port terminal if it is staffed by the terminal operator or the carrier. 61 (l) The definition of “ship” excluded explicitly “air cushion vehicles” in the Proposal. This is not mentioned any more. Ship is also defined in the Athens Convention Article 1.3 as a seagoing vessel, excluding an air-cushion vehicle. However, according to the definition now such vehicles could be included. 62 (m) Whilst the Proposal still mentioned the authorized ticket vendor as a party of the Transport contract the Regulation deleted this part which is consequent since the ticket vendor it not part of the contract of carriage. However, the contract now only refers to the carrier and the passenger. If the vessel is chartered by the tour operator from the carrier the passenger has two parties responsible for the obligations resulting out of the Regulation (see Article 5).

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(n) Compared to the Proposal the definition of “ticket” is much shorter in the Regulation. Whilst the Proposal mentioned paperless form, including electronic form the Regulations only spells out “other evidence of a transport contract”, which includes electronic forms. The provision of issuance by the carrier or its authorized ticket vendor was deleted in the Regulation as well. This criterion is fulfilled by the word “valid”. (o) A ticket vendor is not any more a “retailer of maritime transport services” as provided for in the Proposal. Also the words to sell tickets “for its own account” are deleted. Since the vendor can still sell tickets on behalf of the carrier, the vendor can sell tickets for its own account but only if he also is a carrier. (p) “Travel agent” is a completely new definition. The travel agent is a retailer of tickets not on behalf of the carrier but on behalf of the tour operator or on behalf of the passenger. The travel agent has several explicit obligations in relation to PRMs (see Chapter II). (q) The definition of Tour operator is identical to the Proposal and refers to Articles 2(2) and (3) of the Directive 90/314 EEC on package travel. The Tour operator is explicit not the carrier. (r) “Reservation” was a much more complicated definition in the Proposal that mentioned “an authorization … giving entitlement to transportation subject to previously confirmed personalized transport arrangements”. This was now replaced simply by “booking”. (s) Terminal Operator is also newly included in the Regulation. (t) “Cruise” needed to be defined in contrast to ferry operation. The Proposal was still seeing the criteria in “passenger shipping activities supplemented by accommodation and other facilities, exceeding one day (overnight) stay, which is not a regular or scheduled passenger service between two or more ports, but with passengers usually returning to the port of embarkation.” This definition did not clearly enough differentiate between ferry service and a cruise. The last part “usually returning to the port of embarkation” suggested being a criterion of a cruise, which is very often not the case. Consequently the definition of the Regulation was changed substantially. The criteria now are an operation exclusively for the purpose of pleasure or recreation, supplemented by accommodation and other facilities. Also a cruise has to exceed two overnight stays on board, i.e. a minimum of three overnight stays. (u) “Shipping incident” was not included in the Proposal. It is defined consequently identical to the definition in the Protocol of 1 November 2002 of the Athens Convention.15

15 Athens Convention: Amended by Protocol 2002-11-01 (not in force, to be added as paragraph 5 Article 3.).

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Article 4 Tickets and non-discriminatory contract conditions 1.

Carriers shall issue a ticket to the passenger, unless under national law other documents give entitlement to transport. A ticket may be issued in an electronic format. Without prejudice to social tariffs, the contract conditions and tariffs applied by carriers or ticket vendors shall be offered to the general public without any direct or indirect discrimination based on the nationality of the final customer or on the place of establishment of carriers or ticket vendors within the Union.

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Originally this Article dealt with Transport contract instead of Tickets. Due to the definition of Ticket as the form of a transport contract this was no longer necessary. This paragraph only defines the obligation of the carrier to issue a ticket. Paragraph 2

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Non-discrimination is a very important subject to the Commission. Therefore it is laid out here that no discrimination may take place based on the nationality of the final customer or the place of establishment of carriers or ticket vendors. The Regulation here starts with the first of ten basic rights that were drafted by the Commission: non discriminating access to all modes of transportation. There shall be no discrimination on grounds of nationality, place of living or disability. Therefore the Regulation is also applicable to persons not being a member of the EU. This puts an end to the practice where residents of one Member State are unable to book on the website of the same carrier in another country (offer has to be made to the general public). It also means that travel agents have access to the same fares irrespective of their geographical situation. Vice versa the Proposal the prohibition to discriminate due to the place of residence of the final customer was deleted. Therefore it is possible for a carrier to offer rebates for local residents. Article 5 Other performing parties 1.

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Where the performance of the obligations under this Regulation has been entrusted to a performing carrier, ticket vendor or any other person, the carrier, travel agent, tour operator or terminal operator who has entrusted such obligations shall nevertheless be liable for the acts and omissions of that performing party, acting within that party's scope of employment. In addition to paragraph 1, the party to whom the performance of an obligation has been entrusted by the carrier, travel agent, tour operator or terminal operator shall be subject to the provisions of this Regulation, including provisions on liabilities and defences, with regard to the obligation entrusted.

The inclusion of this Article “Other performing parties” was not contained in the Proposal at all.

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The Council decided to clarify the provisions on sub-contracting of certain obligations stemming from the Regulation by adding a general article on other performing parties.16 Performing Carrier means a person, other than the carrier, who actually performs the carriage wholly or partially (Art. 3 (h)). Other performing parties responsible for other obligations than the carriage under this Regulation, e.g. a ticket vendor but also any other subcontractors are addressed by this Article, too. The clause clarifies that the original parties, which could be the carrier, travel agent, tour operator or terminal operator remain responsible for the fulfillment of the Regulation as well. The explicit differentiation in the Definitions of Article 3 between “Carrier” and “Tour Operator” is ineffective in this Article. The parties to whom the performance is entrusted can rely on all defences but also are exposed to the liabilities. The Commission has chosen the greatest possible application of the Regulation by including all parties possibly involved.

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Article 6 Exclusion of waiver Rights and obligations pursuant to this Regulation shall not be waived or limited, in particular by a derogation or restrictive clause in the transport contract.

The application of the rules of the Regulation cannot be excluded or dimin- 82 ished by contract. The provision that was included in the Proposal, that the carriers may offer 83 conditions more favorable was deleted. Nevertheless this is still possible. CHAPTER II RIGHTS OF DISABLED PERSONS AND PERSONS WITH REDUCED MOBILITY

This chapter regulates one of the basic topics of passenger rights. There was 84 and is widespread agreement that there are four basic principles governing the rights of PRMs: – Non-discrimination – Access – Assistance – Proper information In maritime transport, Directive 2009/45/EC17 on safety rules and standards 85 for passenger ships contains guidelines for ship construction and equipment to facilitate access of passengers with reduced mobility to the ship. However, European accessibility standards do not exist for air or for port side access to waterborne transport. With the Para-Olympic games 2012 taking place in Europe the Commission’s 86 aim was to improve the transport situation for PRMs as comprehensive as possible. 16 Draft Statement, p. 10. 17 Directive 2009/45/EC, OJ 2009 L163/1.

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Article 7 Right to transport 1.

Carriers, travel agents and tour operators shall not refuse to accept a reservation, to issue or otherwise provide a ticket or to embark persons on the grounds of disability or of reduced mobility as such. Reservations and tickets shall be offered to disabled persons and persons with reduced mobility at no additional cost under the same conditions that apply to all other passengers.

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This Article establishes the principle right of being transported for persons with a disability or reduced mobility (PRMs). Paragraph 1

Neither carriers (and because of Article 5.1 also the ticket vendor or the performing carrier), nor travel agents nor tour operators shall refuse to accept a reservation. A reservation means a booking of a specific departure of a passenger service or a cruise (see Article 3r). 89 The same obligation exists for issuance or provision of a ticket and for embarkation. 90 The amendment of “as such” in the end clarified the intent of the legislator. 88

Paragraph 2

Here the other basic right is laid down: to make a reservation or offer a ticket at no additional cost. Extra reservation costs are prohibited. 92 The Commission has emphasized again and again that this is the very core of equal rights. There are no hidden costs allowed. For example where it is not possible to reserve an accessible seat on the internet, a free telephone number should be made available. The Commission has stressed clearly that the infrastructure necessary to provide equal conditions for PRMs should be borne by the providers and where possible by all passengers through the ticket prices. The Commission advised that indeed Carriers will have to incur some additional costs related to fulfillment of the obligations, like information costs (see Article 9), training staff for assistance to PRMs (see Article 13) and appropriate insurance cover. However, according to the Commission these costs will not be significant. Calculation in aviation arrive at an estimate average figure of € 0,60 per passenger. Bus and maritime services are expected to trigger lower costs.18 93 The explicit differentiation in the definitions of Article 3 between “Carrier” and “Tour Operator” is ineffective in this Article. 94 There is a right to refuse on the grounds of safety is mentioned in recital 6 and further stipulated in Article 8. 91

18 Memo 08/765, Question 6 and 7.

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Article 8 Exceptions and special conditions 1.

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By way of derogation from Article 7(1), carriers, travel agents and tour operators may refuse to accept a reservation from, to issue or otherwise provide a ticket to or to embark a disabled person or person with reduced mobility: (a) in order to meet applicable safety requirements established by international, Union or national law or in order to meet safety requirements established by the competent authorities; (b) where the design of the passenger ship or port infrastructure and equipment, including port terminals, makes it impossible to carry out the embarkation, disembarkation or carriage of the said person in a safe or operationally feasible manner. In the event of a refusal to accept a reservation or to issue or otherwise provide a ticket on the grounds referred to in paragraph 1, carriers, travel agents and tour operators shall make all reasonable efforts to propose to the person concerned an acceptable alternative transport on a passenger service or a cruise operated by the carrier. Where a disabled person or a person with reduced mobility, who holds a reservation or has a ticket and has complied with the requirements referred to in Article 11(2), is nonetheless denied embarkation on the basis of this Regulation, that person, and any accompanying person referred to in paragraph 4 of this Article, shall be offered the choice between the right to reimbursement and re-routing as provided for in Annex I. The right to the option of a return journey or re-routing shall be conditional upon all safety requirements being met. Where strictly necessary and under the same conditions set out in paragraph 1, carriers, travel agents and tour operators may require that a disabled person or person with reduced mobility be accompanied by another person who is capable of providing the assistance required by the disabled person or person with reduced mobility. As regards passenger services, such an accompanying person shall be carried free of charge. When carriers, travel agents and tour operators have recourse to paragraphs 1 or 4, they shall immediately inform the disabled person or person with reduced mobility of the specific reasons therefor. On request, those reasons shall be notified to the disabled person or person with reduced mobility in writing, no later than five working days after the request. In the event of refusal according to paragraph 1(a), reference shall be made to the applicable safety requirements.

Paragraph 1

An exception can be made by all parties involved, i.e. by carriers, travel 95 agents and tour operators. The exceptions that can be made from the acceptance of a reservation from 96 PRMs or provision of a ticket to PRMs are limited to Safety requirements

The basis for those safety requirements need to be international (like ISM- 97 Code), Union (like Directive 2009/45/EC on safety rules and standards for passenger ships) or national law. Safety requirements can also be established by the competent authorities, i.e. the classification societies. Design or port infrastructure

A reservation or provision of ticket can also be denied where the design of the 98 passenger ship or port infrastructure and equipment, including port terminals, makes it impossible to carry out the embarkation, disembarkation or carriage of the said person in a safe or operationally feasible manner. It was the intention in Christine Wersel

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respect of a passenger vessel to make clear that carriage may not be refused on the grounds of a person's disability per se, but only on grounds that the vessel's physical characteristics are potentially incompatible with the carriage of disabled passengers or passengers with reduced mobility. Design could be the size and structure. During discussions of the Proposal there were several proposals in respect of formulating the criteria that allow a refusal: – Carriage of the disabled person or person with reduced mobility physically impossible – Carriage is physically impossible or if embarkation or carriage means that a disabled person or person with reduced mobility cannot be afforded an acceptable level of service in a safe and feasible manner; – where the structure of the passenger ship makes the embarkation or carriage of the disabled person or person with reduced mobility physically impossible and where they cannot be afforded the normal level of service in a safe, dignified and operationally feasible manner. The question was not just whether embarkation or carriage is physically possible, but also if the carriage would have other serious consequences for a disabled person or person with reduced mobility, for example in terms of safety. The suggested exception from the general obligation to carry a disabled person – when to do so would be “physically impossible” – was too narrowly drawn. It will almost always be possible to carry the person, but it may be unsafe, uncomfortable, or discriminatory because of the different conditions from those of other passengers. Such additional wording would take account of issues such as whether evacuation of the passenger is possible in the event of an emergency.19 The structure of many old ships was not built under consideration of this Regulation and can only be changed with enormous expenditure. So the transportation of PRMs could be difficult or even impossible. When designing new ships or refurbishing old ones this Regulation has to be taken in consideration, e.g. in accordance with Directive 2006/87/EC of the European Parliament and of the Council of 12 December 2006 laying down technical requirements for inland waterway vessels and Directive 2009/45/EC of the European Parliament and of the Council of 6 May 2009 on safety rules and standards for passenger ships. It has to be pointed out that according to Article 2.5 nothing in this Regulation shall be understood as constituting technical requirements imposing obligations on carriers, to modify or replace ships. The same goes for terminal operators or other entities in respect of their infrastructure, ports or port terminals. Since the definition for ports accommodating passengers is extremely wide it may also be that the port infrastructure does not accommodate PRMs. 19 Draft report I, p. 20.

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If the embarkation, the disembarkation or the carriage is not safe or opera- 106 tionally feasible the carrier, travel agent or tour operator is allowed to refuse a reservation or ticket. There is no further clarification on the terms of “operationally feasible”. There is also no comparable provision in the air transport regulation. Is it for example operationally feasible that a PRM in a wheelchair with no suitable ramp or gangway available is carried on board with four strong crew members? There is no clear answer for that. There are arguments for saying that operationally feasible is only an operation that is normally used for PRMs, like an elevator or a ramp / gangway that either an electric wheelchair or one accompanying person with normal strength is able to manage. 107 No exception in respect of the obligation can be made in respect of costs. The Regulation obliges a passenger with a disability or reduced mobility to 108 inform the carrier 48 hours before the carriage of his need for assistance (Article 11.1) and of his specific needs with regard to accommodation, seating or services required or his need to bring medical equipment, provided the need is known at that time when the reservation is made (Article 11.2). This is an important addition since especially on vessels with no car of bicycle service individual preparations have to be made carefully and cannot be done spontaneously. Paragraph 2

In the event of a refusal for a reservation or ticket the carrier has to make all reasonable efforts to propose an acceptable alternative on a passenger service or a cruise operated by the carrier. The amendment of “all” is also remarkable. The Commission explained that this was done as “clarification for emphasis”.20 There is no equivalent provision in the regulation for aviation passenger rights or any further explanation in the recitals. So there is no precedent or example in respect of “reasonable” efforts. Reasonable efforts might be efforts that a reasonably prudent carrier would observe under a given set of circumstances. Similarly reasonable efforts are those which might fairly and properly be required of a carrier. This is easy if the carrier has e.g. a vessel that is equipped with handicapped facilities and another one that is not serving on the same route to different times. This is however difficult if for example the carrier offers a ferry service in a remote area with no suitable alternatives. Also the question of an alternative being acceptable is open. Acceptable is very subjective. Can the carrier advise this is an acceptable alternative? Is it upon the PRM to decide? This paragraph leaves a lot of room for discussion. The amendment of the words “if feasible and available“ at the end of this paragraph was refused.

20 Draft recommendations II, p. 17.

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Paragraph 3 113

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In case of denial of transportation and provided the advanced information according to Article 11.2 has been given to the carrier the PRM can chose between reimbursement of the passage money within 7 days and where relevant a return service to the first point of departure or re-routing without additional costs and under comparable conditions (see further details in Annex I). The addition in respect of Article 11.2 was not included in the Proposal. In discussions after the Proposal it was emphasized that only with appropriate information the carrier can adequately take care of PRMs. In case the carrier diverts the route and the planned place of disembarkation is not arrived at the carrier has to bear the costs of transfer to the port originally planned (details are described in Annex I). All rights include the person accompanying the PRM. In sentence two the right for re-routing is extended to a return journey in cases where the journey has already partially taken place. Re-routing and return journey shall be conditional upon all safety requirements being met. The safety requirements refer to paragraph 1 of this Article. Paragraph 4

The general rule should be that PRMs can travel alone. Only in very limited exemptions such as described in paragraph 1 the carrier can insist on a person accompanying the PRM. 119 This person has to be capable of providing assistance. 120 After discussion of the Proposal it was added in the Regulation that in passenger services this assisting person has to be transported free of charge. This rule does not apply for cruises. On a cruise the carrier can – under the same conditions – insist on an accompanying person, but is not required to offer a journey free of charge. 118

Paragraph 5

One of the declared goals of the Commission is transparency. This is one of the rules owing its contents to this goal. The PRM, whose reservation or booking is refused due to one of the grounds mentioned in this Article, shall be informed immediately. This can be done orally. Only upon request the carrier shall communicate the reasons in writing not later than 5 working days. The refusal either orally or written, shall include a reference to the applicable safety requirements. 122 This obligation was only added after discussions about the Proposal. 121

Article 9 Accessibility and information 1.

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abled persons and persons with reduced mobility and accompanying persons. The access conditions shall upon request be communicated to national enforcement bodies. The access conditions provided for in paragraph 1 shall be made publicly available by carriers and terminal operators physically or on the Internet, in accessible formats on request, and in the same languages as those in which information is generally made available to all passengers. Particular attention shall be paid to the needs of disabled persons and persons with reduced mobility. Tour operators shall make available the access conditions provided for in paragraph 1 which apply to journeys included in package travel, package holidays and package tours which they organise, sell or offer for sale. Carriers, travel agents and tour operators shall ensure that all relevant information, including online reservation and information, concerning the conditions of carriage, journey information and access conditions is available in appropriate and accessible formats for disabled persons and persons with reduced mobility. Persons needing assistance shall receive confirmation of such assistance by any means available, including electronic means or Short Message Service (SMS).

Paragraph 1

The carriers and the terminal operators shall have in place or establish nondiscriminatory access conditions for the transport. The tour operator is not mentioned here but is incorporated through Paragraph 3. Where there are no access conditions in place their establishment is required. There is no time frame mentioned. So they shall be established promptly. The transport is not defined but “transport contract” is defined in Article 3 (m), as a contract of carriage between a carrier and a passenger for the provision of one or more passenger services or cruises. Whilst the Regulation does not specify the necessary contents of the access rules the Proposal provided for: – Restriction on carriage or of that of mobility equipment – Accessibility of the ships – Facilities on board Those conditions shall be established in cooperation with organisations representative of PRMs. The Proposal was speaking of “representatives of organisations” which was not clear enough. Upon request those access conditions shall be communicated to the national enforcement body (see Article 25). The Regulation does not say upon request by whom. Considering the aim of the paragraph it would be reasonable to give the right to request the access rules to the national enforcement body as described in Article 25.1.

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Publicly available is described as physically available or on the internet. 130 Physically available can be on paper e.g in the catalogues or brochures. The carrier and the terminal operator can chose which alternative they apply. There is no necessity to make the rules available in both forms. Christine Wersel

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In accessible formats (for example, text, Braille, audio, video and/or electronic formats) they need to be made available upon request. Again it is not said upon request by whom but in this paragraph it would be reasonable to say upon request of the PRM. The Proposal still said “at time of reservation”. This was now written in greater detail and reinforced considerably by the new paragraph 4. 132 The languages shall be those in which information is generally made available to all passengers. 133 The obligation does also fall on the tour operator in accordance with Paragraph 3. 131

Paragraph 3 134

Tour operators have the same obligation as carriers and terminal operators in respect of package travel, package holidays and package tours which they organise, sell or offer for sale if the package travel, package holidays and package tours includes a journey on sea or inland waterways, i.e. if the package travel directive 90/314 ECC applies. Paragraph 4

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The travel agents are mention in this Article for the first time. It is their obligation as well the obligation of the carrier and the tour operator to ensure that the relevant information is available to PRMs. The information relevant includes online reservation and information, concerning the conditions of carriage, journey information and access conditions. This has to be in appropriate and accessible format. The Regulation does not define what is appropriate and accessible. Accessible formats: for example, text, Braille, audio, video and/or electronic formats The additional obligation to confirm receipt of such assistance by any means available, including electronic means or Short Message Service (SMS) is newly included in the Regulation. The Proposal did not contain any such provision. It was important to the Commission to refer to the state of the art communication technology. At the time of drafting the Regulation this was the SMStechnology. However, the Commission also referred to Smartphone applications, websites as well as social media.21 With this the PRM can be sure that assistance is provided. The enforcement of the access rules was of utmost importance to the Commission. It is by far listed in greater detail than e.g. in the air transport regulation. The combination of creating access rules, making them publically available and confirming assistance provided for now creates a strong and effective right of non-discriminatory transportation. 21 A European vision for Passengers, p. 6.

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Article 10 Right to assistance in ports and on board ships Subject to the access conditions provided for in Article 9(1), carriers and terminal operators shall, within their respective areas of competence, provide assistance free of charge to disabled persons and persons with reduced mobility, as specified in Annexes II and III, in ports, including embarkation and disembarkation, and on board ships. The assistance shall, if possible, be adapted to the individual needs of the disabled person or person with reduced mobility.

The Proposal had five paragraphs. The only paragraph that remained is a rule 142 that maintains assistance free of charge. The Proposal had a different approach. It allowed the carrier to levy on a non-discriminatory basis charges from all passengers.22 The Proposal also provides for rules how the charge is transparently calculated and checked by the national enforcement body. This idea was abandoned as practically impossible to succeed. The Proposal referred to the quality standards in Article 13 making the carrier 143 responsible for ensuring this standard even if a third party is employed for providing assistance. This is completely deleted. Nevertheless, also under the Regulation it is the carrier’s or the terminal operator’s respectively final responsibility to ensure the assistance is provided in accordance with this Article. Each party has to take care of its respective area of competence. This is clear 144 e.g. for the check in where the terminal operator is responsible. It is also unequivocal that on board the carrier is responsible. Problems occur during embarkation or disembarkation, where both parties need to assist. Also Annex II and III do not clarify the party responsible. It therefore has to be concluded that both parties are responsible as a collective responsibility. Embarkation and disembarkation

The Proposal clarified in Article 10 that where no port exists for a particular 145 destination or leg, the assistance shall be organized by the carrier at the embarkation / disembarkation point. Clearly there are different situations: whilst e.g. for Ro/Ro ferries, the port in- 146 frastructure can deal with PRMs thanks to vehicular RO/RO ramps and elevated passenger walkways linking directly to the vessel. However, the situation is different for tourist voyages (cruises): it is very unlikely that access will always be available for PMRs given the range of different sizes of cruise ships which moreover may show up at the port only once a year during the season. Assistance to be provided

Whilst now the specifications of the assistance are laid down in Annex II and 147 III the Proposal had clarified in Article 11 that the details of assistance for departing from, arriving at or transiting through a port are specified in Annex III.

22 This was criticized by the EESC as being against the interest of inclusion, EESC Paragraph 4.4.

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The assistance shall, if possible, be adapted to the individual needs of the disabled person or person with reduced mobility. With this the provision of assistance should be clarified. 149 An obligation of the Carrier to report on its activities in relation to PRMs to the National Enforcement Bodies included in the Proposal’s paragraphs 4 and 5 was deleted after severe resistance of Carriers against those additional obligations not existent in any other transport mode. 150 The obligations mentioned here are not addressed to the tour operator. 148

Article 11 Conditions under which assistance is provided 1.

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Carriers and terminal operators shall, within their respective areas of competence, provide assistance to disabled persons and persons with reduced mobility as set out in Article 10 provided that: (a) the carrier or the terminal operator is notified, by any means available, including electronic means or SMS, of the person's need for such assistance at the latest 48 hours before the assistance is needed, unless a shorter period is agreed between the passenger and the carrier or terminal operator; and (b) the disabled person or person with reduced mobility presents himself at the port or at the designated point as referred to in Article 12(3): (i) at a time stipulated in writing by the carrier which shall not be more than 60 minutes before the published embarkation time; or (ii) if no embarkation time is stipulated, no later than 60 minutes before the published departure time, unless a shorter period is agreed between the passenger and the carrier or terminal operator. In addition to paragraph 1, disabled persons or persons with reduced mobility shall notify the carrier, at the time of reservation or advance purchase of the ticket, of their specific needs with regard to accommodation, seating or services required or their need to bring medical equipment, provided the need is known at that time. A notification made in accordance with paragraphs 1(a) and 2 may always be submitted to the travel agent or the tour operator from which the ticket was purchased. Where the ticket permits multiple journeys, one notification shall be sufficient provided that adequate information on the timing of subsequent journeys is provided. The passenger shall receive a confirmation stating that the assistance needs have been notified as required in accordance with paragraphs 1(a) and 2. Where no notification is made in accordance with paragraphs 1(a) and 2, carriers and terminal operators shall nonetheless make all reasonable efforts to ensure that the assistance is provided in such a way that the disabled person or person with reduced mobility is able to embark, disembark and travel on the ship. Where a disabled person or person with reduced mobility is accompanied by a recognised assistance dog, that dog shall be accommodated together with that person, provided that the carrier, travel agent or tour operator is notified in accordance with applicable national rules on the carriage of recognised assistance dogs on board passenger ships, where such rules exist.

This Article only addresses the carrier or the terminal operator in Paragraph 1 and 2 but incorporates the tour operator in Paragraph 3 and 5. Through Article 5 other parties are also addressed. Therefore in case a subcontractor is involved the obligations of the carrier remain the same.

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Paragraph 1.(a)

The crucial aspect is that the PRM notifies the carrier or the terminal operator of his or her need for such assistance at least 48 hours before assistance is needed. This time frame of 48 hours was criticized heavily by the EESC.23 It said the strict deadline for PRMs could clearly prevent them from fully benefitting from certain rights linked to the free movement of persons. On the contrary, the Council suggested exchanging this with two working days”. This would have been more beneficial to the carrier or terminal operator. However, in the end this was left unchanged. It was also suggested that in case of a cruise voyage the notification has to be made at time of booking. This is now stipulated in paragraph 2 in a limited form. It is also an obligation under the package travel Directive 90/314 EEC. Here the clients are required to communicate “special requirements” to the organizer or retailer when making the booking, so that the organizer can make the necessary arrangements for his customers throughout the cruise journey. The notification can be done by any means available, including electronic means and SMS. It was important to the Commission to refer to the state of the art communication technology. At the time of drafting the Regulation this was the SMS-technology. However, the Commission also referred to Smartphone applications, websites as well as social media.24 The notification has to be done in writing or orally at the point of sale. This is clarified in Article 12.1, where it is said that the carrier shall take all measures necessary for the receipt of notification, including sale by telephone. The notification cannot be done orally at any point where no sale is provided. Anything else would endanger the smooth operation and thus be contrary to the Regulation’s aim. Furthermore, newly incorporated in the Regulation, the notification period can be shorter if it is agreed between the passenger and the carrier or terminal operator. This flexibility in the notification system is sensible, for example if the person regularly uses the same service. It would also be unreasonable to require carriers to put in place a notification system unless it is of any real value to them. In respect of the notification it is important to note the details of recital 29: It says the Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data should be strictly respected and enforced in order to guarantee respect for the privacy of natural and 23 Opinion of the EESC 16, Paragraph 4.2. 24 A European vision for Passengers, p. 6 .

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legal persons, and to ensure that the information and reports requested serve solely to fulfill the obligations laid down in this Regulation and are not used to the detriment of such persons. If a passenger sends the requested notification this information may not be saved in the carrier’s internal data for future bookings unless the information is received by other means. This was criticized as being too narrow under the aspect of customer relation services. Paragraph 1.(b)

Article 11.1.b is similar to Article 12.e of the Proposal. The carrier has to inform the PRM in writing about the time he has to present himself (not arrive) at the designated point. This shall be not more than 60 minutes before the published embarkation (not departure time as still stipulated in the proposal) time. 162 In contrast to the Proposal the biggest difference is that if no time is stipulated the PRM has to present himself not later than 60 minutes before the published embarkation time. The Proposal mentioned 30 minutes before the published departure time. This was supported by the European Parliament. However, here the carriers and terminal operators could argue an extension to 60 minutes is reasonable and the change from departure to embarkation time is appropriate. 163 Newly inserted is also that in accordance with Article 11.1.b.i the time has to be stipulated in writing. 160 161

Paragraph 2

This is completely new and takes care of the feasibility of special assistance through the carrier. It can be seen as a balance to paragraph 1 with its relative short notification time. It provides that the carrier (not the terminal operator nor the ticket vendor but according to paragraph 3, the travel agent or the tour operator) shall be notified at the time of reservation or advance purchase of the ticket of the specific needs with regard to accommodation, seating or services required or their need to bring medical equipment. 165 This notification of special needs is necessary to guarantee a smooth carriage. This is an important issue since the infrastructure sometimes needs to be adjusted which cannot be done spontaneously but needs to be prepared carefully. 166 There is no stipulation of the form in which the carrier has to be informed, i.e. it can be done in writing or orally. 164

Paragraph 3 167

The Proposal had a paragraph stating that the carriers shall take all measures necessary for the reception of notification. The obligation should have included all points of sale including sale by telephone. This is now regulated in a separate article, in Article 12.1.

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However, in paragraph 3 it is clarified that the notification can be submitted to the travel agent or the tour operator from which the ticket was purchased as well. It is also added that where the ticket allows multiple journeys one notification is sufficient provided that adequate information on the timing of subsequent journeys is provided. Multiple journeys are not defined but could refer to e.g. daily or monthly tickets. Then one notification to the carrier should be sufficient. This with the condition that adequate information is given. It is not said who should give adequate information to whom and what adequate refers to. Considering the objectives of this chapter, to guarantee a comfortable journey without any interruption it can be derived that the adequate information has to be given by the passenger to the carrier. Adequate information is information that allows the carrier to undertake all necessary steps to accommodate the needs of the PRM in the sense of the Regulation as described in paragraphs 1 and 2. The regulation includes for the first time the obligation to provide the passenger with a confirmation that the notification in accordance with paragraphs 1 (a) and 2 have been received. This was asked for by the EESC in its opinion.25 It should be ensured that the passenger can prove that he or she did actually notify his or her assistance needs, in the event of a breakdown in the information transmission system. It is not stated by whom the confirmation has to be issued. This should reasonably be that party to whom the information was given.

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Paragraph 4

Where no notification has been made the carrier and – for the first time ad- 173 dressed in this paragraph – the terminal operator shall make all reasonable efforts to provide assistance. Carriers and terminal operators are not allowed to refer to the notification period and refuse further assistance. This was the same provision in the Proposal. Again, like in Article 8.2, reasonable efforts are not defined. The individual 174 circumstances have to be considered. Reasonable efforts are efforts that a reasonably prudent carrier would observe under a given set of circumstances. Similarly reasonable efforts are those which might fairly and properly be required of a carrier. The consequences of a late notification are not stipulated. However, this can 175 be treated equally to no notification, i.e. the carrier shall make all reasonable efforts to provide assistance.

25 Opinion of the EECS, Paragraph 4.2.

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Paragraph 5

Whilst the Proposal was mentioning a “recognised assistance animal” the Regulation only provides rules for recognised assistance dogs. No other animal than a dog has to be accepted by the carrier. Recognised assistance dog means guide and other assistance dogs, which are highly trained to assist a wide range of disabled persons with everyday tasks. Guide dogs which are trained primarily to provide mobility assistance to blind or partially sighted people are trained by an organisation that is accepted by and affiliated to the International Guide Dog Federation (IGDF). Assistance dogs are trained by an organisation that meets the full membership criteria of Assistance Dogs International (ADI).26 177 This was a very important aspect during the discussions of the Proposal. It was very important for the PRM associations to include the possibility to bring a dog. Such dogs are allowed provided the passenger has notified the carrier, tour operator or travel agent. The form of notification is not described in the Regulation. It can be done written or orally. The notification has to be made in accordance with applicable national rules, where such rules exist. The Regulation does not clarify the form of national rules that should come into consideration. The word “rules” was chosen, not “law”. Therefore any type of rules can be taken into account. In the end of this paragraph it was added “where such rules exist”. This creates an unclear situation in case such rules do not exist. Does the carrier have to accept the dog in case no national rules exist? Does the PRM have to make a notification where no rules exist? Again, taking into account recitals (4) to (11), deriving from the explicit aim of this chapter and discussions preceding the Regulation a wide interpretation in favour of the passenger has to be taken into account. 178 It also has to be considered that the carrier may set certain rules, like at the reservation stage the guide dog owners must confirm that they will provide any drinking and eating bowls for the crossing. Or that no more than 2 parties accompanies by a guide dog are accepted for any particular sailing. Or that in addition to a guide dog, all visually impaired passengers, including foot passengers, must be accompanied by a competent sighted adult.27 Several ferry services and cruise lines have published special rules accommodating assistance dogs.28 Special information might be required for cross border journeys.29 176

26 Recognised assistance dogs. 27 Summary, p. 21. 28 Access to Ferry Travel, p. 24, 25 for ferry lines and MOU Assistance Dogs for cruise operators 29 Access to Ferry Travel, p.21 and Pet Travel.

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Article 12 Reception of notifications and designation of meeting points 1.

2.

3.

Carriers, terminal operators, travel agents and tour operators shall take all measures necessary for the request for notifications, and for the reception of notifications made in accordance with Article 11(1)(a) and 11(2). That obligation shall apply at all their points of sale, including sale by telephone and over the Internet. If travel agents or tour operators receive the notification referred to in paragraph 1 they shall, within their normal office hours, transfer the information to the carrier or terminal operator without delay. Carriers and terminal operators shall designate a point inside or outside port terminals at which disabled persons or persons with reduced mobility can announce their arrival and request assistance. That point shall be clearly signposted and shall offer basic information about the port terminal and assistance provided, in accessible formats.

Paragraph 1

All parties possible have to take all measures necessary. Here a reasonable 179 effort is not enough. It is mentioned for the first time that those parties have to request the notifications and not only receive it. This creates an obligation to ask for all details that might be or become important. Here the Commission argued that it is important the procedures are put in place for the reception of notifications by passengers.30 The onus should not be on a person with restricted mobility to take the initiative to seek information. The request for assistance should be made by the organisation which makes the booking. They have to accept the notification at their points of sale. Not at any other 180 point. The communication within the organization of the parties shall ensure transfer from the point of sale to the involved parties at the point of embarking / disembarking / carrying. The hurdles at the points of sale are reduced since also a sale via telephone 181 or over the Internet has to be able to accommodate the relevant notifications. Paragraph 2

Whilst the carrier can relay the information directly to the department involved in embarking / carrying / disembarking, travel agents and tour operators have to transfer the notification to the carrier. This is regulated in this paragraph. The transfer of the notifications has to be done within their normal office hours without delay. The Proposal had given concrete time lines (see Article 13 of the Proposal): If received 48 hours before departure within 36 hours to the sub-contractor If received later as soon as possible This was changed in the regulation to “without delay” independently of the time of receipt of notification. “Without delay” means within the time one can expect by a carefully acting travel agent or tour operator.

30 Draft recommendations II, p. 22.

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Paragraph 3

The Proposal did only put the obligation on the managing body of a port. The Regulation now addresses it also to the carriers, in spite of the fact that those meeting points belong to the sphere of the terminal operator, since they have to be posted inside or outside the port terminals. The designated point’s purpose is to announce the arrival and request assistance 187 The second sentence is identical to the Proposal. The point shall be clearly signposted, i.e. it may not be hidden in one corner, offer basic information about the port terminal and assistance provided in accessible formats: 188 Accessible formats: for example, text, Braille, audio, video and/or electronic formats 186

Article 13 Quality standards for assistance 1.

Terminal operators and carriers operating port terminals or passenger services with a total of more than 100000 commercial passenger movements during the previous calendar year shall, within their respective areas of competence, set quality standards for the assistance specified in Annexes II and III and shall, where appropriate through their organisations, determine resource requirements for meeting those standards, in cooperation with organisations representative of disabled persons or persons with reduced mobility. In setting quality standards, full account shall be taken of internationally recognised policies and codes of conduct concerning facilitation of the transport of disabled persons or persons with reduced mobility, notably the IMO's Recommendation on the design and operation of passenger ships to respond to elderly and disabled persons’ needs. The quality standards provided for in paragraph 1 shall be made publicly available by terminal operators and carriers physically or on the Internet in accessible formats and in the same languages as those in which information is generally made available to all passengers.

2.

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Paragraph 1

The Proposal obligated only the carrier. Now the Regulation refers to terminal operators and carriers. Tour operators are still left aside. 190 It was rightfully argued as regards assistance, that carriers do not have control or jurisdiction over ports. It is the terminal operator which is responsible for transit through the port until arrival at the ship. This point is particularly important as terminal operators play a key role in providing the necessary infrastructure. An example was set in the Aviation regulation, where it is the airport manager who is responsible for providing assistance to PRMs at the airport. 191 A very crucial difference between the Proposal and the Regulation is the number of commercial passengers that is necessary to apply the Article: 100.000 commercial passenger movements during the previous calendar year.31 The Proposal did not contain any number at all. 192 The number was added by the Council and kept in the text against the resistance of the Commission and the Parliament. 189

31 For example Hamburg had in 2014 about 588.000 cruise passengers, Dover carried 12.7 million passengers in 2013.

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The obligation is – within their respective area of competence (see Article 10) – to set quality standards for assistance specified in Annexes II and III. Whilst in the original wording of the Proposal the additional requirement was to determine resource requirements for meeting those standards, this is now only necessary where appropriate through their organisations, i.e. national or European carrier or terminal operator associations. This refers for example to check-in and register baggage (Annex II). There are passenger services where no check-in and register is possible and necessary since passengers usually do not bring any baggage. With the old version passenger services could have been obliged to nevertheless offer that service to PRMs. This would have been inappropriate. Again there is no time frame for setting those standards. As in Article 9.1 the standards shall be set in cooperation with organisations representative of PRMs. The Proposal was speaking of organisations representing PRMs. The old version could have resulted in a large variety of organisations that could have asked for participation which would have been contra productive.

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The IMOs Recommendation of the design and operation of passenger ships32 197 shall be taken into full account. Those guidelines have their emphasis on ro-ro passenger ferries which are part of the public transport system. With necessary modifications the guidelines may also find use when planning the construction and operation of other types of passenger ships. Those recommendations say for example in the Annex 8, paragraph 2: For the 198 purpose of safety, new passenger ships should to the extent possible be designed in such a way that there is barrier free passage for elderly and disabled persons in public spaces on board and in escape routes to muster stations. Paragraph 3

Whilst the Proposal only said the carriers shall publish their quality standards, 199 the Regulation’s paragraph is much more detailed and addresses the terminal operators as well as the carriers. Publishing shall be done physically or on the Internet in accessible formats and in the same language as normally used. The Commission obviously thought the format needs to describe very clearly. Accessible formats: for example, text, Braille, audio, video and/or electronic 200 formats Article 14 Training and instructions Without prejudice to the International Convention and Code on Standards of Training, Certification and Watchkeeping for Seafarers and to the regulations adopted under the Revised

32 IMO.

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Chapter 3, VI. Convention for Rhine Navigation and the Convention regarding the Regime of Navigation on the Danube, carriers and, where appropriate, terminal operators shall establish disability-related training procedures, including instructions, and ensure that: their personnel, including those employed by any other performing party, providing direct assistance to disabled persons and persons with reduced mobility are trained or instructed as described in Annex IV, Parts A and B; their personnel who are otherwise responsible for the reservation and selling of tickets or embarkation and disembarkation, including those employed by any other performing party, are trained or instructed as described in Annex IV, Part A; and the categories of personnel referred to in points (a) and (b) maintain their competences, for example through instructions or refresher training courses when appropriate.

(a)

(b)

(c)

The need to train staff in order to develop disability awareness and expertise is also part of the Regulation. Its importance was emphasized during discussions subsequent the Proposal. It was argued that training is so important because it is crucial in preventing what can amount to degrading treatment of PRMs even where staff shows goodwill.33 202 The reference to the international law is completely new. The quoted rules shall prevail. This was necessary in order to avoid ambiguity with those legal materials. 203 The Proposal only addressed the carriers. The Regulation also mentions “where appropriate” the terminals. Again the tour operators are not included. 204 The provisions should be without prejudice to general provisions applicable to the embarkation of passengers laid down by the international, Union or national rules in force (recital 10). This is important e.g. in respect of immigration provisions. 201

Subparagraph a)

The Proposal said that the employee shall have the knowledge of how to meet the needs of PRMs. This was changed into the more precise wording: employees giving direct assistance have to be trained or instructed in accordance with Annex IV, Parts A and B. This could for example be ferry staff receiving training in ways of dealing with cars on garage decks, so that parking places in boats allow wheelchair users to get out of their cars. A ship could assign a “Disability officer”. 206 The Proposal was wider in that all employees had to be trained that deals with the traveling public. This phrasing, not precise and difficult to measure, would have led to a much wider circle of employees that needed to be trained. Now the carrier or terminal operator may train only a specialized group of employees, which is in the interest of both sides. Some staff has no contact with passengers with reduced mobility, and there is no need to require them to undergo any such training. 205

33 Minutes, p. 7.

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Subparagraph b)

The personnel that is responsible for selling and reservations has to be trained 207 or instructed in accordance with Annex IV, Parts A only. Subparagraph c)

Not only has the personnel be trained or instructed but the qualification has to 208 be maintained. The wording was similar in the Proposal, where it was said that the personnel receives refresher training where appropriate. The obligation in the Regulation is stronger, since the carrier and the terminal operator have to ensure that the qualification is maintained. The way how this is achieved is flexible. The Proposal on the other hand is weaker in that there is only an obligation to maintain the qualification when appropriate. The Proposal also mentions that all new employees receive training. This is 209 not mentioned expressly in the Regulation however for the relevant group of employees this is the direct result out of subparagraphs a) and b). Article 15 Compensation in respect of mobility equipment or other specific equipment 1.

2. 3.

4.

Carriers and terminal operators shall be liable for loss suffered as a result of the loss of or damage to mobility equipment or other specific equipment, used by a disabled person or person with reduced mobility, if the incident which caused the loss was due to the fault or neglect of the carrier or the terminal operator. The fault or neglect of the carrier shall be presumed for loss caused by a shipping incident. The compensation referred to in paragraph 1 shall correspond to the replacement value of the equipment concerned or, where applicable, to the costs relating to repairs. Paragraphs 1 and 2 shall not apply if Article 4 of Regulation (EC) No 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents [10] applies. Moreover, every effort shall be undertaken to rapidly provide temporary replacement equipment which is a suitable alternative.

Paragraph 1

The liability is addressed to the carrier but also to the terminal operator. The 210 paragraph seeks to put the emphasis on the person who was responsible for the equipment at the time. The liability exists for “mobility equipment or other specific equipment” whilst the Proposal said “wheelchairs or other mobility equipment or parts thereof”. The Regulations wording here now is much wider. Not only mobility is named but all specific equipment without saying what this could be. However, any equipment whether it is used for mobility or just general assistance can be meant. In accordance with this paragraph the Carrier or terminal operator is only li- 211 able if the incident was due to fault or neglect. This was not laid down in the Proposal, where a liability independent of any fault was maintained. The burden of proof falls with the carrier in case of a shipping incident as defined in Article

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3 (u) and with this refers to an equal stipulation in Article 3.3 of the Athens Convention. The Tour Operator is not mentioned in this Article. Paragraph 2

The limit of compensation is the replacement value of the equipment, specifically not the new value. The Proposal had suggested that there shall be no limit to the amount of compensation. However, this was not agreeable to the parties involved in the discussion. 213 Where applicable the costs of repairs have to be reimbursed. There is however no choice of the owner of the equipment since the overall limit is the replacement value. 212

Paragraph 3

This was added for clarification in order to avoid any ambiguity. The Proposal did not mention this neither. The regulation EU 392/2009 refers to the liability of carriers of passengers by sea in the event of accidents and results out of the Athens Convention. 215 Article 3 of the regulation refers to several articles of the Athens Convention, amongst others Article 8. There limits of liability are stipulated.34 216 Article 4 of the regulation refers to Article 3.3 of the Athens Convention in respect of liability for mobility equipment. Article 3.3 stipulates rules in respect of the burden of proof. With this it is clarified that the limits of liability in the mentioned regulation take precedent over paragraphs 1 and 2 of this Article. 214

Paragraph 4

This was taken up from the Proposal. In order to assist the PRM every effort shall be undertaken to provide replacement equipment. Here the Regulation added that it has to be a suitable alternative. This was considered to be an important clarification as the obligation to provide temporary replacement for lost or damaged equipment should also take in consideration the needs of the person. 218 It is not said as e.g.in Articles 8, 11 and 12 that the effort has to be reasonable. In contrast every effort has to be made. So it is possible that for example a wheelchair that is not repairable has to be replaced by another one that, if none is locally available, has to be brought by the fastest service possible, i.e. by air transportation. Nevertheless the proportionality has to be guaranteed. 217

34 For Cabin luggage 833 units of account per passenger, for vehicles and luggage carried therein 3,333 units of account per vehicle and all other types of luggage 1200 units of account per passenger.

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This is the second major part of the Regulation, indeed of any regulation deal- 219 ing with passenger rights, the consequences of interrupted travel throughout the trip, i.e. before and during the journey and in case of disruption.35 The Commission emphasized that information in respect of travel problems 220 from part of the crucial service that carriers or terminal operators should provide to the passengers. The passengers should no longer wait for continuing the journey without knowing precise details of their voyage. This whole chapter is addressed to carriers and terminal operators only. Article 16 Information in the event of cancelled or delayed departures 1.

2.

3.

In the case of a cancellation or a delay in departure of a passenger service or a cruise, passengers departing from port terminals or, if possible, passengers departing from ports shall be informed by the carrier or, where appropriate, by the terminal operator, of the situation as soon as possible and in any event no later than 30 minutes after the scheduled time of departure, and of the estimated departure time and estimated arrival time as soon as that information is available. If passengers miss a connecting transport service due to a cancellation or delay, the carrier and, where appropriate, the terminal operator shall make reasonable efforts to inform the passengers concerned of alternative connections. The carrier or, where appropriate, the terminal operator, shall ensure that disabled persons or persons with reduced mobility receive the information required under paragraphs 1 and 2 in accessible formats.

Paragraph 1

In the Regulation the definitions for “cancellation” and “delay” were deleted. Both definitions were still contained in the Proposal. The Proposal’s definition for cancellation was: “cancellation” means the non-operation of a service which was previously scheduled and for which at least one reservation was made. This is very similar to the Air transport regulation EC 261/2004. The Proposal’s definition for delay was: “delay” means a difference between the time the passenger was scheduled to depart or to arrive in accordance with the published timetable and the time of his actual or expected departure or arrival. Equal to bus transportation the information has to be provided not later than 30 minutes after the scheduled time of departure. Whilst in train transportation the information has to be provided as soon as possible there is no such provision for air transportation. Due to the threshold of 30 minutes it is clear that minimal delays shall not be taken into account. Whilst the Proposal was only mentioning delay, the Regulation clarifies that a cancellation has the same consequences.

35 E.g.: A European vision for Passengers, p. 6.

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The Regulations expressly mentions passenger service or cruise. The Proposal did not mention any of those. 228 The Regulation is relevant to passengers departing from port terminals or if possible passengers departing from ports (not mentioned in the Proposal). Therefore all passengers should benefit from this paragraph. 229 The passengers shall be informed of the situation and of the estimated departure time and estimated arrival time. Information about the new time schedule is not sufficient. The information has to include information about the situation, i.e. the reason for the delay and possible remedies. This was newly inserted in the Regulation. 227

Paragraph 2

This paragraph does not apply to cruises. Whilst the Proposal was speaking about connection the Regulation mentions connecting transport service. The obligations lay not only with the carrier but also where appropriate with the terminal operator. This was newly added in the Regulation. The obligation of the terminal operator is weak, although the terminal operator might often be the most able party to assist. The operator know the local transport services and have ways of communication. 231 Reasonable effort has to be undertaken by the carrier (or terminal operator). 232 The information shall refer to alternative connections. This is identical to the Proposal. 230

Paragraph 3 233

This is completely new. PRMs shall receive the information in accessible formats. The Regulation does not define accessible formats. This would result for example for blind passengers in screen readers for visually impaired people or sign language interpretation for deaf people. Article 17 Assistance in the event of cancelled or delayed departures 1.

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432

Where a carrier reasonably expects the departure of a passenger service or a cruise to be cancelled or delayed for more than 90 minutes beyond its scheduled time of departure, passengers departing from port terminals shall be offered free of charge snacks, meals or refreshments in reasonable relation to the waiting time, provided they are available or can reasonably be supplied. In the case of a cancellation or a delay in departure where a stay of one or more nights or a stay additional to that intended by the passenger becomes necessary, where and when physically possible, the carrier shall offer passengers departing from port terminals, free of charge, adequate accommodation on board, or ashore, and transport to and from the port terminal and place of accommodation in addition to the snacks, meals or refreshments provided for in paragraph 1. For each passenger, the carrier may limit the total cost of accommodation ashore, not including transport to and from the port terminal and place of accommodation, to EUR 80 per night, for a maximum of three nights. In applying paragraphs 1 and 2, the carrier shall pay particular attention to the needs of disabled persons and persons with reduced mobility and any accompanying persons.

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Again cancellation was added in the Regulation compared to the Proposal. 234 This Article does not apply to passengers holding an open ticket as long as the departure time is not specified unless it is a season ticket or a travel pass. Finally it shall not apply if the passenger is informed of the cancellation or delay before the purchase of the ticket or if the cancellation or delay is caused by the fault of the passenger (see Article 20) Paragraph 1

Whilst the Proposal was stipulating a delay time of 60 minutes this was extended to 90 minutes in the Regulation. The Council had even suggested taking 120 minutes. The single time threshold is a simpler way than the time threshold that depends on the voyage distance (as it is currently in EC 261/2004 for air transportation), which was criticized as being too complicated. The snacks, meals or refreshments shall be offered. The carrier can decide what is possible or appropriate. The Proposal was mentioning meals and refreshments. The Regulation added that the obligation is only applicable to passengers departing from port terminals (as defined in Article 3 k). The wording of Article 16 (or, if possible, passengers departing from ports) is not included. The Proposal and the Regulation said the offer has to be free of charge and only offered provided they are available or can reasonably be supplied. This restriction might become practically important in areas where no infrastructure for food etc. is available. For most of the port terminals it will not play any role. However, it was clear to the Commission that the minimum to be provided is always access to the toilets and adequate heating / cooling or air condition.

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Paragraph 2

Consumer organisations criticized that in the air transport regulation there is a difference between long delays and cancellations (something that was changed by the case law of the EEC later on). Therefore the Commission tried to avoid that failure. Here both cases are treated in the same way and “cancellation” was amended in the Regulation compared to the Proposal. The Regulation added “passengers departing from port terminals”. The wording of Article 16 (or, if possible, passengers departing from ports) is again not included. There was a change from “hotel or other accommodation” to “on board or ashore” for clarification. Accommodation not necessarily consists of hotel rooms but could also be other suitable accommodation (recital 13). Accommodation has to be provided only “where and when physically possible”. The European Parliament argued against this exemption. They argued that

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compensation should not be conditional on unspecified material circumstances.36 Completely new is the second sentence. Now the carrier has the right to limit the total cost of accommodation ashore (not on board) not including transportation, to EUR 80 per night for a maximum of three nights. The unlimited assistance was criticized heavily in air transportation as being a too large burden for the carriers. To the contrast the European Parliament argued that it is “completely unreasonable” to oblige someone who has already suffered to bear further costs.37 However, the limitation was inserted. Also the EUR 80 were not undisputed. The Council suggested having a limit of EUR 120 in total. The Commission then suggested EUR 120 per night. It was also discussed to have a certain limit in relation to the ticket price. The compromise was EUR 80 per night. Also accommodation does not have to be provided in all events (see Article 20.3). This paragraph shall not apply where the carrier proves that the cancellation or delay is caused by weather conditions endangering the safe operation of the ship. This was not undisputed since there are arguments conceding that bad weather is foreseeable due to very reliable forecasts. Nevertheless, this was left in the paragraph. However, there is no exemption comparable to Article 19 where the application can be denied if there are extraordinary circumstances hindering the performance of the passenger service which could not have been avoided even if all reasonable measures had been taken. The burden of proof always lies with the operators (see also recital 15). The limit to the right to accommodation to three nights with a maximum of € 80 per night is valid for all passengers, i.e. also for PRMs. Paragraph 3

251

As in Articles 9, 22 and 23 particular attention shall be paid to the need of PRMs. Article 18 Re-routing and reimbursement in the event of cancelled or delayed departures 1.

Where a carrier reasonably expects a passenger service to be cancelled or delayed in departure from a port terminal for more than 90 minutes, the passenger shall immediately be offered the choice between: (a) re-routing to the final destination, under comparable conditions, as set out in the transport contract, at the earliest opportunity and at no additional cost; (b) reimbursement of the ticket price and, where relevant, a return service free of charge to the first point of departure, as set out in the transport contract, at the earliest opportunity.

36 Draft report II, p. 18/26. 37 Draft Report II, p. 18.

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Where a passenger service is cancelled or delayed in departure from a port for more than 90 minutes, passengers shall have the right to such re-routing or reimbursement of the ticket price from the carrier. The payment of the reimbursement provided for in paragraphs 1(b) and 2 shall be made within 7 days, in cash, by electronic bank transfer, bank order or bank cheque, of the full cost of the ticket at the price at which it was purchased, for the part or parts of the journey not made, and for the part or parts already made where the journey no longer serves any purpose in relation to the passenger's original travel plan. Where the passenger agrees, the full reimbursement may also be paid in the form of vouchers and/or other services in an amount equivalent to the price for which the ticket was purchased, provided that the conditions are flexible, particularly regarding the period of validity and the destination.

This article does not apply to cruises. Cruise passengers can claim similar 252 rights under directive 90/314 EEC. It does neither apply to passengers holding an open ticket as long as the departure time is not specified unless it is a season ticket or a travel pass. Again cancellation was newly added in the Regulation. Whilst in Article 17 assistance has to be offered this Article takes care of the 253 passengers travel plans. Paragraph 1

Already where a carrier reasonably expects a delay or cancellation the redress has to be offered independently of any extraordinary circumstances. Whilst the Proposal still intended to apply 120 minutes the Regulation only applies 90 minutes. The time refers to the scheduled time of departure. This is somehow surprising since during the discussion about the Proposal for an amendment for Regulation EC 261/2004 it was clearly said that the number of cases the lead to a compensation should be reduced. One efficient way to do this is to extend the threshold.38 Again there are different time frames for the different modes of transportation. The Commission preferred these individual time frames in contrast to a general definition of “long delay”. The reason was that this way it is possible to consider individual differences of the different transportation modes. Whilst again the train transportation has the shortest period available (60 minutes), bus operators as well as air operators have 120 minutes. The first alternative is much stronger under the Regulation. Whilst under the Proposal it was still sufficient offer alternative transport or where this is impractical informing of alternatives. The Regulation in contrast stipulates re-routing to the final destination. The obligation to bring the passenger to the final destination derives from the transport contract and therefore is not adding further obligations on the carrier. The further obligation to do this under comparable conditions as set out in the contract is problematic. Is it allowed or maybe necessary to take another mode of transportation? Is a deviation allowed? Here all circumstances of the in38 Proposal for EC 261/2004, p. 5.

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dividual situation have to be looked at. Further clarification maybe needs to be given by the courts. Finally the re-routing has to be done at no additional costs. It is not clearly said if the Carrier has to consider other carriers in case it is unable to provide own services within a certain time frame. This was clarified in the Commission’s proposal for an amendment for EC 261/2004. However, it has to be considered that in air transportation there are often several alternatives to get from one point to another. This is not necessarily the case in maritime transportation. Therefore the option to offer passengers re-routing with another carrier might often not be realistic in this transport mode. Alternatively the passenger can choose reimbursement of the ticket price. This is identical to the Proposal. New is that in addition to the ticket price, the passenger can, where relevant, return to the first point of departure. As a part of the general rights for passengers in all modes of transportation, it was very important for the Commission to clarify that the passenger can choose between the two options of re-routing and reimbursement with return service free of charge. The Carrier should not be able to finalize a cancellation by just reimbursing the passenger with the ticket price. However, if the passenger chooses one of the options the other option is no longer available. Interestingly the Commission did not provide explicitly for a third alternative that exists in air and train transportation: take a later transportation, i.e. re-booking with the same carrier. However, it is not excluded and therefore is a valid alternative, if it is agreed with the passenger. Again, choosing that alternative renders the other alternatives invalid.39 Also this Article does explicitly not mention “denied boarding” as a provision for the rights for abandonment or return and refund. The problem of denied boarding and its definition was heavily discussed before the Proposal was published.40 It was a great problem in air transport where overbooking regularly occurred. However, the Commission came to the conclusion that the problem of denied boarding with no reasonable grounds is almost inexistent in waterborne transportation. It was very important to the Commission to note the severe obligations resulting out of this paragraph. Given that improvising a solution on the spot is usually impossible in cases of disruption the necessary agreements and re-routing plans to provide efficient alternatives must be made beforehand, including the use of other carriers or modes of transport. Carriers have to ensure that they have the necessary and competent staff and tools at the terminal available to contact the passengers and to allow them to make their choice quickly and efficiently and as soon as there is a disruption. Situations where passengers are left stranded without any interlocutor still happen too often according to the Com-

39 A European vision for Passengers, p. 9. 40 Summary, p. 12 f.

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mission. The Commission also demands that such situations must be severely prosecuted by NEBs.41 Paragraph 2

This paragraph is newly added to the Regulation. Where a passenger service 267 is cancelled or delayed the right of the passenger shall be guaranteed also after the fact. Clearly the passenger shall have the same rights then. So the Commission added the clarification to stipulate the right to the alternatives in paragraph 1. Paragraph 3

This was changed completely. Whilst according to the Proposal the payment 268 could have been made within one month the Regulation only allows 7 days. This is identical to the solution chosen for air transportation (interestingly the time frame is still one month in coach and rail transportation). The Paragraph furthermore defines the means of payment (cash, electronic 269 bank transfer, bank order or bank cheque). However, a qualification was added in that a payment less than the full ticket price is allowed if a part or parts of the journey are already successfully made. If only a part or parts are affected and this part or those parts of the journey no longer serves any purpose in relation to the passenger's original travel plan, the full ticket price has to be reimbursed. Generally the passenger has the right to receive a payment. Whilst in the Proposal the reimbursement could be made in the form of 270 vouchers and only if the passenger insists on cash the carrier had to pay in cash, the Regulation put it the other way around. Here it is said that the normal form is money and only if the passenger agrees vouchers can be accepted by the passenger. The vouchers are only allowed if they are flexible. This is identical to the proposal. Also the definition of flexible regarding the period of validity and destination is identical to the Proposal. Article 19 Compensation of the ticket price in the event of delay in arrival 1.

2.

Without losing the right to transport, passengers may request compensation from the carrier if they are facing a delay in arrival at the final destination as set out in the transport contract. The minimum level of compensation shall be 25 % of the ticket price for a delay of at least: (a) 1 hour in the case of a scheduled journey of up to 4 hours; (b) 2 hours in the case of a scheduled journey of more than 4 hours, but not exceeding 8 hours; (c) 3 hours in the case of a scheduled journey of more than 8 hours, but not exceeding 24 hours; or (d) 6 hours in the case of a scheduled journey of more than 24 hours. If the delay exceeds double the time set out in points (a) to (d), the compensation shall be 50 % of the ticket price. Passengers who hold a travel pass or a season ticket and who encounter recurrent delays in arrival during its period of validity may request adequate compensation in accordance with

41 A European vision for Passengers, p. 9.

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3. 4.

5.

6.

The right to be compensated is part of the hard core of minimum quality standards for all modes. 272 In contrast to international conventions that are adopted into EU law about liability in case of death and injury (e.g. Athens Convention and Regulation EC 392/2009) the passenger rights regulations all together and this Regulation as well gives a standardized compensation amount regardless of the individual losses. Even if no individual loss or damage has occurred the passenger has the right to receive reimbursement. The criteria for the amount of compensation depend on other objective circumstances, like duration of the delay, the ticket price and the distance of the journey. 273 Both legal systems are therefore separate and autonomous and are applicable parallel to each other as confirmed by the CJEU for aviation.42 274 This article does not apply to cruises. It does not apply to passengers holding an open ticket as long as the departure time is not specified unless it is a season ticket or a travel pass. Furthermore it shall not apply if the passenger is informed of the cancellation or delay before the purchase of the ticket or if the cancellation or delay is caused by the fault of the passenger. Finally it shall not apply where the carrier proves that the cancellation or delay is caused by weather conditions endangering the safe operation of the ship or by extraordinary circumstances hindering the performance of the passenger service which could not have been avoided even if all reasonable measures had been taken (see Article 20). The burden of proof is with the carrier. 271

Paragraph 1 275

It was clearly the Commissions intention to give consumers the right for compensation in case of long delays. The question was how to define “long delay”. Finally it was decided to find a very individual solution – as some operators had

42 CJEU 10 January 2006, Case C-344/04 IATA [2006] ECR I-403; CJEU 22 December 2008, Case C-549/07 Wallentin-Herrmann [2008] ECR I-11061; CJEU 19 November 2009, Joined Cases C-402/07 Sturgeon e.a. and C-432/07 Böck and Lepuschitz [2009] ECR I-10923.

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suggested in their answers to the Commission’s questions,43 since a definition is hard to find. In accordance with the judgments of the CJEU compensation is given in case of long delays. The time frame for long delays is exactly spelled out. The Proposal’s wording said, that a passenger may request compensation “facing a delay in arrival due to a cancellation or a delay in departure”. The Regulation’s formulation was shortened and only speaks of “facing a delay in arrival”, deleting the second part (due to a cancellation or a delay in departure). The result is nevertheless the same. In case of cancellation the passenger faces a delay in arrival, too. This is supported by rulings of the CJEU. In the precedent case, the Sturgeon-decision of the CJEU, the court decided that in spite of the wording of regulation EC 261/2004 where it is said compensation shall be received in case of a cancellation (Art. 5 and Art. 7 Paragraph 1) that a delay of more than three hours results in the same consequences as a cancellation.44 This result was strongly opposed by airlines. Nevertheless, also national courts consequently followed that interpretation. In this respect there was a judgment of the Landgericht Stuttgart.45 The court decided that a flight that was not cancelled but delayed more than 7 hours has the same effect as a cancellation. This interpretation is supported as well by Article 20.2 and 20.4. There it is clarified that there is no right for compensation under the circumstances described there in case of delay and cancellation. Only passengers have this right. Passengers are not defined in the Regulation but the term does not refer to road hauliers, who shall not benefit from compensation. This was clarified during discussions of the Proposal, where the Commission confirmed that this legislation does not apply to freight drivers.46 This was also confirmed in recital (2). The passenger has to face a delay, not the ship. This could be important in cases where ferry operators offer multi valid tickets, i.e. in case of a delay the passenger can use the ship from another company. Here the ship would be delayed but not the passenger. Important is that the passenger does not lose the right of transportation. The amounts of compensation were made considerably smaller in contrast to the air transportation regulation EC 261/2004 and the Proposal.47 Also in contrast to the EC 261/2004 regulation there is no fixed amount for compensation but an amount relative to the ticket price. This is a new scheme. It was the declared aim of the Commission to differentiate in the different modes of transportation in respect of conditions under which compensation is due, the amount and the circumstances under which the operator can be exempt43 44 45 46 47

Summary, p. 14. Joined Cases Sturgeon e.a. Böck and Lepuschitz supra. 21 March 2012 – Case 13 S 93/11. Draft report I, p. 15. EESC: In its opinion the EESC called for a much higher compensation, Paragraph 4.6.

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ed. The Commission argued they would take into account the different needs of passengers or the specifics of each mode. Different criteria are applicable for example in respect of the amount of time lost as a result of a disruption (minimum one hour, in rail), the distance of the journey (air and waterborne transport) and the ticket price. 285 The compensation still starts with 25%. Whilst the Proposal offered this for a delay of 60 to 119 minutes the Regulation has several steps depending on the duration of the voyage. This dependence is completely new but similar to the compensation for delayed flight, that depends on the distance of the flight in kilometers. 286 Only if the delay exceeds double the time set out in points (a) to (d), the compensation shall be 50 % of the ticket price. The Proposal already offered 50% for a delay of 120 minutes or more and even 100% if the carrier fails to provide information of adequate alternative transport services. It was also argued by the Commission that 50% is not sufficient for act as a proper disincentive and that one should take at least 75% into consideration. The maximum compensation however now remains at 50% of the ticket price. Paragraph 2

This is completely new. Only passengers that hold a season ticket or a travel pass have any rights in accordance with this paragraph. There is no definition of travel pass and it is unclear if this could be a travel pass valid for only a day or several days of a week at minimum. 288 Furthermore the passengers have to encounter recurrent delays in arrival during its period of validity. Again it is not said how often recurrent is. Is it two times? Ten times? Again the principle of proportionality should be obeyed, i.e. the longer the ticket is valid the more often a delay has to occur before a compensation has to be paid. 289 The consequences are that they may request adequate compensation in accordance with the carrier's compensation arrangements. Consequently the carrier has to draft compensation arrangements. These arrangements shall state the criteria for determining delay in arrival and for calculation of compensation. Again it leaves the details to the carrier in the first place and later on maybe to the European Court of Justice except the criterion mention in the next paragraph. 287

Paragraph 3 290

Here it is maintained that compensation shall be calculated in relation to the price which the passenger actually paid for the delayed passenger service. Generally the higher the price of the ticket the higher the compensation has to be. But other criteria have to be taken into account, like the duration of the validity of the ticket and the duration of the delay and the number of delays. The carrier has extensive latitude.

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Paragraph 5

This is identical to the Proposal. The carrier is allowed to make the compen- 291 sation within one month and it can be paid in vouchers and / or other services. The vouchers are only allowed if they are flexible. Also the definition of flexible as the period of validity and destination is identical to the Proposal. Only if the passenger insists on cash the carrier has to pay in cash. The Commission had thought of a solution where vouchers are only allowed 292 if the passenger agrees similar to Article 18.3. But now it is clear that the carrier may offer vouchers without further enquiry. The voucher solution itself is regarded as a good solution for carriers and passengers as they are flexible, rapid and easy for both parties. Paragraph 6

This is new as well. The commission gives very detailed provisions in case of 293 payment. The compensation of the ticket price shall not be reduced by financial transaction costs such as fees, telephone costs or stamps. Carriers may introduce a minimum threshold under which payments for compensation will not be paid. This threshold shall not exceed EUR 6, i.e. the ticket price has to exceed EUR 24. The carrier may deny any payment if the compensation would be six Euro or less. The number is a typical compromise. The Council suggested EUR 10, whilst the Commission offered EUR 4. Article 20 Exemptions 1. 2.

3. 4.

Articles 17, 18 and 19 shall not apply to passengers with open tickets as long as the time of departure is not specified, except for passengers holding a travel pass or a season ticket. Articles 17 and 19 shall not apply if the passenger is informed of the cancellation or delay before the purchase of the ticket or if the cancellation or delay is caused by the fault of the passenger. Article 17(2) shall not apply where the carrier proves that the cancellation or delay is caused by weather conditions endangering the safe operation of the ship. Article 19 shall not apply where the carrier proves that the cancellation or delay is caused by weather conditions endangering the safe operation of the ship or by extraordinary circumstances hindering the performance of the passenger service which could not have been avoided even if all reasonable measures had been taken.

The Proposal did not mention a special Article for exemptions but included 294 the provisions in the respective Article. In bringing the exemption in one Article all exemptions could be overviewed at once. Paragraph 1

The rights for assistance, re-routing, reimbursement and compensation do not 295 apply to passengers with open tickets as long as the time of departure is not specified. Open tickets can be used at any time.

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There is an exception from the exemption for passengers holding a travel pass or a season ticket. 297 This paragraph does not apply to cruises (see Article 2.1 c). 296

Paragraph 2

The rights for assistance and compensation do not apply in case the relevant information is provided before the ticket is purchased. Since the delay can be avoided by the passenger if he is informed this is a sensible rule. The rights do also not apply if the cancellation or delay is caused by the fault of the passenger. 299 Article 18, re-routing and reimbursement, is not mentioned here. Therefore even if the delay or cancellation known to the passenger at time of purchase of the ticket he maintains the right for re-routing or reimbursement. 298

Paragraph 3

This Paragraph refers to assistance free of charge for adequate accommodation on board, or ashore, and transport to and from the port terminal and place of accommodation in addition to the snacks, meals or refreshments in the event of cancelled or delayed departures (Art. 17.2). 301 During discussions subsequent to the Proposal it was pointed out by several stakeholders that the influence of bad weather is greater for maritime transport than for rail or air transport. This for example was very important for Ferry operators operating in northern Europe. 302 Those delegations who were in favour of an exemption for weather conditions and "extraordinary circumstances" have stated that even with such a limitation carriers would be exposed to a great risk of having to pay large sums for accommodation. The number of passengers on board a ship might be considerably higher compared to other transport modes (on board smaller ships the number of passengers can be several hundreds and on board big ferries the number of passengers can be up to 7,000). In a worst case scenario, a carrier might feel forced to go out at sea even if the weather conditions are very bad and this to the detriment of the safety of passengers. Therefore, these delegations proposed a general exemption to the obligation of assistance (Article 17) in case the passenger is informed of the delay before the purchase of the ticket and of the obligation to supply snacks, meals and refreshments and accommodation in case of bad weather conditions or extraordinary circumstances. Two delegations and the Commission strongly opposed these proposals.48 303 Here the exemption of “extraordinary circumstances” as known from the air transportation regulation and mentioned in this Article further down in paragraph 4 was not inserted. Resulting therefrom the carrier has to provide assistance free of charge, adequate accommodation on board or ashore and transportation as well as meals etc. even in the event of extraordinary circumstances. 300

48 COREPER, p. 6.

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This is confirmed in a court decision of the CJEU in relation to air transportation where the court decided that even in extraordinary circumstances (the eruption of the Icelandic volcano Eyjafjallajökull) the air carrier has to provide care to the air passengers.49 The court argued in this decision that the value of protecting passengers is higher than the burden for the airline. However, the carrier can use the exemption “weather conditions endangering the safe operation of the ship”. This is – in the system of passenger rights – a new exception. The regulation 261/2004 for air transportation in contrast does not provide for such an exemption. There is no further definition for weather conditions endangering the safe operation of the ship in Article 3. However, recital (16) gives some indication: Those weather conditions could include but are not limited to strong winds, heavy seas, strong currents, difficult ice conditions and extremely high or low water levels, hurricanes, tornados and floods. On the other hand it was pointed out that due to very good forecasts the influence is only minimal. But the exemption was maintained also in the interest of a high level of protection for maritime passengers. It clearly spells out that the burden of proof is with the carrier. This is also the clear understanding of the Commission.

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307

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Paragraph 4

This paragraph refers to compensation of the ticket price in the event of can- 310 cellation or delay in arrival and stipulates that Art. 19 shall not apply. Art. 19 only refers to delay in arrival and not explicitly to cancellation. This discrepancy is only surprising at first sight. There is no doubt that the Commission intended to give the consumer compensation also in the event of a cancellation, since the decisive factor is the delay in arrival independent of the original cause. Also following the logic of the firm case law of the CJEU long delays and cancellation have to be treated equally.50 It does not apply to cruises. 311 Here two defences of the carrier are offered: – weather conditions endangering the safe operation of the ship (details under paragraph 3 supra) and – extraordinary circumstances hindering the performance of the passenger service which could not have been avoided even if all reasonable measures had been taken.

49 CJEU 31 January 2013, Case C-12/11 Denise McDonagh ./. Ryan Air; http://curia.europa/ juris/documents.jsf?num=C-12/11 50 See recital 278.

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314

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The Proposal said “exceptional circumstance” whilst the Regulation says “extraordinary circumstances” in line with Article 5.3 of the air transportation regulation. Against the recommendation of the EESC a further clarification that “the provision does not apply to a technical problem occurring on the ship and causing the cancellation of the travel unless this problem derives from events which by their nature or origin are not inherent to the normal performance of the activity of the carrier” was not added to this paragraph. The EESC also recommended adding that the minimum maintenance requirements for a ship should not alone serve as a proof that the carrier has taken all “reasonable measures”. This was not done.51 Extraordinary circumstances are not defined but in discussions subsequent to the Proposal it was suggested that the following reasons could be cancellation reasons besides the weather: – technical reasons; – safety; – security; – problems in ports (e.g. non-availability of a berth); – strikes or social action; – political conflicts. Consequently extraordinary circumstances are mentioned in the recitals. Here an unusually long list of examples is named. Extraordinary circumstances should include but not be limited to, natural disasters such as fires and earthquakes, terrorist attacks, wars and military or civil armed conflicts, uprisings, military or illegal confiscations, labour conflicts, landing any sick, injured or dead person, search and rescue operations at sea or on inland waterways, measures necessary to protect the environment, decisions taken by traffic management bodies or port authorities, or decisions by the competent authorities with regard to public order and safety as well as to cover urgent transport needs (recital (17)). So far there are no decisions of the CJEU interpreting this clause, but – as said above – a similar provision can be found in EU Regulation 261/2004 dealing with air transportation. There, in Art. 5 Paragraph 3 it is said that the air carrier shall not be obliged to pay compensation “if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.” So the element of “hindering the performance” was newly added in this Regulation. Only if the extraordinary circumstances are connected to the performance they have to be taken into account. There are several rulings of the CJEU dealing with the interpretation of “extraordinary circumstances” in relation to air transportation, e.g. a decision about 51 EESC, Paragraph 4.62.

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the eruption of the Icelandic volcano Eyjafjallajökull.52 With some cautiousness it might be possible to find some further clarification in those rulings. This is supported by the fact that recital no. 19 refers to the decisions of the CJEU. 318 Some of the basic arguments of the court should be laid out here: The term refers to all circumstances over which the air carrier has no control: an event which is not inherent in the normal exercise of the activity of the air carrier concerned and is beyond the actual control of that carrier on account of its nature or origin. In the Eyjafjallajökull judgment the Advocat General pointed out that the no- 319 tion of “extraordinary circumstances” is not defined in EU law. He explained that the scope of that term must be determined in accordance with its usual meaning in everyday language, account also being taken of the context in which it is used and the purpose of the legislation of which it forms part. Generally the interpretation of the Article has to obey the following princi- 320 ples: Principle of proportionality

The court argued that the measures adopted by the Regulation 261/2004 do 321 not appear inappropriately to the objective pursued by the Community legislature, which relates to strengthening protection for passengers who suffer cancellation of, or long delays to, flights.53 Principle of Equal treatment or non-discrimination and not being arbitrary and objectively justified (EU Charta of Fundamental Rights)

Another remarkable decision can be found in Germany. The BGH confirmed 322 in a decision regarding the cancellation of a flight due to a technical defect that this does not lead to extraordinary circumstances even if all regular maintenance and repair cycles are obeyed by the carrier.54 A technical defect does not constitute extraordinary circumstances that could 323 not have been avoided even if all reasonable measures had been taken even if the carrier can prove that all maintenance measures have been carried out as requested. This has already been decided by the CJEU in respect of air transportation.55 The situation might only be different if the problem results out of incidents, that are not inherent in the normal exercise of the activity of the air carrier concerned and is beyond the actual control of that carrier on account of its nature or origin.

52 Denise McDonagh ./. Ryan Air supra. 53 CJEU IATA /ELFAA ./. Department of Transport supra. 54 CJEU 22 December 2008, Case C-549/07 Wallentin-Herrmann, [2008] ECR I-11061 in BGH 12 November 2009, NJW 2010, 1070. 55 CJEU 22 December 2008, Case C-549/07 Wallentin-Herrmann, supra.

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There has been a further decision by the BGH confirming that strike of pilots falls within this scope of application.56 At least in Germany it could be concluded that therefore strikes would be a reason for the carrier to deny any compensation in accordance with Article 19. Of course the carrier still has to bring the passenger to the final destination and reimburse for additional accommodation costs.57 The court also says not necessarily all extraordinary circumstances lead to an exemption but only extraordinary circumstances that could not have been avoided even if all reasonable measures had been taken. An earthquake of hurricane by itself would not fulfill the criteria but only if additional measures could not prevent the annulation. Interestingly the court also says there is no difference between internal strikes (pilots) and external strikes (airport operator). A strike affects the carrier from the outside and is not part of the normal operation. The carrier has no legally serious influence on the striking personnel. This would render the right of the carrier for freedom of collective bargaining “Koaltionsfreiheit”58 worthless. The court also says which measures have to be taken in personal, technical and economical respect in order to avoid that extraordinary circumstances lead to annulation has to be determined in accordance with each case individually at that specific time. In any case, if extraordinary circumstances are confirmed, the carrier has to prove that he has done all measures necessary to avoid the extraordinary circumstances.59 However, still in December 2012 the Commission and in March 2013 the European Parliament60 criticized that a clearer and more coherent application of the rules on extraordinary circumstances across all modes need to be taken.61 A definition of “extraordinary circumstances” is therefore included in the proposal for an amendment of EC 261/2004 in Art. 2(m): “Extraordinary circumstances” means circumstances which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control. For the purpose of the regulation, extraordinary circumstances shall include the circumstances set out in the Annex. The Annex says: Non-exhaustive list of circumstances considered as extraordinary circumstances for the purposes of this Regulation 1. The following circumstances shall be considered as extraordinary:

56 BGH 21 August 2012 (Az.: X ZR 146/11.). 57 Confirmed by Handelsgericht Wien, 28 August 2013, Verein für Konsumenteninformation ./. Iberia, 1R/226/12 g. 58 Art. 12 I and Article 28 of the EU Charta of Fundamental Rights. 59 LG Stuttgart 21 March 2012 – 13S 93/11. 60 EP resolution. 61 A European vision for Passengers, p. 12.

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i. ii.

natural disasters rendering impossible the safe operation of the flight; technical problems which are not inherent in the normal operation of the aircraft, such as the identification of a defect during the flight operation concerned and which prevents the normal continuation of the operation; or a hidden manufacturing defect revealed by the manufacturer or a competent authority and which impinges on flight safety; iii. security risks, acts of sabotage or terrorism rendering impossible the safe operation of the flight; iv. life-threatening health risks or medical emergencies necessitating the interruption or deviation of the flight concerned; v. air traffic management restrictions or closure of airspace or an airport; vi. meteorological conditions incompatible with flight safety; and vii. labour disputes at the operating air carrier or at essential service providers such as airports and Air Navigation Service Providers. 2. The following circumstances shall not be considered as extraordinary: i. technical problems inherent in the normal operation of the aircraft, such as a problem identified during the routine maintenance or during the pre-flight check of the aircraft or which arises due to failure to correctly carry out such maintenance or pre-flight check; and ii. unavailability of flight crew or cabin crew (unless caused by labour disputes). In contrast to the air transportation regulation the basis in the maritime Regu- 331 lation is the ticket price and not a fixed sum that has to be paid. In IATA / ELFAA case the CJEU still argued that the fixed sum is more appropriate since the harmful consequences to which the delay gives rise are in no way related to the price paid for a ticket. However, this was heavily criticized again and again. Meanwhile there are also thought to change the basis in the air transportation regulation. There remains a certain uncertainty about the final interpretation. This even 332 more since the court also said that the situation of enterprises in other sectors, like bus, rail and maritime, is not comparable in respect of the way they are functioning, the access and the spread of networks.62 Article 21 Further claims Nothing in this Regulation shall preclude passengers from seeking damages in accordance with national law in respect of loss resulting from cancellation or delay of transport services before national courts, including under Directive 90/314/EEC.

According to this important article all passengers have access to national 333 compensation schemes in accordance with national law besides the Regulation and all claims can be filed before national courts.

62 CJEU IATA /ELFAA ./. Department of Transport, supra, paragraph 93–99.

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334

335

336

337

338

339

In the Proposal the above ideas were mentioned in Articles 19, 20 and 21 separately and were divided into two parts. The Directive 90/314, referring to package travel, was mentioned in Articles 19 (2) (Re-routing and reimbursement) and 20(2) (Compensation of the ticket price) as part of the relevant specific Article with the following wording: “The right to compensation / reimbursement under this Article shall not apply to passengers on a cruise journey unless such rights arise under the Directive 90/314/ EEC.” Cruises are generally viewed as package travel. According to the Proposal passengers on a cruise could only rely on Directive 90/314 in regards to re-routing and reimbursement and compensation. The right to go to the national courts was stipulated in Article 21 of the Proposal however with the following wording: “Nothing in this Regulation shall preclude passengers from seeking damages in accordance with national law in respect of loss resulting from cancellation or delay of transport services before national courts.” During discussion for the Proposal consumer organisations stated that this Regulation shall not affect the standards governing liability of operators offering tourist packages as set out in Directive 90/314. Indeed it was unclear if passengers traveling on a journey covered by EU Directive 90/314 but not on a cruise could rely on the Directive. The wording in the Regulation was extended not only to cruise passengers but to all passengers. It is clear now that all passengers are allowed to claim damages under Directive 90/314. The explicit mentioning of cruise passengers has to be seen in relation to the non-application of Articles 16(2),18, 19 and 20(1) and (4) to cruises, package travel (see Article 2.1.c), Therefore cruise passenger are still restricted to re-routing and compensation in accordance with EU Directive 90/314. The extension to all passengers is however surprising and far from being clear. It is not specified if it should be left to national law if an accumulation of claims under this Regulation and Directive 90/314 are allowed. The answer is even more in dispute since in Annex I of this Regulation the right of reimbursement in case of denied boarding for persons with reduced mobility is denied to the extent their journey form part of a package and reimbursement is granted under Directive 90/314 (Annex I paragraph 2). It is therefore not excluded that package travel passengers claim under this Regulation and parallel under Directive 90/314 in case of a package travel that is not a cruise. There is no limitation like in the new proposal for the Regulation 261/2004 covering air transportation saying the claims may not “cumulate rights under both legal acts if the rights safeguard the same interest or have the same objective”. This is also inconsistent with previous and current other regulations63 and should be adjusted by the Commission since it would allow certain passengers to 63 E.g. EU Regulation 261/2004 confirmed by BGH 20 September 2014 – XZR 126/13, RRa 2015, 17.

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receive reimbursement twice, whilst cruise passengers and passengers whose journey does not form part of a package do not have an equivalent right. Carriers also requested an addition similar to Regulation EC 261/2004 (air transportation) where it is said that compensation granted under that Regulation may be deducted from compensation received in accordance with other passenger rights (Article 12.1). This was not added. The consequence would be that passengers may receive compensation in accordance with this Regulation – in addition to other national legal bases Very important is the extension to national law in contrast to the national courts only. It was not sufficiently clear in the proposal that the passengers could apply national law as well. This had to be clarified since the Directive 90/314 was transferred to national law in several countries and it is not necessarily directly applicable. Furthermore the Commission did not want to weaken consumer rights by excluding rights under national law in case there are stronger or other national rules. This Regulation shall not apply in cases where a package tour is cancelled for reasons other than cancellation of the passenger service or the cruise (see recital (20)).

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Prescription period

There is no rule in the Regulation concerning prescription period. It was al- 344 ways and still is the position of the Commission that national law should apply if clear national rules are available.64 The Commission says that overall the introduction of a minimum one year prescription period would bring slightly increased legal certainty for consumers but since most Member States already have at least one year prescription periods, no major costs or impacts are expected if this topic is left to national law. 345 This was confirmed by the CJEU.65 CHAPTER IV GENERAL RULES ON INFORMATION AND COMPLAINTS

As part of the general agenda of the Commission consumer rights are extend- 346 ed to information and complaints in every regulation concerning passenger transportation. In contrast to several other points there was general agreement during discussing the Proposal that more information is necessary. Article 22 Right to travel information Carriers and terminal operators shall, within their respective areas of competence, provide passengers with adequate information throughout their travel in formats which are accessible to everybody and in the same languages as those in which information is generally made avail-

64 Latest example: Commission / Impact Assessment, p. 142. 65 CJEU 22.11.2012, Case C-13911, Morè ./. KLM.; http://curia.europa/juris/documents.jsf? num=C-139/11.

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Carriers and terminal operators are obliged under the Regulation. Adequate information throughout their travel, i.e. the information does not only have to be supplied before departure but also during the voyage. 349 Whilst the Proposal mentioned “in the most appropriate format” the Regulation clarifies that it shall be in formats which are accessible to everybody and in the same language as those in which information is generally made available to all passengers. This is the same wording used throughout the Regulation and again clarifies that the language that the carrier or terminal operator generally uses can be used here as well. It is, for example, not necessary to give the information in every language of all Member States. 350 Again it is emphasized that particular attention shall be paid to PRM. 351 Stakeholders provided recommendations in respect of the formats for information to provide to passengers, especially to PRMs (see also recital no. (21)): – Port installations and ships should be equipped with visual and audible means of – communicating information; – All printed information should be available in alternative formats such as large print – and Braille and should be in plain language supplemented with pictorial content; – During the journey, safety announcements should also be made available in written – form so that a person who is deaf will have access to the information; such – announcements should be included with all tickets so that deaf persons will be aware – of them in the event of an emergency; this could include vibrating or flash alerts in cruise of ferry ships to alert those passengers to emergency situations at night – A Braille version of the ship map should be made available at the reception area so – that those who are blind or partially sighted can find out where to go in the event of an – emergency; – Systems with adapted telephones facilitating communication in sign language and – writing should be installed; – Information should be provided in various languages; – One consumer association suggests that tickets should be issued together with relevant – information for PRM passengers, such as a list of hotels situated in the places of 347 348

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stopovers, including phone numbers or a description of port services. The internet could be a valid medium to provide information requested. Article 23 Information on passenger rights

1.

2.

3.

Carriers, terminal operators and, when applicable, port authorities, shall, within their respective areas of competence, ensure that information on the rights of passengers under this Regulation is publicly available on board ships, in ports, if possible, and in port terminals. The information shall be provided as far as possible in accessible formats and in the same languages as those in which information is generally made available to all passengers. When that information is provided particular attention shall be paid to the needs of disabled persons and persons with reduced mobility. In order to comply with the information requirement referred to in paragraph 1, carriers, terminal operators and, when applicable, port authorities, may use a summary of the provisions of this Regulation prepared by the Commission in all the official languages of the institutions of the European Union and made available to them. Carriers, terminal operators and, when applicable, port authorities shall inform passengers in an appropriate manner on board ships, in ports, if possible, and in port terminals, of the contact details of the enforcement body designated by the Member State concerned pursuant to Article 25(1).

Paragraph 1

This paragraph is addressed to carriers, terminal operators and, when applicable, port authorities. The latter ones were defined in the Proposal but are not included in the Regulation any more. Therefore it does not make sense to include this wording in this part of the Regulation. The relevant authorities are covered by the definitions of terminal operator and port terminal. A very crucial part of all regulations concerning passenger rights during transportation is the information of the passengers about their rights. The Commission’s point of view is that it is not sufficient to write down regulations with important rights. Only if each passenger easily gets the opportunity to take notice of his or her rights the application of the rules is possible.66 Article 14 of Regulation EC 261/2004 (air transport) already stipulated that information has to be given to passengers. However, obviously there is a problem of enforcement. Therefore this Regulation has extensive rules about the information on passenger rights which were not included in the air transport regulation. The Proposal says passengers have to be provided with “appropriate and comprehensible information regarding their rights under this Regulation at the latest on departure.” The Proposal also contained the obligation to make the information publicly available. The Regulation has shortened this to the obligation that “information on the rights of passengers under this Regulation is publicly available.” The words “appropriate and comprehensible” are no longer contained any more. The time limit “at the latest on departure” is replaced by the obligation to publish the rights in ports. The carrier has to publish the rights on board. 66 A European vision for Passengers, p. 2.

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The Regulation leaves open how this has to be ensured. Neither the form nor the contents is exactly described in the Regulation. It lies in the hands of the relevant operator, i.e. the terminal operators, the carriers or – if applicable the port operator to find a way. 358 Also the distribution is not described. The information can be distributed e.g. by public bulletin at the terminal or reception of the passenger vessel or, in the case of cruise operators e.g. in the information folder of each cabin. 359 Whilst the Proposal mentioned “in the most appropriate format” the Regulation clarifies as in previous Articles that it shall be in formats which are accessible to everybody (e.g. Systems with adapted telephones facilitating communication in sign language and writing should be installed) and in the same language as those in which information is generally made available to all passengers. This is the same language used throughout the Regulation and again clarifies that the language that the carrier or terminal operator generally uses can be used here as well. It is, for example, not necessary to give the information in every language of all Member States. 360 Again it is emphasized that particular attention shall be paid to PRM. 357

Paragraph 2

The idea of a summary prepared by the Commission that may be used by carriers, terminal operators and, when applicable, port authorities, in order to comply with the information requirement referred to in paragraph 1, is newly inserted in the Regulation. It was possibly inserted as a compromise between the wording of the Proposal, where “appropriate and comprehensible” information had to be used. The carrier, terminal operators and, when applicable, port authorities may use the Commission’s wording but do not have to. 362 The Commission is supposed to publish the wording in all the official languages of the institutions of the European Union and made available to the carriers, terminal operators and, when applicable, port authorities. 363 So far the Commission has not presented such a wording.67 361

Paragraph 3

As mentioned in the heading of this chapter complaints, which are an integral part of any regulations dealing with passenger rights, are considered. 365 The information provided to the passengers shall contain the contact details of the enforcement body designated by the Member State concerned pursuant to Article 25(1). This is the only defined contents that shall be in the information described in this Article. 364

67 December 2014.

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Article 24 Complaints 1. 2.

Carriers and terminal operators shall set up or have in place an accessible complaint-handling mechanism for rights and obligations covered by this Regulation. Where a passenger covered by this Regulation wants to make a complaint to the carrier or terminal operator, he shall submit it within 2 months from the date on which the service was performed or when a service should have been performed. Within 1 month of receiving the complaint, the carrier or terminal operator shall give notice to the passenger that his complaint has been substantiated, rejected or is still being considered. The time taken to provide the final reply shall not be longer than 2 months from the receipt of a complaint.

Paragraph 1 366 The terminal operator was newly included in this Article. The word “accessible” was not contained in the Proposal. It shows again the 367 aim of the Commission to make everything as easy for consumers as possible. Again it is not further described how the complaint procedure shall look like.

Paragraph 2

Whilst the Proposal had suggested that passenger have one month to file a complaint the Regulation now stipulates two month. The time period starts to run from the day the service was performed or should have been performed. The consequences of missing the time period are not stipulated. Within one month (the Proposal was speaking of 20 working days) of receiving the complaint the carrier or the terminal operator shall give notice to the passenger that – his complaint has been substantiated – rejected – or is still being considered As in the Proposal the time between receipt of a complaint and the final answer shall not be longer than two month. The Paragraph in the Proposal that stipulated that if no reply is received with the time limits set out above the complaints shall be deemed to have been accepted was – after much criticism – deleted. So there is no consequence if the two months are missed. The Regulation does not provide for an absolute time bar. It was already decided in respect of the aviation regulation that the national time bar shall be applicable.68 This will most likely therefore be the case in this Regulation as well. Therefore missing the above mentioned two months to submit a complaint do not have any consequences since the national courts are still able to take the case.

68 CJEU 22 November 2012 Case C 139/11 Moré ./. KLM.

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Article 25 National enforcement bodies 1.

2. 3.

4.

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375 376

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Each Member State shall designate a new or existing body or bodies responsible for the enforcement of this Regulation as regards passenger services and cruises from ports situated on its territory and passenger services from a third country to such ports. Each body shall take the measures necessary to ensure compliance with this Regulation. Each body shall, in its organisation, funding decisions, legal structure and decision-making, be independent of commercial interests. Member States shall inform the Commission of the body or bodies designated in accordance with this Article. Any passenger may submit a complaint, in accordance with national law, to the competent body designated under paragraph 1, or to any other competent body designated by a Member State, about an alleged infringement of this Regulation. The competent body shall provide passengers with a substantiated reply to their complaint within a reasonable period of time. A Member State may decide: (a) that the passenger as a first step shall submit the complaint covered by this Regulation to the carrier or terminal operator; and/or (b) that the national enforcement body or any other competent body designated by the Member State shall act as an appeal body for complaints not resolved under Article 24. Member States that have chosen to exempt certain services pursuant to Article 2(4) shall ensure that a comparable mechanism of enforcement of passenger rights is in place.

When considering the deficiencies of the first passenger related regulation EC 261/2004 for air transportation it was felt by the Commission that often the carriers fail to offer passengers the rights to which they are entitled to.69 A study executed by the Commission showed e.g. that less than 50% of surveyed passengers in Germany, Denmark and the UK were, when facing problems for delays or cancellation, offered meals, refreshment and accommodation. Only a fraction received financial compensation (2 -4%).70 Amongst others the Commission argues that a better complaint handling and stricter sanctioning assist in creating a better situation. Carriers feared that a “claim culture” would be created. Also they argued it would be more efficient to have own claims handling procedures71 and found NEBs are too bureaucratic and not cost effective. Although the institution of NEBs was therefore not undisputed the experience with the airline regulation influenced the further regulations in so far as a strong enforcement regime should be installed. Against this background this and the following Articles have to be seen. Already according to the regulation for air transport in Article 16 infringements could be complained to a body named by each member state. The provision of national enforcement bodies is meanwhile part of every passenger rights regulation. The EESC called for a stronger national enforcement body that also can “fully enforce an effective, dissuasive and proportionate system of sanctions which, 69 Proposal for EC 261/2004, p. 2. 70 Memo 13/203, p. 2. 71 Summary, p. 26.

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in all events includes the possibility of ordering the payment of compensation to affected passengers as a result of having lodged a complaint.72 Another organization, the European Consumer Centres Network, a network of 29 European consumer centers, provides assistance to travelers who need information and guidance in case of travel disruption. Those national enforcement bodies should be independent from commercial interests in terms of organization, funding decisions, legal structure and decision-making, which is similar for rail and bus but- at that time – was not incorporated for air transportation.73 The Commission located some problems here because the national authorities interpreted the Regulation in different ways.74 In the Commissions view NEB’s should ensure in case of reimbursement or re-routing that Carriers prepare themselves adequately to face situations of disruption by setting up effective systems of assistance to passengers and are always present or represented at the terminals whenever an incident occurs. From the Commission’s point of view the large majority of claims should be handled by the carrier directly. Therefore it is necessary that the information provided by the carrier to the passengers is accurate, legally correct and given in timely fashion. If this is not guaranteed this represents a major breach of the law that NEBs have to – if necessary – sanction. It is also the idea of the Commission that the complaint procedure with carriers shall be facilitated in that state of the art information technology is used (not only traditional communication such as international telephone calls or fax) for making claims.75 In summary the Commission favours a three step system for settling disputes: – Direct complaint to the company – Quick out of court conciliation and arbitration body – Complaint to the court The NEBs of all transport modes shall co-operate in order to ensure a coherent application and enforcement of passenger rights.76 Efficient enforcement requires active monitoring by NEBs in addition to reactive measures based on individual passenger complaints. It is the declared aim of the Commission that the NEBs adopt a more proactive policy with also more exchange of information between the NEBs and the Commission.77

72 73 74 75 76 77

16 July 2009, EESC, Paragraph 4.9. Proposal for (EC) No. 261/2004 / Impact Assessment, p. 161. A European vision for Passengers, p. 3. A European vision for Passengers, p. 14. A European vision for Passengers, p. 14. Proposal for (EC) No 261/2004, p. 8.

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Paragraph 1 389

390

391

392

393

During discussions preceding the Proposal it was widely agreed that legal action may be too expensive, too slow or too complicated for passengers inconvenienced during a journey. Therefore the solution of NEBs was put forward. Each Member state shall designate a new or existing body or bodies. It is not necessary that the member states create a new body. Also existing bodies could be suitable. In Germany the designated body is the „Eisenbahnbundesamt“, which is also the designated body for passenger rights in the bus and rail sector. The national basis is stipulated in EU-Fahrgastrechte-Schifffahrt-Gesetz.78 The body is responsible for the enforcement of this Regulation as regards passenger services and cruises from and to ports situated on its territory. This corresponds for example with § 4 of the EU-FahrgRSchG, where it is stipulated that the administration can take all measures necessary to manifest, to remove or to prevent a violation against this Regulation. Each body shall, in its organisation, funding decisions, legal structure and decision-making, be independent of commercial interests. The Proposal had suggested instead of “commercial interests” only “carriers”. The much more general wording of the Regulation shows that not only one sided interests of carriers should be ignored but also the interest of consumer interest organisations. The funding of those bodies has to ensure this independence, i.e. through taxes and / or fees. Paragraph 2

So that the Commission is able to control the application of this Article the Member States shall inform the Commission about their enforcement body. 395 The Commission will also survey if the national sanction scheme fulfills the necessary criteria: – To be effective – Proportionate – dissuasive79 396 This is necessary in order to have an economic incentive to comply with passenger’s rights legislation and to ensure a proper level playing field. 397 A list of all National Enforcement Bodies notified so far is attached at the end of this commentary. 394

Paragraph 3 398

The paragraph stipulates the right for any passenger to submit a complaint about an alleged infringement of this Regulation 78 (EU-FahrgRSchG) of 5 December 2012 (BGBl. I S. 2454.). 79 A European vision for Passengers, p. 14.

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to the competent body designated under paragraph 1, or to any other competent body designated by a Member State. There is no necessity to first complain at the NEB. The passenger can directly go to the national courts. Germany decided to designate the arbitration body for public transportation (Schlichtungsstelle für den öffentlichen Personenverkehr) in Berlin as the body responsible for dealing with complaints.80 In order to even improve this right the Regulation added that the competent body shall provide passengers with a substantiated reply to their complaint within a reasonable period of time. The Regulation does not specify reasonable period. The Commission said experience has shown the importance of fixing time limits for complaint handling both for operators and NEBs. It has caused obvious resentment within the Commission that within air transportation no such a time limit was fixed and that air carriers and also NEBs are misusing this freedom by not answering to complaints or answering with long delays.81 As a consequence of this this Regulation fixes deadlines for operators (two month, see Article 24) and NEBs (reasonable time). It possibly can be concluded that NEBs may take longer than two month but not considerably longer. A further sentence was added in this paragraph: A Member State may decide: (a) that the passenger as a first step shall submit the complaint covered by this Regulation to the carrier or terminal operator; This solution was already offered in the Package Directive 90/314 EEC, Article 6, where operators are obliged to make prompt efforts to find appropriate solutions in case of passenger complaints. This was taken up in German law. According to § 2 EU-FahrgRSchV the arbitration body is subsidiary to the complaints procedure of the carrier. and/or (b) that the national enforcement body or any other competent body designated by the Member State shall act as an appeal body for complaints not resolved under Article 24. The decisions of the NEBs are not binding. If a party contests the wording it can still go to court. The passenger can also go directly to the court without contacting the NEB.82 Not mentioned in the Article itself but in the recitals is the idea that carriers should inform the National Enforcement bodies of their arrangements for improving care and assistance offered (No. 18). 80 EU-Fahrgastrechte-Schifffahrt-Verordnung (EU-FahrgRSchV, 12 December 2012 (BGBl. I S. 2571) and the EU-Fahrgastrechte-Schifffahrt-Gebührenverordnung (EU-FahrgRSchGebV), 20 December 2012 (BGBl. I S. 2797). 81 A European vision for Passengers, p. 13. 82 In Germany: § 6 II FahrgRSchG.

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Paragraph 4

Article 2(4) offered the Member States the chance to exempt from the application of this Regulation passenger services covered by public service obligations, public service contracts or integrated services provided that the rights of passengers under this Regulation are comparably guaranteed under national law. 407 If the Member States have taken this chance they nevertheless have to ensure a comparable mechanism of enforcement of passenger rights. 408 As in Article 2(4) it is not clear why this exemption is made available if the enforcement rights shall have a comparable level. 406

Article 26 Report on enforcement By 1 June 2015 and every 2 years thereafter, the enforcement bodies designated pursuant to Article 25 shall publish a report on their activity in the previous two calendar years, containing in particular a description of actions taken in order to implement the provisions of this Regulation, details of sanctions applied and statistics on complaints and sanctions applied.

This Article was weakened considerable after the Proposal was published. The Proposal suggested that the national enforcement bodies shall write a report on 1 June each year. The contents of the report were already defined in a similar detailed way as in this Article. 410 PRM and consumer organisations were favouring a publication of an annual list of complaints and solutions.83 411 However, an obligation addressed to the national bodies to keep statistics on individual complaints that should be made available to the Commission upon request up to three years after the incident was deleted. 409

Article 27 Cooperation between enforcement bodies National enforcement bodies referred to in Article 25(1) shall exchange information on their work and decision-making principles and practice to the extent necessary for the coherent application of this Regulation. The Commission shall support them in that task.

This was already similar in the Proposal. An amendment by the Council saying “shall, whenever appropriate, exchange information…” was not accepted. 413 It is not described how the process of exchanging information should function. 414 The Commission announced that in 2014 it will work with NEBs to agree on guidance for applying EU law.84 Meanwhile there are some rules how and when the NEBs should become involved.85 412

83 Summary, p. 31. 84 A European vision for Passengers, p. 16. 85 See below list of National Enforcement Bodies, introductory comments.

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Article 28 Penalties The Member States shall lay down rules on penalties applicable to infringements of the provisions of this Regulation and shall take all the measures necessary to ensure that they are implemented. The penalties provided for shall be effective, proportionate and dissuasive. Member States shall notify those rules and measures to the Commission by 18 December 2012 and shall notify it without delay of any subsequent amendment affecting them.

The wording was similar in the Proposal. Only the date was not mentioned then but it is the date of becoming effective of the Regulation. The general rule of penalties is not fitting in the structure of every national law (e.g. it is unknown in German Civil law). However, it is meanwhile an integral part of all passenger Regulations (e.g. Regulation EC No. 261/2004, Art. 16.3). In Germany there is a catalogue of fines implemented in the FahrgRSchV, § 4. The Member State shall also take all measures necessary to ensure that the rules of this Regulation are implemented. The penalties provided for shall be effective, proportionate and dissuasive. Each Member State can try to find out how the penalty shall look like in order to fulfill those criteria.

415 416

417 418

FINAL PROVISIONS

Article 29 Report The Commission shall report to the European Parliament and to the Council by 19 December 2015 on the operation and the effects of this Regulation. The report shall be accompanied where necessary by legislative proposals implementing in further detail the provisions of this Regulation, or amending it.

The wording was similar in the Proposal. Only the date was not mentioned 419 then but it is three years after becoming effective of the Regulation which was already the idea of the Proposal. The EESC demanded in its opinion that the report should specifically exam- 420 ine whether any disparity in legislation in this field affects competition or the proper running of the internal market.86 This provision shows that the Commission is of the opinion that the passenger 421 rights regulations in general and this Regulation specifically can or maybe even needs to be improved after two years of application. This is taken up by the European Parliament and the Council, who both agree that this legislation is a growing and changing project that needs to be looked regularly.

86 EESC, Paragraph 4.1.9.

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Article 30 Amendment to Regulation (EC) No 2006/2004 In the Annex to Regulation (EC) No 2006/2004 the following point shall be added: "18. Regulation (EU) No 1177/2010 of the European Parliament and of the Council of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway [].

422

This amendment had to be made as this Regulation is the next regulation in the list of EU directives and regulations that protect consumer interests and therefore are listed in the annex of the Regulation on consumer protection cooperation of October 2004. Article 31 Entry into force This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Union. It shall apply from 18 December 2012. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Strasbourg, 24 November 2010. For the European Parliament The President J. Buzek For the Council The President O. Chastel [1] OJ C 317, 23.12.2009, p. 89. [2] Position of the European Parliament of 23 April 2009 (OJ C 184 E, 8.7.2010, p. 293), position of the Council at first reading of 11 March 2010 (OJ C 122 E, 11.5.2010, p. 19), position of the European Parliament of 6 July 2010 (not yet published in the Official Journal) and decision of the Council of 11 October 2010. [3] OJ L 378, 31.12.1986, p. 4. [4] OJ L 364, 12.12.1992, p. 7. [5] OJ L 389, 30.12.2006, p. 1. [6] OJ L 163, 25.6.2009, p. 1. [7] OJ L 158, 23.6.1990, p. 59. [8] OJ L 364, 9.12.2004, p. 1. [9] OJ L 281, 23.11.1995, p. 31. [10] OJ L 131, 28.5.2009, p. 24. [11] OJ L 334, 17.12.2010, p. 1."

423

The Regulation was published on 17 December 2010 in the Official Journal of the EU and its provisions apply as from 18 December 2012.

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In contrast to earlier Regulations this Regulation has a date for entry into 424 force (on the 20th day following its publication in the Official Journal of the European Union) and a separate application date, i.e. from 18 December 2012. There is no practical difference since the application date has passed. Again a compromise was reached. The Council has suggested 36 month after publication and the Commission 12 month. Also in contract to the Regulation EC 261/2004 it is expressly mentioned in 425 this Article that the Regulation shall be binding in its entirety and directly applicable in all Member States. C. Annex CHAPTER VI ANNEX I

ANNEX I RIGHT TO REIMBURSEMENT OR RE-ROUTING FOR DISABLED PERSONS AND PERSONS WITH REDUCED MOBILITY AS REFERRED TO IN ARTICLE 8 1.

2. 3.

Where reference is made to this Annex, disabled persons and persons with reduced mobility shall be offered the choice between: – (a) – reimbursement within 7 days, paid in cash, by electronic bank transfer, bank order or bank cheque, of the full cost of the ticket at the price at which it was purchased, for the part or parts of the journey not made, and for the part or parts already made if the journey no longer serves any purpose in relation to the passenger's original travel plan, plus, where relevant, – a return service to the first point of departure, at the earliest opportunity; or (b) re-routing to the final destination as set out in the transport contract, at no additional cost and under comparable conditions, at the earliest opportunity; or (c) re-routing to the final destination as set out in the transport contract, under comparable conditions, at a later date at the passenger's convenience, subject to availability of tickets. Paragraph 1(a) shall also apply to passengers whose journeys form part of a package, except for the right to reimbursement where such a right arises under Directive 90/314/EEC. When, in the case where a town, city or region is served by several ports, a carrier offers a passenger a journey to an alternative port to that for which the reservation was made, the carrier shall bear the cost of transferring the passenger from that alternative port either to that for which the reservation was made, or to another nearby destination agreed with the passenger.

The Proposal mentioned in the heading “in case of advanced booking”. This 426 was deleted. In 1 (b) it was added “at no additional costs” for clarification. 427 Besides this the whole Annex I is identical to the Proposal. Annex I refers to Article 8(4). In case a person with reduced mobility has bought a ticket but is denied boarding in accordance with this Regulation, i.e. especially due to safety reasons, Chapter III is not applicable. Therefore this Annex stipulates the consequences of denied boarding in such a case.

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Paragraph 1

Similar rights as already laid down in Article 18 are available to the PRM. Paragraph 1.a is similar to Article 18.3. Paragraph 1.b is the same as Article 18.1.a. Paragraph 1.c does not exist in Article 18. Although all passengers can of course choose this alternative as well, it is explicitly mentioned here. Paragraph 2 428

According to this paragraph passengers on a package travel shall have the same right as other passengers, i.e. right to be reimbursed, re-routing as early as possible or at a later date. The right to reimbursement in accordance with paragraph 1 a, i.e. reimbursement of the full cost of the ticket within 7 days however, is excluded “where such right arises under Directive 90/314 EEC”. If the passenger has the right of reimbursement under the package travel directive there is no right – to the extent already reimbursed – to get a reimbursement twice. This is surprising since the equivalent Article in the Regulation, Article 21, does not provide for this result. It is however equivalent to the wording of the Proposal. One can therefore assume that whilst the wording in the Regulation in Article 21 was changed during discussion successive to the Proposal the wording here remained unchanged. ANNEX II ASSISTANCE IN PORTS, INCLUDING EMBARKATION AND DISEMBARKATION, AS REFERRED TO IN ARTICLES 10 AND 13 1.

2.

3.

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Assistance and arrangements necessary to enable disabled persons and persons with reduced mobility to: – communicate their arrival at a port terminal or, if possible, a port and their request for assistance, – move from an entry point to the check-in counter, if any, or to the ship, – check in and register baggage, if necessary, – proceed from the check-in counter, if any, to the ship, through emigration and security points, – embark the ship, with the provision of lifts, wheelchairs or other assistance needed, as appropriate, – proceed from the ship door to their seats/area, – store and retrieve baggage on the ship, – proceed from their seats to the ship door, – disembark from the ship, with the provision of lifts, wheelchairs or other assistance needed, as appropriate, – retrieve baggage, if necessary, and proceed through immigration and customs points, – proceed from the baggage hall or the disembarkation point to a designated point of exit, – if required, make their way to the toilet facilities (if any). Where a disabled person or person with reduced mobility is assisted by an accompanying person, that person must, if requested, be allowed to provide the necessary assistance in the port and with embarking and disembarking. Handling of all necessary mobility equipment, including equipment such as electric wheelchairs.

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Temporary replacement of damaged or lost mobility equipment with equipment which is a suitable alternative. Ground handling of recognised assistance dogs, when relevant. Communication in accessible formats of information needed to embark and disembark.

Paragraph 1 429 Indent 1: it was added: “port terminal or, if possible, a port …” Indent 4: “customs” was deleted. Does that mean that customs is not neces- 430 sarily included or shall it be included in “security” or did they think at embarkations customs is not necessary? At the tenth point (disembarkation) customs is again included as in the Proposal. Indent 5: It was suggested to change the wording into: “board the ship, with 431 the provision of the means required” It was argued that it seems pointless to stipulate that expensive equipment, which many vessels or ports do not have, must be available.87 The original wording was however left unchanged.

Paragraph 4

The Proposal said “not necessarily on a like for like basis”, whilst the Regu- 432 lation now says “a suitable alternative”. It would be prudent for a carrier to have a spare wheelchair on board. Paragraph 5

“dog” instead of “animal” There are no further dissimilarities between the Proposal and the Regulation. ANNEX III ASSISTANCE ON BOARD SHIPS AS REFERRED TO IN ARTICLES 10 AND 13 1. 2. 3. 4. 5. 6.

Carriage of recognised assistance dogs on board the ship, subject to national regulations. Carriage of medical equipment and of the mobility equipment necessary for the disabled person or person with reduced mobility, including electric wheelchairs. Communication of essential information concerning a route in accessible formats. Making all reasonable efforts to arrange seating to meet the needs of disabled persons or persons with reduced mobility on request and subject to safety requirements and availability. If required, assistance in moving to toilet facilities (if any). Where a disabled person or person with reduced mobility is assisted by an accompanying person, the carrier shall make all reasonable efforts to give such person a seat or a cabin next to the disabled person or person with reduced mobility.

87 Draft report I, p. 63.

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Paragraph 2 435

The Proposal had a different idea: “transport of up to two pieces of mobility equipment per PRM, including electric wheelchair. The number of equipment pieces is no longer limited. Paragraph 5

“(if any)” was added in the Regulation.

436

Paragraph 6

“or cabin” was added in the Regulation.

437

ANNEX IV DISABILITY-RELATED TRAINING, INCLUDING INSTRUCTIONS, AS REFERRED TO IN ARTICLE 14 –

– – – – –

– – – – –

–

–

Disability-awareness training, including instructions, includes: awareness of and appropriate responses to passengers with physical, sensory (hearing and visual), hidden or learning disabilities, including how to distinguish between the different abilities of persons whose mobility, orientation or communication may be reduced, barriers faced by disabled persons and persons with reduced mobility, including attitudinal, environmental/physical and organisational barriers, recognised assistance dogs, including the role and the needs of an assistance dog, dealing with unexpected occurrences, interpersonal skills and methods of communication with people with hearing impairments, visual impairments or speech impairments and people with a learning disability, general awareness of IMO guidelines relating to the Recommendation on the design and operation of passenger ships to respond to elderly and disabled persons’ needs. Disability-assistance training, including instructions, includes: how to help wheelchair users make transfers into and out of a wheelchair, skills for providing assistance to disabled persons and persons with reduced mobility travelling with a recognised assistance dog, including the role and the needs of those dogs, techniques for escorting passengers with visual impairments and for the handling and carriage of recognised assistance dogs, an understanding of the types of equipment which can assist disabled persons and persons with reduced mobility and a knowledge of how to carefully handle such equipment, the use of boarding and deboarding assistance equipment used and knowledge of the appropriate boarding and deboarding assistance procedures that safeguard the safety and dignity of disabled persons and persons with reduced mobility, understanding of the need for reliable and professional assistance. Also awareness of the potential of certain disabled persons and persons with reduced mobility to experience feelings of vulnerability during travel because of their dependence on the assistance provided, a knowledge of first aid.

“Including instructions” in the heading was added in the Regulation. The Proposal differentiated between “staff who deal directly…” and “staff directly assisting persons …”. This was changed in the Regulation into: “Disability awareness” and “disability assistance”. 440 There are no other dissimilarities between the Proposal and the Regulation. 438 439

464

Christine Wersel

Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers

List of National Enforcement Bodies Regulation [EC] 1177/2010 http://ec.europa.eu/transport/themes/passengers/maritime All carriers/terminal operators shall have a complaint-handling mechanism in place for passengers travelling by sea and inland waterways. Passengers may also submit complaints to one of the National Enforcement Bodies (NEBs) listed below. Please note that in some countries (as indicated in the last column of the table), complaints shall first be submitted to the carrier/terminal operator. Passengers may only address their complaint to the NEB when the issue was not resolved at the level of the carrier/terminal operator (e.g. in the absence of reply within two months, if their complaint was dismissed, etc.). Please also note that some National enforcement bodies may not be able to enforce your claims and offer you redress. If you are not satisfied with the carrier/terminal operator's response and/or with the answer from the National Enforcement Body, you will have to pursue the matter through alternative dispute resolution or in Court. The competent NEB is the NEB of the EU country of departure except when the service departs from a third country. Then, the NEB of the EU country of arrival is competent. However, passengers are free contact the NEB of their choice. The table below is based on the information received from the EU Member States. Updated: 17 July 2015

Christine Wersel

465

466

Service Public Fédéral Mobilité et Transports, Direction Générale Transport maritime Federale Overheidsdienst Mobiliteit en Vervoer, Directoraat-generaal Maritiem Vervoer

Complaints against carriers and port operators Bulgarian Maritime Administration Executive Agency 9 Dyakon Ignatiy Street, Sofia 1000 Complaints against tour operators and travel agents Ministry of Economy, Energy and Tourism 8 Slavyanska Street, Sofia 1000

Coastal Liner Service Agency (CLSA) Agencija za obalni linijski pomorski promet Ulica grada Antofagaste 6, 21000 Split, Croatia

Department of Merchant Shipping of the Republic of Cyprus (Unit 'Rights of Passengers Travelling by Sea') Killinis, Mesa Geitonia 4007, Limassol, Postal address: P.O. Box 56193, 3305 Limassol

National Navigation Authority of the Czech Republic

Bulgaria

Croatia

Cyprus

Czech Republic

Organisation

Belgium

Austria

Member States

Christine Wersel Tel: +420 234 637 111 Fax: +420 283 871 514 [email protected] www.spspraha.cz

Tel. +357 25 848100 Fax: +357 25 848200 e-mail: [email protected] www.shipping.gov.cy

Tel: +385 21 / 329 370 Fax: +385 21 / 329 379 [email protected] www.agencija-zolpp.hr

Tel. (+359 2) 930 0910 Fax: (+359 2) 930 0920 e-mail: [email protected] Tel. (exchange): (+359 2) 940 7001 Fax: (+359 2) 987 2190 (+359 2) 981 9970 e-mail: [email protected]

Tel. +32 2 277 35 01 [email protected] www.mobilit.belgium.be/fr/navigation/droitspassage rs/ www.mobilit.belgium.be/nl/scheepvaart/passagiersr echten/

Contact details

NO

YES

YES

NO

NO

Obligation to submit the complaint first to the carrier / terminal operator

Chapter 3, VI.

Complaints against carriers and complaints that are not handled by other national authorities: The Danish Maritime Authority/ Søfartsstyrelsen Complaints against terminal operators: The Danish Transport Authority/ Trafikstyrelsen Complaints of an economic nature regarding tickets of approx. EUR 100 or more The Danish Consumer Complaints Board/Forbrugerklagenævnets sekretariat (Konkurrence- og Forbrugerstyrelsen)

Consumer Protection Board Tarbijakaitseamet Rahukohtu 2 10130 Tallinn, Estonia

Complaints from private consumers: Consumer Disputes Board P.O. Box 306 FIN-00531; Helsinki Complaints from business travelers and PRM-matters: Finnish Transport Safety Agency P.O Box 320 FIN-00101 Helsinki Supervision of the interests of consumers on a collective level (no handling of individual cases): Consumer Ombudsman / Competition and Consumer Authority Postal address: P.O.B. 5, FIN-00531 Helsinki Visiting address: Siltasaarenkatu 12 A, 00530 Helsinki

Estonia

Finland

Organisation

Denmark

Member States

Tel. +358 29 566 5200 e-mail: [email protected] www.kuluttajariita.fi Tel. +358 29 534 5000 e-mail: [email protected] www.trafi.fi Tel. (exchange) +358 29 505 3000 e-mail: [email protected] www.kkv.fi

Tel: +372 6201700 Fax: +372 6201701 [email protected] www.tarbijakaitseamet.ee

Tel.: +45 9137 6000 Fax: +45 9137 6001 e-mail: [email protected] www.dma.dk/Policy/Sider/PassengerRights.aspx Tel.: +45 7221 8800 Fax: +45 7262 6790 e-mail: [email protected] www.trafikstyrelsen.dk Tel.: +45 4171 5000 Fax: +45 4171 5100 e-mail: [email protected] www.kfst.dk

Contact details

YES

YES

YES

Obligation to submit the complaint first to the carrier / terminal operator

Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers

Christine Wersel

467

468

Ministry of Shipping, Maritime Affairs and the Aegean Akti Vasiliadi Gate E1 – E2, Piraeus PostCode 18510, Greece

Complaints against ports and terminal operators National Transport Authority, Road, Railway and Shipping Authority, Shipping Department Nemzeti Közlekedési Hatóság Útügyi, Vasúti és Hajózási Hivatal Hajózási Főosztály 1066 Budapest, Teréz krt. 62. 1387 Budapest 62, POB: 30. Complaints againts carriers a) first instance bodies: Consumer Protection Inspectorates of the Metropolitan/County Government Offices b) secondinstance body: Hungarian Authority for Consumer Protection Nemzeti Fogyasztóvédelmi Hatóság 1088 Budapest, József krt.6.

Hungary

Eisenbahn-Bundesamt Heinemannstr. 6 53175 Bonn, Germany

Germany

Greece

Ministère de l'économie et des finances Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) Paris Bercy, France

Organisation

France

Member States

Christine Wersel

Tel: + 36 1 474 1751 Fax: + 36 1 311 1412 e-mail: [email protected] www.nkh.gov.hu General e-mail address for complaint submission: [email protected] Tel: +36 1 459 4800 Fax: +36 1 210 4677 www.nfh.hu

Tel: +30 213 137 4266 Tel: +30 213 137 1495 Fax: +30 210 413 5673 e-mail: [email protected] www.yen.gr www.hcg.gr

Tel: +49(228)30795-400 Fax: +49(228)30795-499 [email protected] www.eba.bund.de

Tel. +33 1 44 97 31 26 e-mail: [email protected] www.service-public.fr

Contact details

NO

YES

YES

NO

Obligation to submit the complaint first to the carrier / terminal operator

Chapter 3, VI.

Christine Wersel

Malta Competition and Consumer Affairs Authority Mizzi House, National Road Blata l-Bajda Hamrun HMR 9010

Inspectie Leefomgeving en Transport Bezoekadres Weena 723 3013 AM Rotterdam, the Netherlands Postadres Postbus 8634 3009 AP Rotterdam, the Netherlands

Netherlands

Complaints from passengers and cruise participants: The State Consumer Rights Protection Authority Vilniaus str. 25 01402 Vilnius Supervision of the interests of consumers on a collective level (no handling of individual cases): Lithuanian Maritime Safety Administration J. Janonio str. 24 92251 Klaipėda

Consumer Rights Protection Centre Brivibas Street 55 Riga, LV – 1010, Latvia

National Transport Authority Dun Sceine Harcourt Lane Dublin 2 Ireland

Organisation

Malta

Luxembourg

Lithuania

Latvia

Italy

Ireland

Member States

Tel. 088-4890000 www.ilent.nl/onderwerpen/transport/passagiersrech ten/passagiersrechten_water/index.aspx

Tel. +356 2395 2000; Fax: +356 2124 2406 e-mail: [email protected] www.mccaa.org.mt/en/sea-passenger-rights

Tel. +370 5 262 6751 Fax: +370 5 279 14 66 e-mail: [email protected] www.vvtat.lt Tel. +370 46 469 602 Fax: +370 46 469 600 e-mail: [email protected] www.msa.lt

Tel: +371 65452554 Fax: + 371 67388634 e-mail: [email protected] www.ptac.gov.lv

Tel: +353 18798300 Fax: +353 18798300 e-mail: [email protected] www.nationaltransport.ie http://transportforireland.ie

Contact details

YES

YES

YES

YES

YES

Obligation to submit the complaint first to the carrier / terminal operator

Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers

469

470

Maritime Transport: Ports of the western and central coast (e.g. Świnoujscie, Szczecin, Kołobrzeg, Darłowo): Maritime Office in Szczecin Pl. Batorego 4 70-207 Szczecin Ports of the eastern coast (e.g. Gdańsk, Gdynia): Maritime Office in Gdynia Chrzanowskiego 10 81-338 Gdynia Inland Navigation: Inland Navigation Office in Szczecin Pl. Batorego 4 70-207 Szczecin

Instituto da Mobilidade e dos Transportes, I.P. (Institute for Mobility and Transport) Av. das Forças Armadas, 40, 1649-022 Lisboa Portugal

National Authority for Consumer Protection

Slovak Trade Inspection Prievozska 32 827 99 Bratislava 215, Slovakia

Portugal

Romania

Slovakia

Organisation

Poland

Member States

Christine Wersel Tel.: +421 258 272 159 Fax: +421 253 414 996 e-mail: [email protected] www.soi.sk

Tel. +40 311 18 62 Fax: +40 314 34 62 e-mail: [email protected] www.anpc.gov.ro/

Tel. +351 217 949 066 Fax: +351 217 973 777 e-mail: [email protected] www.imt-ip.pt

Tel. +48 91 440 34 00 Fax: +48 91 434 46 56 e-mail: [email protected] www.ums.gov.pl Tel. +48 58 620 22 85 Fax: +48 58 620 30 3 e-mail: [email protected] www.umgdy.gov.pl Tel. +48 91 434 02 79 Fax: +48 91 434 01 29 e-mail: [email protected] szczecin.uzs.gov.pl/

Contact details

YES

Tel. +40 311 18 62 Fax: +40 314 34 62 e-mail: [email protected] www.anpc.gov.ro/

YES (complaints‘ book)

YES

Obligation to submit the complaint first to the carrier / terminal operator

Chapter 3, VI.

Handling of complaints related to contractual relationships between carriers and passengers/consumers Market Inspectorate Parmova 33 1000 Ljubljana Monitoring of the ability of employees to assist people with disabilities/reduced mobility, availability of information on passenger rights Slovenian Maritime Administration Ukmarjev trg 2, 6000 Koper

Consumer Protection AECOSAN Príncipe de Vergara 54 28006 Madrid Complaints concerning to safety ships and deficiencies in access and assistance for persons with disabilities and reduced mobility on board Dirección General de la Marina Mercante Ports/ Port Terminals Puertos del Estado Avenida del Partenón, 10 28042 Madrid

Spain

Organisation

Slovenia

Member States

Tel. +34 91 822 44 40 / +34 91 822 44 63 e-mail: [email protected] www.consumo-inc.gob.es Tel. +34 91 524 55 19 / +34 91 524 55 05 e-mail: [email protected] www.puertos.es

Tel. +386 1 280 87 00 Fax: +386 1 280 87 40 e-mail: [email protected] www.ti.gov.si Tel. +386 5 663 21 00 Fax.: +386 5 663 21 02 e-mail: [email protected] www.up.gov.si

Contact details

YES

YES

Obligation to submit the complaint first to the carrier / terminal operator

Commentary on Regulation EC/1177/2010 Concerning the Rights of Passengers

Christine Wersel

471

472

Christine Wersel

Switzerland

Norway

Iceland

United Kingdom

Sweden

Member States

Maritime and Coastguard Agency Spring Place Bay 2/23 105 Commercial Road Southamption SO151EG

Supervision of the Regulation in general: Swedish Consumer Agency Complaints from consumers: National Board for Consumer Disputes (ARN) Box 174 101 23 STOCKHOLM Supervision of disability-related training issues: Swedish Transport Agency

Organisation

Tel: + 44 (0)2380 329 315 e-mail: [email protected] www.dft.gov.uk/mca/

Tel. +46 771 423 300 e-mail: [email protected] www.konsumentverket.se Tel. +46 8 508 860 00 Fax: +46 8 508 860 01 e-mail: [email protected] www.arn.se Tel. +46 771 503 503 e-mail: [email protected] www.transportstyrelsen.se

Contact details

YES

YES

Obligation to submit the complaint first to the carrier / terminal operator

Chapter 3, VI.

Regulation (EC) No 392/2009 on the Liability of Carriers of Passengers by Sea

Politis

Antonios

VII. Regulation (EC) No 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents A. Introduction and Commentary on Article 1 – Subject matter . . . . . . . . . . . . 1. Basics and Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. International legal Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The Process of Accession within the European Union . . . . . . . . . . . . . . a) The Necessity of a uniform Set of Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Failed Proposal for a Council Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Shared external Competences: The 2002 Protocol as a mixed Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Competency and implementation Issues . . . . . . . . . . . . . . . . . . . . . . (1) EU not a Member of the IMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Concerted Accession by Community and Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Adoption of Regulation (EC) No 392/2009 . . . . . . . . . . . . . . . . . . . . . . . . aa) New Commission Proposal: Incorporation through EU Secondary Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Accession to the Convention no longer Mandatory for the Regime’s Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Accession by Council Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Shift of Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Amended Commission Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. New hierarchical Order and its Effects on the Liability Regime for Carriage Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4 10 10 12 13 16 17 18 21 21 22 24 24 25 28 33

B. Commentary on Article 2 – Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relationship between the Regulation’s and the Convention’s respective Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) International Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) “Contract of Carriage” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) “Ship” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) “International Carriage” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Link to State Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Domestic Carriage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Competent Jurisdiction and Recognition/Enforcement of Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Competent Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Recognition and Enforcement of Claims . . . . . . . . . . . . . . . . . . . . . . . . . .

35 35

C. Commentary on Article 3 – Liability and Insurance. . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Liability Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Liability for Death or personal Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Liability for Loss or Damage to Luggage . . . . . . . . . . . . . . . . . . . . . . . . . aa) Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Basis of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Liability for Valuables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . dd) Notice of Loss of or Damage to Luggage . . . . . . . . . . . . . . . . . . . . . d) “Shipping Incident”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Persons liable and Attribution of Fault. . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Performing Carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66 66 69 69 71 74 74 75 78 80 81 85 86 89

Antonios Politis

39 41 41 42 47 48 50 53 56 58 63

473

Chapter 3, VII. cc) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f) Period of Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g) Recoverable Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Death and Personal Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . bb) Loss of or Damage to Luggage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h) Possibilities of Exoneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i) Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aa) Limitation in Cases of Death or personal Injury . . . . . . . . . . . . . bb) Limitation in Cases of Loss of or Damage to Luggage and Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cc) Loss of Right to limit Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . j) Statute of Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . k) Other Claims against the Carrier or the performing Carrier. . . . 3. Compulsory Insurance and Right of direct Action . . . . . . . . . . . . . . . . . . . a) The Insurance Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Insurance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) The Right of direct Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The IMO Reservation and Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) The Reservation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) The Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92 94 98 99 101 103 106 107 111 113 117 121 122 124 130 133 136 138 140

D. Commentary on Article 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 E. Commentary on Article 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 2. Global Limitation of Liability under the LLMC 1996 . . . . . . . . . . . . . . . 152 F. Commentary on Article 6 – Advance Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 G. Commentary on Article 7 – Information to Passengers . . . . . . . . . . . . . . . . . . 161 H. Commentary on Article 8 – Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Commentary on Article 9 – Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 J. Commentary on Article 10 – Committee Procedure . . . . . . . . . . . . . . . . . . . . . . 164 K. Commentary on Article 11 – Transitional Provisions . . . . . . . . . . . . . . . . . . . . 165 L. Commentary on Article 12 – Entry into Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 ANNEX I PROVISIONS OF THE ATHENS CONVENTION ANNEX TO ATHENS CONVENTION ANNEX II Extract From the IMO Reservation APPENDIX A Clauses referred to in guidelines 2.1.1, 2.1.2 and 2.2.1 APPENDIX B Clauses referred to in guideline 3

Literature: Berlingieri, International Maritime Conventions (Volume 1): The Carriage of Goods and Passengers by Sea (2014); Berlingieri, “The Athens Convention and the European Parliament Regulation (EC) No. 392/2009”, Il Diritto Marittimo (2011), pp. 1125-1140; Chalmers/Davies/Monti, European Union Law (2nd ed. 2010); Czerwenka, “Haftung für Personen- und Gepäckschäden bei Schiffsreisen”, Deutsches Autorecht (2014), pp. 242-248; Damar, “Compulsory insurance in international maritime conventions”, Journal of International Maritime Law (2009), pp. 151-168; Damar, “Die Costa Concordia ist auf den Felsen gelaufen – auch das Recht auf Haftungsbeschränkung?”, Verbraucher und Recht (2012), pp. 287-294; Duintjer Tebbens, “The European Union and the Athens Convention on Maritime Carriers' Liability for Passengers in Case of Accidents: an Incorporation Adventure”, Revue hellénique de droit international (2008), pp. 653-667; Gahlen, “Jurisdiction, Recognition and Enforcement under the 1974 PAL for Passenger Claims, the 2002 Protocol and EU Regulation 392/2009”, European Transport Law (2014), pp. 13-23; Gahlen, Civil Liability for Accidents

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Regulation (EC) No 392/2009 on the Liability of Carriers of Passengers by Sea at Sea (2015); Gahlen, “Ships revisited: A comparative study”, Journal of International Maritime Law (2014), pp. 252-269; Griggs/Williams/Farr, Limitation of Liability for Maritime Claims (2005); Hoffmann/Tüngler/Kirchner, “Europarechtliche Unfallhaftung und Versicherungspflicht der Anbieter von Seereisen”, Europäische Zeitschrift für Wirtschaftsrecht (2013), pp. 332-335; Hoffmann/Tüngler/Kirchner, “Das neue Seeversicherungsnachweisgesetz”, Recht der Transportwirtschaft (2013), pp. 264-267; Karsten/Seidenspinner, “Zum Vorteile des Verkehrsnutzers – 20 Jahre EU-Passagierrecht im Spannungsfeld zwischen international governance und europäischen Nutzerrechten“, Zeitschrift für Europäisches Privatrecht (2010), 830-860; Karsten, “Im Fahrwasser der Athener Verordnung zu Seereisenden: Neuere Entwicklungen des europäischen Passagierrechts“, Verbraucher und Recht (2009), pp. 213-225; Lagoni, “Die Haftung des Beförderers von Reisenden auf See und im Binnenschiffsverkehr und das Gemeinschaftsrecht – Die EG auf Konfrontationskurs mit dem Völkerrecht”, Zeitschrift für Europäisches Privatrecht (2007), pp. 1079-1096; Liu N./Maes, “Legal constraints to the European Union’s accession to the IMO”, Journal of Maritime Law and Commerce (2012), pp. 279-291; Lubach, “Zur Havarie der Costa Concordia: Erste Gerichtsentscheidung in Spanien”, Transportrecht (2013), pp. 405-407; Mandaraka-Sheppard, Modern Maritime Law – Volume 2: Managing Risks and Liabilities (3rd ed. 2013); MandarakaSheppard, Modern Maritime Law and Risk Management (2nd ed. 2009); Martínez-Gutiérrez, Limitation of Liability in International Maritime Conventions: The relationship between global limitation conventions and particular liability regimes (2012); Martínez-Gutiérrez, “New European rules on the liability of carriers and passengers by sea in the event of accidents”, Journal of International Maritime Law (2012), pp. 293-305; Olmedo Peralta, “New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea in the Event of Accidents under Regulation (EC) No 392/2009”, European Transport Law (2014), 247-270; Peltz, “The Athens Convention Revisited”, (2012) Journal of Maritime Law & Commerce, pp. 491-520; Piras, “International Recent Developments: European Union – Maritime Passenger Transport”, Tulane Maritime Law Journal (2012), pp. 627-639; Ringbom, “EU Regulation 44/2001 and its Implications for the International Maritime Liability Conventions”, Journal of Maritime Law & Commerce (2004), pp. 1-33; Ringbom, The EU Maritime Safety Policy and International Law (2008); Røsæg, “News under the Athens Sun – New Principles and Lost Opportunities of the Athens Convention 2002”, in: Scandinavian Studies in Law 46, Maritime and Transport Law (2004), pp. 153-173; Røsæg, “Passenger liabilities and insurance: Terrorism and war risks”, in: Rhidian Thomas (ed.), Liability Regimes in Contemporary Maritime Law (2007), pp. 206-230; Røsæg, “The Athens Convention on Passenger Liability and the EU”, in: Basedow/Magnus/Wolfrum (ed.), Hamburg Lectures on Maritime Affairs 2007 & 2008 (2009), pp. 55-75; Røsæg, “The Athens Regulation and international law”, Zeitschrift für europäisches Privatrecht (2008), pp. 599-604; Schilling, Die Rechte des Passagiers im maritimen Schiffsverkehr, Transportrecht (2013), pp. 401-405; Serdy, “Public International Law Aspects of Shipping Regulation”, in: Baatz et al. (ed.), Maritime Law (3rd ed. 2014), p. 303-338; Soyer, “Boundaries of the Athens Convention: What you see is not always what you get!”, in: Rhidian Thomas (ed.), Liability Regimes in Contemporary Maritime Law (2007), p. 183-206; Soyer, “Sundry Considerations on the Draft Protocol to the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea 1974”, Journal of Maritime Law and Commerce (2002), pp. 519-541; Takahashi, “External Competence Implications of the EC Regulation on Jurisdiction and Judgments”, The International and Comparative Law Quaterly (2003), pp. 529-534; Tonner, “Reiserecht maritim – Die Kreuzfahrt als Pauschalreise, die Haftung nach dem Athener Übereinkommen 2002 und die Fahrgastrechte im Schiffsverkehr“, Reiserecht Aktuell (2013), pp. 206-212; Tsimplis, “Liability in respect of passenger claims and its limitation”, Journal of International Maritime Law (2009), pp. 125-150; Tsimplis/Shaw, “Carriage of Passengers”, in: Baatz et al. (ed.), Maritime Law (3rd ed. 2014), p. 209-221.

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REGULATION (EC) No 392/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 80(2) thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the European Economic and Social Committee (1), Having regard to the opinion of the Committee of the Regions (2), Acting in accordance with the procedure laid down in Article 251 of the Treaty (3), in the light of the joint text approved by the Conciliation Committee on 3 February 2009, Whereas: (1) Within the framework of the common transport policy, further measures need to be adopted in order to enhance safety in maritime transport. Those measures should include liability rules for damage caused to passengers, since it is important to ensure a proper level of compensation for passengers involved in maritime accidents. (2) The Protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 was adopted on 1 November 2002 under the auspices of the International Maritime Organisation (IMO). The Community and its Member States are in the process of deciding whether to accede to or ratify that Protocol. In any case, the provisions thereof incorporated by this Regulation should apply for the Community from no later than 31 December 2012. (3) The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the Protocol of 2002 (the Athens Convention), applies to international transport only. The distinction between national and international transport has been eliminated within the internal market in maritime transport services and it is therefore appropriate to have the same level and nature of liability in both international and national transport within the Community. (4) The insurance arrangements required under the Athens Convention must take into consideration the financial means of ship-owners and insurance companies. Ship-owners must be in a position to manage their insurance arrangements in an economically acceptable way and, particularly in the case of small shipping companies operating national transport services, account must be taken of the seasonal nature of their operations. When setting insurance arrangements under this Regulation, account should therefore be taken of the different classes of ship. (5) It is appropriate to oblige the carrier to make an advance payment in the event of the death of or personal injury to a passenger, whereby advance payment does not constitute recognition of liability.

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Regulation (EC) No 392/2009 on the Liability of Carriers of Passengers by Sea (6) Appropriate information on rights being conferred on passengers should be provided to those passengers prior to their journey or, where that is not possible, at the latest on departure. (7) The Legal Committee of the IMO adopted on 19 October 2006 the IMO Reservation and Guidelines for the Implementation of the Athens Convention (the IMO Guidelines) to address certain issues under the Athens Convention, such as, in particular, compensation for terrorism-related damage. As such, the IMO Guidelines may be considered a lex specialis. (8) This Regulation incorporates and makes binding parts of the IMO Guidelines. To that end, where it occurs in the provisions of the IMO Guidelines, the verb ‘should’ should, in particular, be understood as ‘shall’. (9) The provisions of the Athens Convention (Annex I) and of the IMO Guidelines (Annex II) should be understood, mutatis mutandis, in the context of Community legislation. (10) The system of liability provided for by this Regulation should be extended step-by-step to the different classes of ship as set out in Article 4 of Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships (4). Account should be taken of the consequences for fares and the ability of the market to obtain affordable insurance coverage at the level required against the policy background of strengthening passengers' rights and the seasonal nature of some of the traffic. (11) The matters covered by Articles 17 and 17bis of the Athens Convention fall within the exclusive competence of the Community in so far as those Articles affect the rules established by Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (5). To that extent, these two provisions will form part of the Community legal order when the Community accedes to the Athens Convention. (12) For the purposes of this Regulation, the expression ‘or is registered in a Member State’ should be considered to mean that the flag State for the purposes of bareboat charter-out registration is either a Member State or a contracting party to the Athens Convention. Necessary steps should be taken by the Member States and the Commission to invite the IMO to develop guidelines on the concept of bareboat charter-out registration. (13) For the purposes of this Regulation, the expression ‘mobility equipment’ should be considered to mean neither luggage nor vehicles within the meaning of Article 8 of the Athens Convention. (14) The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (6).

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Chapter 3, VII. (15) In particular, the Commission should be empowered to amend this Regulation in order to incorporate subsequent amendments to the international conventions, protocols, codes and resolutions related thereto. Since those measures are of general scope and are designed to amend non-essential elements of this Regulation, inter alia, by supplementing it with new non-essential elements, they must be adopted in accordance with the regulatory procedure with scrutiny provided for in Article 5a of Decision 1999/468/EC. (16) The European Maritime Safety Agency, established by Regulation (EC) No 1406/2002 of the European Parliament and of the Council (7), should assist the Commission in preparing and drafting a progress report on the functioning of the rules laid down by this Regulation. (17) The national authorities, particularly the port authorities, play a fundamental and vital role in identifying and managing the various risks in relation to maritime safety. (18) Member States have taken the firm commitment in their Statement on Maritime Safety of 9 October 2008 to express, no later than 1 January 2012, their consent to be bound by the International Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996. Member States may make use of the option provided for in Article 15(3bis) of that Convention to regulate, by means of specific provisions of this Regulation, the system of limitation of liability to be applied to passengers. (19) Since the objective of this Regulation, namely to create a single set of rules governing the rights of carriers by sea and their passengers in the event of an accident, cannot be sufficiently achieved by the Member States and can therefore, by reason of its scale and effects, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective, HAVE ADOPTED THIS REGULATION:

Article 1 Subject matter 1. This Regulation lays down the Community regime relating to liability and insurance for the carriage of passengers by sea as set out in the relevant provisions of: (a) the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, as amended by the Protocol of 2002 (the Athens Convention) as set out in Annex I; and (b) the IMO Reservation and Guidelines for Implementation of the Athens Convention adopted by the Legal Committee of the IMO on 19 October 2006 (the IMO Guidelines) as set out in Annex II. 2. Furthermore, this Regulation extends the application of those provisions to carriage of passengers by sea within a single Member State on board ships of Classes A and B under Article 4 of Directive 98/18/EC, and lays down certain supplementary requirements. 3. No later than 30 June 2013, the Commission shall, if appropriate, present a legislative proposal in order, inter alia, to extend the scope of this Regulation to ships of Classes C and D under Article 4 of Directive 98/18/EC.

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A. Introduction and Commentary on Article 1 – Subject matter 1. Basics and Terminology

The European compensatory regime regarding passengers suffering death or 1 injury or the loss of or damage to luggage during a carriage by sea is characterized by a complex interplay between different levels of legislation: Beside Regulation (EC) No 392/2009 on the liability of carriers of passengers by sea in the event of accidents,1 the regime is mainly governed by an international agreement, the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea of 1974 as amended by the 2002 Protocol.2 It is completed by the respective national laws of the EU Member States. Regarding several passenger’s rights – i.e. compensation for cancellations, delay, itinerary changes as well as the rights of people with reduced mobility – the regime is supplemented by Regulation No. 1177/2010 of 24 November 2010 which is discussed separately. Lastly, claims under this liability regime may be capped under the International Convention on Limitation for Maritime Claims as amended by the 1996 Protocol.3 The role and relevance of Regulation 392/2009 in this interplay was subject 2 to many changes over the last decade: Initially intended as a mere guarantee of uniform implementation of the Athens Convention 2002 by Member States, the Regulation became the sole directly applicable piece of legislation incorporating the Convention’s substance into EU law. Finally, i.e. after the Convention’s entry into force, the Regulation’s role was reduced to a mere supplement to the now directly applicable Convention.4 This “fluctuation” in relevance is largely linked to the lengthy process of ratification of the Athens Convention 2002 in the European Union (then: European Community). This introduction will first examine the international legal framework re- 3 garding maritime safety of passengers (under 2.), followed by an analysis of the process of incorporation of the Athens Convention 2002 into EU law and subsequently the EU’s accession to the Convention (III.). Lastly, the different levels of legislation are put into a hierarchical order (IV.), forming a three-level regulatory framework of carrier’s liability.

1 Hereinafter referred to as “Regulation 392/2009” or “the Regulation”. 2 Hereinafter referred to as “Athens Convention 2002”, “AC 2002” or “the Convention”. 3 Hereinafter referred to as “LLMC 1996”. Regarding the Convention’s interaction with the LLMC 1996, see Article 5, para. 152 et seqq. 4 See Articles 4, 6 and 7 Regulation 392/2009.

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2. International legal Framework

In view of several significant maritime disasters over the last decades5 as well as the increasing size and passenger carrying capacity of ferries and cruise liners,6 the protection of passengers not only through enhanced maritime safety standards but by means of adequate financial compensation came more and more into focus. The general consensus was that a far-reaching regime of financial protection could best be achieved by a global approach, i.e. through an international agreement establishing common standards for all maritime passengers. 5 After two failed attempts to regulate on a global scale,7 the “Athens Convention relating to the Carriage of Passengers and their Luggage by Sea” (hereinafter: the Athens Convention 1974) was adopted on 13 December 1974. It entered into force on 28 April 1987 and replaced a situation in which liability was often excluded in passenger carriage contracts.8 Although more successful than its predecessors, its success was also limited, as it was ratified only by 35 States.9 Given its main aim of a globally applicable, uniform regime of passenger protection, the Athens Convention 1974 is widely considered a failure. The main reason for this relatively low level of acceptance – especially among EU 4

5 Several incidents led to major changes regarding the protection of maritime passengers: The M/S Scandinavian Star incident of 1990, the capsize of the Herald Free Enterprise in 1987 and the sinking of the Estonia in 1994 led to major amendments of the SOLAS-Convention and, thereby, to enhancements of maritime safety regulations. Recent examples include the Sewol, the Costa Concordia and the Express Samina: The Sewol capsized and sank on 16 April 2014, at least 295 people lost their life. The Costa Concordia was wrecked on 13 January 2012 with 32 people losing their life. Finally, 82 people lost their life when the Express Samina sank on 26 September 2000. 6 Currently, the largest cruise ships are the “Oasis of the Seas” and the “Allure of the Seas”, each with a passenger capacity of 6,296. 7 The Carriage of Passengers by Sea Convention of 1961 and the Passenger Luggage Convention of 1967. Both failed, as the first was only ratified by 11 and the second only by 2 states. However, they laid the regulatory groundwork as to the key issues of a workable maritime regime for passenger protection which were later brought together in the Athens Convention 1974, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions: The relationship between global limitation conventions and particular liability regimes (2012), p. 115. 8 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 117. It has to be kept in mind, though, that claims following major maritime disasters are still most often settled in agreements out of court, i.e. not necessarily according to the liability and limitation regimes in place, see Gahlen, Civil Liability for Accidents at Sea (2015), p. 240, referring to the Costa Concordia disaster. 9 Most importantly, Canada, Australia, India and the United States did not ratify the AC 1974, see Soyer, Boundaries of the Athens Convention: What you see is not always what you get!, in: Rhidian Thomas (ed.), Liability Regimes in Contemporary Maritime Law (2007), p. 183, para. 11.1; Tsimplis/Shaw, Carriage of Passengers, in: Baatz et al., Maritime Law (3rd ed. 2014), p. 210. The mentioned number (35) does not include the latest accession to the AC 1974 of Congo, which happened after the entry into force of the AC 2002, see IMO – status of multilateral Conventions (as of 10 March 2015), p. 308, available at www.imo.org/.

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Member States10 – was that its liability limits were considered to be too low.11 Efforts to raise the liability limits were made in 1976 and in the late 1980’s, but the resulting revision protocols were even less successful.12 As no real progress had been made regarding the Convention's global accep- 6 tance since its entry into force, the Legal Committee of the International Maritime Organization (IMO) decided in 1996 to start negotiations in order to prepare yet another revision protocol:13 One that would ensure at least a similar level of protection as that provided by the Montreal Convention14 for air passengers, while taking into account the specific circumstances of maritime passenger transport, and would therefore be met with more acceptance.15 The resulting revision protocol was adopted in 200216 and brought substantial changes to the liability regime for maritime carriers of passengers (hereinafter: The 2002 Protocol): One of the main features of this revised version was a two-tiered liability regime for claims for death or personal injury caused by so-called “shipping incidents”.17 Furthermore, in order to install an effective system of financial protection, the liability regime was coupled with compulsory insurance to be taken out by carriers as well as a right to direct action against the insurer.18 Most importantly, seeing that the main reason for the Convention’s limited global acceptance had been its low liability limit, the latter was significantly raised.19 This new Revision Protocol had to overcome several problems, too, as the 7 number of ratifications stagnated after the first four in 2005.20 The major issue that kept many potential States Parties from acceding was the newly introduced insurance requirement, which – uncommon in the field of marine insurance or insurance in general – included the insurance of terrorism-related risks.21 At the time, the insurance market did not offer corresponding contracts for carriers to fulfil their obligation, since the overall liability exposure in case of, e.g., cruise 10 Only 6 Member States (Belgium, Croatia, Greece, Ireland, Latvia and the United Kingdom) were contracting states, all of which have now denounced the AC 1974 in order to adhere to the 2002 Protocol. 11 See Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 129. 12 Protocol to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, which entered into force on 30 April 1989 (26 contracting states); Protocol of 1990 to amend the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, which did not enter into force (6 contracting states). 13 IMO Doc. LEG 77/4/4. 14 The Convention for the Unification of Certain Rules for International Carriage by Air of 28 May 1999. 15 See Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea 1974, (2002) Journal of Maritime Law and Commerce, pp. 519 (520-522). 16 IMO Doc. LEG/CONF. 13/20 (19 November 2002). 17 See Article 3, para. 71 and 81. 18 Articles 4bis(1) and (10) AC 2002, see Article 3, para. 122 et seqq. 19 It was raised from 46,666 SDR to 400,000 SDR, Article 7 AC 2002, see Article 3, para. 106 et seqq. 20 These were Albania, Latvia, Saint Kitts and Nevis and the Syrian Arab Republic. 21 See Article 3, para. 103 et seqq. and 136 et seqq.

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ships, was far higher than the P&I clubs accepted.22 In view of this hesitation, it was entirely unclear whether the 2002 Protocol would ever reach the required 10 ratifications in order to enter into force.23 8 Consequently, possible options to avoid another failed revision protocol were evaluated. After four years of discussions, the Legal Committee of the IMO – with the blessing of the IMO Assembly24 – adopted the “IMO Reservation and Guidelines for the Implementation of the Athens Convention” on 19 October 2006. The Guidelines addressed, in particular, the issue of insurability of terrorism-related risks and recommended that all Contracting States should include the same Reservation in their respective instrument of ratification in order to guarantee a certain degree of uniformity. If included, the Reservation would modify the insurance requirements in order to achieve a commercially acceptable level for the insurance market and hereby facilitate the Convention’s entry into force.25 9 After the required 10 ratifications were finally reached on 23 April 2013,26 the 2002 Protocol entered into force one year later, on 23 April 2014. Its number of ratifications or accessions has now reached 21, the combined merchant fleets of the States Parties constituting approximately 42.09% of the gross tonnage of the world’s merchant fleet.27 According to Article 15 of the 2002 Protocol, the Athens Convention 1974 and the 2002 Protocol are to be read and interpreted together as one consolidated text – hereinafter: The Athens Convention 2002. 3. The Process of Accession within the European Union a) The Necessity of a uniform Set of Rules 10

In the European Union (then: European Community), the necessity of a workable liability regime in the form of uniformly applicable rules for passengers of all modes of transport had been identified since 2002, when the EU Commission

22 Røsæg, News under the Athens Sun – New Principles and Lost Opportunities of the Athens Convention 2002, Scandinavian Studies in Law 46, 153 (161); Røsæg, The Athens Convention on Passenger Liability and the EU (2009), in: Basedow/Magnus/Wolfrum (ed.), Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 57. 23 Damar, Compulsory Insurance in international maritime conventions, Journal of International Maritime Law (2009), 151 (163). 24 IMO Assembly Resolution A.988(24); Røsæg, The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 57, 58. 25 For further details, see Article 3, para. 136 et seqq. 26 See Article 20(1) of the 2002 Protocol. The number was reached with the ratification by Belgium. The other 9 were Albania, Belize, Denmark, Latvia, Netherlands, Palau, Saint Kitts and Nevis, Serbia and Syrian Arab Republic. It had also been acceded to by the European Union in 2011, although only the accession or ratification by states is relevant for this count, see Article 19(3) of the 2002 Protocol. 27 The other contracting states are Bulgaria, Croatia, Greece, Ireland, Lithuania, Malta, Marshall Islands, Norway, Panama, Romania, United Kingdom; see IMO – status of multilateral Conventions (as of 10 March 2015), p. 320, available at www.imo.org.

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presented a White Paper on Transport Policy.28 Up until then, the financial protection of maritime passengers had been marked by national differences as the extent of carrier’s liability was fixed at varying levels depending on the respective Member State’s legislation and international commitments.29 These diverging standards were deemed capable of creating unfair competition between European carriers and unbalanced treatment between passengers travelling within the Community. In a communication following the White Paper, the Commission outlined cer- 11 tain key elements of such a regime: Strict liability, compulsory insurance and the right to direct action against the insurer or, in other words, elements which were provided by the Athens Convention 2002.30 Additionally, the Commission introduced the notion that the regime should be applicable to all forms of maritime passenger transport in the Community. Thus, in order to ensure a uniform set of rules for all journeys regardless of their place of departure, destination or respective route, this new regime would not only include international carriage, but intra-community carriage and carriage within single Member States as well.31 b) Failed Proposal for a Council Decision

Even though the necessity of harmonized rules had already been identified, 12 the ratification of the Athens Convention 2002 caused several difficulties. These were not only related to various issues regarding the regime’s subject matter, but also to “home-made problems”, as the allocation of external competences between Community (or later, the EU) and Member States was subject to significant fluctuation in this area. aa) Shared external Competences: The 2002 Protocol as a mixed Agreement

The question as to whether the Community or its Member States were the 13 competent body to ratify or accede to the Athens Convention 2002 arose during the negotiations of the revision protocol of 2002: Until then, Member States had acted under the assumption that they were the only competent bodies to con-

28 White Paper European transport policy for 2010, COM(2001)370. The priorities outlined in this document include the constant improvements of shipping safety, improvements to the transport of citizens and their rights as passengers in the different transport modes. 29 Communication on the enhanced safety of passenger ships, COM(2002) 158, p. 8. 30 COM(2002) 158, pp. 8, 9. 31 See Commission proposal COM(2005) 592 final, p. 8: “From the perspective of both the industry and passengers, there is hardly a distinction between domestic and international traffic within the Community. It is of the interest of all parties involved to have a uniform and clear regime applicable to the transport of passengers in the Community.”.

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clude international agreements.32 This assumption, however, turned out to be imprecise, seeing that the distribution of external competence was designed by Community law to mirror the internal allocation of legislating power: According to the ERTA doctrine as established by the European Court of Justice (CJEU),33 where the EU (or then: the Community) acquires internal regulatory competence, a corresponding external power to negotiate and conclude international agreements is implied.34 The key factor in this context is whether international obligations assumed by Member States might affect EU legislation.35 Consequently, the ERTA doctrine establishes that the EU’s external competence becomes exclusive as soon as common rules are adopted. 14 Issues of maritime transport generally fall under Articles 4(2) and 100(2) TFEU and are therefore subject to shared competences.36 Since the Community had not adopted common rules regarding a compensatory regime for maritime passengers at the time the 2002 Protocol was negotiated, Member States were still able to adopt national legislation. Accordingly, treaty making powers regarding the Convention’s main subject matter – the financial protection of maritime passengers – still lay with the Member States. 15 However, the Athens Convention 2002 does not only concern issues of maritime transport: In its Articles 17 and 17bis, it also contains rules regarding the competent jurisdiction as well as the recognition and enforcement of judgments. In these areas, the European Community had already exercised its legislative competence with the adoption of Regulation (EC) No 44/2001 (hereinafter: The

32 E.g., the 2001 Convention for Civil Liability for Bunker Oil Pollution Damage (BOPC) only provided for States to become parties, not for supra-governmental organisations like the EU. Member States had partly lost their external competence to conclude this international agreement, entailing that the EC had to accede as well in order for the BOPC to become fully applicable within the EC. In the end, ratification was made possible by virtue of a Council Decision, enabling and encouraging Member States to sign the Convention “in the interest of the Community”, see Council Decision 2002/762/EC of 19 September 2002 and Takahashi, External Competence Implications of the EC Regulation on Jurisdiction and Judgments, The International and Comparative Law Quaterly (2003), 529 et seqq. 33 First developed in Case 22/70 Commission v Council (ERTA) (1971) ECR 263. This judgment was further clarified in subsequent judgments, most notably the Open Skies judgments (e.g. CJEU, Case C-467/98 Commission v. Denmark (2002) ECR I-9519) and Opinion 1/03, Lugano Convention (2006) ECR I-1145. The ERTA doctrine was later crystallized in Article 216(1) TFEU by the Lisbon Treaty. 34 For a detailed analysis of the effects of this ERTA doctrine in the maritime sector, see Ringbom, The EU Maritime Safety Policy and International Law (2008), p. 57 et seqq.; regarding the ERTA doctrine in general, see Chalmer/Davies/Monti, European Union Law (2nd ed. 2010), p. 640 et seqq. 35 Case 22/70 Commission v Council (ERTA) (1971) ECR 263, paragraph 22. The requirements that must be met for an international agreements to “affect” EU-Legislation are considered to be light: The mere fact that the subject-matters of two provisions coincide suffices, see Opinion 1/03, (2006) ECR I-1145 paragraph 151, 153 and 155 referring to the Brussels I-Regulation. 36 Lagoni, Die Haftung des Beförderers von Reisenden auf See und im Binnenschiffsverkehr und das Gemeinschaftsrecht – Die EG auf Konfrontationskurs mit dem Völkerrecht, Zeitschrift für Europäisches Privatrecht (2007), 1079 (1084).

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Brussels I-Regulation, now recast as Regulation (EU) No. 1215/2012).37 Therefore, a ratification of these parts of the Athens Convention 2002 was bound to impact the uniformity and consistent application of already existing Community legislation.38 As a result of the ERTA doctrine, the external competence to conclude the international agreement partially shifted to the Community, making the 2002 Protocol a “mixed agreement”.39 bb) Competency and implementation Issues

Thus, in order to be applicable as a whole, the 2002 Protocol had to be rati- 16 fied by both, the European Community and its Member States, each within the borders of their respective external competence. This, however, entailed several problems. (1) EU not a Member of the IMO

The European Union was and still is not a member of the IMO.40 Consequent- 17 ly, the possibility of an adhesion by a non-state entity had not been taken into account in previous IMO Conventions, even though some of them have to be considered mixed agreements as well: E.g., the Bunker Oil Pollution Convention (BOPC), the Hazardous and Noxious Substances by Sea Convention (HNS Convention) and the Civil Liability for Oil Pollution Damage Convention (CLC) all include provisions on jurisdiction and the recognition and enforcement of judgments. In the past, the Council had evaded this problem by formally mandating the Commission to negotiate on behalf of the Community regarding the matters covered by the Brussels I-Regulation.41 During the negotiations on the 2002 37 Regulation (EC) No 44/2001 of the Council of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. 38 E.g., Articles 17 and 17bis partly overlap with Articles 11(1)(b), 13(2), 17(3), 18(1) and 36 et seqq. of Brussels I-Regulation (recast), see Article 2, para. 59 and 64; see also Ringbom, The EU Maritime Safety Policy and International Law (2008), p. 71; Duintjer Tebbens, The European Union and the Athens Convention on Maritime Carriers' Liability for Passengers in Case of Accidents: An Incorporation Adventure, Revue hellénique de droit international (2008), 653 (658); For a detailed analysis of the various minor differences between the two, see Røsæg, The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 61 et seq. 39 See Amended proposal for a Council Decision of 30.11.2010 COM(2010) 686 final, p. 2. Evidently, this result applies to most maritime liability conventions which include provisions on jurisdiction and the recognition and enforcement of judgments, i.e., most notably, the BOPC, the HNS Convention and the CLC, see Ringbom, The EU Maritime Safety Policy and International Law (2008), p. 74. 40 The 1948 Convention on the Intergovernmental Maritime Consultative Organization is only open to states, see Articles 4 and 76. The EU only has observer status but has expressed the view that this should be changed, see White Paper COM(2001) 370 final, p. 98; Recommendation from the Commission to the Council, SEC(2002) 381 final. For a further examination of this issue, see Liu N./Maes, Legal constraints to the European Union’s accession to the IMO, JMLC (2012), p. 279 et seqq. 41 See Opinion 2/91 ECR 1993 I-01061, paragraph 5 and the respective Article 1(1) of Council Decisions 2002/762 (regarding the BOPC – 2002 OJ L 256, p. 7), 2002/971 (HNS Convention – 2002 OJ L 337, p. 55), 2004/246 (Oil Pollution Convention – OJ 2004, L 78, p. 23).

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Protocol, the issue was solved differently:42 The addition of Article 19 allowed – for the first time in the history of the IMO43 – so-called “Regional Economic Integration Organisations” (REIOs)44 to become party to an international agreement having to amend the agreement itself.45 The EU was therefore able to accede to the Athens Convention 2002. (2) Concerted Accession by Community and Member States

Consequently, in 2003, the European Commission submitted a proposal for a Council Decision concerning the accession to the Athens Convention 2002 by the European Community.46 Since Member States had to adhere to the mixed agreement as well, the Commission called upon the Member States to “take the necessary measures” to do so before the end of 2005.47 This compulsory time frame was included in order to achieve a more or less simultaneous entry into force. For practical reasons, unanimous support by Member States was required:48 If only several Member States were to conclude the 2002 Protocol, its provisions on jurisdiction and recognition and enforcement of judgments would, in theory, apply throughout the Community by virtue of EC law, whereas its main provisions would only apply in Member States which had themselves acceded to the Convention.49 19 Alongside the proposal for a Council Decision, the European Commission intended to submit a proposal for a Regulation which would complement the Protocol’s accession by transposing the Convention’s regime into community law and extend the Convention’s applicability to all (i.e. not only international) waterway passenger transport to fulfil a key element of the envisioned European compensatory regime. This course of action had already proved successful during the process of ratification of the Montreal Convention and would guarantee uniform applicability throughout the Community as well as interpretation by the CJEU. According to the Commission’s plan, the ratification of the Athens Con18

42 See IMO LEG/CONF. 13/7 (18 July 2002). 43 See Serdy, Public International Law Aspects of Shipping Regulation, in: Baatz et al., Maritime Law (3rd ed. 2014), p. 325. 44 Such REIOs are constituted by sovereign states that have transferred competence over certain matters to those Organisations. A similar clause can be found in Article 53 Montreal Convention. 45 Beside the addition of the REIO-clause, the Council expressed its wish to introduce certain amendments to the draft Protocol regarding its provisions on and recognition and enforcement of judgments, which led to the inclusion of a “disconnection clause” in Article 17bis(3), see Article 2, para. 63 et seqq. 46 Commission proposal COM(2003)375 final. 47 Commission proposal COM(2003)375 final, Article 3. 48 Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (661). 49 Non-ratification by some Member States would have led to an “incomplete mixed agreement” and to several uncertainties regarding the Convention's effective applicability and reach, see Ringbom, The EU Maritime Safety Policy and International Law (2008), p. 88 et seq., 101 and Ringbom, EU Regulation 44/2001 and its Implications for the International Maritime Liability Conventions, (2004) JMLC, pp. 18-19.

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vention 2002 by Council Decision as well as the incorporation by Regulation were supposed to happen simultaneously. In this way, they were supposed to institute a uniform and universally applicable liability regime at once.50 However, the planned concerted accession and simultaneous entry into force 20 of Convention and Regulation turned out more difficult than envisioned: Seeing that an accession to the 2002 Protocol would be accompanied by substantial effects on the entire maritime transport sector, several Member States were not eager to be forced into a compulsory time frame to accede to the agreement.51 This first led to deadlock in the Council and finally to an indefinite suspension of negotiations in 2003.52 The 2002 Protocol was therefore – for the time being – not acceded to by the Community. c) Adoption of Regulation (EC) No 392/2009 aa) New Commission Proposal: Incorporation through EU Secondary Law

In view of the lack of progress in Council, the Commission decided to aban- 21 don the idea of a concerted accession for the time being and to concentrate on internal legislation instead. Alongside other parts of the 3rd Maritime Package (the so-called Erika III-Package),53 it submitted a proposal for a Regulation which would incorporate the Convention through EU secondary law in order to at least add its substance to the acquis communautaire.54 Hereby, an equal level of protection for maritime passengers throughout the Community was to be achieved, without the necessity of an accession to the Athens Convention 2002. Moreover, the scope of the regime’s provisions was extended to include all carriage by sea within Member States.55 In addition, several supplements to the compensatory regime – advance payments, compensation for lost or damaged mobility equipment and the obligation to inform passengers of their rights56 – were included in order to adapt the Convention’s regime to liability systems of other modes of transport. Lastly, the Regulation made the IMO Guidelines bind-

50 The Commission confirmed its intention to present this proposal in its communication “Strengthening passenger rights within the European Union”, COM(2005) 46. 51 Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (662). 52 Following a dispute between the United Kingdom and Spain regarding Gibraltar, see Amended Proposal: Explanatory memorandum 2003/0132 (NLE)/COM(2010) 686 final, p. 2. 53 This legislative package of 2005 was the successor of the Erika I and II Packages, which were drafted in the aftermath of the accident of the MV Erika, which sank off the coast of France in 1999, causing a major environmental disaster. The overall aims of Erika III were to reinforce existing EU safety legislation and to transpose major international instruments into Community law. 54 COM(2005) 592 final. 55 In its initial proposal, the Commission had envisioned applicability on all maritime passenger transport within Member States, i.e. including inland waterway transport, see above, para. 11. 56 see Articles 4, 6 and 7, para. 143, 157, 161.

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ing within the EU, thereby guaranteeing uniformity regarding matters covered by these.57 bb) Accession to the Convention no longer Mandatory for the Regime’s Applicability

Despite now focussing on internal legislation, the Commission never entirely abandoned its initial plan of a simultaneous entry into force of both, the Convention and the Regulation. Consequently, it proposed that the Regulation should become applicable whenever the Athens Convention 2002 enters into force for the Community.58 However, seeing that there had not been any progress made in this regard since 2003, a fixed date of entry into force was included.59 Thus, regardless whether the Athens Convention 2002 would ever be acceded to by the Community, the Regulation would enter into force at the latest on that specific date, the 31 December 2012. If, however, the Athens Convention 2002 should become applicable for the Community before that date, the Regulation would enter into force simultaneously, in this case as a mere supplement to the international agreement. 23 By including a fixed date of entry into force, the Regulation detached itself from an uncertain entry into force of the Athens Convention 2002. Thereby, it ensured a level of maritime passenger protection equivalent to the Convention’s regime as well as a uniform interpretation by the CJEU, even if the intended accession by the Community would for any reason fall through. Since the Athens Convention 2002 had, in fact, not entered into force by that time, Regulation (EC) No. 392/2009 entered into force on 31 December 2012. 22

d) Accession by Council Decisions aa) Shift of Competence 24

There was one more advantage of this modus operandi of incorporation by Regulation. As examined above, a main reason for the failed concerted ratification in 2003 was the dependence on the Member States’ willingness to ratify or accede to the Convention. Following the adoption of Regulation (EC) No 392/2009, the situation changed: The European Community had now exercised its competence regarding the matters covered by the Regulation and acquired exclusive legislative competence over these. As a result of the aforementioned ERTA doctrine, the EU was now able to accede to the 2002 Protocol as a whole, i.e. not only regarding the matters covered by the Brussels I-Regulation. A ratifi-

57 Furthermore, the initial proposal contained the elimination of the possibility for Member States to adopt higher limits than those instituted by Article 7(2) AC 2002, see COM(2005)592 final, p. 10. The European legislator later abandoned this idea. 58 COM(2005) 592 final, p. 10. 59 All this was laid down in Article 12 Regulation 392/2009.

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cation or accession by Member States was no longer a prerequisite for the Convention’s applicability.60 bb) Amended Commission Proposal

Following this shift of competence, the Commission submitted an amended 25 proposal for a Council Decision regarding an accession of the, now, European Union to the Athens Convention 2002.61 Accordingly, this proposal was not restricted to the rules affecting the Brussels I-Regulation, but directed at an accession to the Protocol as a whole. After several debates over the right legal basis,62 the proposal was finally split in two separate decisions, one regarding Articles 17 and 17bis AC 2002, and one regarding the rest of the Convention’s provisions.63 The negotiations regarding the amended proposal went more smoothly than in 26 2003, when the original proposal was submitted: Even though the proposed Council Decision still contained a provision calling upon Member States to “take the necessary steps” to ratify or accede to the Protocol, an adhesion by Member States was no longer a prerequisite of EU-wide applicability, much less a simultaneous ratification by Union and Member States.64 In fact, Member States’ cooperation was only needed regarding their vote in the Council, which facilitated the process.65 After Parliament’s consent on 15 November 2011, both Council Decisions 27 were adopted. The EU finally acceded to the 2002 Protocol on 19 December 2011.66 However, this accession did not take effect until 23 April 2014, when the Protocol finally entered into force.

60 Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (665): “By inverting the chronological – and logical at that – order of (first) ratification and (then) implementation of the Convention, the Community legislator has modified the role of the Member States”. 61 COM(2010) 686 final, which is based on Council Document 15838.03. 62 Initially, the amended proposal was based on Article 100(2) in conjunction with Article 219 TFEU, since the majority of the provisions of the Protocol are issues of maritime transport. The provisions concerning jurisdictional issues were regarded as an ancillary component and therefore needed, in the Commission’s opinion, no further legal basis, see COM(2010) 686 final, p. 2. 63 Council Decision 2012/22/EU of 12 December 2011, on the legal basis of Article 100(2) in conjunction with Article 218 TFEU and Council Decision 2012/23/EU of 12 December 2011 on the legal basis of Article 81(1) and (2) lit. a) and c) TFEU in conjunction with Article 218. Denmark did not take part in the adoption of the Council Decision regarding Articles 17 and 17bis AC 2002, since it is not bound by the Brussels I-Regulation. Denmark has, however, acceded to the AC 2002. See Recommendation on the draft Council decision concerning the accession of the European Union to the 2002 Protocol, A7-0356/2011, p. 7. 64 Ringbom, The EU Maritime Safety Policy and International Law (2008), p.103. 65 There, unanimous cooperation was not a necessity, since the Council decision only required a qualified majority. 66 See IMO doc PAL.4/Circ.5.

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4. New hierarchical Order and its Effects on the Liability Regime for Carriage Contracts

After the obstacles during the legislative process were finally overcome and the Athens Convention 2002 came into force in 2014, it became applicable within the European Union’s borders to the effect that individuals may rely directly on its provisions.67 This, however, did not entail any significant improvements regarding the passenger’s legal position, given that the substantial aspects of the regime had already been incorporated for more than a year.68 Even the CJEU’s jurisdiction to review and interpret the Convention's main provisions had already been achieved by virtue of Regulation (EC) No 392/2009.69 29 Nevertheless, the entry into force of Regulation and Convention had a substantial effect regarding the hierarchical order of the European compensatory regime for passenger transport by sea: Before the Regulation, when the Athens Convention in its original version of 1974 had been acceded to only by a few Member States, the position of the Convention in the Member States’ hierarchical order had been subject to extensive legal debate: First, it was unclear whether the Convention would be applicable if the claim was brought in a nonstate party jurisdiction.70 Furthermore, the Convention's interaction with the Package Travel Directive71 was subject to legal uncertainty, as the Directive, or rather its national implementation, was in conflict with several provisions of the original Athens Convention: E.g., cruise passengers can be entitled to compensation under the Directive as well,72 although its requirements regarding burden of proof,73 statute of limitation74 and recoverable damage75 may differ signifi28

67 Its provisions forming the basis of claims comply with the requirements of direct effect as stipulated in the CJEU’s Haegemann-judgment (Case 181/73 (1974) ECR 449, para. 5): Since the Court held in the IATA and ELFAA-judgment (C-344/04 (2006) ECR I-403) that the Montreal Convention had a direct effect, the same applies to the AC 2002, given that the two are – at least partly – comparable regarding their subject matter. 68 A slight improvement, however, is the applicability of Article 17 AC 2002, which provides more potential jurisdictions, see Article 2, para. 58. 69 As Ringbom notes, the method employed by the Court for interpreting international agreements is not necessarily the same as that used for the interpretation of EU law, in: The EU Maritime Safety Policy and International Law (2008), pp. 108-109. 70 E.g., this was an issue in the Sea Diamond case of 20 January 2011 ((2011) 64 Droit Maritime Français 604, Cour d'Appel de Nancy) and the Pince Laurent case of 19 May 1999 ((2000) 52 Droit Maritime Français 26, Cour d'Appel de Paris), both concerning the applicability of the AC 1974 on claims brought in France. 71 Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (1990), OJ L158/59. 72 According to its Article 2, the Package Travel Directive applies to all travel which is part of a pre-arranged set of services sold or offered for sale at an inclusive price covering a period of more than 24 hours or including an overnight stay and which combines at least two of the following: transport, accommodation, or any other tourist services accounting for a significant proportion of the price. Cruise contracts are therefore usually encompassed by the Directive’s scope. 73 See Davis v. Stena ((2005) 2 Lloyd's Rep. 12). 74 See Norfolk v My Travel ((2004) 1 Lloyd’s Rep. 106). 75 See Article 3, para. 98.

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cantly from those under the Athens Convention. Furthermore, compensation under the Package Travel Directive is not bound to any limitation of liability, begging the question whether breaches of cruise contracts may entitle to damages under both regimes regardless of the Convention’s express intention in its Article 14.76 These problems were solved with the entry into force of the Athens Conven- 30 tion 2002:77 As Article 216(2) TFEU establishes, international agreements acceded to by the EU bind its Member States as well.78 The obligation to comply with international agreements extends to the Member States’ internal legal order, regardless if they are themselves States Parties to the international agreement in question. Nevertheless, since they are only bound by virtue of EU law, Member States that have themselves not ratified or acceded to the Convention, cannot be considered “States Parties”. In consequence, in order for several provisions of the Athens Convention 2002 to be workable, the term “State Party” as used in the Convention has to be interpreted as “State bound by the Athens Convention 2002”.79 However, it has to be pointed out that even though Member States have lost most of their external competences regarding the Convention’s subject matter, they are still able to ratify of accede: Since the European Union has left several issues to be decided by the Member States, they still have the corresponding external competences, i.e., most significantly, the opt-out clause in Article 7(2) AC 2002.80 International agreements concluded by the EU become “an integral part of the 31 European legal order”.81 Their hierarchical position can be located between primary and secondary EU Law, exercising primacy over provisions of secondary EU-legislation.82 Any conflicting provision of the Package Travel Directive or its respective national implementation has now become inapplicable to carriage 76 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (130); for a detailed analysis of these problems, see Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 195 et seqq. 77 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (132); Tsimplis/Shaw, Carriage of Passengers, in: Baatz et al., Maritime Law (3rd ed. 2014), p. 221; Soyer, Boundaries of the Athens Convention, Liability Regimes in Contemporary Maritime Law (2007), p. 185. 78 Karsten/Seidenspinner, Zum Vorteile des Verkehrsnutzers – 20 Jahre EU-Passagierrecht, ZEuP (2010), 830 (832 et seq.). 79 Regarding the external perspective of international law, Ringbom suggests that it is “justifiable to assess the compatibility of Community maritime safety legislation with international law as if the “Community group” were a single state”, in: The EU Maritime Safety Policy and International Law (2008), p. 165 et seq. 80 See Article 3, para. 109 et seq. Hence, the Convention still has to be considered a mixed agreement, see Recommendation on the draft Council decision concerning the accession of the European Union to the 2002 Protocol, A7-0356/2011, p. 8. See also Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (665) and Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilites (2014), p. 807. 81 See the CJEU-cases IATA & ELFAA (Rs. C-344/04, para. 35 et seq.), Intertanko (C-308/06, para. 42), Schenkel (C-173/07, para. 43) and Wallentin-Hermann (C-549/07, para. 28). 82 See Case C-344/04 IATA & ELFAA (2006) ECR I-403, para 35.

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contracts under the Athens Convention 2002.83 Furthermore, given that Member States are now bound to the Convention regardless of their own status as a State party, it became irrelevant in which Member State a claim under the Convention was brought: The Athens Convention 2002 has become applicable within the whole EU as the respective jurisdiction’s lex fori.84 32 As a result of this primacy of international agreements over EU secondary legislation,85 the Regulation lost a major part of its relevance: Passengers’ claims falling under the Convention’s scope, i.e. those involving international carriage, are now governed by the Athens Convention 2002 directly.86 Regarding international carriage, the Regulation was the main legal source only for just under 16 Months, i.e. until the Convention’s entry into force on 23 April 2014. However, given that the Regulation contains several supplements to the Convention’s regime, it still functions as the basis of claims regarding its Articles 4, 6 and 7. The same applies to non-international carriage falling under Article 2 Regulation, i.e. carriage by sea within Member States. Since such carriage is not encompassed by the Convention’s own scope of application, it falls under the Convention’s regime solely by virtue of the Regulation.87 5. Conclusion 33

The Regulation’s main aim was to incorporate the substance of the Athens Convention 2002 into the acquis in a time when an entry into force of the Convention itself seemed increasingly uncertain. Even though Regulation 392/2009 has now lost its status as the main legal source for international voyages by sea, it played a fundamental part in shaping the European regime of financial protection of maritime passengers in force: First and foremost, the Regulation paved the way for a general entry into force of the Athens Convention 2002 by signalling the EU’s willingness to be bound by the Convention’s liability regime.88 Moreover, by bringing forward the Regulation, the EU effectively changed the role of the Member States89 and hereby facilitated the process of accession. 83 This is a consequence of Article 14 AC 2002, see Article 3, para. 121. 84 Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, Deutsches Autorecht (2014), 242 (242). This naturally does not apply to non-Member States. Given that the Athens Convention contains a limitation of claims for death and personal injury, courts of non-party states may reject the Convention's application regardless of its scope due to reasons of public policy, see e.g. regarding the United States Peltz, The Athens Convention Revisited (2012) Journal of Maritime Law & Commerce, 491 (517). 85 See the CJEU’s IATA and ELFAA-judgment, C-344/04 (2006) ECR I-403, para 35: Agreements concluded under Article (300) “prevail over provisions of secondary Community legislation”. For the disconnection clause, see Article 3, para. 64. 86 See Article 2, para. 39 et seq. 87 See Article 2, para. 39 et seq. and 59. 88 Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea in the Event of Accidents under Regulation (EC) No 392/2009, European Transport Law (2014), 247 (248). 89 Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (665).

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Ultimately, the EU’s accession to the Athens Convention 2002 was a result of 34 the CJEU’s ERTA doctrine. In the context of Regulation 392/2009, this doctrine allowed for a circumvention of the Member States’ cooperation in a point in time where the process of accession by EU and Member States had already begun. This modus operandi can certainly be criticized as it may impair Member States’ acceptance for the EU’s role in the context of international agreements. Nevertheless, it constitutes a new approach to implementing international conventions in the maritime field90 and could very well serve as a blueprint for many similar situations to come, as many of the “home-made problems”91 the EU is usually facing when adhering to so-called mixed agreements can be avoided. Article 2 Scope This Regulation shall apply to any international carriage within the meaning of point 9 of Article 1 of the Athens Convention and to carriage by sea within a single Member State on board ships of Classes A and B under Article 4 of Directive 98/18/EC, where: (a) the ship is flying the flag of or is registered in a Member State; (b) the contract of carriage has been made in a Member State; or (c) the place of departure or destination, according to the contract of carriage, is in a Member State. Member States may apply this Regulation to all domestic sea-going voyages.

B. Commentary on Article 2 – Scope Article 2 of the Athens Convention 2002 – Application 1. This Convention shall apply to any international carriage if: (a) the ship is flying the flag of or is registered in a State Party to this Convention, or (b) the contract of carriage has been made in a State Party to this Convention, or (c) the place of departure or destination, according to the contract of carriage, is in a State Party to this Convention.

1. Overview

Regulation 392/2009 and the Athens Convention 2002 both contain a provi- 35 sion regarding scope of application in their respective Article 2. The Athens Convention's Article 2(1)92 only stipulates the applicability of the Convention’s provisions on international carriage, whereas the Regulation's Article 2(1) also includes carriage by sea within single Member States on certain categories of

90 Gahlen, Jurisdiction, Recognition and Enforcement under the 1974 PAL, the 2002 Protocol and EU Regulation 392/2009, (2014) European Transport Law, 13 (13). 91 Regarding these “house-made” problems, see Ringbom, EU Regulation 44/2001 and its Implications for the International Maritime Liability Conventions, (2004) JMLC, pp. 1 et seqq. 92 Article 2(1) AC 2002 – as reproduced above – remained unaltered by the 2002 Protocol. Since it was not incorporated by Regulation 392/2009, it is not reproduced in its Annex I.

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ships. Finally, Article 2(2) Regulation 392/2009 contains an opening clause regarding the remaining categories. 36 Apart from these provisions, the question whether the Convention's liability regime applies depends on other factors as well. First, given that the Athens Convention governs claims arising in a contractual relationship,93 the regime’s applicability depends on the existence of a contract of carriage between carrier and passenger (see below, para. 43 et seqq.). Furthermore, the liability evoking incident must have occured during the carrier's period of responsibility under Article 3(6) AC 2002 (see Article 3, para. 94 et seqq.). Lastly, the claim must be brought before a competent court, for which Article 17 AC 2002 sets out a list of competent jurisdictions each claimant can choose from (see below, para. 58 et seqq.). 37 If the requirements under Article 2(1) AC 2002 or Article 2(1) Regulation 392/2009 are met, the regime functions as the lex fori in all Member States of the EU.94 It is therefore irrelevant whether a claim is brought in a Member State that has ratified or acceded to the Athens Convention 2002. (see Article 1 and Introduction, para. 31).95 If, however, the carriage is subject to a civil liability regime under any other international convention concerning the carriage of passengers or luggage by another mode of transport in so far as those provisions have mandatory application to carriage by sea, the Convention’s liability regime is not applicable, i.e. neither directly nor by virtue of EU Secondary law.96 38 The Athens Convention 2002 contains several other provisions governing its scope of application, which are applicable to both, international and domestic carriage by sea:97 According to Article 21 AC 2002, a commercial carriage undertaken by a State or a Public Authority is covered by the regime’s scope as long as the contract of carriage falls under the meaning of Article 1 of the Convention. Moreover, Article 20 AC 2002 exempts damage caused by a nuclear incident from the scope of the Convention, under the condition of a liability of

93 Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (247, 253); Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (126). 94 Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (242). 95 Naturally, this does not apply to states that are neither Parties to the AC 2002 nor Member States. In such cases, the Convention's liability regime may only be applicable by virtue of contractual incorporation, see Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (244). Regarding contractual incorporation in the United States, see US Court of Appeals (11th Ct.), 21.9.2012, 10-15840- The estate of Tore Myhra v. Royal Carribean Cruises (IFTTA Law Review (2013), 3) and Peltz, The Athens Convention Revisited, JMLC (2012), pp. 491 – 520. 96 See Article 2(2) AC 2002, which was also incorporated by Article 3 of the Regulation. 97 Either directly or by virtue of Article 3 Regulation (EC) No. 392/2009.

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the operator of the nuclear installation under any other international convention or under national law.98 2. Relationship between the Regulation’s and the Convention’s respective Article 2

Both, the Regulation as well as the Athens Convention 2002 contain a provi- 39 sion governing their respective scope of application. This is the result of the Commission’s intention to institute a liability regime for all maritime passengers travelling within the EU, not only for those on international voyages as encompassed by the Convention. In order to do that, the Convention’s scope had to be extended by virtue of EU secondary law (see Article 1 and Introduction, para. 11). The resulting Article 2(1) Regulation 392/2009 is based on the corresponding provision in Article 2(1) AC 2002, although two changes were made: Apart from the mentioned extension regarding ships engaged in domestic sea-going carriage (see below, para. 53 et seqq.), the reference to the “State Party to this convention” was replaced by a reference to EU Member States in order to ensure applicability even if no Member States were to become parties to the Convention.99 Accordingly, the Convention’s Article 2(1) was not incorporated in Article 3 Regulation 392/2009. Nevertheless, the Athens Convention 2002 is now directly applicable 40 throughout the European Union. Regarding international carriage, the regime’s scope of application is therefore governed by Article 2(1) of the Convention which supersedes the Regulation’s provision (see Article 1 and Introduction, para. 31 et seq.). The Convention’s primacy over the Regulation does not entail any negative or positive effects as to the effective reach of the liability regime, given that Member States are now bound to the Athens Convention 2002 regardless of their status as States Parties.100 The Regulation’s Article 2(1) has therefore lost most of its relevance for international carriage.101 The situation is different regarding domestic carriage by sea, which is only included in the regime’s scope by virtue of Article 2(1) Regulation 392/2009.

98 This provision is in line with similar ones in other transport conventions, i.e, specifically Article 25(3) of the Hamburg Rules and Article 86 of the Rotterdam Rules; Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 261. 99 Berlingieri, The Athens Convention and the European Parliament Regulation (EC) No. 392/2009, Il Diritto Marittimo (2011), 1125 (1127). 100 EU Member States cannot be automatically considered “States Parties”, since they are bound to the AC 2002 only by virtue of EU law (see Article 1 and Introduction, para. 30). 101 Nevertheless, Article 2(1) is still the governing provision regarding the applicability of the Regulation’s original legislation, i.e. its Articles 4, 6 and 7.

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3. Scope a) International Carriage 41

According to Article 2(1) AC 2002 as well as its corresponding provision in Regulation 392/2009, the Athens Convention 2002 applies to any international carriage if the ship in question is flying the flag of or is registered in a State Party to the Athens Convention 2002,102 or, if the contract of carriage has been made in a State Party, or, if the place of departure or destination, according to the contract of carriage, is in a State Party. Hence, the terms “contract of carriage” (see below, under aa), “ship” (under bb) and “international carriage” (under cc) are of crucial importance for the determination of the Convention’s scope. aa) “Contract of Carriage”

Given that claims under the Athens Convention 2002 are of a contractual nature,103 the term “contract of carriage” – as defined in Article 1(2) AC 2002 – plays a central role for the applicability of the Convention’s liability regime as well as the identification of the competent jurisdiction (see below, para. 56 et seqq.). Moreover, since the “carrier” as the regime’s primary subject is defined by his obligation under a “contract of carriage”, the term functions as a determining factor his identification (see Article 3, para. 85 et seqq.). Lastly, the Convention’s definition of a “passenger” as the regime’s benefactor in Article 1(4) AC 2002 requires the establishment of a contract of carriage under which a person is carried.104 43 In spite of the term’s crucial importance, the Athens Convention 2002 does not offer a satisfactory definition: Article 1(2) AC 2002 merely defines it as “a contract made by or on behalf of a carrier for the carriage by sea of a passenger or of a passenger and his luggage”. This definition describes the carrier’s contractual obligation and clarifies that the contract does not have to be concluded by him directly. Furthermore, the requirement of a contract logically excludes claims of persons a carrier never consciously agreed to take on board – i.e. claims of stowaways or people rescued at sea.105 44 Apart from that, the identification of a “contract of carriage” can prove rather difficult, seeing that – depending on the respective jurisdiction – there are differ42

102 In order for the liability regime to be workable, the term “State Party” has to be interpreted as “state bound by the AC 2002” in this context (see Article 1 and Introduction, para. 30). 103 Tsimplis, Liability in respect of passenger claims and it´s limitation, JIML (2009), 125 (126). 104 Article 1(4) describes a passenger as “any person carried in a ship: (a) under a contract of carriage or (b) who (…) is accompanying a vehicle or live animals (…).” Bus drivers and drivers accompanying commercial vehicles are therefore also considered “passengers” under the AC 2002, see Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 189, para. 11.15. 105 Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (250).

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ent understandings of what a “contractual relationship” is constituted of: Most notably, it is unclear if a gratuitous carriage should be considered a contractual obligation. In this context, Article 1(2) AC 2002 does not require that a passenger must have concluded the contract of carriage or paid the fee himself: Even where the affected passenger’s ticket was not paid by the passenger himself but by some other person on his behalf, the relationship between passenger and carrier is still considered “contractual”.106 If, however, there was no remuneration involved whatsoever, the existence of 45 a contract of carriage depends on the respective jurisdiction and legal system a claim is brought in: E.g., under English law, the existence of a contractual bond between carrier and carried person can only be assumed where both parties provide consideration for the contract: In other words, a ticket must have been purchased for a fee – even if this fee is only a nominal one.107 By contrast, under German law, a relationship can be seen as contractual even in cases where the performance is provided without any sort of remuneration or direct exchange of benefits.108 Generally speaking, it appears reasonable to rule out voyages that clearly have no commercial background.109 However, it is not always easy to distinguish those voyages from those with an – even if abstract – commercial dimension: If, for example, tickets are given out free of charge by the carrier as part of a promotional campaign, an assessment of the carriage as a contractual performance will depend on the respective jurisdiction’s approach. Furthermore, since the members of the crew cannot be considered passen- 46 gers and the carrier does not perform a carriage to their benefit, claims of members of the crew are not covered by the Athens Convention 2002.110 bb) “Ship”

Another central prerequisite for the application of the Athens Convention 47 2002 is that the carriage of passengers and their luggage is performed on a ship, Article 1(4) AC 2002. In its Article 1(3), the Convention defines a ship as a “sea-going vessel, excluding an air-cushion vehicle”. Thus, apart from the exclusion of hovercrafts, the only indication as to the capabilities a vessel must have can be found in the term “sea-going”: Since the Athens Convention 2002 106 See Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 190, para. 11.17. 107 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 100; Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 190, para. 11.17. 108 Under German law, a relationship can be classified as contractual, if e.g. the performance in question is of high economic importance for the recipient. 109 Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 190, 11.17, referring to the Marchioness disaster in which a boat was hired by an individual for the purpose of celebrating his birthday with his guests. 110 This can be explained by the notion that a possible conflict with maritime labour law was to be avoided. The determination can be difficult where the respective person cannot clearly be categorized as either crew member or passenger.

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only covers the actual carriage of passengers by sea as opposed to the carriage of passengers by inland waterways, the question whether a ship is sea-going or not depends wholly on the geographical area in which it is operated, not on its capability of proceeding to sea.111 Regarding the physical attributes a vessel must have in order to qualify as a ship, the Convention does not offer any guidance. Hence, whether a vessel can be considered a “ship” under the Athens Convention 2002 is to be determined under general maritime law standards.112 cc) “International Carriage”

Regarding the term “international carriage”, Article 2(1) AC 2002 as well as its counterpart in Regulation 392/2009 refer to its definition in Article 1(9) AC 2002. According to this provision, an international carriage is “any carriage in which, according to the contract of carriage, the place of departure and the place of destination are situated in two different States, or in a single State if, according to the contract of carriage or the scheduled itinerary, there is an intermediate port of call in another State.” Thus, for the Athens Convention 2002 to be applicable, it is required for the carriage to be scheduled to leave one state and enter another. It suffices if the only point of contact with the other state is an intermediate port of call. This allows the inclusion of cruise contracts in which departure and destination are in the same port.113 49 Article 1(9) AC 2002 determines the place of departure/destination solely “according to the contract of carriage” (see above, under para. 42 et seqq.). This means that any destination to or call at a port in another State must appear in the contract of carriage or in the scheduled itinerary as provided by the other contracting party.114 It follows that if – according to the contract of carriage – the ship was supposed to leave one and to enter another state, but for whatever reason did not, it is still considered an international carriage.115 If, however, the scheduled itinerary does not include a call at a port of another State, but the ship 48

111 Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 187; Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilites (2014), p. 795. Regarding the term “sea-going”, see the judgment The Sea Eagle, (2012) 2 Lloyd’s Rep. 37 paras 31-33. Since the EU did not extend the Regulation’s scope to inland waterways, this distinction is still of relevance. 112 Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 187 et seq. For a further discussion see Gahlen, Ships revisited: a comparative study, JIML (2014), pp. 252 – 269. 113 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 260; Tonner, Reiserecht maritim – Die Kreuzfahrt als Pauschalreise, Reiserecht Aktuell (2013), 206 (209). 114 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 260. 115 Hoffmann/Tüngler/Kirchner, Europarechtliche Unfallhaftung und Versicherungspflicht der Anbieter von Seereisen, EuZW 2013, 332 (333).

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occasionally does call at a port of another state, Article 1(9) AC 2002 does not consider it an “international carriage”.116 dd) Link to State Party

Apart from the carriage having an international context in the sense of Arti- 50 cle 1(9) AC 2002, Article 2 AC 2002 requires a link between the carriage and a State Party. Possible links can either be of a territorial or of a contractual nature. Under subparagraphs (a) and (c) of Article 2(1) AC 2002, a carriage re- 51 quires a territorial link to a State party: Either the ship is flying the flag of or is registered in a State Party (a), or the place of departure or destination is in a State Party (c). The alternative link to the state of registration under (a) is meant to include cases of bareboat charter registration, where the ship is registered in two different states.117 Again, since Article 1(9) AC 2002 determines the place of departure/destination “according to the contract of carriage”, it is only required that a point of contact to the State Party was contractually agreed upon (see above, para. 49). If – according to the contract – the carriage was scheduled to call at a port of a State Party, but for whatever reason did not, the Athens Convention 2002 is still applicable. Furthermore, the Athens Convention 2002 is applicable if the contract of car- 52 riage was concluded in a State Party – subparagraph (b). Normally, the place where a contract was concluded is the place where the passenger is residing,118 although the results of (b) can be rather arbitrary where the contract was concluded via the internet. Thus, subparagraph (b) expands the Convention’s scope considerably.119 Before the 2002 Protocol entered into force, the identically worded Article 2(1)(b) of the Athens Convention 1974 was usually the only chance for passengers to fall under the original Convention’s scope, given that

116 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 260. 117 Berlingieri, The Athens Convention and the European Parliament Regulation (EC) No. 392/2009, Il Diritto Marittimo (2011), 1125 (1127); see Recital 12 of Regulation (EC) No 392/2009: “For the purposes of this regulation, the expression “or is registered in a Member State” should be considered to mean that the flag state for the purposes of bareboat charterout registration is either a Member State or a contracting party to the Athens Convention.”. 118 Berlingieri, The Athens Convention and the European Parliament Regulation (EC) No. 392/2009, Il Diritto Marittimo (2011), 1125 (1128). 119 It has to be noted that where the link is made solely through (b), an effective port state control e.g. regarding the ship’s compliance with Article 4bis(13) cannot be guaranteed, seeing that in such cases no state authority is bound by the AC 2002, see Hoffmann/Tüngler/Kirchner, Europarechtliche Unfallhaftung und Versicherungspflicht der Anbieter von Seereisen, EuZW 2013, 332 (333).

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its global acceptance was rather limited (see Article 1 and Introduction, para. 5).120 b) Domestic Carriage

Regarding carriage within single Member States, the scope of the Athens Convention 2002 was extended by virtue of Regulation 392/2009 to include certain categories of passenger ships engaged in domestic voyages by sea. This extension was deemed necessary to ensure a wide-ranging application of the Regulation covering all passengers travelling within the EU.121 After all, the distinction between national and international transport had been eliminated within the internal market in maritime transport services.122 The Athens Convention 2002 is applicable to domestic carriage by sea solely by virtue of EU secondary law, i.e. Article 2 Regulation 392/2009. This corresponds with the course of action taken by the EU legislator regarding air travel, where the Montreal Convention’s scope of application was extended to flights within single Member States.123 It has to be noted, though, that this level of applicability is not as high as initially planned, since domestic voyages on inland waterways are not included in the Regulation’s scope.124 54 In particular, Article 2(1) Regulation 392/2009 extends the application of the Athens Convention 2002 to carriage of passengers by sea within a single Member State when made on board of ships of Classes “A” and “B” as defined in Article 4 Council Directive 98/18 on safety rules and standards for passenger 53

120 Most notably, this was the case for Costa Concordia disaster of 2012. The cruise ship was flying the Italian Flag at the time of the incident. Its departure and destination point were both in Italy. Since Italy was never a State Party to the Convention, the AC 1974 would only apply where the contract of carriage was made in a State party to the Convention, see Martínez-Gutiérrez, New European rules on the liability of carriers and passengers by sea in the event of accidents, JIML (2012), 293 (294). For a discussion of the applicable law from a German perspective, see Damar, Die Costa Concordia ist auf den Felsen gelaufen – auch das Recht auf Haftungsbeschränkung? Verbraucher und Recht (2012), 287 et seqq. 121 COM(2005) 592 final, 9. 122 See Recital 3 of Regulation 392/2009; Martínez-Gutiérrez, New European rules on the liability of carriers and passengers by sea in the event of accidents, JIML (2012), 293 (296). 123 See Article 1 of Regulation (EC) No 2027/97 as revised by Regulation (EC) Nr. 889/2002; Tonner, Reiserecht maritim – Die Kreuzfahrt als Pauschalreise, RRa 2013, 206 (210). 124 See COM(2005) 592 final, p. 10. After a controversial debate, a majority in the EU Parliament rejected the inclusion of inland waterways. The Council agreed with this rejection and argued that an inclusion would neither be appropriate nor would it take specific requirements to inland waterways into account, see Codecision Procedure Report A6-0102/2009 of 25 February 2009, pp. 7, 8.

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ships.125 On the basis of this referral, the main part of the Athens Convention 2002 is applicable to those ships engaged in domestic voyages that are authorized to perform voyages in the course of which they may be more than 15 miles away from a place of refuge or more than 5 miles from the line of the coast.126 Article 2(2) of the Regulation contains an opening clause, which enables 55 Member States to apply this Regulation to all domestic sea-going voyages – i.e. the remaining classes “C” and “D”.127 By contrast, Article 11 Regulation 392/2009 offers Member States the possibility to defer the application of the Regulation until 31 December 2016 for class “A” ships and until 31 December 2018 for class “B” ships. Several Member States have made use of this transitional period and postponed the application to Class A and B ships (see Article 11, para. 63 et seq.). Therefore, the Regulation’s application can be considered optional in this regard.128 4. Competent Jurisdiction and Recognition/Enforcement of Judgments Article 17 of the Athens Convention 2002 – Competent jurisdiction (1) An action arising under Articles 3 and 4 of this Convention shall, at the option of the claimant, be brought before one of the courts listed below, provided that the court is located in a State Party to this Convention, and subject to the domestic law of each State Party governing proper venue within those States with multiple possible forums: (a) the Court of the State of permanent residence or principal place of business of the defendant; or (b) the Court of the State of departure or that of the destination according to the

125 Recast by Council Directive 2009/45/EC of May 6, 2009, amended by Commission Directive 2010/36/EU of 1 June 2010. In this Directive, passenger ships are divided into 4 classes according to the sea area in which they operate. Article 4 reads: “‘Class A’ means a passenger ship engaged on domestic voyages other than voyages covered by Classes B, C and D. ‘Class B’ means a passenger ship engaged on domestic voyages in the course of which it is at no time more than 20 miles from the line of coast, where shipwrecked persons can land, corresponding to the medium tide height. ‘Class C’ means a passenger ship engaged on domestic voyages in sea areas where the probability of exceeding 2.5 m significant wave height is smaller than 10 % over a one-year period for all-year-round operation, or over a specific restricted period of the year for operation exclusively in such period (e.g. summer period operation), in the course of which it is at no time more than 15 miles from a place of refuge, nor more than 5 miles from the line of coast, where shipwrecked persons can land, corresponding to the medium tide height. ‘Class D’ means a passenger ship engaged on domestic voyages in sea areas where the probability of exceeding 1.5 m significant wave height is smaller than 10 % over a one-year period for all-year-round operation, or over a specific restricted period of the year for operation exclusively in such period (e.g. summer period operation), in the course of which it is at no time more than 6 miles from a place of refuge, nor more than 3 miles from the line of coast, where shipwrecked persons can land, corresponding to the medium tide height.”. 126 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 292. 127 The Netherlands and Denmark (with some exceptions) have made use of this possibility. Article 1(3) Regulation 392/2009 provides that no later than June 30, 2013, the Commission shall, if appropriate, present a legislative proposal in order, inter alia, to extend the scope of the Regulation to ships of Classes “C” and “D”. 128 Martínez-Gutiérrez, New European rules on the liability of carriers and passengers by sea in the event of accidents, JIML (2012), 293 (296).

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Chapter 3, VII. contract of carriage; or (c) the Court of the State of the domicile or permanent re sidence of the claimant, if the defendant has a place of business and is subject to jurisdiction in that State; or (d) the Court of the State where the contract of carriage was made, if the defendant has a place of business and is subjec t to jurisdiction in that State. (2) Actions under Article 4 bis of this Convention shall, at the option of the claimant, be brought before one of the courts where action could be brought ag ainst the carrier or performing carrier according to paragraph 1. (3) After the occurrence of the incident which has caused the damage, the parties may agree that the claim for damages shall be submitted to any jurisdiction or to arbitration. Article 17bis of the Athens Convention 2002 – Recognition and enforcement (1) Any judgment given by a court with jurisdiction in accordance with Article 17 which is enforceable in the State of origin where it is no longer subject to ordinary forms of review, shall be recognised in any State Party, except: (a) where the judgment was obtained by fraud; or (b) where the defendant was not given reasonable notice and a fair opportunity to present his or her case. (2) A judgment recognised under paragraph 1 shall be enforceable in each State Party as soon as the formalities required in that State have been complied with. The formalities shall not permit the merits of the case to be re-opened. (3) A State Party to this Protocol may apply other rules for the recognition and enforcement of judgments, provided that their effect is to ensure that judgments are recognised and enforced at least to the same extent as under paragraphs 1 and 2.

In order for a passenger to be able to base his claim on any of the Convention's provisions, he must bring his action before a court in a competent jurisdiction. The competent jurisdiction for claims as well as the recognition and enforcement of judgments are governed by Articles 17 and 17bis AC 2002. They were both not incorporated by Article 3 Regulation 392/2009, which can be explained by the fact that the European legislator had already provided harmonized rules in this regard in Regulation (EC) No 44/2001 (Brussels I-Regulation, now recast as Regulation (EU) No. 1215/2012).129 In a situation where the entry into force of the Convention seemed rather unlikely, an inclusion of rules regarding already harmonized subjects did not seem necessary.130 However, with the entry into force of the Athens Convention 2002, Articles 17 and 17bis finally became part of the legal order of the EU131 and therefore prevail over any provisions of the Brussels I-Regulation (see Article 1 and Introduction, under para. 31).132 57 The existence of harmonized rules regarding jurisdiction as well as recognition and enforcement of judgments caused problems during the negotiations of the 2002 Protocol: Member States were prevented from signing the 2002 Protocol in respect of Articles 17 and 17bis AC 2002, as they had lost their external 56

129 Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 351, 20.12.2012. Hereinafter it is referred to as “Brussels I-Regulation (recast)”. 130 Røsæg presumes that this happened based on the belief that the existing community laws were equivalent to the Athens provisions, The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 62. 131 Recital 11 of Regulation 392/2009. 132 With the exception of the disconnection clause in Article 17bis(3), see below, para. 64.

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competence regarding the matters covered by the Brussels I-Regulation. Since the European Union became the only competent body to ratify in this regard, an “accession clause” had to be inserted in Article 19 of the 2002 Protocol. This provision enabled “Regional Economic Integration Organizations” like the EU to accede to the Convention (see Article 1 and Introduction, para. 17). a) Competent Jurisdiction

Article 17(1) AC 2002 lists the available jurisdictions which are competent to 58 hear cases arising under Articles 3 and 4 of the Convention, all of which have to be located in a State Party.133 It is for each claimant to choose a jurisdiction among those listed. As a consequence, multiple forums can be called upon simultaneously after an incident involving more than one victim. If multiple courts are available within a State Party, the proper venue remains governed by domestic law. The forums provided by subparagraphs (a) to (d) of Article 17(1) AC 2002 59 are (a) the courts of the state in which the defendant has his permanent residence or principal place of business, (b) the courts of the state where the carriage of passengers was supposed to start and finish according to the contract of carriage (see above, under para. 42 et seqq.), (c) the courts of the state in which the claimant has his permanent residence or domicile, and (d) the courts of the state where the contract of carriage was concluded. Subparagraphs (c) and (d) only apply if the defendant has a place of business and is subject to the jurisdiction in that state. Claimants under the Athens Convention 2002 are in a better position than they were prior to its entry into force, since the forums listed in (c) and (d) are not provided under the Brussels I-Convention (recast).134 Under (a), Article 17(1) AC 2002 refers to the residence or place of business 60 of the “defendant”. Since this paragraph governs competent jurisdictions for actions arising under Article 3 and 4 AC 2002, possible “defendants” are the (contractual) carrier and the performing carrier (see Article 3, para. 86-91). Claims under Article 4bis (see Article 3, para. 133) are not referred to in this paragraph, which leads to the conclusion that the provider of financial security is not considered a “defendant” under Article 17(1) AC 2002. Nevertheless, Article 17(2) AC 2002 provides that the claimant has the option to bring an action 133 As a result of the EU's accession to the AC 2002, the term “State Party” has to be interpreted as “state bound by the AC 2002” in this context (see Article 1 and Introduction, para. 30). 134 Under the Brussels I-Regulation (recast), the forum at the domicile of the claimant under subparagraph (c) is only provided for claims against an insurer (Articles 11(1)(b), 13(2)) or for “consumer contracts” which applies to transportation agreements if accommodation is included (Articles 17(3), 18(1)). Consequently, only passengers of cruises are granted the forum at their domicile, whereas e.g. passengers of ferries are not. The forum where the contract was concluded is not provided by the Brussels I-Regulation (recast). For a detailed analysis, see Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (656 et seq.) and Røsæg, The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 61 – 66.

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under Article 4bis AC 2002 before one of the competent jurisdictions under paragraph 1. Thus, no additional forum was introduced by the 2002 Protocol and its right of direct action under Article 4bis(10) AC 2002. It is therefore possible for a provider of financial security to be sued in a jurisdiction in which he does not have a place of business.135 61 Article 17(3) AC 2002 provides the possibility for the parties to agree – post accident – that claims shall be submitted to any jurisdiction of choice or arbitration. Any contractual provision seeking to restrict the range of competent jurisdictions concluded prior to the accident is considered null and void under Article 18 AC 2002. 62 As said above, the Brussels I-Regulation (recast) – although by its own definition applicable136 – does not govern the competent jurisdiction for claims under the Athens Convention 2002. The same applies to claims arising from incidents on carriage within Member States, since jurisdictional aspects of such claims are usually governed by domestic law. b) Recognition and Enforcement of Claims

Article 17bis(1) and (2) AC 2002 sets out rules for the recognition and enforcement of judgments based on the Athens Convention 2002. Any judgment by a competent court in litigation governed by the Convention that is final, i.e. not subject to ordinary forms of review, has to be recognized and enforced in courts of all States Parties. Consequently, any review of the merits by the enforcing court is prohibited.137 The only exceptions provided are judgments that where obtained by fraud or where the defendant was not given reasonable notice of the action and a fair opportunity to present the case.138 64 Although – similarly to Article 17 – Article 17bis AC 2002 generally prevails over any differing provision of the Brussels I-Regulation (recast), a disconnection clause was included in its paragraph 3.139 This clause allows States Parties to apply other rules of recognition and enforcement of judgments if the same or 63

135 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 123. 136 Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (658). Before the Convention's entry into force, the competent jurisdiction for claims under Article 3, 4 or 4bis was to be determined on the basis of the Brussels I-Regulation, i.e. (in the Regulation’s recast version) Article 7(1) for the contractual carrier, Article 7(2) for the performing carrier and Articles 10 et seq. for the insurer or other provider of financial security. 137 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 124. 138 As Tsimplis points out, it is unclear whether the deprivation of a fair opportunity to present the case has to be the result of a lack of reasonable notice or whether their coexistence without a causal link is sufficient, in: Liability in respect of passenger claims and its limitation, in: Liability in respect of passenger claims and its limitation, JIML (2009), 125 (147). 139 This was the result of the Commission’s initiative during the negotiations of the 2002 Protocol, see LEG/CONF. 13/7 (18 July 2002).

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a higher level of recognition and enforcement is ensured.140 As a result, the Brussels I-Regulation (recast) remains partly applicable regarding judgments based on the Athens Convention 2002: Their recognition and enforcement is governed by Articles 36 et seqq. Brussels I-Regulation (recast). Since this Regulation only provides for rules regarding judgments that were given in EU Member States, its continued application has no effect on other (non-EU) States Parties to the Convention.141 Regarding the available exceptions under Article 45(1) Brussels I-Regulation 65 (recast),142 there are uncertainties as to whether this provision ensures recognition and enforcement “at least to the same extent” as Article 17bis(1) and (2) AC 2002. Evidently, whilst negotiating the disconnection clause, the Commission was under the impression that the Brussels I-Regulation is generally more permissive than the Athens Convention’s regime – shown by the fact that under Article 45(1) Brussels I-Regulation (recast) even judgments that are not final yet have to be recognized.143 As it has been pointed out,144 this presumption was not accurate, since Article 45(1) Brussels I-Regulation (recast) allows non-recognition due to public policy as well as irreconcilability whereas Article 17bis AC 2002 does not. This could be considered a minor difference, as particularly the reference to public policy is of practically no importance.145 However, the two regimes do not completely align. Nevertheless, this does not entail a mandatory non-application of the Brussels I-Regulation (recast), since this would render the whole disconnection clause irrelevant. Instead, the exceptions regarding public policy and irreconcilability have to be disregarded when it comes to final judgments under the Athens Convention 2002. This does not apply to judgments which are still subject to ordinary forms of review since such judgments have to be recognized solely by virtue of the Brussels I-Regulation (recast).

140 As Røsæg observes, this wording does not allow any real departure from Article 17bis AC 2002 since its requirements must be met anyway, in: The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 62. 141 See LEG/CONF. 13/7 (18 July 2002), Annex I, p. 4. 142 The discussion originally concentrated on Article 34 of the original Brussels I-Regulation, which is largely equivalent to its recast version. 143 See LEG/CONF. 13/7 (18 July 2002), Annex II, p. 1. 144 Røsæg, The Athens Convention on Passenger Liability and the EU (2009), in: Hamburg Lectures on Maritime Affairs 2007 & 2008, p. 67, Duintjer Tebbens, The European Union and the Athens Convention: An Incorporation Adventure, RHDI (2008), 653 (658); Gahlen, Jurisdiction, Recognition and Enforcement under the 1974 PAL for Passenger Claims, the 2002 Protocol and EU Regulation 392/2009, ETL (2014), 13 (18-19). 145 It has been pointed out, though, that a judgment from one Member State’s court could very well be regarded as “contravening public policy” by another Member State, especially with regard to the differing views on limitation of liability for claims arising from death or personal injury. For a discussion of this problem, see Gahlen, Jurisdiction, Recognition and Enforcement under the 1974 PAL, the 2002 Protocol and EU Regulation 392/2009, ETL (2014), 13 (19 et seqq.).

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Article 3 Liability and insurance 1. The liability regime in respect of passengers, their luggage and their vehicles and the rules on insurance or other financial security shall be governed by this Regulation, by Articles 1 and 1bis, Article 2(2), Articles 3 to16 and Articles 18, 20 and 21 of the Athens Convention set out in Annex I and by the provisions of the IMO Guidelines set out in Annex II. 2. The IMO Guidelines as set out in Annex II shall be binding.

C. Commentary on Article 3 – Liability and Insurance 1. Overview

Article 3 is the core provision of Regulation (EC) No 392/2009. Its sole objective is to adopt the liability regime of the Athens Convention 2002 for claims relating to death or personal injury as well as loss or damage to luggage regarding international carriage by sea and to extend it to the carriage of passengers within single Member States: The incorporation of Articles 1 and 1bis, Article 2(2), Articles 3 to 16 and Articles 18, 20 and 21 AC 2002 in Article 3(1) of the Regulation made the Convention's significant provisions146 applicable within the European Union even before the its direct entry into force, thus providing a uniform system of liability, compensation and compulsory insurance by virtue of EU secondary law. Furthermore, Article 3(2) declared the IMO Guidelines as set out in Annex II (i.e., including the Reservation) binding. Both, the incorporated provisions of the Athens Convention 2002 and the IMO Reservation and Guidelines can be found in the Regulation’s Annex I and II respectively. 67 With the entry into force of the Athens Convention 2002 on 23 April 2014, Article 3 Regulation 392/2009 has largely become obsolete, seeing that the Convention is now directly applicable within the EU. Furthermore, the IMO Reservation and, by reference, the IMO Guidelines were included in the European Union’s instrument of accession and were made binding in this manner.147 International carriage is therefore directly governed by the Convention, an incorporation either of the Convention’s provisions or its Guidelines is no longer necessary (see Article 1 and Introduction, para. 32).This, however, does not apply to carriage within single Member States, seeing that such carriage is only encompassed by the Regulation’s scope of application (see Article 2, para. 53 et seqq.). In this regard, Article 3 Regulation 392/2009 is still of relevance. 66

146 In its proposal COM(2005) 592 final, the European Commission had intended to refer to “all provisions of the Athens Convention 2002 relevant to such (i.e. the Carrier’s) liability” to ensure exact alignment with the Convention, a similar approach to the incorporation of the Montreal Convention into Community law by Regulation (EC) No 889/2002. However, as this method of referral to “relevant” provisions was deemed imprecise, potentially misleading or irrelevant provisions of the Convention’s text (namely Articles 2(1), 17, 17bis, 19) were removed from Annex I. 147 See PAL.4/Circ.5 (19 December 2011) regarding the accession to the AC 2002 by the EU as well as Council Decisions 2012/23/EU and 2012/22/EU of 12 December 2011.

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Apart from the incorporation of the Athens Convention 2002 along with the 68 IMO Guidelines, Article 3 Regulation 392/2009 has no further original content, since it only refers to the provisions set out in Annexes I and II.148 This makes it necessary to outline the Convention’s liability regime regarding death or personal injury and loss of or damage to luggage (see under 2., para. 69 et seqq.), its provisions regarding compulsory insurance (under 3., para. 122 et seqq.) as well as the changes made to the liability regime by the IMO Reservation and Guidelines (under 4., para. 136 et seqq.). On several issues, the regime as set out in the following analysis is complemented by other provisions of the Regulation which are discussed separately (see Articles 4, 5, 6 and 7, para. 143, 146, 157 and 161). 2. Liability Regime a) General

Even though a multitude of claims may arise within a contractual relationship 69 between a carrier and passenger,149 the Athens Convention 2002 only applies to the liability for the death of and personal injury to passengers as well as loss or damage to their luggage.150 Regardless of the respective loss or damage, the carrier (or the performing carrier, see below, para. 85 et seqq.) is only liable if the incidents resulting in said loss or damage occurred “in the course of the carriage”, i.e. during his respective period of responsibility as defined in Article 1(8) AC 2002 (see below, para. 94). Once this has been established – the burden of proof lying with the claimant –, the Convention contains different sets of rules for either the liability for death or personal injury (see para. 71 et seqq.) or for the loss of or damage to luggage (see para. 74 et seqq.). The claimant has to prove the extent of the loss, i.e. the nature of the injury as well as any recoverable damage that resulted from it (see below, para. 98 et seqq.).151 The Convention's rules regarding carrier's and performing carrier's liability 70 (i.e., its Articles 3, 4, 11 and 12), liability limits (Articles 7 and 8 with the exception of Article 8(4)), burden of proof (Article 3(1), (4), (6) and (8) as well as Articles 6 and 11), or the competent jurisdiction (Article 17(1) and (2)) all have mandatory character, as the Athens Convention 2002 means to protect the passenger as the weaker party of the contractual relationship.152 Article 18 AC 148 Schilling, Die Rechte des Passagiers im maritimen Schiffsverkehr, Transportrecht (2013), 401 (402). 149 For example, claims arising from delays or other performance issues on the part of the carrier are governed by Regulation (EU) 1177/2010 concerning the rights of passengers when travelling by sea and inland waterway or by the respectively applicable national law. 150 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 262; The 2002 Protocol added the carrier’s obligation regarding compulsory insurance as well as the direct action against insurers in Article4bis AC 2002. 151 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 265. 152 Gahlen, Civil Liability for Accidents at Sea (2015), p. 228.

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2002 states that all contractual provisions which are in conflict with these rules and which were concluded before the occurrence of an incident causing any of the losses addressed by the Convention, shall be null and void. In order to preserve the contract and, thus, subject it to the Convention's rules, the nullity of such contractual provision does not render the contract itself void.153 b) Liability for Death or personal Injury

Regarding liability for death or personal injury under the Athens Convention 2002, the basis of liability as well as the burden of proof depend on the question whether the loss occurred due to a “shipping incident”, i.e. an incident that is inherent to the transport by sea (for a discussion of the term, see below para. 81 et seqq.). Since a causal connection between a shipping incident and the respective death or personal injury is beneficial for the claimant (see para. 72 et seq.), the burden of proof in this regard lies with him.154 Regardless of whether the personal damage is the result of a shipping incident or not, the limit of liability is set at 400,000 SDR per passenger by Article 7(1) AC 2002 (see below, para. 107 et seqq.). 72 If the loss of life or the personal injury is suffered as a result of a shipping incident, Article 3(1) AC 2002 stipulates a two-tiered liability system: Up to an amount of 250,000 Special Drawing Rights155 (approx. 315,000 €) per passenger the carrier’s liability is strict: He is liable regardless of his fault with very restricted possibilities of exoneration (Article 3(1)(a) and (b) AC 2002, see below, para. 103 et seq.). If the damage exceeds 250,000 SDR, the carrier is further liable up to an amount of 400,000 SDR (approx. 505,000 €). This second tier of liability is based on presumed fault or neglect of the carrier,156 which means that the carrier has the burden of proving that the shipping incident occurred without his fault or neglect. This allocation of burden of proof can be explained by the fact that if a loss was caused by a shipping incident, it will be quite difficult for the passenger to prove any fault of the carrier.157 Neither the strict liability nor the presumed fault entail a presumption of the damage being a 71

153 Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (253). 154 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 265. 155 Article 9 AC 2002 declares the “Special Drawing Right” (SDR) as the unit of account for the calculation of the limits of liability and contains elaborate provisions for conversion into national currencies. Exchange rates can be found on www.imf.org. 156 Regarding the term “fault or neglect of the carrier”, see para. 87 et seq. 157 Even more so in cases where a passenger loses his life, as it will be very difficult for the next of kin to establish carrier’s fault, see Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (3rd ed. 2014), p. 798; Berlingieri notes that the provision’s negative wording indicates that where the carrier only partially contributed to the occurrence of a loss, he is still liable for the whole loss, in: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 265. This, however, only applies within the limits of Article 6 AC 2002, i.e. in cases of contributory fault of the passenger (see below, para. 105).

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result of the shipping incident, for which the burden of proof lies with the claimant. Claimants under Article 3(1) AC 2002 are entitled to an advance payment (see Article 6, para. 157 et seqq.). If the loss of life or personal injury is not the result of a shipping incident, 73 the basis of liability can be found in Article 3(2) AC 2002: Under this provision, carrier's liability is fault-based, i.e. he is only liable if the loss of life or injury occurred due to his fault or neglect. The burden of proof is reversed compared to Article 3(1) AC 2002: The claimant has to prove the carrier’s fault or neglect. This allocation of burden of proof is – in comparison with other liability conventions158 – very disadvantageous to the passenger, who will usually face many difficulties proving the carrier's neglect.159 Furthermore, put together with Article 14 AC 2002 (see below, para. 121), it might be in conflict with national rules implementing EU consumer protection laws.160 However, given the Convention's primacy over both, EU and national law, this conflict is solved in favour of the Convention (see Article 1 and Introduction, para. 29 et seqq.). c) Liability for Loss or Damage to Luggage aa) Terminology

Concerning loss of or damage to luggage, the basis of liability depends on 74 the type of luggage in question.161 The Convention generally distinguishes between two categories, i.e. “cabin luggage” and “luggage other than cabin luggage”. “Luggage” – the generic term – should not be understood in a strict sense:162 Its definition in Article 1(5) AC 2002 includes “any article or vehicle carried by the carrier under a contract of carriage” excluding live animals as well as any article or vehicle under a charter party or bill of lading. “Cabin luggage”, as referred to in Article 3(3) AC 2002, is defined by Article 1(6) AC 2002 as “luggage which the passenger has in his cabin or is otherwise in his possession, custody or control”. In this context, this includes any luggage which the passenger has in or on his vehicle.163 Consequentially, “luggage other than cabin luggage”, as referred to in Article 3(4) AC 2002, is any luggage that is in the custody of the carrier or that the passenger cannot access during the voy-

158 E.g., see Article 17(1) Montreal Convention. 159 See Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (258). Piras sees it as similar to a tort liability system, in: International Recent Developments: European Union – Maritime Passenger Transport, Tulane Maritime Law Journal (2012), 627. 160 E.g., see Section 651f German Civil Code implementing Article 5(2) Package Travel Directive. 161 For the recoverable damage in this context, see below, para. 101. 162 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 262. 163 This explicitly does not apply to the limitation of liability (Article 8) and the temporal scope of application (Article 1(8)).

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age.164 This distinction between “cabin luggage” and other “luggage” is relevant in the context of limitation of liability (see below, para. 111)165 as well as the applicable period of responsibility (see para. 94 et seqq.). Regarding liability for valuables under Article 5 AC 2002, see para. 78 et seq. bb) Basis of Liability

Regardless of the type of luggage that was lost or damaged, the Athens Convention 2002 establishes a fault-based liability: The carrier is only liable if the incident giving rise to a claim was caused by his fault or neglect.166 However, the type of luggage is of crucial importance for the allocation of burden of proof. 76 Liability for damaged or lost cabin luggage is governed by Article 3(3) AC 2002, according to which the burden of proof regarding the carrier's fault lies with the claimant. If, however, the damage or loss was caused by a shipping incident, fault or neglect of the carrier is presumed, meaning that the burden of proving otherwise lies with the carrier. Since the involvement of a shipping incident clearly benefits the claimant, he has to prove the causal connection between loss or damage and shipping incident.167 According to Article 4 Regulation 392/2009, any loss or damage regarding mobility equipment or other specific equipment used by a passenger with reduced mobility (“PRM equipment”) is also governed by Article 3(3) AC 2002 (see Article 4, para. 143 et seqq.). 77 Liability regarding luggage other than cabin luggage is governed by Article 3(4) AC 2002: The burden of proof is reversed, i.e. the carrier has to prove the absence of his fault or neglect. Logically, in order to succeed in doing that, he has to identify the incident that caused the loss or damage. The underlying assumption in this context is that it will be rather difficult for the passenger to prove any fault or negligence on the part of the carrier if the damaged or lost object is not even in his possession or under his control. 75

cc) Liability for Valuables 78

The carrier is not liable for the loss or damage to “valuables” as defined in Article 5 AC 2002 unless they were “deposited with the carrier for the agreed purpose of safe-keeping” in which case liability can arise up to the limits either provided in Article 8(3) AC 2002 or agreed to under Article 10(1) AC 2002. The term’s definition includes monies, negotiable securities, gold, silverware, jew164 This distinction is similar to the method used in Article 17(2) Montreal Convention regarding liability for “checked” and “unchecked” baggage. 165 The Convention contains specific provisions regarding the limit of liability for the loss or damage to vehicles, see para. 111. 166 This includes fault or neglect on the part of his servants (Article 3(5)(b) AC 2002) and – although not explicitly stated – agents, see para. 85 et seqq. 167 It follows that in order to recover his loss under Article 3(3) AC 2002 the passenger must either prove the carrier's fault or that the damage or loss occurred due to a shipping incident, see Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 266.

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ellery, ornaments and works of art. It also includes “other valuables”, entailing that Article 5 AC 2002 has to be considered an open list.168 The wording “with the carrier” does not encompass a passenger using a safe located in his cabin.169 In case the carrier who performs the carriage has no storage facilities at his disposal or wrongfully rejects a request for deposition for safe-keeping, Article 5 AC 2002 is not applicable to his benefit. In such cases, the carrier is liable irrespective of the passenger’s intention to deposit his valuables with him.170 If the carrier is in fact unable to invoke the exclusion of liability of Article 5 79 AC 2002, it is unclear whether the carrier should be strictly liable or based on (presumed) fault, as no indication as to the basis of liability can be found in the Athens Convention 2002. Given the responsibility and the exclusive control that a carrier takes over once the valuables were deposited with him and, consequentially, the passenger’s restricted access to them, it has been argued that the carrier’s liability should be based on Article 3(1) AC 2002 and therefore strict.171 However, the Convention only uses this type of liability in the context of loss of life or personal injury. Strict liability can therefore only be considered an exception, entailing that it should not be transferred to other contexts lightly. Moreover, Article 5 AC 2002 was already part of the Athens Convention 1974 whereas the concept of strict liability was not introduced until 2002, which is why the use of strict liability could not have been intended when the original Athens Convention was drafted. Based on the assumption that the basis of liability is to be found within the Athens Convention, liability under Article 5 AC 2002 should rather be based on presumed fault.172 However, the omission of an explicit basis of liability could also be construed as a referral to national law,173 which – given that the “agreed purpose of safe-keeping” usually constitutes a contractual relationship – would probably produce similar results.174 168 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 268. 169 See Lee v. Airtours Holidays Ltd. ((2004) 1 Lloyd's Law Report 692), even though the court held that the Athens Convention 1974 was not applicable to the case. 170 See Lee v. Airtours Holidays Ltd. ((2004) 1 Lloyd's Law Report 683) in which it was held that such conduct constitutes a breach of contract, since the wording of Article 5 implies an obligation to provide corresponding facilities, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 121; according to Tsimplis, a lack of facilities or wrongful rejection should be regarded as an indication by the carrier not to rely on Article 5 AC 2002, thus removing the exclusion for all valuables irrespective of the passenger’s intention to deposit them with the carrier, in: Liability in respect of passenger claims and its limitation, JIML (2009), 125 (130). 171 See Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 268. 172 Gahlen, Civil Liability for Accidents at Sea (2015), p. 251. In aggregate, this would amount to a liability along the lines of Article 3(4) AC 2002 (see para. 77). Such an interpretation is also supported by the provision's reference to Article 8(3) AC 2002. 173 This interpretation is supported by Article 11 AC 2002 regarding claims against servants or agents of the carrier (see below, para. 92). Like Article 5, Article 11 AC 2002 does not mention a basis of liability. It merely offers defences against claims under national law. 174 E.g., under German law, contractual liability is usually based on presumed fault, see Section 280(1) German Civil Code.

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dd) Notice of Loss of or Damage to Luggage 80

The passenger affected by loss or damage to luggage has to give written notice of any loss or damage to luggage within a specific period of time: Either immediately for apparent damage (i.e. at the time of disembarkation for cabin luggage or at the time of re-delivery for other luggage) or within 15 days for non-apparent damage, Article 15(1) AC 2002. If he fails to comply, it is presumed that the luggage was received undamaged and – although not expressly stated in the provision – in whole.175 In this case, it is on the passenger to prove otherwise. Needless to say, the mere notice of loss or damage cannot relieve the passenger of his burden of proof regarding the nature of loss or damage or its extent.176 d) “Shipping Incident”

As the decisive factor for the required degree of fault and the burden of proof (see above, para. 71 and 75), the determination of an incident as a “shipping incident” is of crucial importance for all claims under the Athens Convention 2002.177 Its objective is to distinguish between those risks arising from the particularities of the carriage by sea and those that present themselves on shore as well, i.e. those arising from the “hotel characteristics” of maritime voyages.178 This distinction constitutes a unique feature of the Athens Convention 2002, as it is the only international convention regarding passenger transportation basing the respective applicability of parts of its regime on a distinguishing factor that refers to the particularities of the respective method of travel.179 82 The term’s definition in Article 3(5)(a) AC 2002 contains an enumeration of incidents that constitute the typical risks of a maritime carrier:180 “Shipwreck, capsizing, collision or stranding of the ship, explosion or fire in the ship, or de81

175 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 280. 176 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 280. 177 The term was introduced by the 2002 Protocol, although in its original Article 3(3), the Athens Convention 1974 contained a provision which reversed the allocation of the burden of proof in cases of the occurrences now included in the definition of the term (except for the addition of capsizing) to the benefit of the claimant; see Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 263. 178 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 115; Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (522, 524). 179 This is due to the fact that passengers of ships are usually able to freely move around whereas plane passengers are confined to their seat. Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 265; Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (522); Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (258). 180 Piras, International Recent Developments: European Union – Maritime Passenger Transport, Tul.Mar.L. J. (2012), 627 (630 et seq.).

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fect in the ship”. In its initial version, the Athens Convention 1974 did not provide any further explanation or definition of these terms,181 as they were deemed self-explanatory.182 The 2002 Protocol added a definition of the term “defect in the ship”, which is now defined as “any malfunction, failure or non-compliance with applicable safety regulations in respect of any part of the ship or its equipment when used for the escape, evacuation, embarkation, and disembarkation of passengers, or when used for the propulsion, steering, safe navigation, mooring, anchoring, arriving at or leaving berth or anchorage, or damage control after flooding, or when used for the launching of life saving appliances” in Article 3(5)(c) AC 2002. This very detailed definition appears to be exhaustive, entailing that only the explicitly named events fall under the definition. Therefore, other shortcomings on the part of the carrier – such as inadequate manning183 or human error when using the navigational equipment – cannot be considered “defects in the ship”. By contrast, as a result of the referral to the “applicable safety regulations”, non-compliance with technical safety regulations (such as SOLAS or the ISM code) can lead to the establishment of a defect in the ship under Article 3(5)(c) AC 2002.184 Moreover, all expressly named malfunctions etc. only constitute a defect in 83 the ship “when used” (not: “generally” used) for the escape, evacuation, embarkation, and disembarkation of passengers etc., entailing that only short periods of time are covered. Thus, the definition does not generally include shortcomings in the ship's condition:185 E.g., faults in a handrail that lead to an accident could only be categorized as a shipping incident if the accident itself occurred in the course of embarkation or disembarkation, but not if a passenger was simply going from his cabin to the deck.186 Although this does seem like an arbitrary outcome,187 such an interpretation is imperative if the wording of the Convention is taken seriously. It also supports a somewhat clear distinction between shipping and non-shipping incidents since mere shortcomings regarding

181 As a matter of fact, the AC 1974 did not include the term “capsizing” at all. 182 Or “easily recognized”, see Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 102; Although this might be the case regarding the terms “shipwreck”, “stranding” or “explosion or fire”, there are some uncertainties as to the other terms' meaning: E.g., as Berlingieri asks, does “capsizing” include a situation in which the ship takes a significant list and then comes back upright? Does “collision” include the striking of a ship against a fixed object, such as a pier? In: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 263. 183 Griggs, Williams & Farr, Limitation of Liability for Maritime claims (2005), p. 102. 184 Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (2014), p. 808; Gahlen, Civil Liability for Accidents at Sea (2015), p. 250. 185 Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (525). 186 Example by Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (145) under footnote 185. 187 An interpretation of the term including all malfunctions etc. regardless of the purpose of its use at the time (“generally used”) could only be considered if the wording was amended.

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the ship’s condition without the element of transport by sea do not necessarily have to be regarded as a maritime peril. 84 It has to be pointed out that the inclusion of the shipping incident as the decisive factor regarding the applicable liability regime may cause uncertainty in situations in which there is more than one isolated factor contributing to the accident. If one of these factors does not constitute a shipping incident, it is unclear if the respective loss can be regarded as “caused by a shipping incident” as required by Article 3(1) or (3) AC 2002. The Convention does not elaborate on the required degree of causality between a shipping incident and the consequential loss.188 However, the omission of the term “wholly” (as used in Article 3(1) (b) AC 2002, see below, para. 103 et seq.) regarding the shipping incident speaks in favour of an interpretation under which the shipping incident must have mainly caused the personal or property damage.189 e) Persons liable and Attribution of Fault 85

The Convention contains two possible subjects to its liability provisions: The “carrier” in Article 3 and – by reference in Article 4 AC 2002 – the “performing carrier” as defined in Article 1(1)(a) and (b) AC 2002 respectively.190 aa) Carrier

86

According to Article 1(1)(a) AC 2002, “carrier” means “a person by or on behalf of whom a contract of carriage has been concluded, whether the carriage is actually performed by that person or by a performing carrier”. The term should not be understood in a literal sense, as its definition does not refer to the actual act of transport, but rather to the status as a party of the “contract of carriage” (see Article 2, para. 42 et seqq.). Consequently, tour operators, ferry and cruise companies as well as travel agencies191 are also included, i.e. parties for which a potential liability under a maritime convention may come as a surprise.192 As clarified in Article 21 AC 2002, it does not make a difference in this 188 This problem has become more pressing with the introduction of strict liability, since under the AC 1974, the carrier was granted the opportunity to prove the absence of his fault. See Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 115. 189 Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (525). 190 This does not include the insurer as the possible defendant of a direct action under Article 4bis(10) AC 2002, which is discussed separately, see below, para. 133 et seqq.; The Montreal Convention uses a similar method in its Article 39, distinguishing between the “contracting carrier” and the “actual carrier”. 191 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 97; However, if such company concludes the contract of carriage by issuing a ticket on behalf of a shipowner, it is he who is considered a contracting “carrier” under the Convention, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 118. 192 Most notably, companies offering package travel can fall under the Convention's term, entailing a potential conflict with the EU Package Travel Directive, or rather its national implementation. Regarding this conflict see below, para. 121.

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regard if the commercial carriage is undertaken by a State or a Public Authority as long as the contract of carriage falls under the meaning of Article 1 of the Convention. “Fault or neglect of the carrier” does not only include the carrier’s personal 87 fault: Under Article 3(5)(b) AC 2002, negligence of his servants acting within the scope of their employment is included as well. Remarkably and by contrast to other provisions in the Convention,193 no reference is made to the carrier’s agents. In view of the corresponding Article 4(2) AC 2002, which extends the carrier’s liability to the acts and omissions of the performing carrier as well as the performing carrier’s servants and agents, the omission of the carrier’s own agents from his attributable fault seems all the more surprising. In the absence of a logical explanation, an interpretation as a mere error in drafting seems appropriate: Consequently, the carrier is in fact liable for his agents’ acts or omissions despite the provision’s misleading wording. However, the carrier is not liable for the negligence of independent contractors, such as e.g. employees of shopping outlets on cruise ships or shipyard workers, given that the carrier does not use them in the performance of his obligations under the contract of carriage.194 It has to be noted that the Convention leaves the interpretation of the terms 88 “fault” and “neglect” to the respectively applicable domestic law of the court seized (see Article 2, para. 58 et seq.), which can lead to differing interpretations among EU Member States as to the reach of the carrier’s liability.195 bb) Performing Carrier

The “performing carrier” is defined by Article 1(1)(b) AC 2002 as “a per- 89 son other than the carrier, being the owner, charterer or operator of a ship, who actually performs the whole or part of the carriage”.196 The reference to the “actual performance” implies that in order to fall under this term a person must have full possession of the ship, which is not the case e.g. regarding voyage-, slot- or time-charters. Consequently, if a claimant intends to sue the performing carrier, he does not have the choice between owner, charterer or operator but must direct his claim towards the person who was in full possession and control of the ship when the loss evoking incident occurred. 193 Articles 11, 12 and 13 AC 2002; furthermore, the original wording of Article 3(1) in the AC 1974 also included “servants”. 194 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 119; Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (244). 195 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 118. Mandaraka-Sheppard points out that regarding the establishment of fault, courts will look beyond the immediate cause and examine the operational diligence of the carriers, i.e. including proper risk assessment and training practices, in: Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (2013), p. 798. 196 Except for the reference to the “manager”, this definition is in line with the one used in the LLMC regarding the term “shipowner”, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 117.

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Under Article 4(1) AC 2002, if part of the carriage is entrusted to one or more performing carriers,197 both “carrier” and “performing carrier” are potentially liable under the Convention: The contractual carrier remains liable for the entire carriage, whereas the performing carrier is only liable if the loss was caused by events that occurred during the part of the carriage performed by him.198 In such cases, the passenger is given a choice between two possible defendants. Where and to the extent that both defendants are liable, their liability is joint and several, Article 4(4) AC 2002. As expressly stipulated in Article 4(5) AC 2002, nothing in Article 4 shall prejudice any rights of recourse between the contractual and the performing carrier. Those rights of recourse are, however, not governed by any provision of the Athens Convention 2002 but by the respectively applicable lex fori. 91 Contrary to the attribution of fault to the contractual carrier, there is no express provision extending the performing carrier’s liability to the acts and omissions of his servants (or agents, see above, para. 87). Nevertheless, an attribution of fault along the lines of Article 3(5)(b) AC 2002 is implied in Article 4(1) AC 2002, which subjects the performing carrier to “the provisions” of the Convention.199 Additionally, the performing carrier is entitled to all defences a carrier may invoke under the Convention regarding his part of the carriage. Even if the carrier agrees to further obligations not imposed by the Convention or a waiver of rights, such agreement has no effect on the performing carrier unless expressly agreed by him in writing (Article 4(3) AC 2002). 90

cc) Other

In its Article 1(1)(c), the Convention contains a third category of carrier: The “carrier who actually performs the whole or a part of the carriage”. Although this category is of no relevance regarding the Convention’s liability provisions, it identifies the subject of compulsory insurance under Article 4bis AC 2002 and is therefore examined in this context (see below, para. 122 et seq.). Furthermore, Article 6 Regulation No 392/2009 refers to this category regarding its obligation of advance payments (see there, para. 157 et seqq.). 93 The Convention does not institute a liability of the servants or agents of a carrier or performing carrier. Their liability is solely governed by the respectively applicable national law. However, Article 11 AC 2002 contains a so-called “Himalaya-clause”,200 stipulating that if action is brought against those servants 92

197 More than one performing carrier can be involved under a contract of carriage – the Convention imposes no restriction in that regard, see Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (129). 198 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (129). 199 Any other interpretation would entail an assessment of this omission as an error in drafting; see Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 103. 200 Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (244); such a provision can also be found in Article 30(1) of the Montreal Convention.

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or agents,201 they are entitled to all defences and limits of liability the carrier or performing carrier may invoke under the Convention, provided that they prove they acted within the scope of their employment. Hereby, the Athens Convention 2002 attempts to prevent claimants circumventing the Convention's liability regime (and, most importantly, its liability limits) by bringing actions against servants or agents rather than against the carrier or performing carrier.202 f) Period of Responsibility

According to its Article 3(6), the Convention’s regime on carrier’s liability 94 only takes effect if the loss was caused by incidents which “occurred in the course of the carriage”. Consequently, before any conclusions in relation to the existence or extent of claims can be drawn, it has to be established whether the loss evoking incident occurred during the period in which the respective “carriage” as defined by Article 1(8) AC 2002 took place.203 In this regard, the burden of proof lies with the claimant.204 Article 3(6) in conjunction with Article 1(8) AC 2002 stipulate certain periods of responsibility in which a carrier is potentially liable. The period of responsibility varies depending on the respective loss or dam- 95 age to be compensated, distinguishing between the passenger, cabin luggage and luggage which is not cabin luggage:205 Subparagraph (a) of Article 1(8) AC 2002 generally describes “carriage” as the “period during which the passenger and/or his cabin luggage are on board the ship or in the course of embarkation or disembarkation, and the period during which the passenger and his cabin luggage are transported by water from land to the ship or vice-versa (…)”, provided that “the cost for such transport is included in the fare” or that the vessel used for this purpose “has been put at the disposal of the passenger by the carrier”. The provision offers no further explanation regarding the point at which the embarkation process begins. Since the aim of the Convention is to establish a liability regime for the period in which the carrier is responsible for the passenger’s well-being, the embarkation process begins at the earliest where the passenger’s

201 As already mentioned, independent contractors are not addressed by the Athens Convention. 202 Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (245); Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 120. 203 See Martínez-Gutiérrez, New European rules on the liability of carriers and passengers by sea in the event of accidents, JIML (2012), 293 (297). 204 The parties of the contract of carriage (see Article 2, para. 42) may agree upon a longer period, but not a shorter one, since such a contractual provision would trigger Article 18 AC 2002 (see above, para. 69 et seq.). 205 For a discussion of these terms, see para. 74.

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safety is under the carrier’s supervision.206 Based on this notion, e.g. the passage of a passenger from shore to the ship through the gangway, moveable bridge, ramps or platforms is included in the carrier’s period or responsibility.207 Not included is the period during which the passenger is “in a marine terminal or station or on a quay or in or on any other port installation”, regardless if such facility is owned by the carrier or part of his organization.208 96 Regarding cabin luggage,209 the general period of responsibility under subparagraph (a) is extended by virtue of subparagraph (b) of Article 1(8) AC 2002 to further include the period in which the passenger is “in a marine terminal or station or on a quay or in or on any other port installation” and such luggage “has been taken over by the carrier (…) and has not been re-delivered to the passenger”. This extension can be explained by the notion that cabin luggage is often not brought to the cabin by the passenger himself, but by personnel of the ship.210 The period of responsibility for cabin luggage also applies to mobility equipment or other specific equipment used by a passenger with reduced mobility under Article 4 of the Regulation (see there, para. 143 et seqq.). 97 Regarding luggage which is not cabin luggage (see above, para. 74), the period of responsibility is governed by subparagraph (c) of Article 1(8) AC 2002, under which the carrier is liable from the moment he or his servant or agent takes over the luggage until its redelivery. Therefore, “carriage” covers the time in which the carrier (or his agents or servants) is in possession of said luggage. The period of responsibility for vehicles is also governed by subparagraph (c). Nevertheless, it has to be slightly adjusted in this regard, since vehicles are usually not “taken over” and “redelivered” by the carrier: Passengers on ferry boats usually drive their vehicles on and off the ship by themselves. It follows that the period of coverage starts when the passenger leaves his vehicle in the garage and ends when he enters his vehicle to drive it off the ship.211

206 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (128); Olmedo Peralta suggests that in cases where disabled persons or persons with reduced mobility require assistance from the ship's personnel in order to get on or off the ship, the period of responsibility should be broadened, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (256). Under Article 11 Regulation (EU) No 1177/2009 the carrier has the obligation to provide such assistance. 207 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 262; Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (255). 208 Olmedo Peralta, New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (256). 209 In this context, the term “cabin luggage” does not include luggage transported in or on a vehicle, see Article 1(6) AC 2002. 210 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 262. 211 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 270.

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g) Recoverable Damages

Once the carrier’s liability is established, the passenger will only be able to 98 recover if he can demonstrate that the type of loss he suffered is recoverable under the Athens Convention 2002.212 The Convention only covers claims for certain types of losses, i.e. claims for death or personal injury of passengers or for loss of or damage to luggage. Other breaches of contract, such as claims for delay or insufficient services, are not covered.213 aa) Death and Personal Injury

Article 3(1) and (2) AC 2002 allows passengers to recover the loss suffered as 99 a result of death or personal injury. The only further indication as to the extent of this “loss” can be found in Article 3(5)(d) AC 2002, where it is clarified that “loss shall not include punitive or exemplary damages”. Apart from that, the Convention leaves the term personal injury to be construed by the court seized of the case. In so doing, it leaves the extent of recoverable damage under Article 3(1) and (2) AC 2002 to be determined by the jurisdiction the claimant chooses to bring his claim, which naturally encourages a certain degree of forum shopping.214 Most notably, it is unclear whether the term “personal injury” includes men- 100 tal or psychiatric illness resulting from an accident where no physical injury was suffered by the passenger. In that regard, the anterior Montreal Convention uses the more restrictive term “bodily injury” in its Article 17, which might be construed as an indication that mental distress was not intended to be excluded from the recoverable injury under the Athens Convention 2002.215 Accordingly, in a decision regarding the Costa Concordia disaster, a Spanish court did not differentiate between psychological and physical injuryies and treated both kinds of injuries as subject to the Convention.216

212 Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 186, para. 11.8; Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 265. 213 An exception can be found in Article 1(7) AC 2002 (see below, para. 101). Furthermore, in cases of delays, claims can generally be based on Article 19 Regulation 1177/2010 or on national law (see Article 21 Regulation 1177/2010). 214 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 131, under Footnote 137. 215 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 131, under Footnote 137; Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 193, para. 11.27; It has to be noted that this difference in the wording does not exist in every language version: E.g., in the German versions, the term “Körperverletzung” is used for both, personal and bodily injury. 216 Juzgado de Primera Instancia No 63 de Madrid (18.04.2013), discussed in Lubach, “Zur Havarie der Costa Concordia: Erste Gerichtsentscheidung in Spanien”, Transportrecht (2013), pp. 405-407; Gahlen, Civil Liability for Accidents at Sea (2015), p. 227 et seq.

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bb) Loss of or Damage to Luggage

The Convention only offers little guidance as to the types of loss recoverable under its Article 3(3) and (4): According to Article 1(7) AC 2002, “loss of or damage to luggage includes pecuniary loss resulting from the luggage not having been redelivered to the passenger within a reasonable time after the arrival of the ship (…)”, although delays caused by labour disputes are excluded. Usually, “pecuniary loss” consists of the cost of clothing or toiletry for the period of delayed redelivery.217 Seeing that a delayed redelivery does not necessarily result in a diminution in the luggage’s value, the provision’s wording even goes one step further: It allows for a recovery of consequential loss – e.g., the loss of a possibility to acquire a potential gain.218 This poses the question to what extent such consequential damage caused by the delayed redelivery is covered by the Athens Convention 2002. Again, the answer to this question depends on the jurisdiction the claim is brought in, given that the term “pecuniary loss” might be interpreted in very different ways. Furthermore, the standards regarding remoteness and causation vary considerably from one Member State to another. 102 Moreover, it is unclear whether the referral to “luggage” in Article 1(7) AC 2002 covers “cabin luggage” as well. Given that the Convention’s definition of “cabin luggage” refers to “luggage” as the generic term, this question should be answered in the affirmative.219 101

h) Possibilities of Exoneration 103

As outlined above (see para. 71 et seq.), where the death or personal injury was caused by a shipping incident, a carrier or performing carrier can only avert liability if he proves either that the incident “resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character”, or that it “was wholly caused by an act or omission done with the intent to cause the incident by a third party” (Article 3(1) (a) and (b) AC 2002). The second exception is meant to exclude liability for terrorist and pirate attacks.220 Given that the 2002 Protocol introduced the concept of strict liability to the Athens Convention, these limited possibilities of exoneration have become particularly important.221 Their wording is similar to the ex-

217 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 267. 218 Under common law, pecuniary loss covers both “normal” pecuniary loss as well as consequential loss, Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 191 et seq., para. 11.22-11.26. 219 Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 193, para. 11.26. 220 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (145). 221 Olmedo Peralta suggest that because of these possibilities, the liability regime in case of shipping incidents cannot be called strict but rather “semi-strict”, in: New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (257, 259, 267).

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oneration provisions of the CLC.222 The only difference is the reference to the “intent to cause the incident“ in Article 3(1)(b) AC 2002 instead of the “intent to cause the damage“ in Article 3(2)(b) CLC, which entails a differing interpretation as to the intent required: Under the CLC, the third party must foresee and intend the concrete damage, whereas under the Athens Convention 2002, the intent to cause a mere “incident” suffices.223 Furthermore, the term “wholly” gave cause for concerns: If the damage was 104 only caused partly by a terrorist act and partly by the carrier’s (or anybody else’s) negligence, carrier’s liability is not excluded.224 This can be the case e.g. where the carrier (i.e. his servants or agents) fails to carry out sufficient controls to detect terrorists among the passengers or where the ship is unnecessarily navigated through war zones.225 As a consequence, the carrier's insurer under Article 4bis AC 2002 is liable for risks which are generally excluded from any standard P&I cover,226 leading to several problems regarding the insurability of potential liability under the Convention (see below, para. 136). Another possibility of exoneration lies in the referral to the lex fori in cases of 105 contributory fault in Article 6 AC 2002: If the carrier can prove that the passenger contributed to his own loss, e.g. by disobeying the crew's instructions when proceeding to embark or disembark or by entering areas of the ship not open to passengers, the court seized of the case may exonerate the carrier wholly or partly in accordance with its domestic law.227 As clarified in Article 3(7) AC 2002, it makes no difference in this regard whether the carrier's liability is strict or fault-based. Even though there is no provision expressly stating this, Article 6 AC 2002 is applicable to the performing carrier as well.228

222 See Article 3(2)(a) and (b) CLC. 223 See Gahlen, Civil Liability for Accidents at Sea (2015), p. 253; Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (523). They both provide the example of a piratical attack where the pirates do not necessarily intend to cause damage to the ship’s structure or equipment. 224 Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (523). 225 See Røsæg, Passenger Liabilities and Insurance: Terrorism and War Risks, in: Rhidian Thomas (ed.), Liability Regimes in Contemporary Maritime Law (2007), p. 211 for details. 226 Damar, Compulsory insurance in international maritime conventions, JIML (2009), 151 (163). 227 Berlingieri notes that the Convention regulates the burden of proof, whereas the seized court's lex fori regulates to which extent the carrier may be exonerated, in: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 267; Olmedo Peralta observes that this remission to the lex fori at such an important point “breaks the uniform character” of these rules and therefore encourages forum shopping, in: New Requirements and Risk Distribution for the Liability of Carriers of Passengers by Sea, ETL (2014), 247 (269). 228 Article 4(1) AC 2002 states that the performing carrier „shall be subject to and entitled to the provisions of the Convention for the part of the carriage performed by him“.

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i) Limitation of Liability 106

A limitation of liability for claims regarding personal damage (Article 3(1) and (2) AC 2002) and property damage (Article 3(3) and (4) AC 2002) is provided by Articles 7 and 8 AC 2002 respectively. These limits apply to the aggregate of all claims229 against the carrier, the performing carrier and their servant or agents (Article 11 AC 2002) in all proceedings regardless in which state a suit is filed. Consequently, a claimant will not be able to recover more than the prescribed amounts by suing more than one person or in more than one jurisdiction. Higher limits of liability may be agreed upon expressly and in writing by carrier and passenger (Article 10(1) AC 2002), although such an agreement has no effect on the performing carrier unless agreed with him under the same formal requirements (Article 4(3) AC 2002).230 aa) Limitation in Cases of Death or personal Injury

Article 7(1) AC 2002 limits liability in cases of death or personal injury to 400,000 SDR (approx. 505,000 €) per passenger on each distinct occasion.231 This limit is not to be exceeded even if the law of the court seized of the case awards damages in the form of periodical income payments, in which case the limit has to be applied on the equivalent capital value of such payments. Regarding damage that resulted from certain war- or terrorism-related risks as enumerated in section 2.2. of the IMO Guidelines, liability is restricted by virtue of the IMO Reservation to 250,000 SDR (approx. 315,000 €) per passenger on each distinct occasion, which concurs with the limit of strict liability under Article 3(1) AC 2002. Regarding the IMO Reservation and Guidelines, see below, para. 136 et seqq. 108 Article 7(1) AC 2002 refers to both “passenger” and “occasion” and was introduced by the 2002 Protocol, replacing the original Convention’s wording which set the limit “per carriage”.232 Since the limit applies to each passenger separately, the wording “each distinct occasion” entails that if a passenger is injured on two (or more) occasions during the same carriage, the liability limits apply on each of those “occasions” separately.233 107

229 The Convention clarifies in Article 10(2) that neither interest on damages nor legal costs are included in the limits stipulated in Articles 7 and 8 AC 2002. This can be extremely important in major accidents, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 125. 230 Regarding these requirements, see Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 272. 231 The 2002 Protocol increased the limits of liability of the original Athens Convention significantly (originally set at 46,666 SDR), see Article 1 and Introduction, para. 5 et seq. 232 The previous wording was abandoned in order to bring the Convention in line with Articles 6 and 7 of the LLMC Convention, see LEG 83/4/3 of 3 August 2001, p. 2 and LEG 83/14 of 23 October 2001, p. 10; However, the limits regarding luggage in Article 8 remained “per carriage”, see below, para. 111. 233 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 269.

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Article 7(2) AC 2002 contains an “opt-out clause”, permitting States Parties 109 to determine higher per capita limits for claims regarding death or personal injury by specific (national) provisions or even to install unlimited liability for such claims. If a State Party decides to make use of the clause, this unilateral amendment of the Athens regime becomes part of the state's lex fori. Even though this might undermine the intended uniformity, the inclusion of the optout clause was deemed necessary to encourage those states that were demanding higher limits or were against a limitation of claims altogether to ratify the Convention.234 All States Parties that install higher limits or remove all limitation are required to inform the Secretary General of the IMO thereof. Even though the EU acquired the legislative competence in the matters cov- 110 ered by Regulation 392/2009, Member States kept their competence regarding the opt-out clause (see Article 1 and Introduction, para. 24 and 30).235 Member States are therefore free to install higher per capita limits of limitation regardless of any other State’s actions.236 However, in order to do so, they first have to become “States Parties” under Article 7(2) AC 2002, i.e. they are required to either ratify or accede to the Convention.237 It has to be noted that a unilateral use of the opt-out clause by a Member State might create problems regarding the applicability of each limit as between Member States. Furthermore, it might lead to unfair competition between carriers in the EU.238 bb) Limitation in Cases of Loss of or Damage to Luggage and Vehicles

Article 8 AC 2002 provides liability limits for claims regarding the loss of or 111 damage to luggage. The provision distinguishes between different categories of luggage as defined in Article 1(5) and (6) AC 2002 (see above, para. 74) and sets out separate limits of liability for each category. Since each limit only applies per category (as opposed to per piece of luggage), it is irrelevant how many pieces of luggage a passenger was carrying.239 The application of the limit “per carriage” – as opposed to “on each distinct occasion” (see above, para. 108) – entails that the respective limit only applies once per passenger for the whole period of responsibility under Article 1(8) AC 2002, i.e. regardless of a possible

234 See Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (533) und Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 139. 235 Recital 3, Council Decision 2012/22/EU. 236 Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (533). 237 Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (2013), p. 807. 238 This is why during the legislation process it was discussed whether the use of the opt-out clause by Member States should be prohibited, see Commission Proposal COM(2005) 592, pp. 10, 14. 239 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 270.

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multitude of incidents.240 These limits do not apply to mobility equipment or other specific equipment used by a passenger with reduced mobility (see Article 4, para. 143 et seqq.). 112 Article 8(1) AC 2002 sets the liability limit for loss of or damage to cabin luggage at 2,250 SDR (approx. 2,850 €) per passenger, per carriage. By contrast to the Convention’s provisions regarding the basis and the period of liability, Article 8(2) AC 2002 specifically mentions vehicles.241 For those, the limit is set at 12,700 SDR (approx. 16,000 €) per vehicle, per carriage. This limit includes all luggage carried in or on a vehicle (Article 1(6) AC 2002). For all other luggage – this includes valuables deposited with the carrier for safe-keeping under Article 5 AC 2002 – the limit is set at 3,375 SDR (approx. 4,300 €) per passenger, per carriage (Article 8(3) AC 2002). Deductibles of at most 330 SDR (approx. 415 €) for damage to vehicles and 149 SDR (approx. 190 €) for damage to other luggage may be agreed between passenger and carrier (Article 8(4) AC 2002). cc) Loss of Right to limit Liability

Article 13(1) AC 2002 determines that the carrier loses the right to limit his liability “if it is proved that the damage resulted from an act or omission of the carrier done with the intent to cause such damage, recklessly and with knowledge that such damage would probably result”. The provision bases the loss of the right to limit on the knowledge that “such” damage was likely to happen.242 It is therefore not only required that the intentional act or omission was the cause in fact, but, additionally, that the damage sustained by the passenger was not too remore or, in other words, a probable result of the conduct.243 114 Given that Article 13 AC 2002 explicitly refers to Articles 7 and 8,244 the provision’s use of the term “damage” is meant to cover all possible claims under the Convention, i.e. not only those that arise from “damage” as opposed to loss, death or personal injury.245 Servants or agents of the carrier against whom an action for damages under the Convention is brought directly lose their right to 113

240 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 270. 241 Although treated as “cabin luggage” regarding the grounds of liability (see Article 1(6) AC 2002), the limitation of liability for luggage carried in or on vehicles is governed by different limitation amounts than the rest of the “cabin luggage”. 242 A comparable wording can be found in Article 4 LLMC, Article V(2) CLC 1992, Article 9(2) HNS Convention. By contrast, Article 4(5) of the Hague-Visby Rules does not include the word “such” and just refers to “the damage”. 243 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 270; Berlingieri, The Athens Convention and the European Parliament Regulation (EC) No. 392/2009, Il Diritto Marittimo (2011), 1125 (1137); Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 106. 244 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 106. 245 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 127; Berlingieri explains this use of the word “damage” with the provision's origin, which he sees in Article 4(5)(e) of the Hague-Visby Rules, in: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 272.

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limit under the same conditions, Article 13(2) AC 2002, even though their liability is generally governed by national law (see above, para. 93). There is no provision stipulating that reckless acts of his agents or servants 115 deprive the carrier of his right to limit liability (or vice versa, for that matter), which gives rise to the question whether misconduct on the part of the carrier’s servants or agents can be attributed to him (again, or vice versa). Contrary to the LLMC which in its Article 4 refers to the carrier’s “personal” acts, Article 13 AC 2002 only refers to acts or omissions “of the carrier” (or “of that servant or agent” of the carrier, paragraph 2). This could be construed as evidence for an intended attribution of misconduct. However, a comparison to Article 21(2)(a) of the Montreal Convention shows that if such an attribution were in fact intended, it would have been included in the Convention’s text. Consequently, there is no attribution of conduct between carrier and his servants or agents in this regard. Only the carrier’s own misconduct can lead to a loss of his right to limit liability.246 His agents’ or servants’ conduct can affect the carrier’s right to limit only if they are considered his alter ego.247 Quite surprisingly – especially in view of the express provision regarding ser- 116 vants or agents in paragraph 2 – Article 13 AC 2002 does not refer to the performing carrier. Prima facie, this would result in an “unbreakable right to limit liability”248 for the performing carrier. Naturally, such an outcome could not have been intended under any circumstances.249 Since Article 4(1) AC 2002 stipulates that performing carriers “shall be subject and entitled to the provisions of this Convention” it rather follows that where performing carriers are entitled to the right of liability limitation, they also are subject to provisions restricting the use of such right.250 j) Statute of Limitation

Article 16(1) AC 2002 sets out a general time bar of two years which applies 117 to both claims for death or personal injury and luggage claims. Depending on the jurisdiction a claim under the Convention is brought in, the time bar’s legal 246 Therefore, the omission of the word “personal” does not have a substantial effect, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 126 and Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (138), both referring to the judgment The Lion ((1990) Lloyd's Rep. 144 at 145, 149 et seq.). Berlingieri holds the opposite view, basing it on the attribution of fault in Article 3(5) (b) AC 2002, in: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 273. 247 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 106. For a discussion of the term alter ego, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), pp. 57 and 127 as well as Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (138 et seqq). 248 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 106. 249 Martínez-Gutiérrez assesses this omission as a mere “oversight” in drafting, in: Limitation of liability in international maritime conventions (2012), p. 127. 250 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 272.

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effect can either be substantive, which would extinguish the cause of action, or procedural, leaving the claim intact but preventing any civil proceedings.251 According to Article 16(2) AC 2002, the calculation of the time bar varies depending on the respective loss. In case of personal injury, it is calculated from the date of disembarkation; in case of death of the passenger, it is calculated either from the date the passenger should have disembarked or, if an injury results in the death of the passenger after disembarkation, from the date of death, provided that the time bar period does not exceed three years from the date of disembarkation.252 118 In case of loss of or damage to luggage, the time bar is calculated from the date of disembarkation or the date when disembarkation should have taken place, whichever is later. The Convention does not distinguish between the different categories of luggage (see above, para. 74).253 Furthermore, no specific reference is made to vehicles, entailing that the time bar for actions in this regard is governed by the general rule in Article 16(1) and (2) AC 2002. 119 Article 16(3) AC 2002 provides that the grounds for suspension and interruption are governed by the lex fori. The provision does, however, contain an absolute time bar. No action can be brought once any of the following periods of time has expired: Either (a) five years from the date of disembarkation or the date when disembarkation should have taken place, whichever is later, or, if earlier, (b) three years from the date when the claimant knew or ought reasonably to have known of the injury, loss or damage caused by the incident.254 The second alternative applies if the claimant knew or should have known of the injury, loss or damage caused by the incident prior to the lapse of two years under Article 16(2) AC 2002.255

251 The time bar’s legal effect was discussed recently in the UK decision Feest v SWSHA [2014] EWHC 177 (QB) as well as on appeal in SWSHA v. Bay Island Voyages [2015] EWCA Civ 708. In these proceedings, the question at issue was whether claims barred by Article 16 AC 2002 could nevertheless serve as the basis for contribution claims under the UK Civil Liability (Contribution) Act 1978. Under section 1(3) of this Act, a contribution claim cannot be brought if the cause of action, against the person from whom a contribution is sought, is extinguished. 252 This time bar for claims regarding physical injury or even death can be seen as rather short compared to most countries’ statutes of limitation in tort law, see Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (534). 253 This is criticized by Berlingieri, who holds the view that the time bar for actions for damage to luggage other than cabin luggage should rather be calculated from the date of its redelivery to its passenger, in: International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 281. 254 This absolute time bar had been the central issue in a number of decisions, e.g. the Prince Laurent decision (Cour d'Appel de Paris, 19.05.1999 - conflict with French procedural law) and the Norfolk v. MyTravel decision (Plymouth County Court, 21.08.2003, 2004 1 Lloyd's Rep. 106 – conflict with Package Travel Directive 90/314/EEC). After the EU’s accession to the Athens Convention 2002 both of these conflicts were eliminated as a result of the, now, clear hierarchy of legislation (see Article 1 and Introduction, para. 29 et seqq.). 255 Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 281.

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Notwithstanding the general rules, limitation periods may be extended by a 120 written declaration of the carrier or by a written agreement between the parties after the respective incident, Article 16(4) AC 2002. k) Other Claims against the Carrier or the performing Carrier

According to Article 14 AC 2002, no action for damages governed by the 121 Athens Convention 2002 shall be brought against a carrier or performing carrier „otherwise than in accordance with this Convention“. Within its subject matter, the Convention is designed to be the sole legal base for passengers’ claims against the carrier or the performing carrier.256 However, the term “carrier” might encompass persons or entities that are also bound by the Package Travel Directive 90/314/EEC (see above, para. 86).257 This can lead to several conflicts, seeing that under this Directive, passengers can theoretically recover the same losses, although with differing rules regarding burden of proof, statute of limitation and, most importantly, without the limitations of liability. In the past, the interaction between the Package Travel Directive and the Athens Convention (in its original version of 1974) had been the subject of several decisions, seeing that it was unclear whether an international agreement (that had not even entered into force) could have primacy over national legislation implementing the Directive.258 This conflict has been resolved by the EU's accession to the Athens Convention 2002.259 Given the Convention's primacy over both EU and national law, Article 14 AC 2002 cannot be undermined by any conflicting claims based on the Package Travel Directive (see Article 1 and Introduction, para. 29 et seqq.). Lastly, Article 14 AC 2002 does not prohibit a claim against agents or servants. However, if they are held liable for damages governed by the Conven-

256 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (130). This provision can be particularly important where claims under the Convention are barred by Article 14 AC 2002 (see above, para. 117 and fn. 251). In this context, see the UK decisions Feest v SWSHA [2014] EWHC 177 (QB) and SWSHA v. Bay Island Voyages [2015] EWCA Civ 708, both concerning the same case. In these, the question at issue was whether a Part 20 claim against the carrier seeking a contribution for damages, pursuant to the UK Civil Liability (Contribution) Act 1978, could be subject to Articles 14 and 16 AC 2002. 257 Especially cruise contracts are often sold as package travel falling under the scope of the Directive. 258 In the decision Lee v. Airtours Holidays Ltd ((2004) 1 Lloyd's Law Reports 683), the judge held that the national provisions implementing the Directive should be applied unless the provisions of the Convention were specifically incorporated in the contract. By contrast, in Norfolk v. MyTravel ((2004) 1 Lloyd's Law Review 106), the judge held that the Athens Convention 1974 was in force in the UK by virtue of section 183 Merchant Shipping Act 1995. For a detailed analysis, see Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 195, para. 11.30 et seq.; Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (130); Gahlen, Civil Liability for Accidents at Sea (2015), p. 236 et seq. 259 The introduction of Regulation 392/2009 had already partly resolved this issue, see Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (132); Soyer, Boundaries of the Athens Convention, in: Liability Regimes in Contemporary Maritime Law (2007), p. 185, para. 11.6. under Footnote 19.

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tion, Article 11 AC 2002 entitles them to limit their liability to the same extent as the carrier or performing carrier. 3. Compulsory Insurance and Right of direct Action

In Article 4bis of the consolidated version, the 2002 Protocol introduced the concept of compulsory insurance to the Athens Convention.260 This requirement is directed towards ensuring an adequate protection of passengers in the events of either death or personal injury. It had been found in various areas of maritime law that injured parties were facing difficulties recovering their damage in the eventuality of death or personal injury.261 Particularly where a ship is owned by a company with limited liability and no assets beyond the ship itself, compulsory insurance can ensure a certain financial stability to shipping companies and therefore provide an adequate level of passenger protection.262 123 This protection is completed by the passenger’s right of direct action against the insurer under Article 4bis(10) AC 2002. Although this right has generally not been welcomed by P&I clubs in any maritime convention,263 it serves the basic aim of compensating victims as soon as possible. 264 From the passengers’ point of view, claims can be settled more efficiently by going straight to the insurer, bypassing the time-consuming burden to find out where to sue, especially where the potential defendant is a large multinational company with subsidiary companies in different jurisdictions.265 122

a) The Insurance Requirement 124

Under Article 4bis(1) AC 2002, where a ship is licensed to carry more than twelve passengers, the “carrier who actually performs the whole or part of the carriage” (Article 1(1)(c) AC 2002) is required to maintain insurance or other financial security to cover liability for death and personal injury to passengers. In contrast to the other categories of carriers (see above, para. 85 et seq.), this “actually performing carrier” is based on the act of carriage only. In other words, the insurance requirement applies independently of the parties of the con260 The idea of an insurance obligation for carriers is not new: CLC 1992, BOPC 2001, the Wreck Removal Convention 2007 and the HNS Convention 2010 all include such a requirement as a means of forcing carriers to meet any potential liability, see Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (2013), p. 807. 261 Martínez-Gutiérrez, New European rules on the liability of carriers and passengers by sea in the event of accidents, JIML (2012), 293 (301 under II.2.5). 262 Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (526). However, this presumption is not necessarily valid in the context of the cruise market, see Gahlen, Civil Liability for Accidents at Sea (2015), p. 258. 263 In the context of passenger transport, the clubs were even less enthusiastic in light of the many thousand direct claims that can potentially result from one single incident, all of which would have to be handled simultaneously, see Damar, Compulsory insurance in international maritime conventions, JIML (2009), 151 (161). 264 Damar, Compulsory insurance in international maritime conventions, JIML (2009), 151 (168). 265 Mandaraka-Sheppard, Modern Maritime Law and Risk Management (2009), p. 937.

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tract of carriage.266 Consequently, if a “carrier” under Article 1(1)(a) AC 2002 does not carry out any part of the transport himself, he has no obligation under this provision.267 The obligation to maintain insurance will therefore most likely lie with a shipping line,268 i.e. an entity which is actually in a position to enhance its safety standards and thereby comply with its insurers’ requirements.269 Ships owned by States Parties can be operated without meeting the insurance requirements under Article 4bis if certain conditions are met (Article 4bis(15) AC 2002, see below, para. 132). The amount of insurance cover is set by Article 4bis(1) AC 2002 at 250,000 125 SDR (approx. 315,000 €) “per passenger on each distinct occasion”. This amount concurs with the limit of the first tier of (strict) liability as set in Article 3(1), which means that the actually performing carrier is not obliged to maintain insurance equivalent to his possible overall liability of 400,000 SDR per passenger. Even where a State party has made use of the opt-out timeclause in Article 7(2) AC 2002 (see above, under 109 et seq.), the carrier’s insurance cover does not have to exceed the mandatory amount under Article 4bis(1) AC 2002.270 The reference to “each distinct occasion” was selected to bring the Athens 126 Convention in line with the LLMC.271 Contrary to the limitation of liability per passenger where this reference appears coherent,272 it seems unfortunate in the context of the required insurance cover, as it is neither evident if “on each distinct occasion” covers the possibility of more than one “occasions” during one carriage nor if “per passenger” means the actually transported passengers of a carriage or the number of passengers a ship is licensed to carry.273 Since any other interpretation would entail that the amount of insurance cover could not be determined prior to a carriage, the only logical interpretation is the reading of said wording as “per passenger on each carriage”.274 This interpretation concurs with the Legal Committee’s decision to refer exclusively to the number of pas266 Whereas the “performing carrier” under Article 1(1)(b) AC 2002 is entrusted with the performance of the carrier's obligation under a contract of carriage. 267 This seems appropriate since in order to ensure adequate financial protection it only is necessary for passengers to benefit from one insurance contract guaranteeing the amount they are entitled to under 4bis(10) AC 2002. Damar holds the opposite view, in: Compulsory insurance in international maritime conventions, JIML (2009), 151 (160). 268 Gahlen, Civil Liability for Accidents at Sea (2015), p. 260. 269 See Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (526) who notes that it will be in the interest of the insurers “to conduct regular checks and to require higher safety standards as a condition to their providing financial security”. 270 Gahlen, Civil Liability for Accidents at Sea (2015), p. 259. 271 See LEG 83/14 of 23 October 2001, p. 10. 272 The wording “on each distinct occasion” in Article 3 clarifies that if more than one accidents happen during one carriage, the liability regime is applicable to each of the accidents independently. 273 See Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 135. 274 Or, as Martínez-Gutiérrez suggests, “multiplied by the number of passengers carried”, in: Limitation of liability in international maritime conventions (2012), p. 135.

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sengers that were actually carried.275 The amount of insurance cover a carrier is obliged to obtain for each carriage is therefore calculated by multiplying the number of actually carried passengers in said carriage by 250,000 SDR. Nevertheless, the carrier may opt to insure in the amount of passengers he is licensed to carry for practical reasons.276 Considering that nowadays there are cruise ships with passenger capacities of more than six thousand, it becomes apparent, what dimensions the required insurance cover can assume under the Athens Convention 2002.277 127 Regarding war- and terrorism-related risks, the extent of insurance cover is capped at 340 million SDR in any case (see below, para. 138). This, however, only becomes relevant if the passenger capacity of a ship is higher than 1,340. 128 Any insurance sum under this provision is intended exclusively for the satisfaction of claims under the Athens Convention 2002 resulting from death or personal injury. The insurance is therefore not available to cover property damage. Furthermore, any sums paid by the insurer “shall discharge any liability arising under the Convention to the extent of the amount paid” (Article 4bis(11) AC 2002). 129 According to Article 4bis(6) AC 2002, insurance only qualifies if it cannot be terminated within less than three months’ notice. If the contract of insurance is terminated, the insurer has to notify the relevant authorities. This three month period is applicable to any modifications of the insurance contract resulting in the insurance no longer satisfying the requirements of Article 4bis AC 2002. b) The Insurance Certificate 130

A certificate of insurance attesting that insurance (or other financial security) meeting the requirements of Article 4bis(1) AC 2002 is in force must be acquired by any ship authorized to carry more than twelve passengers (Article 4bis(2) AC 2002). It has to be carried on board and a copy must be deposited with the authority that keeps record of the ship’s registry (Article 4bis(5) AC 2002). The certificate must contain certain information as specified in Article 4bis(2) AC 2002.278 If it is not in English, French or Spanish, the certificate has to include a translation in any of these languages (Article 4bis(4) AC 2002).

275 See LEG 83/14 of 23 October 2001, pp. 10, 11. 276 See Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 135. 277 This was one of the reasons why many States were cautious to ratify the 2002 Protocol, since it was not clear whether any insurer on the market would be able to offer insurance of this dimension, see Hoffmann/Tüngler/Kirchner, Europarechtliche Unfallhaftung und Versicherungspflicht der Anbieter von Seereisen, EuZW (2013), 332, 334. 278 A model form of the certificate can be either found in the Annex of the Convention or – in a modified version taking into account the amendments by the IMO-Reservation – in Appendix B of the IMO-Reservation and Guidelines (under point 2.).

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The certificate must be issued by States Parties279 after the appropriate au- 131 thority has established that the above requirements have been complied with (Article 4bis(2) AC 2002). A State Party may delegate its obligation to issue the certificates to an institute or organization recognized for this purpose, of which the Secretary General of the IMO must be notified, Article 4bis(3) AC 2002. States Parties are obliged to mutually recognize any certificate issued by another State Party as having the same force as one issued by them, Article 4bis(9) AC 2002. A State Party is required not to permit a vessel under its flag to be operated at 132 any time without the required certificate (Article 4bis(12) AC 2002). Accordingly, a State Party is expected to ensure under its national laws that insurance or other financial security is in force for any passenger ship entering or leaving a port in its territory – regardless if this ship is flying the flag of that state (Article 4bis(13) AC 2002). Provided that a State Party maintains records attesting the existence of the certificate in an electronic format which is available to all parties, ships are not required to carry said certificate on board or to produce it when leaving or entering the State’s ports, if the State Party notifies the Secretary-General of the IMO of both, the existence of electronic records and exemption of the certification requirements (Article 4bis(14) AC 2002). Ships owned by States Parties and operated without insurance (see above, para. 124) are required to carry a certificate issued by the respective State Party declaring that any potential liability is covered in accordance with paragraph 1. Such certificate has to “follow as closely as possible the model prescribed by paragraph 2” (Article 4bis(15) AC 2002). c) The Right of direct Action

Like other international conventions in the field of maritime carriage,280 Arti- 133 cle 4bis(10) AC 2002 provides that any claim covered by compulsory insurance under Article 4bis can be brought directly against the insurer or other person providing financial security.281 In the case of ships that maintain insurance on a voluntary basis (i.e. with a capacity of under 12 passengers), there is no right of direct action against the insurer: In contrast to the other conventions’ provisions on direct action, Article 4bis(10) AC 2002 only refers to insurance “pursuant to this Article”, i.e. not to insurance in general. As a result, only where an insu-

279 In Article 4bis AC 2002, the term “State Party” has to be read as “state bound by the AC 2002” in the context of EU Member States, given that most Member States are not themselves party to, but bound by the Athens Convention by virtue of EU law (see Article 1 and Introduction, para. 30.). 280 Article VII(8) CLC 92; Article 12(8) HNS Convention; Article 7(10) BOPC; Article 12(10) Nairobi Convention on the Removal of Wrecks. 281 Hereinafter generally referred to as “the insurer”.

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rance is mandated by Article 4bis AC 2002, a right of direct action can follow.282 134 If direct action is taken, the insurer’s liability is limited to the amount the actually performing carrier is required to maintain per passenger under Article 4bis(1) AC 2002, i.e. 250,000 SDR per passenger claiming. This applies even in case the carrier or performing carrier lost his right to limit his liability under Article 13 AC 2002, or where a State Party has installed unlimited liability under Article 7(2) AC 2002.283 The insurer can rely on most of the defences the “carrier referred to in paragraph 1” – i.e. the insurance holder – would have been entitled to invoke, except for bankruptcy and winding up proceedings. Additionally, the insurer can invoke the defence that the damage resulted from the wilful misconduct of the insurance holder,284 which e.g. includes the deliberate overloading of a ship.285 Other than that, the insurer cannot invoke defences which he would have been entitled to invoke against a claim by the insurance holder: In particular, this renders the “pay to be paid”-rule as well as the defence of “unseaworthiness” invalid.286 135 If the claimant decides to pursue his claim directly against the insurer, the defendant has the right to require the carrier or the performing carrier to be joined in the proceedings, Article 4bis(10) AC 2002. Here, the provision does not refer to the carrier “who actually performs the whole or part of the carriage” but to the “carrier or the performing carrier”. It follows that any party against whom claims may be asserted under the Convention can be joined in the proceedings, not only the insured party. If the claimant obtains a payment by the insurer under Article 4bis AC 2002, the liability of the carrier is discharged to the extent of the amount paid, Article 4bis(11) AC 2002. 282 Damar holds the opposite view, in: Compulsory insurance in international maritime conventions, JIML (2009), 151 (161). 283 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (146). 284 This defence caused a lot of debates during the negotiations, see LEG 83/14 (23 October 2001), pp. 11-12 and LEG 83/4/7. Some delegations felt that an adequate protection of passengers would not be possible if insurers were entitled to invoke this defence: Where an accident occurred due to a deliberate act of the carrier, passengers would be deprived of their right to compensation whereas those rights would still exist where a carrier would act negligently. Ultimately, the defence was adopted after it was pointed out that it would be “poor public policy to allow a shipowner to insure against the consequences of his own wilful misconduct”, Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (530). This decision has since been strongly criticized on the grounds that insurers are in a better position than passengers to evaluate the shipowner and his ship, see Damar, Compulsory insurance in international maritime conventions, JIML (2009), 151 (164); Mandaraka-Sheppard, Modern Maritime Law and Risk Management (2009), p. 940. 285 See Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (529) for more details. 286 The inclusion of the pay to be paid-rule in an insurance contract entails that the insurer’s liability only arises after the insured person has paid and obtained a release from the claimant, see Soyer, Sundry Considerations on the Draft Protocol to the Athens Convention 1974, JMLC (2002), 519 (528); Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 138.

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4. The IMO Reservation and Guidelines

Where shipping incidents were the cause of a loss, a carrier can avert liability 136 if he proves that the incident was „wholly caused by an act or omission done with the intent to cause the incident by a third party”, Article 3(1)(b) AC 2002 (see above, para. 104). Based on this wording, if the incident was not “wholly” – i.e. not exclusively – caused by a terrorist act, but also e.g. by the carrier’s negligence to protect the passengers,287 the carrier is liable up to the normal amount under the Convention. Terrorism-related incidents are therefore not completely excluded by this provision.288 Consequently, the insurance requirement under Article 4bis AC 2002 covers the risk of damage (partly) resulting from terrorist acts. Such risks, however, are generally excluded from standard cover offered by P&I clubs,289 which explains their unwillingness to provide the required insurance. In view of the much higher liability limits compared to other Conventions, it became clear that carriers would not be able to find insurance for their exposure under the Convention’s liability regime. This resulted in a low number of ratifications in the first years following the adoption of the 2002 Protocol to a point where it was unclear, if it would ever enter into force.290 A solution to this problem was found in 2006: Rather than starting negotiations for yet another revision of the Convention itself,291 the Legal Committee of the IMO adopted a Reservation and a set of Guidelines for the implementation of the Protocol recommending that States which ratify the 2002 Protocol should include this Reservation.292 The intention was to ensure – without having to modify the Convention – that carriers addressed by the Convention will be able to obtain insurance cover as required by Article 4bis AC 2002 in accordance with existing market conditions.293 By this model reservation, despite the 2002 Protocol not being ratified in the initially planned way, a certain degree of uniformity was preserved.294

287 For examples as to possible scenarios in which an incident is only partly caused by a terrorist act, see above, para. 104. 288 IMO-Resolution A.988(24) (9 February 2006). 289 Mandaraka-Sheppard, Modern Maritime Law and Risk Management (2009), p. 943; Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (148). 290 See Damar, Compulsory insurance in international maritime conventions, JIML (2009), 151 (163). 291 The idea was to save time and to prevent opening discussions about other controversial issues regarding the AC 2002, see Røsæg, Passenger Liabilities and Insurance: Terrorism and War Risks, in: Liability Regimes in Contemporary Maritime Law (2007), p. 212. 292 “Guidelines for the Implementation of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002”, adopted at the Legal Committee’s 92nd session in October 2006, see Circular Letter No. 2758 (20 November 2006). This action was unprecedented, since the IMO had never encouraged states to include a reservation in their instrument of ratification in order to make a convention workable, Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 140. 293 LEG 101/8/3 (12 March 2014), p. 2. 294 Røsæg, Passenger Liabilities and Insurance: Terrorism and War Risks, in: Liability Regimes in Contemporary Maritime Law (2007), p. 213.

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The European Union included this Reservation along with the Guidelines in its instrument of accession and also urges its Member States to declare the Reservation when ratifying or acceding to the Athens Convention 2002.295 Its modifications of the Convention are therefore binding throughout the European Union. This includes the IMO Guidelines as well as any future amendments thereto, which are by reference also binding throughout the European Union.296 The same applies to the carriage within single Member States, although not by virtue of the EU’s accession to the Convention but rather by virtue of EU Secondary law, i.e. Article 3(2) of Regulation 392/2009 (see Article 2, para. 53 et seqq.). a) The Reservation

138

The Reservation limits liability in respect of death or personal injury caused by any of the risks referred to in paragraph 2.2 IMO Guidelines297 to the lower of two amounts: 250,000 SDR in respect of each passenger on each distinct occasion298 or 340 million SDR overall per ship on each distinct occasion (paragraph 1.2).299 These limits apply regardless of any contrary result under Articles 4 or 7 AC 2002 and regardless of the basis of the claim – either Article 3(1) or (2) AC 2002, provided that the carrier did not lose his right to limit liability under Article 13 AC 2002 (paragraph 1.5). The Reservation uses the same method to limit the liability of the performing carrier, servants or agents of the carrier. The same applies for the aggregate of the amounts recoverable pursuant to Article 12 AC 2002 (paragraph 1.4).300 Consequently, regarding war and terrorismrelated risks referred to in paragraph 2.2, the insurer is only liable up to these amounts and insurance cover is only required to this extent (paragraph 1.6). 295 See Recital 11 of Council Decision 2012/22/EU of 12 December 2011 concerning the accession of the European Union. 296 PAL.4/Circ.5 (5 December 2011) regarding the accession by the EU, Annex, p. 4. 297 The risks listed in paragraph 2.2. of the Guidelines are: “– war, civil war, revolution, rebellion, insurrection, or civil strife arising there from, or any hostile act by or against a belligerent power, – capture, seizure, arrest, restraint or detainment, and the consequences thereof or any attempt thereat, – derelict mines, torpedoes, bombs or other derelict weapons of war, – act of any terrorist or any person acting maliciously or from a political motive and any action taken to prevent or counter any such risk, – confiscation and expropriation.”. 298 Which concurs with the limit of strict liability according to Article 3 of the Convention. 299 This method of an “upward limit” is – even though not “absolute” but rather “alternate” similar to the upward limit of 25 million SDR under the LLMC 1976. According to Martínez-Gutiérrez, such a limitation could be interpreted as being an additional “global limitation” which would possibly cause a conflict with the LLMC 1996, in: Limitation of liability in international maritime conventions (2012), p. 183. Røsæg regards this limitation for damage caused by war risks as a mere “sub-limit” for terrorism claims limiting only a fraction of possible claims, for which there is nothing in the wording of the Conventions to prevent, in: Passenger Liabilities and Insurance: Terrorism and War Risks, in: Liability Regimes in Contemporary Maritime Law (2007), p. 223. Regarding global limitation under the LLMC, see Article 5, para. 146 et seqq. 300 However, the Reservation does neither prevent nor in any way affect an express agreement between carrier and passenger on higher liability limits under Article 10 AC 2002, paragraph 1.5.

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Furthermore, the reservation addresses the effects that the modifications to 139 carrier’s liability have on the insurance certificate under Article 4bis(2) AC 2002. Paragraph 1.10 suggests that a State Party should issue the insurance certificate in a modified way in order to reflect the provisions of the Reservation – namely paragraphs 1.2, 1.6, 1.7 and 1.9 – and to include any other limitation, requirement or exemption required by the insurance market to ensure an adequate insurability under the Athens Convention 2002. A model certificate of insurance is provided in Appendix B to the Guidelines. b) The Guidelines

With the idea being not to include too much detail in the Reservation itself,301 140 it refers to the Guidelines regarding several essential aspects: First and foremost, the excluded risks for non-war-insurance in paragraph 2.2. of the Guidelines. This approach has the advantage of high flexibility, since any future amendment of the Guidelines302 indirectly modifies all model reservations that States Parties have declared without them having to amend the wording of their respective reservations itself. Whenever the Guidelines are revised, the Legal Committee determines the amendments’ date of entry into force (paragraph 1.13). Taking into account that P&I clubs are usually unable or not willing to pro- 141 vide the required compulsory insurance regarding the “war risks” referred to in paragraph 2.2.,303 an additional insurance contract with a separate insurer has to be concluded.304 The Guidelines suggest that the relevant authorities should issue insurance certificates under Article 4bis(2) AC 2002 based on two written confirmations that the insurance cover is in force – the so-called “Blue Cards”. One Blue Card will be issued by an insurer of war risks and another by an insurer for non-war risks. Each insurer will only be liable for the risks and the amount stipulated in the respective insurance contract, paragraph 2. Paragraph 2.3 of the Guidelines clarifies that non-war insurance should cover all perils subject to compulsory insurance, other than those risks listed in paragraph 2.2.305 Model certificates for both war and non-war confirmations are provided in 142 Annex B to the Guidelines. Surprisingly, only the “owner of a ship” is listed as a possible beneficiary of the Blue Card, not the addressee of the Convention’s insurance requirements, i.e. the “carrier who actually performs the whole or a part of the carriage”. This omission could be due to the fact that the model blue cards 301 Røsæg, Passenger Liabilities and Insurance: Terrorism and War Risks, in: Liability Regimes in Contemporary Maritime Law (2007), p. 213. 302 See 1.13. Model Reservation. It is not entirely clear how the amendment procedure will work, Røsæg, Passenger Liabilities and Insurance: Terrorism and War Risks, in: Liability Regimes in Contemporary Maritime Law (2007), p. 213. 303 Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 142, 143. 304 LEG 92/5/2 (15 September 2006), p. 2. 305 Both types of insurance (war and non-war) are subject to exceptions regarding loss or damage caused by radioactivity, chemical, biological, bio chemical, or electromagnetic weapons or cyber-attacks, see paragraphs 2.1.1 and 2.1.2 referring to Appendix A to the Guidelines.

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in Annex B were modelled after equivalent confirmations under other Conventions, e.g. the Bunker Oil Pollution Convention, where the shipowner rather than the carrier is the primary addressee. Nevertheless, the term “shipowner” under Article 1(3) BOPC can mean the owner, bareboat charterer, manager or operator of a ship. To a certain extent, this overlaps with the term “actually performing carrier” under Article 1(1)(c) AC 2002. For clarity purposes, further information specifying the actual beneficiary of insurance should be added when completing a blue card.306 Article 4 Compensation in respect of mobility equipment or other specific equipment In the event of loss of, or damage to, mobility equipment or other specific equipment used by a passenger with reduced mobility, the liability of the carrier shall be governed by Article 3(3) of the Athens Convention. The compensation shall correspond to the replacement value of the equipment concerned or, where applicable, to the costs relating to repairs.

D. Commentary on Article 4

Article 4 of Regulation 392/2009 addresses the legal treatment of mobility equipment or other specific equipment used by a passenger with reduced mobility (PRM equipment) under the liability regime of the Athens Convention 2002. In the maritime transport sector, the rights of passengers with reduced mobility are largely governed by Regulation No 1177/2010 (see Chapter 3, VI.),307 which in its Article 15(1) and (2) also includes rules regarding the loss of or damage to PRM equipment. However, a conflict between these provisions can be ruled out due to the fact that they are mutually exclusive (see Article 15(3) Regulation No 1177/2010). Article 4 Regulation No 392/2009 subjects claims regarding such equipment to the basis of liability of Article 3(3) AC 2002. To that extent, PRM equipment is treated like cabin luggage under the Athens Convention 2002 (see Article 3, para. 74 and 76): The carrier's fault is presumed if the loss is caused by a shipping incident. If not, the claimant will have to prove fault or neglect on the part of the carrier. Furthermore, for lack of a special provision regarding PRM equipment, the referral to Article 3(3) AC 2002 also entails an application of the carrier's period of responsibility for cabin luggage (i.e. Article 1(8)(a) and (b) AC 2002, see Article 3, para. 94 et seqq.). 144 By contrast, the reference to Article 3(3) AC 2002 does not entail an application of the liability limit for cabin luggage as set out in Article 8(1) AC 2002: This limit was regarded as unreasonably low considering the potential value of 143

306 For more details, see Hoffmann/Tüngler/Kirchner, Das neue Seeversicherungsnachweisgesetz, Recht der Transportwirtschaft (2013), 264 (266). 307 Regulation (EU) No 1177/2010 of 24 November 2010 concerning the rights of passengers when travelling by sea and inland waterway and amending Regulation (EC) No 2006/2004.

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PRM equipment.308 Consequently, Recital 13 of the Regulation states that “the expression “mobility equipment” should be considered to mean neither luggage nor vehicles within the meaning of Article 8 of the Athens Convention”.309 Thereby, the Regulation separates the PRM equipment from the general limitation of claims under the Athens Convention 2002. This separation can be criticised, given that Article 14 AC 2002 excludes all claims brought “otherwise than in accordance with this Convention” (see Article 3, para. 121).310 PRM equipment normally falls under the term “luggage” under Article 1(5) AC 2002 and, consequently, under its liability limits of Article 8 AC 2002. The only way of avoiding a conflict between Recital 13 and the Convention311 is to consider PRM equipment as a category sui generis, therefore not falling under the term “luggage”.312 Either way, the inclusion of this – rather important – stipulation in the Regulation’s recitals and not in its main provisions is surprising. Regarding recoverable damage, Article 4 Regulation 392/2009 states that 145 the compensation shall correspond to the replacement value of the equipment concerned or, where applicable, to the costs relating to repairs. Therefore, even if the lost or damaged mobility equipment is in fact worth more than the limits prescribed in Article 8 AC 2002, passengers are able to recover their whole damage. A delayed redelivery of the mobility equipment to the passenger resulting in pecuniary loss under Article 1(7) AC 2002 (see Article 3, para. 101) can also lead to a claim based on Article 4 Regulation, since Recital 13 only states that mobility equipment should not be considered as luggage “within the meaning of Article 8 of the Athens Convention“. Article 5 Global limitation of liability 1. This Regulation shall not modify the rights or duties of the carrier or performing carrier under national legislation implementing the International Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996, including any future amendment thereto. In the absence of any such applicable national legislation, the liability of the carrier or performing carrier shall be governed only by Article 3 of this Regulation. 2. In respect of claims for loss of life or personal injury to a passenger caused by any of the risks referred to in paragraph 2.2 of the IMO Guidelines the carrier and the performing carrier may limit their liability pursuant to the provisions referred to in paragraph 1 of this Article.

308 Under Article 8(1) AC 2002, the limit of liability for cabin luggage is fixed at 2,250 SDR (approx. 2,850 €). 309 The Regulation does not include a definition of this term, which can be criticized in view of the conflict with Article 14 AC 2002, see Karsten, Im Fahrwasser der Athener Verordnung zu Seereisenden, VuR (2009), 213 (216). 310 Lagoni, Die Haftung des Beförderers von Reisenden auf See und im Binnenschiffsverkehr und das Gemeinschaftsrecht, ZEuP (2007), 1079 (1084). 311 Lagoni, Die Haftung des Beförderers von Reisenden auf See und im Binnenschiffsverkehr und das Gemeinschaftsrecht, ZEuP (2007), 1079 (1084). 312 Karsten, Im Fahrwasser der Athener Verordnung zu Seereisenden, VuR (2009), 213 (216).

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E. Commentary on Article 5 Article 19 Athens Convention 2002 – Other conventions on limitation of liability This convention shall not modify the rights or duties of the carrier, the performing carrier, and their servants or agents provided for in international conventions relating to the limitation of liability of owners of seagoing ships.

1. General

Apart from the limitation of liability as set out in Articles 7 and 8 AC 2002, claims of passengers under the Athens Convention 2002 may be subject to further limitation under other conventions, such as the International Convention on Limitation for Maritime Claims either in its original version of 1976 (LLMC 1976) or in its amended version of the 1996 Protocol (LLMC 1996). Article 5 Regulation 392/2009 – as well as its counterpart in Article 19 AC 2002 – addresses the possibility for States Parties to apply a global cap on claims falling under the scope of the Athens Convention 2002 and to hereby reduce the per capita compensation claims below the Convention’s ceilings.313 147 Article 5(1) Regulation 392/2009 states that the (contracting or performing) carrier’s right to limit his liability under national legislation implementing the LLMC 1996 remains unaffected by Regulation 392/2009. By contrast, Article 19 of the Athens Convention 2002 is not restricted to national legislation implementing the LLMC 1996, but allows for a global cap based on any international convention relating to the limitation of liability of owners of seagoing ships. Most importantly, this includes the LLMC in its original version of 1976.314 The Regulation’s provision is therefore much more restrictive. 148 Contrary to the Commission’s initial plan,315 Article 19 AC 2002 was not incorporated by the Regulation.316 Nevertheless, the provision is now directly applicable within the EU after the Athens Convention 2002 entered into force (see Article 1 and Introduction, para. 30 et seqq.). 149 In spite of the entry into force of a higher-ranking provision with the same subject matter, Article 5 Regulation 392/2009 has not lost its relevance: Its re146

313 It has to be noted that if such a global cap under the LLMC is applied, passenger claims may also be competing with other LLMC claims, such as crew claims or claims for bunker oil pollution, see Gahlen, Civil Liability for Accidents at Sea (2015), p. 233. 314 Furthermore, Article 19 AC 2002 includes servants or agents, or rather their right to apply global limits on their liability, whereas Article 5 Regulation 392/2009 does not. 315 In its initial proposal, the Commission had envisaged an incorporation of Article 19 AC 2002 in Article 3 of the Regulation, see COM(2005) 592 final. Since the possibility to further reduce the per capita limitation was not desired by Parliament, the reference to Article 19 AC 2002 was deleted from the proposed Regulation. However, in its Common Position, the Council reintroduced the idea of global limitation under other Conventions, seeing that several Member States had already become parties to the LLMC 1996, see Codecision Procedure Report (3rd reading) A6-0102/2009, pp. 7, 9. 316 In contrast to other provisions of the AC 2002 like Articles 17 and 17bis, which were marked in the Annex I as “not reproduced”, Article 19 was – quite surprisingly – not mentioned at all, Berlingieri, The Athens Convention and the European Parliament Regulation (EC) No. 392/2009, Il Diritto Marittimo (2011), 1125 (1140).

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strictions as to the applicable limitation regimes are still valid, since the European legislator expressed his will to only allow global caps under the 1996 version of the LLMC. This has several advantages, since the LLMC 1996 is far more compatible with the limitation of liability under Article 7 AC 2002.317 A limitation by virtue of any other global limitation regime is therefore prohibited within the European Union.318 Currently, 22 EU Member States are Parties to the LLMC 1996.319 This, how- 150 ever, does not necessarily entail a right for ship-owners to apply a global cap on claims throughout these Member States: If there is no national legislation implementing the LLMC 1996, there is no global liability limit, given that Article 5(1) Regulation 392/2009 stipulates that liability of the (performing or contractual) carrier will be governed only by Article 3 of the Regulation in that case.320 Article 5(2) Regulation 392/2009 addresses the compatibility of a global lim- 151 itation under the LLMC 1996 with the limitation of liability under the IMO Reservation and Guidelines. It clarifies that Article 5(1) Regulation 392/2009 also applies on claims for loss of life or personal injury caused by any of the risks referred to in paragraph 2.2 of the IMO Reservation and Guidelines (see Article 3, para. 136 et seqq.). Therefore, such claims can be subject to a global cap under national legislation implementing the LLMC 1996.321 2. Global Limitation of Liability under the LLMC 1996

The Athens Convention 2002 and the LLMC limit carrier’s liability in differ- 152 ent manners. Whereas the Athens Convention 2002 sets a maximum amount per passenger claiming, e.g. at 400,000 SDR for claims for loss of life or personal injury,322 the LLMC caps carrier's liability globally: If two limits – regardless

317 Gahlen, Civil Liability for Accidents at Sea (2015), p. 257. For the many conflicts between the LLMC 1976 and the AC 2002, see Martínez-Gutiérrez, Limitation of liability in international maritime conventions (2012), p. 176 et seqq. 318 This restriction, however, is virtually of no importance since all of the EU Member States which are parties to the LLMC 1976 are also parties to the LLMC 1996, see Article 9 of the 1996 Protocol. 319 These are Belgium, Bulgaria, Croatia, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Romania, Spain, Sweden and the United Kingdom, see IMO – status of multilateral Conventions (10 March 2015), p. 368, available at www.imo.org. 320 Since the Athens Convention 2002 entered into force, this reference to Article 3 Regulation 392/2009 must be understood as a reference to the liability regime of the Athens Convention regarding international carriage. 321 For the conflict between the LLMC's global cap and the cap of 340 Million SDR under Paragraph 1.2 of the IMO Reservation, see Article 3 Regulation 392/2009, para. 138 and Berlingieri, International Maritime Conventions (Vol. 1): The Carriage of Goods and Passengers by Sea (2014), p. 290 et seq. 322 Since Article 14 AC 2002 obliges the passenger to bring his claims in accordance with the Athens Convention, this is the maximum amount a passenger can be entitled to under the Athens Convention 2002.

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whether of a global nature or not – are applicable, the lower limit always applies.323 153 Regarding claims for the loss of life or personal injury, Article 7 LLMC 1996 stipulates an independent system of liability limitation: Passengers with such claims are entitled to a separate fund, excluded from the general fund under Article 6 LLMC 1996.324 The limit of liability under this provision is calculated by multiplying the number of passengers a ship is authorized to carry by a specific SDR figure representing the per capita amount of liability: In the case of the 1996 version of the LLMC this amount is set at 175,000 SDR.325 In contrast to the original version 1976, the LLMC 1996 does not contain an upward limit of global liability.326 154 This global limit under the LLMC 1996 applies even if only one passenger is killed or injured.327 Therefore, in order for the LLMC to have any effect on passenger’s claims, there have to be multiple claims with an overall extent exceeding the global cap – in other words: a major disaster claiming many victims. If the global cap is exceeded, all claims abate pro rata.328 155 In its Article 15.3bis,329 the LLMC 1996 permits contracting states to increase or even eliminate these global limits under their national law, which entails the possibility of unlimited liability under the LLMC 1996.330 Taking into account the option to adopt higher per capita liability limits under Article 7(2) AC 2002 (see Article 3, para. 109 et seq.), states which are parties to both Conventions have wide-ranging leeway regarding the arrangement of their limits of carrier’s liability.331

323 Tsimplis/Shaw, Carriage of Passengers, in: Baatz et al., Maritime Law (2014), p. 216. 324 The term “passenger” under Article 7(2) LLMC 1996 is compatible with the definition of passenger under the Athens Convention 2002, see Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (135). 325 In its original version, the number of passengers was multiplied by 46,666 SDR. 326 By removing this overall gap, the LLMC was made compatible with the general liability limits as provided in Article 7 AC 2002, see Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (135 et seq.). Particularly in cases of ships with high passenger-carrying capacities, this relatively low upward limit seems to stand in the way of adequate compensation as established by the Athens Convention 2002, which is why Martínez-Gutiérrez opines that States who are still parties to the LLMC 1976 should denounce it and adopt the 1996 Protocol, in: Limitation of liability in international maritime conventions (2012), p. 181. 327 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (134). 328 Griggs, Williams & Farr, Limitation of Liability for Maritime Claims (2005), p. 109. 329 Article 15.3bis LLMC 1996 allows States Parties to: “(...) regulate by specific provisions of national law the system of liability to be applied to claims for loss of life or personal injury to passengers of a ship, provided that the limit of liability is not lower than that prescribed in paragraph 1 of Article 7”. 330 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (136). 331 With this flexible approach, earlier conflicts that existed between the Athens Convention 1974 and the original LLMC 1976 have been eliminated. For an outline of the various models of liability limitation States Parties of both conventions can adopt, see Tsimplis/Shaw, Carriage of Passengers, in: Baatz et al., Maritime Law (2014), p. 217.

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For all claims for property damage under the Athens Convention 2002 there 156 are no special limits provided under the LLMC 1996. Such claims fall under the term “any other claims” in Article 6.1(b) LLMC 1996 and take part in the general limitation fund. All passengers’ claims for property damage rate equally with all other property claims.332 As for the calculation, the global limit of liability increases proportionally by reference to the registered tonnage of a ship.333 Since Article 5(1) Regulation 392/2009 expressly includes “any future amendment” to the LLMC 1996, the recent amendment of Article 6 LLMC by Resolution LEG.5 (99), significantly raising the limits of liability relating to “any other claims”,334 has to be taken into account. These new global limits for property damage entered into force on 8 June 2015. Article 6 Advance payment 1. Where the death of, or personal injury to, a passenger is caused by a shipping incident, the carrier who actually performed the whole or a part of the carriage when the shipping incident occurred shall make an advance payment sufficient to cover immediate economic needs on a basis proportionate to the damage suffered within 15 days of the identification of the person entitled to damages. In the event of the death, the payment shall not be less than EUR 21 000. This provision shall also apply where the carrier is established within the Community. 2. An advance payment shall not constitute recognition of liability and may be offset against any subsequent sums paid on the basis of this Regulation. It shall not be refundable, except in the cases set out in Article 3(1) or Article 6 of the Athens Convention or Appendix A to the IMO Guidelines, or where the person who received it is not the person entitled to damages.

F. Commentary on Article 6 – Advance Payment

Where the death or personal injury is due to a shipping incident, the passen- 157 ger or other person entitled to damages335 has a right to an advance payment. The payment shall be calculated on the basis of the damage suffered and shall be made within 15 days. In the event of a passenger’s death, it shall not be less than 21.000 €. The right to advance payment under Article 6 Regulation 392/2009 is a supplement to the strict liability regime under Article 3(1) AC 2002. It is meant to assist injured passengers or next of kin of deceased passengers; the payment must, therefore, be “sufficient to cover immediate economic needs”. With Article 6 Regulation 392/2009, the European legislator adapted the liability

332 Tsimplis, Liability in respect of passenger claims and its limitation, JIML (2009), 125 (134, 137). 333 Article 6(1)(b) LLMC 1996. 334 IMO Legal Committee Resolution LEG.5 (99) Adoption of Amendments of the Limitation Amounts in the Protocol of 1996 to the Convention on Limitation of Liability for Maritime Claims, 1976 (Adopted on 19 April 2012), IMO Doc. LEG 99/14. 335 I.e., in the event of a passenger’s death, his next of kin.

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regime as installed by the Athens Convention 2002 to the level of protection found in other modes of transport within the European Union.336 158 The advance payment is only due if the death of or personal injury to the passenger was caused by a shipping incident. In all other cases, the passenger has no right to an advance payment. The purpose behind this provision is that a passenger will easily be able to obtain his compensation where shipping incidents caused the respective loss, seeing that the carrier's or performing carrier's possible defences are extremely limited under the strict liability regime of Article 3(1) AC 2002 (see Article 3, under para. 103 et seqq.). The obligation under Article 6 primarily addresses the “actually performing carrier”, as defined by Article 1(c) AC 2002 (see Article 3, para. 124). If, however, the “carrier” – i.e. the party of the contract of carriage – is established within the European Union, the passenger or other person entitled to damages can claim an advance payment from him instead. As for the amount of the advance payment, the Regulation generally states that it shall be “sufficient to cover immediate economic needs on a basis proportionate to the damage suffered”. Only in case of the death of a passenger, the Regulation sets a minimum amount of 21.000 €. 159 As stated in Article 6(2) Regulation 392/2009, the advance payment does not constitute in itself a recognition of liability and may be offset with any subsequent payment on the basis of the Regulation. Any sum paid under Article 6(1) Regulation 392/2009 is not refundable. Article 3(1) or Article 6 AC 2002 are listed as the only exceptions, meaning that the carrier or performing carrier has to either exonerate himself (see Article 3, para. 103) or prove that the passenger contributed to his own death or personal injury (see Article 3, para. 105). If the advance payment exceeds the actually incurred loss, the actually performing carrier may reclaim the exceeding amount. Furthermore, an advance payment made based on the wrong assumption that a shipping incident caused the loss does not have to be refunded. In such cases, the passenger can keep the advance payment if he has a claim under Article 3(2) AC 2002, i.e. on the condition that fault or negligence can be established. 160 The entry into force of the Athens Convention 2002 did not have any effect on the right to an advance payment under Article 6 Regulation 392/2009. First, the provision's wording does not refer to any special basis of claims, meaning that it is irrelevant whether the claim is based on Article 3 Regulation 392/2009 or on the Convention directly.337 Furthermore, it has to be noted that Article 6 Regulation 392/2009 is not in conflict with Article 14 AC 2002 (see Article 3, para. 121): The payment under Article 6 Regulation is an advance on a passenger’s claim under the Convention and is supposed to ensure that a claimant is 336 See Commission’s Proposal for a Regulation, COM(2005) 592 final, p. 10. The corresponding provisions for other modes of transport can be found in Article 5 Regulation (EC) No 2027/97 as amended by Regulation (EC) No 889/2002 (air carrier liability) and Article 13 Regulation (EC) No 1371/2007 (rail passengers’ rights and obligations). 337 Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (245).

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granted a certain part of his compensation as soon as possible. It is therefore not an additional basis for claims. This is demonstrated by Article 6(2) Regulation 392/2009, where it is clarified that any sum paid in advance may be offset against any subsequent sums paid under the Athens Convention 2002.338 Article 7 Information to passengers Without prejudice to the obligations of tour operators set out in Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (8), the carrier and/or performing carrier shall ensure that passengers are provided with appropriate and comprehensible information regarding their rights under this Regulation. Where the contract of carriage is made in a Member State, that information shall be provided at all points of sale, including sale by telephone and via the Internet. Where the place of departure is in a Member State, that information shall be provided prior to departure. In all other cases, it shall be provided at the latest on departure. To the extent that the information required under this Article has been provided by either the carrier or the performing carrier, the other shall not be obliged to provide it. The information shall be provided in the most appropriate format. In order to comply with the information requirement under this Article, the carrier and performing carrier shall provide passengers with at least the information contained in a summary of the provisions of this Regulation prepared by the Commission and made public.

G. Commentary on Article 7 – Information to Passengers

According to Article 7 Regulation 392/2009, a carrier and/or the performing 161 carrier has to ensure that passengers are provided with appropriate and comprehensible information regarding their rights under the Regulation, including their rights to compensation, applicable limits of liability and the possibility of direct action against the insurer. A summary of these rights has been prepared by the Commission and functions as the minimum amount of information to be given out.339 It has to be pointed out that there is no penalty imposed for non-provision of information.340 With the requirement of pre-journey information under this provision, the European legislator adapted the passenger transport by sea to other modes of transport, i.e. the air and rail sector.341 As to the point in time the passengers must be informed, Article 7 Regu- 162 lation 392/2009 contains a three-fold rule: Where a contract of carriage was con338 Regarding this question see Czerwenka, Haftung für Personen- und Gepäckschäden bei Schiffsreisen, DAR (2014), 242 (245); Lagoni, Die Haftung des Beförderers von Reisenden auf See und im Binnenschiffsverkehr und das Gemeinschaftsrecht, ZEuP (2007), 1079 (1087 et seq.); Røsæg, The Athens Regulation and international law, ZEuP (2008), pp. 599 et seqq. 339 This summary can be downloaded under: http://ec.europa.eu/transport/themes/passengers/m aritime/doc/rights-in-case-of-accident.pdf. 340 Tsimplis/Shaw, Carriage of Passengers, in: Baatz et al., Maritime Law (2014), p. 218. 341 See Article 6 Council Regulation (EC) No 2027/97 on air carrier liability in the event of accidents, as amended by Regulation (EC) No 889/2002 of the European Parliament and of the Council of 13 May 2002 and Article 8 Regulation (EC) No 1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights and obligations.

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cluded in a Member State, the information has to be provided at the point of sale. If a carriage under Article 2 Regulation 392/2009 has its point of departure in a Member State, the information has to be provided prior to departure. In all other cases, the information has to be provided “at the latest on departure”. Article 8 Reporting No later than three years after the date of application of this Regulation, the Commission shall draw up a report on the application of this Regulation, which shall, inter alia, take into account economic developments and developments in international fora. That report may be accompanied by a proposal for amendment of this Regulation, or by a proposal for a submission to be made by the Community before the relevant international fora.

H. Commentary on Article 8 – Reporting

Since Regulation 392/2009 entered into force on 31 December 2012 (see Article 12, para. 165), the Commission is required to draw up a report on its application no later than the 31 December 2015. In this regard, the Commission has already compiled an overview regarding the application of the Regulation on domestic carriage by sea and the different classes of ships included by Member States (see Article 11, para. 164).342 Article 9 Amendments 1. Measures designed to amend non-essential elements of this Regulation and relating to the incorporation of amendments to the limits set out in Article 3(1), Article 4bis(1), Article 7(1) and Article 8 of the Athens Convention to take account of decisions taken pursuant to Article 23 of that Convention, as well as corresponding updates to Annex I to this Regulation, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 10(2) of this Regulation. Taking into consideration the consequences for fares and the ability of the market to obtain affordable insurance coverage at the level required against the policy background of strengthening passengers' rights, as well as the seasonal nature of some of the traffic, by 31 December 2016, the Commission shall, on the basis of a suitable impact assessment, adopt a measure relating to the limits set out in Annex I for ships of Class B under Article 4 of Directive 98/18/EC. That measure, designed to amend non-essential elements of this Regulation, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 10(2) of this Regulation. 2. Measures designed to amend non-essential elements of this Regulation and relating to the incorporation of amendments to the provisions of the IMO Guidelines set out in Annex II shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 10(2).

342 See European Commission, Application of Regulation (EC) No 392/2009 to domestic carriage on board ships of classes A, B, C and D as of 31/12/2012: http://ec.europa.eu/transport /themes/passengers/maritime/doc/application-of-regulation-392-2009.pdf.

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I. Commentary on Article 9 – Amendments Article 22 Athens Convention 2002 – Revision and Amendment 1. A Conference for the purpose of revising or amending this Protocol may be convened by the Organization. 2. The Organization shall convene a Conference of States Parties to this Protocol for revising or amending this Protocol at the request of not less than one-third of the States Parties.

Article 9 Regulation 392/2009 is only relevant for those provisions that are 163 applicable solely by virtue of the Regulation, i.e. those regarding carriage within single Member States as well as for the supplements to the Convention’s liability regime in Articles 4, 6 and 7 Regulation 392/2009 (see Article 1 and Introduction, para. 32). The Regulation installs the regulatory procedure with scrutiny343 for all measures adopted by the Commission to amend non-essential elements. Regarding ships of class “B”, for which the Regulation does not stipulate a mandatory inclusion into the liability regime so far (see Article 2, para. 53 et seqq. as well as Article 11, para. 163 et seq.), the Commission has to conduct an impact assessment regarding a mandatory application of the liability limits in Articles 7 and 8 AC 2002 on such ships. This assessment shall take economic implications (such as affordable insurance coverage) as well as the seasonal nature of some of the affected traffic into consideration. The Commission shall adopt a suitable measure by 31 December 2016. As regards those provisions that were previously incorporated by virtue of Article 3 of the Regulation and are now directly applicable within the EU, there is no longer a need for an amendment to the Regulation: The EU and its Member States are directly bound to any amendment to the Athens Convention 2002 (see Article 1 and Introduction, para. 31 et seq.). In this regard, the Convention contains its own provision regarding amendments in Article 22 AC 2002. Furthermore, the 2002 Protocol instituted the “tacit acceptance procedure”, a measure designed to simplify the procedure of raising the limits of liability, in Article 23 AC 2002.344 This procedure can be triggered by at least half of the States Parties. The resulting amendments can be adopted by a majority of two thirds of the States Parties.345 Article 10 Committee procedure 1. The Commission shall be assisted by the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) established by Regulation (EC) No 2099/2002 of the European Parliament and of the Council (9).

343 Regarding this procedure, see Article 5a of Council Decision 1999/468/EC (OJ L 184, 17.7.1999, p. 23). 344 In contrast to the general provision on amendments in Article 22 AC 2002, Article 23 was reproduced in Annex 1 to the Regulation, even though it was not incorporated by Article 3(1) Regulation 392/2009. 345 For more details, see Gahlen, Civil Liability for Accidents at Sea (2015), p. 256 and Mandaraka-Sheppard, Modern Maritime Law (Vol. 2): Managing Risks and Liabilities (3rd ed. 2013), p. 793.

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J. Commentary on Article 10 – Committee Procedure 164

Article 10(1) Regulation 392/2009 addresses the necessity of participation of the Committee on Safe Seas and Prevention of Pollution (COSS) in the Commission’s rule and decision making process. As Recital 15 states, the Commission has the power to amend this Regulation in order to incorporate subsequent amendments to the Athens Convention 2002 (or other Conventions which might be of importance for the liability regime, e.g. the LLMC 1996) and any protocols, codes and resolutions related thereto.346 When the Commission adopts such implementing measures,347 it has to observe the requirements of the “comitology procedure”.348 Under these rules, the Commission is required to consult with the EU Member States about draft proposals. In order to centralize all consultations with Member States regarding maritime safety and to hereby facilitate rule making, the COSS was created by Regulation EC/2009/2002. Article 10(2) Regulation 392/2009 refers to Decision 1999/468/EU on procedures for the exercise of implementing powers conferred on the commission and stipulates the mandatory application of Articles 5a(1) to (4) and Article 7 of this Decision on the regulatory procedure with scrutiny. Article 11 Transitional provisions 1. In respect of carriage by sea within a single Member State on board ships of Class A under Article 4 of Directive 98/18/EC, Member States may choose to defer application of this Regulation until four years after the date of its application. 2. In respect of carriage by sea within a single Member State on board ships of Class B under Article 4 of Directive 98/18/EC, Member States may choose to defer application of this Regulation until 31 December 2018.

K. Commentary on Article 11 – Transitional Provisions 165

Article 2(1) Regulation 392/2009 extends the application of the Athens Convention 2002 to carriage of passengers by sea within a single Member State

346 As a result of the Convention’s direct entry into force, these powers have been considerably reduced, since many of the Regulation’s provisions are now superseded by the – for the most part – identical provisions of the Athens Convention 2002, see Article 1 and Introduction, para. 32. 347 See Article 291 TFEU. 348 Regarding the EU’s comitology procedures, see Chalmers/Davies/Monti, European Union Law (2010), pp. 117 et seqq.

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when made on board of ships of Classes “A” and “B” as defined in Article 4 of Directive 98/18/EC349 (see Article 2, para. 53 et seqq.). Article 11 Regulation 392/2009 offers Member states the possibility to defer 166 the application of the Regulation until 31 December 2016 for class “A” ships and until 31 December 2018 for class “B” ships. Croatia, Cyprus, the United Kingdom, Italy, Spain, Estonia, Latvia, Germany, Greece and Portugal have made use of the transitional period and postponed the application to Class A and B ships. Ireland has made use of the transitional period only for class B ships. Malta notified the Commission that no Class A and B ships are operating in its jurisdiction.350 Article 12 Entry into force This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union. It shall apply from the date of the entry into force of the Athens Convention for the Community, and in any case from no later than 31 December 2012. This Regulation shall be binding in its entirety and directly applicable in all Member States.

L. Commentary on Article 12 – Entry into Force

The application of Regulation (EC) No. 392/2009 started on 31 December 167 2012, since the Athens Convention 2002 had not entered into force for the European Union by that time. The 31st of December 2012 was included as a fixed date of entry into force in order to guarantee an entry into force of the Convention's main provisions for the European Union even without an accession by the European Union (see Article 1 and Introduction, para. 23 et seq.). After the European Union acceded to the 2002 Protocol on 19 December 2011,351 the Athens Convention 2002 did finally enter into force on 23 April 2014, nearly 16 months after Regulation 392/2009.

349 Council Directive 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships, recast by Council Directive 2009/45/EC of May 6, 2009, amended by Commission Directive 2010/36/EU of 1 June 2010. 350 See European Commission, Application of Regulation (EC) No 392/2009 to domestic carriage on board ships of classes A, B, C and D as of 31/12/2012: http://ec.europa.eu/transport /themes/passengers/maritime/doc/application-of-regulation-392-2009.pdf. 351 See IMO doc PAL.4/Circ.5 and Council Decisions 2012/22/EU and 2012/23/EU of 12 December 2011.

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ANNEX I PROVISIONS OF THE ATHENS CONVENTION

(Consolidated text of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 and the Protocol of 2002 to the Convention)

Article 1 Definitions In this Convention the following expressions have the meaning hereby assigned to them: (a) (b) (c)

1. ‘carrier’ means a person by or on behalf of whom a contract of carriage has been concluded, whether the carriage is actually performed by that person or by a performing carrier; ‘performing carrier’ means a person other than the carrier, being the owner, charterer or operator of a ship, who actually performs the whole or a part of the carriage; and ‘carrier who actually performs the whole or a part of the carriage’ means the performing carrier, or, in so far as the carrier actually performs the carriage, the carrier; 2. ‘contract of carriage’ means a contract made by or on behalf of a carrier for the carriage by sea of a passenger or of a passenger and his luggage, as the case may be; 3. ‘ship’ means only a seagoing vessel, excluding an air-cushion vehicle;

(a) (b)

4. ‘passenger’ means any person carried in a ship: under a contract of carriage; or who, with the consent of the carrier, is accompanying a vehicle or live animals which are covered by a contract for the carriage of goods not governed by this Convention;

(a)

5. ‘luggage’ means any article or vehicle carried by the carrier under a contract of carriage, excluding: articles and vehicles carried under a charter party, bill of lading or other contract primarily concerned with the carriage of goods; and live animals;

(b)

6. ‘cabin luggage’ means luggage which the passenger has in his cabin or is otherwise in his possession, custody or control. Except for the application of paragraph 8 of this Article and Article 8, cabin luggage includes luggage which the passenger has in or on his vehicle; 7. ‘loss of or damage to luggage’ includes pecuniary loss resulting from the luggage not having been re-delivered to the passenger within a reasonable time after the arrival of the ship on which the luggage has been or should have been carried, but does not include delays resulting from labour disputes; (a)

(b)

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8. ‘carriage’ covers the following periods: with regard to the passenger and his cabin luggage, the period during which the passenger and/or his cabin luggage are on board the ship or in the course of embarkation or disembarkation, and the period during which the passenger and his cabin luggage are transported by water from land to the ship or vice-versa, if the cost of such transport is included in the fare or if the vessel used for this purpose of auxiliary transport has been put at the disposal of the passenger by the carrier. However, with regard to the passenger, carriage does not include the period during which he is in a marine terminal or station or on a quay or in or on any other port installation; with regard to cabin luggage, also the period during which the passenger is in a marine terminal or station or on a quay or in or on any other port installation if that luggage has been taken over by the carrier or his servant or agent and has not been re-delivered to the passenger;

ANNEX I PROVISIONS OF THE ATHENS CONVENTION (c)

with regard to other luggage which is not cabin luggage, the period from the time of its taking over by the carrier or his servant or agent on shore or on board until the time of its re-delivery by the carrier or his servant or agent; 9. ‘international carriage’ means any carriage in which, according to the contract of carriage, the place of departure and the place of destination are situated in two different States, or in a single State if, according to the contract of carriage or the scheduled itinerary, there is an intermediate port of call in another State; 10. ‘Organisation’ means the International Maritime Organisation; 11. ‘Secretary-General’ means the Secretary-General of the Organisation.

Article 1bis Annex The Annex to this Convention shall constitute an integral part of the Convention.

Article 2 Application 1. […] 2. Notwithstanding paragraph 1 of this Article, this Convention shall not apply when the carriage is subject, under any other international convention concerning the carriage of passengers or luggage by another mode of transport, to a civil liability regime under the provisions of such convention, in so far as those provisions have mandatory application to carriage by sea.

Article 3 Liability of the carrier

(a) (b)

1. For the loss suffered as a result of the death of or personal injury to a passenger caused by a shipping incident, the carrier shall be liable to the extent that such loss in respect of that passenger on each distinct occasion does not exceed 250 000 units of account, unless the carrier proves that the incident: resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character; or was wholly caused by an act or omission done with the intent to cause the incident by a third party. If and to the extent that the loss exceeds the above limit, the carrier shall be further liable unless the carrier proves that the incident which caused the loss occurred without the fault or neglect of the carrier. 2. For the loss suffered as a result of the death of or personal injury to a passenger not caused by a shipping incident, the carrier shall be liable if the incident which caused the loss was due to the fault or neglect of the carrier. The burden of proving fault or neglect shall lie with the claimant. 3. For the loss suffered as a result of the loss of or damage to cabin luggage, the carrier shall be liable if the incident which caused the loss was due to the fault or neglect of the carrier. The fault or neglect of the carrier shall be presumed for loss caused by a shipping incident. 4. For the loss suffered as a result of the loss of or damage to luggage other than cabin luggage, the carrier shall be liable unless the carrier proves that the incident which caused the loss occurred without the fault or neglect of the carrier.

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport 5. For the purposes of this Article: ‘shipping incident’ means shipwreck, capsizing, collision or stranding of the ship, explosion or fire in the ship, or defect in the ship; ‘fault or neglect of the carrier’ includes the fault or neglect of the servants of the carrier, acting within the scope of their employment; ‘defect in the ship’ means any malfunction, failure or non-compliance with applicable safety regulations in respect of any part of the ship or its equipment when used for the escape, evacuation, embarkation and disembarkation of passengers, or when used for the propulsion, steering, safe navigation, mooring, anchoring, arriving at or leaving berth or anchorage, or damage control after flooding; or when used for the launching of life saving appliances; and ‘loss’ shall not include punitive or exemplary damages.

(a) (b) (c)

(d)

6. The liability of the carrier under this Article only relates to loss arising from incidents that occurred in the course of the carriage. The burden of proving that the incident which caused the loss occurred in the course of the carriage, and the extent of the loss, shall lie with the claimant. 7. Nothing in this Convention shall prejudice any right of recourse of the carrier against any third party, or the defence of contributory negligence under Article 6 of this Convention. Nothing in this Article shall prejudice any right of limitation under Articles 7 or 8 of this Convention. 8. Presumptions of fault or neglect of a party or the allocation of the burden of proof to a party shall not prevent evidence in favour of that party from being considered.

Article 4 Performing carrier 1. If the performance of the carriage or part thereof has been entrusted to a performing carrier, the carrier shall nevertheless remain liable for the entire carriage according to the provisions of this Convention. In addition, the performing carrier shall be subject and entitled to the provisions of this Convention for the part of the carriage performed by him. 2. The carrier shall, in relation to the carriage performed by the performing carrier, be liable for the acts and omissions of the performing carrier and of his servants and agents acting within the scope of their employment. 3. Any special agreement under which the carrier assumes obligations not imposed by this Convention or any waiver of rights conferred by this Convention shall affect the performing carrier only if agreed by him expressly and in writing. 4. Where and to the extent that both the carrier and the performing carrier are liable, their liability shall be joint and several. 5. Nothing in this Article shall prejudice any right of recourse as between the carrier and the performing carrier.

Article 4bis Compulsory insurance 1. When passengers are carried on board a ship registered in a State Party that is licensed to carry more than twelve passengers, and this Convention applies, any carrier who actually performs the whole or a part of the carriage shall maintain insurance or other financial security, such as the guarantee of a bank or similar financial institution, to cover liability under this Convention in respect of the death of and personal injury to passengers. The limit of the compulsory insurance or other financial security shall not be less than 250 000 units of account per passenger on each distinct occasion.

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(a) (b) (c) (d) (e)

(f)

(a)

(b)

(c)

2. A certificate attesting that insurance or other financial security is in force in accordance with the provisions of this Convention shall be issued to each ship after the appropriate authority of a State Party has determined that the requirements of paragraph 1 have been complied with. With respect to a ship registered in a State Party, such certificate shall be issued or certified by the appropriate authority of the State of the ship's registry; with respect to a ship not registered in a State Party it may be issued or certified by the appropriate authority of any State Party. This certificate shall be in the form of the model set out in the annex to this Convention and shall contain the following particulars: name of ship, distinctive number or letters and port of registry; name and principal place of business of the carrier who actually performs the whole or a part of the carriage; IMO ship identification number; type and duration of security; name and principal place of business of insurer or other person providing financial security and, where appropriate, place of business where the insurance or other financial security is established; and period of validity of the certificate, which shall not be longer than the period of validity of the insurance or other financial security. 3. A State Party may authorise an institution or an organisation recognised by it to issue the certificate. Such institution or organisation shall inform that State of the issue of each certificate. In all cases, the State Party shall fully guarantee the completeness and accuracy of the certificate so issued, and shall undertake to ensure the necessary arrangements to satisfy this obligation. A State Party shall notify the Secretary-General of: (i) the specific responsibilities and conditions of the authority delegated to an institution or organisation recognised by it; (ii) the withdrawal of such authority; and (iii) the date from which such authority or withdrawal of such authority takes effect. An authority delegated shall not take effect prior to three months from the date on which notification to that effect was given to the Secretary-General. The institution or organisation authorised to issue certificates in accordance with this paragraph shall, as a minimum, be authorised to withdraw these certificates if the conditions under which they have been issued are not complied with. In all cases the institution or organisation shall report such withdrawal to the State on whose behalf the certificate was issued. 4. The certificate shall be in the official language or languages of the issuing State. If the language used is not English, French or Spanish, the text shall include a translation into one of these languages, and, where the State so decides, the official language of the State may be omitted. 5. The certificate shall be carried on board the ship, and a copy shall be deposited with the authorities who keep the record of the ship's registry or, if the ship is not registered in a State Party, with the authority of the State issuing or certifying the certificate. 6. An insurance or other financial security shall not satisfy the requirements of this Article if it can cease, for reasons other than the expiry of the period of validity of the insurance or security specified in the certificate, before three months have elapsed from the date on which notice of its termination is given to the authorities referred to in paragraph 5, unless the certificate has been surrendered to these authorities or a new certificate has been issued within the said period. The foregoing provisions shall similarly apply to any modification which results in the insurance or other financial security no longer satisfying the requirements of this Article. 7. The State of the ship's registry shall, subject to the provisions of this Article, determine the conditions of issue and validity of the certificate.

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport 8. Nothing in this Convention shall be construed as preventing a State Party from relying on information obtained from other States or the Organisation or other international organisations relating to the financial standing of providers of insurance or other financial security for the purposes of this Convention. In such cases, the State Party relying on such information is not relieved of its responsibility as a State issuing the certificate. 9. Certificates issued or certified under the authority of a State Party shall be accepted by other States Parties for the purposes of this Convention and shall be regarded by other States Parties as having the same force as certificates issued or certified by them, even if issued or certified in respect of a ship not registered in a State Party. A State Party may at any time request consultation with the issuing or certifying State should it believe that the insurer or guarantor named in the insurance certificate is not financially capable of meeting the obligations imposed by this Convention. 10. Any claim for compensation covered by insurance or other financial security pursuant to this Article may be brought directly against the insurer or other person providing financial security. In such case, the amount set out in paragraph 1 applies as the limit of liability of the insurer or other person providing financial security, even if the carrier or the performing carrier is not entitled to limitation of liability. The defendant may further invoke the defences (other than the bankruptcy or winding up) which the carrier referred to in paragraph 1 would have been entitled to invoke in accordance with this Convention. Furthermore, the defendant may invoke the defence that the damage resulted from the wilful misconduct of the assured, but the defendant shall not invoke any other defence which the defendant might have been entitled to invoke in proceedings brought by the assured against the defendant. The defendant shall in any event have the right to require the carrier and the performing carrier to be joined in the proceedings. 11. Any sums provided by insurance or by other financial security maintained in accordance with paragraph 1 shall be available exclusively for the satisfaction of claims under this Convention, and any payments made of such sums shall discharge any liability arising under this Convention to the extent of the amounts paid. 12. A State Party shall not permit a ship under its flag to which this Article applies to operate at any time unless a certificate has been issued under paragraphs 2 or 15. 13. Subject to the provisions of this Article, each State Party shall ensure, under its national law, that insurance or other financial security, to the extent specified in paragraph 1, is in force in respect of any ship that is licensed to carry more than twelve passengers, wherever registered, entering or leaving a port in its territory in so far as this Convention applies. 14. Notwithstanding the provisions of paragraph 5, a State Party may notify the SecretaryGeneral that, for the purposes of paragraph 13, ships are not required to carry on board or to produce the certificate required by paragraph 2 when entering or leaving ports in its territory, provided that the State Party which issues the certificate has notified the Secretary-General that it maintains records in an electronic format, accessible to all States Parties, attesting the existence of the certificate and enabling States Parties to discharge their obligations under paragraph 13. 15. If insurance or other financial security is not maintained in respect of a ship owned by a State Party, the provisions of this Article relating thereto shall not be applicable to such ship, but the ship shall carry a certificate issued by the appropriate authorities of the State of the ship's registry, stating that the ship is owned by that State and that the liability is covered within the amount prescribed in accordance with paragraph 1. Such a certificate shall follow as closely as possible the model prescribed by paragraph 2.

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Article 5 Valuables The carrier shall not be liable for the loss of or damage to monies, negotiable securities, gold, silverware, jewellery, ornaments, works of art, or other valuables, except where such valuables have been deposited with the carrier for the agreed purpose of safe-keeping in which case the carrier shall be liable up to the limit provided for in paragraph 3 of Article 8 unless a higher limit is agreed upon in accordance with paragraph 1 of Article 10.

Article 6 Contributory fault If the carrier proves that the death of or personal injury to a passenger or the loss of or damage to his luggage was caused or contributed to by the fault or neglect of the passenger, the Court seized of the case may exonerate the carrier wholly or partly from his liability in accordance with the provisions of the law of that court.

Article 7 Limit of liability for death and personal injury 1. The liability of the carrier for the death of or personal injury to a passenger under Article 3 shall in no case exceed 400 000 units of account per passenger on each distinct occasion. Where, in accordance with the law of the court seized of the case, damages are awarded in the form of periodical income payments, the equivalent capital value of those payments shall not exceed the said limit. 2. A State Party may regulate by specific provisions of national law the limit of liability prescribed in paragraph 1, provided that the national limit of liability, if any, is not lower than that prescribed in paragraph 1. A State Party, which makes use of the option provided for in this paragraph, shall inform the Secretary-General of the limit of liability adopted or of the fact that there is none.

Article 8 Limit of liability for loss of or damage to luggage and vehicles 1. The liability of the carrier for the loss of or damage to cabin luggage shall in no case exceed 2 250 units of account per passenger, per carriage. 2. The liability of the carrier for the loss of or damage to vehicles including all luggage carried in or on the vehicle shall in no case exceed 12 700 units of account per vehicle, per carriage. 3. The liability of the carrier for the loss of or damage to luggage other than that mentioned in paragraphs 1 and 2 shall in no case exceed 3 375 units of account per passenger, per carriage. 4. The carrier and the passenger may agree that the liability of the carrier shall be subject to a deductible not exceeding 330 units of account in the case of damage to a vehicle and not exceeding 149 units of account per passenger in the case of loss of or damage to other luggage, such sum to be deducted from the loss or damage.

Article 9 Unit of Account and conversion 1. The Unit of Account mentioned in this Convention is the Special Drawing Right as defined by the International Monetary Fund. The amounts mentioned in Article 3(1), Article 4bis(1), Article 7(l) and Article 8 shall be converted into the national currency of the State of the court seized of the case on the basis of the value of that currency by reference to the Special Drawing Right on the date of the judgment or the date agreed upon by the parties. The value of the

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport national currency, in terms of the Special Drawing Right, of a State Party which is a member of the International Monetary Fund, shall be calculated in accordance with the method of valuation applied by the International Monetary Fund in effect on the date in question for its operations and transactions. The value of the national currency, in terms of the Special Drawing Right, of a State Party which is not a member of the International Monetary Fund, shall be calculated in a manner determined by that State Party. 2. Nevertheless, a State which is not a member of the International Monetary Fund and whose law does not permit the application of the provisions of paragraph 1 may, at the time of ratification, acceptance, approval of or accession to this Convention or at any time thereafter, declare that the Unit of Account referred to in paragraph 1 shall be equal to 15 gold francs. The gold franc referred to in this paragraph corresponds to sixty-five and a half milligrams of gold of millesimal fineness nine hundred. The conversion of the gold franc into the national currency shall be made according to the law of the State concerned. 3. The calculation mentioned in the last sentence of paragraph 1, and the conversion mentioned in paragraph 2 shall be made in such a manner as to express in the national currency of the States Parties, as far as possible, the same real value for the amounts in Article 3(1), Article 4bis(1), Article 7(1) and Article 8 as would result from the application of the first three sentences of paragraph 1. States shall communicate to the Secretary-General the manner of calculation pursuant to paragraph 1, or the result of the conversion in paragraph 2, as the case may be, when depositing an instrument of ratification, acceptance, approval of or accession to this Convention and whenever there is a change in either.

Article 10 Supplementary provisions on limits of liability 1. The carrier and the passenger may agree, expressly and in writing, to higher limits of liability than those prescribed in Articles 7 and 8. 2. Interest on damages and legal costs shall not be included in the limits of liability prescribed in Articles 7 and 8.

Article 11 Defences and limits for carriers' servants If an action is brought against a servant or agent of the carrier or of the performing carrier arising out of damage covered by this Convention, such servant or agent, if he proves that he acted within the scope of his employment, shall be entitled to avail himself of the defences and limits of liability which the carrier or the performing carrier is entitled to invoke under this Convention.

Article 12 Aggregation of claims 1. Where the limits of liability prescribed in Articles 7 and 8 take effect, they shall apply to the aggregate of the amounts recoverable in all claims arising out of the death of or personal injury to any one passenger or the loss of or damage to his luggage. 2. In relation to the carriage performed by a performing carrier, the aggregate of the amounts recoverable from the carrier and the performing carrier and from their servants and agents acting within the scope of their employment shall not exceed the highest amount which could be awarded against either the carrier or the performing carrier under this Convention, but none of the persons mentioned shall be liable for a sum in excess of the limit applicable to him. 3. In any case where a servant or agent of the carrier or of the performing carrier is entitled under Article 11 of this Convention to avail himself of the limits of liability prescribed in Arti-

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ANNEX I PROVISIONS OF THE ATHENS CONVENTION cles 7 and 8, the aggregate of the amounts recoverable from the carrier, or the performing carrier as the case may be, and from that servant or agent, shall not exceed those limits.

Article 13 Loss of right to limit liability 1. The carrier shall not be entitled to the benefit of the limits of liability prescribed in Articles 7 and 8 and Article 10(1), if it is proved that the damage resulted from an act or omission of the carrier done with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result. 2. The servant or agent of the carrier or of the performing carrier shall not be entitled to the benefit of those limits if it is proved that the damage resulted from an act or omission of that servant or agent done with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result.

Article 14 Basis for claims No action for damages for the death of or personal injury to a passenger, or for the loss of or damage to luggage, shall be brought against a carrier or performing carrier otherwise than in accordance with this Convention.

Article 15 Notice of loss or damage to luggage (a)

(b)

1. The passenger shall give written notice to the carrier or his agent: in the case of apparent damage to luggage: (i) for cabin luggage, before or at the time of disembarkation of the passenger; (ii) for all other luggage, before or at the time of its re-delivery; in the case of damage to luggage which is not apparent, or loss of luggage, within 15 days from the date of disembarkation or re-delivery or from the time when such re-delivery should have taken place. 2. If the passenger fails to comply with this Article, he shall be presumed, unless the contrary is proved, to have received the luggage undamaged. 3. The notice in writing need not be given if the condition of the luggage has at the time of its receipt been the subject of joint survey or inspection.

Article 16 Time-bar for actions 1. Any action for damages arising out of the death of or personal injury to a passenger or for the loss of or damage to luggage shall be time-barred after a period of two years. (a) (b)

(c)

2. The limitation period shall be calculated as follows: in the case of personal injury, from the date of disembarkation of the passenger; in the case of death occurring during carriage, from the date when the passenger should have disembarked, and in the case of personal injury occurring during carriage and resulting in the death of the passenger after disembarkation, from the date of death, provided that this period shall not exceed three years from the date of disembarkation; in the case of loss of or damage to luggage, from the date of disembarkation or from the date when disembarkation should have taken place, whichever is later.

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport 3. The law of the Court seized of the case shall govern the grounds for suspension and interruption of limitation periods, but in no case shall an action under this Convention be brought after the expiration of any one of the following periods of time: a period of five years beginning with the date of disembarkation of the passenger or from the date when disembarkation should have taken place, whichever is later; or, if earlier; a period of three years beginning with the date when the claimant knew or ought reasonably to have known of the injury, loss or damage caused by the incident.

(a) (b)

4. Notwithstanding paragraphs 1, 2 and 3 of this Article, the period of limitation may be extended by a declaration of the carrier or by agreement of the parties after the cause of action has arisen. The declaration or agreement shall be in writing.

Article 17 Competent jurisdiction Article 17bis Recognition and enforcement Article 18 Invalidity of contractual provisions Any contractual provision concluded before the occurrence of the incident which has caused the death of or personal injury to a passenger or the loss of or damage to the passenger's luggage, purporting to relieve any person liable under this Convention of liability towards the passenger or to prescribe a lower limit of liability than that fixed in this Convention except as provided in Article 8, paragraph 4, and any such provision purporting to shift the burden of proof which rests on the carrier or performing carrier, or having the effect of restricting the options specified in Article 17, paragraphs 1 or 2, shall be null and void, but the nullity of that provision shall not render void the contract of carriage which shall remain subject to the provisions of this Convention.

Article 20 Nuclear damage No liability shall arise under this Convention for damage caused by a nuclear incident: if the operator of a nuclear installation is liable for such damage under either the Paris Convention of 29 July 1960 on Third Party Liability in the Field of Nuclear Energy as amended by its Additional Protocol of 28 January 1964, or the Vienna Convention of 21 May 1963 on Civil Liability for Nuclear Damage, or any amendment or Protocol thereto which is in force; or if the operator of a nuclear installation is liable for such damage by virtue of a national law governing the liability for such damage, provided that such law is in all respects as favourable to persons who may suffer damage as either the Paris or the Vienna Conventions or any amendment or Protocol thereto which is in force.

(a)

(b)

Article 21 Commercial carriage by public authorities This Convention shall apply to commercial carriage undertaken by States or Public Authorities under contract of carriage within the meaning of Article 1. [Articles 22 and 23 of the Protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974]

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Article 22 Revision and amendment Article 23 Amendment of limits 1. Without prejudice to the provisions of Article 22, the special procedure in this Article shall apply solely for the purposes of amending the limits set out in Article 3(1), Article 4bis(1), Article 7(1) and Article 8 of the Convention as revised by this Protocol. 2. Upon the request of at least one half, but in no case less than six, of the States Parties to this Protocol, any proposal to amend the limits, including the deductibles, specified in Article 3(1), Article 4bis(1), Article 7(1) and Article 8 of the Convention as revised by this Protocol shall be circulated by the Secretary General to all Members of the Organisation and to all States Parties. 3. Any amendment proposed and circulated as above shall be submitted to the Legal Committee of the Organisation (hereinafter referred to as ‘the Legal Committee’) for consideration at a date at least six months after the date of its circulation. 4. All States Parties to the Convention as revised by this Protocol, whether or not Members of the Organisation, shall be entitled to participate in the proceedings of the Legal Committee for the consideration and adoption of amendments. 5. Amendments shall be adopted by a two thirds majority of the States Parties to the Convention as revised by this Protocol present and voting in the Legal Committee expanded as provided for in paragraph 4, on condition that at least one half of the States Parties to the Convention as revised by this Protocol shall be present at the time of voting. 6. When acting on a proposal to amend the limits, the Legal Committee shall take into account the experience of incidents and, in particular, the amount of damage resulting therefrom, changes in the monetary values and the effect of the proposed amendment on the cost of insurance. (a)

(b)

(c)

7. No amendment of the limits under this Article may be considered less than five years from the date on which this Protocol was opened for signature nor less than five years from the date of entry into force of a previous amendment under this Article. No limit may be increased so as to exceed an amount which corresponds to the limit laid down in the Convention as revised by this Protocol increased by six per cent per year calculated on a compound basis from the date on which this Protocol was opened for signature. No limit may be increased so as to exceed an amount which corresponds to the limit laid down in the Convention as revised by this Protocol multiplied by three. 8. Any amendment adopted in accordance with paragraph 5 shall be notified by the Organisation to all States Parties. The amendment shall be deemed to have been accepted at the end of a period of 18 months after the date of notification, unless within that period not less than one fourth of the States that were States Parties at the time of the adoption of the amendment have communicated to the Secretary General that they do not accept the amendment, in which case the amendment is rejected and shall have no effect. 9. An amendment deemed to have been accepted in accordance with paragraph 8 shall enter into force 18 months after its acceptance. 10. All States Parties shall be bound by the amendment, unless they denounce this Protocol in accordance with Article 21, paragraphs 1 and 2 at least six months before the amendment enters into force. Such denunciation shall take effect when the amendment enters into force.

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport 11. When an amendment has been adopted but the 18 month period for its acceptance has not yet expired, a State which becomes a State Party during that period shall be bound by the amendment if it enters into force. A State which becomes a State Party after that period shall be bound by an amendment which has been accepted in accordance with paragraph 8. In the cases referred to in this paragraph, a State becomes bound by an amendment when that amendment enters into force, or when this Protocol enters into force for that State, if later.

ANNEX TO ATHENS CONVENTION CERTIFICATE OF INSURANCE OR OTHER FINANCIAL SECURITY IN RESPECT OF LIABILITY FOR THE DEATH OF AND PERSONAL INJURY TO PASSENGERS Issued in accordance with the provisions of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002

Name of ship

Distinctive number or letters

IMO ship identification number

Port of registry

Name and full address of the principal place of business of the carrier who actually performs the carriage

This is to certify that there is in force in respect of the abovenamed ship a policy of insurance or other financial security satisfying the requirements of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002. Type of security … Duration of security … Name and address of the insurer(s) and/or guarantor(s) Name … Address … This certificate is valid until … Issued or certified by the Government of … (Full designation of the State) OR The following text should be used when a State Party avails itself of Article 4bis, paragraph 3: The present certificate is issued under the authority of the Government of … (full designation of the State) by … (name of institution or organisation) At …On … (Place) (Date) … (Signature and title of issuing or certifying official) Explanatory notes: 1. If desired, the designation of the State may include a reference to the competent public authority of the country where the Certificate is issued.

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ANNEX I PROVISIONS OF THE ATHENS CONVENTION 2. If the total amount of security has been furnished by more than one source, the amount of each of them should be indicated. 3. If security is furnished in several forms, these should be enumerated. 4. The entry ‘Duration of Security’ must stipulate the date on which such security takes effect. 5. The entry ‘Address’ of the insurer(s) and/or guarantor(s) must indicate the principal place of business of the insurer(s) and/or guarantor(s). If appropriate, the place of business where the insurance or other security is established shall be indicated.

ANNEX II Extract From the IMO Reservation IMO RESERVATION AND GUIDELINES FOR IMPLEMENTATION OF THE ATHENS CONVENTION Reservation 1. The Athens Convention should be ratified with the following reservation or a declaration to the same effect: [1.1.] Reservation in connection with the ratification by the Government of … of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002 (the Convention) Limitation of liability of carriers, etc.

–

[1.2.] The Government of … reserves the right to and undertakes to limit liability under paragraph 1 or 2 of Article 3 of the Convention, if any, in respect of death of or personal injury to a passenger caused by any of the risks referred to in paragraph 2.2 of the IMO Guidelines for Implementation of the Athens Convention to the lower of the following amounts: 250 000 units of account in respect of each passenger on each distinct occasion,

–

or 340 million units of account overall per ship on each distinct occasion. [1.3.] Furthermore, the Government of … reserves the right to and undertakes to apply the IMO Guidelines for Implementation of the Athens Convention paragraphs 2.1.1 and 2.2.2 mutatis mutandis, to such liabilities. [1.4.] The liability of the performing carrier pursuant to Article 4 of the Convention, the liability of the servants and agents of the carrier or the performing carrier pursuant to Article 11 of the Convention and the limit of the aggregate of the amounts recoverable pursuant to Article 12 of the Convention shall be limited in the same way. [1.5.] The reservation and undertaking in paragraph 1.2 will apply regardless of the basis of liability under paragraph 1 or 2 of Article 3 and notwithstanding anything to the contrary in Article 4 or 7 of the Convention; but this reservation and undertaking do not affect the operation of Articles 10 and 13. Compulsory insurance and limitation of liability of insurers [1.6.] The Government of … reserves the right to and undertakes to limit the requirement under paragraph 1 of Article 4bis to maintain insurance or other financial security for death or personal injury to a passenger caused by any of the risks referred to in paragraph 2.2 of the IMO Guidelines for Implementation of the Athens Convention to the lower of the following amounts:

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250 000 units of account in respect of each passenger on each distinct occasion,

–

or 340 million units of account overall per ship on each distinct occasion. [1.7.] The Government of … reserves the right to and undertakes to limit the liability of the insurer or other person providing financial security under paragraph 10 of Article 4bis, for death or personal injury to a passenger caused by any of the risks referred to in paragraph 2.2 of the IMO Guidelines for Implementation of the Athens Convention, to a maximum limit of the amount of insurance or other financial security which the carrier is required to maintain under paragraph 1.6 of this reservation. [1.8.] The Government of … also reserves the right to and undertakes to apply the IMO Guidelines for Implementation of the Athens Convention including the application of the clauses referred to in paragraphs 2.1 and 2.2 in the Guidelines in all compulsory insurance under the Convention. [1.9.] The Government of … reserves the right to and undertakes to exempt the provider of insurance or other financial security under paragraph 1 of Article 4bis from any liability for which he has not undertaken to be liable. Certification

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[1.10.] The Government of … reserves the right to and undertakes to issue insurance certificates under paragraph 2 of Article 4bis of the Convention so as: to reflect the limitations of liability and the requirements for insurance cover referred to in paragraphs 1.2, 1.6, 1.7 and 1.9, and to include such other limitations, requirements and exemptions as it finds that the insurance market conditions at the time of the issue of the certificate necessitate. [1.11.] The Government of … reserves the right to and undertakes to accept insurance certificates issued by other States Parties issued pursuant to a similar reservation. [1.12.] All such limitations, requirements and exemptions will be clearly reflected in the Certificate issued or certified under paragraph 2 of Article 4bis of the Convention. Relationship between this Reservation and the IMO Guidelines for Implementation of the Athens Convention [1.13.] The rights retained by this reservation will be exercised with due regard to the IMO Guidelines for Implementation of the Athens Convention, or to any amendments thereto, with an aim to ensure uniformity. If a proposal to amend the IMO Guidelines for Implementation of the Athens Convention, including the limits, has been approved by the Legal Committee of the International Maritime Organisation, those amendments will apply as from the time determined by the Committee. This is without prejudice to the rules of international law regarding the right of a State to withdraw or amend its reservation.’ Guidelines 2. In the current state of the insurance market, State Parties should issue insurance certificates on the basis of one undertaking from an insurer covering war risks, and another insurer covering non war risks. Each insurer should only be liable for its part. The following rules should apply (the clauses referred to are set out in Appendix A): 2.1. Both war and non war insurance may be subject to the following clauses: 2.1.1. Institute Radioactive Contamination, Chemical, Biological, Bio-chemical and Electromagnetic Weapons Exclusion Clause (Institute clause No 370); 2.1.2. Institute Cyber Attack Exclusion Clause (Institute clause No 380);

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ANNEX I PROVISIONS OF THE ATHENS CONVENTION 2.1.3. the defences and limitations of a provider of compulsory financial security under the Convention as modified by these guidelines, in particular the limit of 250 000 units of account per passenger on each distinct occasion; 2.1.4. the proviso that the insurance shall only cover liabilities subject to the Convention as modified by these guidelines; and 2.1.5. the proviso that any amounts settled under the Convention shall serve to reduce the outstanding liability of the carrier and/or its insurer under Article 4bis of the Convention even if they are not paid by or claimed from the respective war or non war insurers.

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2.2. War insurance shall cover liability, if any; for the loss suffered as a result of death or personal injury to passenger caused by: war, civil war, revolution, rebellion, insurrection, or civil strife arising there from, or any hostile act by or against a belligerent power, capture, seizure, arrest, restraint or detainment, and the consequences thereof or any attempt thereat, derelict mines, torpedoes, bombs or other derelict weapons of war, act of any terrorist or any person acting maliciously or from a political motive and any action taken to prevent or counter any such risk, confiscation and expropriation, and may be subject to the following exemptions, limitations and requirements: 2.2.1. War Automatic Termination and Exclusion Clause

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2.2.2. In the event the claims of individual passengers exceed in the aggregate the sum of 340 million units of account overall per ship on any distinct occasion, the carrier shall be entitled to invoke limitation of his liability in the amount of 340 million units of account, always provided that: this amount should be distributed amongst claimants in proportion to their established claims, the distribution of this amount may be made in one or more portions to claimants known at the time of the distribution, and the distribution of this amount may be made by the insurer, or by the Court or other competent authority seized by the insurer in any State Party in which legal proceedings are instituted in respect of claims allegedly covered by the insurance. 2.2.3. 30 days notice clause in cases not covered by 2.2.1. 2.3. Non-war insurance should cover all perils subject to compulsory insurance other than those risks listed in 2.2, whether or not they are subject to exemptions, limitations or requirements in 2.1 and 2.2. 3. An example of a set of insurance undertakings (Blue Cards) and an insurance certificate, all reflecting these guidelines, are included in Appendix B.

APPENDIX A Clauses referred to in guidelines 2.1.1, 2.1.2 and 2.2.1 Institute Radioactive Contamination, Chemical, Biological, Bio-chemical and Electromagnetic Exclusion Clause (Cl. 370, 10/11/2003) This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith 1. In no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from:

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport 1.1. ionising radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel; 1.2. the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof; 1.3. any weapon or device employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter; 1.4. the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter. The exclusion in this sub clause does not extend to radioactive isotopes, other than nuclear fuel, when such isotopes are being prepared, carried, stored, or used for commercial, agricultural, medical, scientific or other similar peaceful purposes; 1.5. any chemical, biological, bio chemical, or electromagnetic weapon. Institute Cyber Attack Exclusion Clause (Cl. 380, 10/11/03) 1. Subject only to clause 10.2 below, in no case shall this insurance cover loss damage liability or expense directly or indirectly caused by or contributed to by or arising from the use or operation, as a means for inflicting harm, of any computer, computer system, computer software programme, malicious code, computer virus or process or any other electronic system. 2. Where this clause is endorsed on policies covering risks of war, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power, or terrorism or any person acting from a political motive, Clause 10.1 shall not operate to exclude losses (which would otherwise be covered) arising from the use of any computer, computer system or computer software programme or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile. War Automatic Termination and Exclusion 1.1. Automatic Termination of Cover Whether or not such notice of cancellation has been given cover hereunder shall TERMINATE AUTOMATICALLY 1.1.1. upon the outbreak of war (whether there be a declaration of war or not) between any of the following: United Kingdom, United States of America, France, the Russian Federation, the People's Republic of China; 1.1.2. in respect of any vessel, in connection with which cover is granted hereunder, in the event of such vessel being requisitioned either for title or use. 1.2. Five Powers War This insurance excludes 1.2.1. loss damage liability or expense arising from the outbreak of war (whether there be a declaration of war or not) between any of the following: United Kingdom, United States of America, France, the Russian Federation, the People's Republic of China; 1.2.2. requisition either for title or use.

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APPENDIX B Clauses referred to in guideline 3 I. Examples of insurance undertakings (Blue Cards) referred to in guideline 3 Blue Card issued by War Insurer Certificate furnished as evidence of insurance pursuant to Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002. Name of Ship: IMO Ship Identification Number: Port of registry: Name and Address of owner: This is to certify that there is in force in respect of the above named ship while in the above ownership a policy of insurance satisfying the requirements of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002, subject to all exceptions and limitations allowed for compulsory war insurance under the Convention and the implementation guidelines adopted by the Legal Committee of the International Maritime Organisation in October 2006, including in particular the following clauses: [Here the text of the Convention and the guidelines with appendices can be inserted to the extent desirable] Period of insurance from: 20 February 2007 to: 20 February 2008 Provided always that the insurer may cancel this certificate by giving 30 days written notice to the above Authority whereupon the liability of the insurer hereunder shall cease as from the date of the expiry of the said period of notice but only as regards incidents arising thereafter. Date:

This certificate has been issued by: … Signature of insurer

War Risks, Inc [Address] As agent only for War Risks, Inc.

Blue Card issued by Non-War Insurer Certificate furnished as evidence of insurance pursuant to Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002 Name of Ship: IMO Ship Identification Number: Port of registry: Name and Address of owner: This is to certify that there is in force in respect of the above named ship while in the above ownership a policy of insurance satisfying the requirements of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002, subject to all exceptions and limitations allowed for non-war insurers under the Convention and the implementation guidelines adopted by the Legal Committee of the International Maritime Organisation in October 2006, including in particular the following clauses: [Here the text of the Convention and the guidelines with appendices can be inserted to the extent desirable]

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Chapter 3: Developing a Liberalised and Competitive EU Market for Maritime Transport Period of insurance from: 20 February 2007 to: 20 February 2008 Provided always that the insurer may cancel this certificate by giving three months written notice to the above Authority whereupon the liability of the insurer hereunder shall cease as from the date of the expiry of the said period of notice but only as regards incidents arising thereafter. Date:

This certificate has been issued by:

PANDI P&I [Address] As agent only for PANDI P&I

… Signature of insurer

II. Model of certificate of insurance referred to in guideline 3 CERTIFICATE OF INSURANCE OR OTHER FINANCIAL SECURITY IN RESPECT OF LIABILITY FOR THE DEATH OF AND PERSONAL INJURY TO PASSENGERS Issued in accordance with the provisions of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002

Name of ship

Distinctive number or letters

IMO ship identification number

Port of reg- Name and full address of the istry principal place of business of the carrier who actually performs the carriage

This is to certify that there is in force in respect of the abovenamed ship a policy of insurance or other financial security satisfying the requirements of Article 4bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002. Type of Security … Duration of Security … Name and address of the insurer(s) and/or guarantor(s) The insurance cover hereby certified is split in one war insurance part and one non-war insurance part, pursuant to the implementation guidelines adopted by the Legal Committee of the International Maritime Organisation in October 2006. Each of these parts of the insurance cover is subject to all exceptions and limitations allowed under the Convention and the implementation guidelines. The insurers are not jointly and severally liable. The insurers are: For war risks: War Risks, Inc., [address] For non-war risks: Pandi P&I, [address] This certificate is valid until … Issued or certified by the Government of … (Full designation of the State) OR The following text should be used when a State Party avails itself of Article 4bis, paragraph 3: The present certificate is issued under the authority of the Government of … (full designation of the State) by … (name of institution or organisation)

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On … (Date)

… (Signature and title of issuing or certifying official) Explanatory notes: 1. If desired, the designation of the State may include a reference to the competent public authority of the country where the certificate is issued. 2. If the total amount of security has been furnished by more than one source, the amount of each of them should be indicated. 3. If security is furnished in several forms, these should be enumerated. 4. The entry ‘Duration of Security’ must stipulate the date on which such security takes effect. 5. The entry ‘Address’ of the insurer(s) and/or guarantor(s) must indicate the principal place of business of the insurer(s) and/or guarantor(s). If appropriate, the place of business where the insurance or other security is established shall be indicated.

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I. Introduction A. The Foundations of Maritime Safety and Pollution Control in the EU. .

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B. The EU Treaty and the Broader International Framework . . . . . . . . . . . . . . .

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C. Maritime Transport Under the Common Transport Policy . . . . . . . . . . . . . . .

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D. The Creation of the European Maritime Safety Agency (EMSA) . . . . . . .

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E. Responsibilities for Flag States under EU Law and the “Erika III” Package. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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F. EU Marine Environmental Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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G. Maritime Transport and Broader Environmental Protection . . . . . . . . . . . . .

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H. Emerging Areas: Ship Recycling and the Regulation of Offshore Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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I. The Prospect of an EU Integrated Maritime Policy. . . . . . . . . . . . . . . . . . . . . . .

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Literature: Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487; Chalmers/Davies/Monti, European Union Law (2nd ed. 2010); Christodoulou-Varotsi, Maritime Safety Law and Policies of the European Union and the United States of America (2008); Chuah, The Third Maritime Safety Package – Objectives and Challenges, Journal of International Maritime Law 2009, p. 271; Craig/de Búrca, EU Law – Text, Cases and Materials (5th ed., 2011); Engels, European Ship Recycling Regulation (2013); Gordon, The Deepwater Horizon disaster: the regulatory response in the United Kingdom and Europe, in: Caddell/Thomas, Shipping, Law and the Marine Environment in the 21st Century: Emerging Challenges for the Law of the Sea – Legal Implications and Liabilities (2013); Güner-Özbek, The European Maritime Safety Agency ”EMSA“, pp. 71, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige (2012); van Hooydonk, The European Port Services Directive: The Good or the Last Try?, Journal of International Maritime Law 2005, pp. 188; van Hooydonk, Prospects after the Rejection of the European Port Services Directive, Il Diritto Marittimo 2004, pp. 851; Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, German Yearbook of International Law (48) 2005, pp. 223; Juda, The European Union and Ocean Use Management: The Marine Strategy and the Maritime Policy, Ocean Development & International Law 2007, pp. 259; Koivurova, A Note on the European Union’s Integrated Maritime Policy, Ocean Development & International Law 2009, pp. 171; Liu, Access to the Market of Port Services – the European Port Package II, pp. 247, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Lorenzon, Safety and Compliance, pp. 360, in: Baatz (ed.), Maritime Law (3rd ed. 2014); Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013); Markus/Schlacke, Die Meeresstrategie-Rahmenrichtlinie der Europäischen Gemeinschaft, Zeitschrift für Umweltrecht (ZUR) 2009, pp. 464; Merry, Framing Environmental Disaster – Environmental Advocacy and the Deepwater Horizon Oil Spill (2014); Molenaar, The EC Directive on Port State Control in Context, International Journal of Marine and Coastal Law 1996, pp. 241; Peters, The EC and Regional Organizations for the Protection of the Sea, pp. 149, in: Ehlers/Lagoni (eds.), Maritime Policy of the European 566

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A. The Foundations of Maritime Safety and Pollution Control in the EU

The geography of the EU and the importance of maritime trade to its econo- 1 my explain in large part why it has devoted a considerable effort to the development of a separate regulatory framework for maritime transport.1 The EU is almost surrounded by the sea and also penetrated by it as well as by waterways, navigable or capable of being made so. And its history confirms that movement of persons and goods by water, in times of peace and war, necessarily has played a vital part in its development and in all probability will continue to do so. Transport by sea makes a vital contribution to the EU’s economic performance. At the same time this mode of transport inevitably entails considerable risks for the EU’s marine environment, especially pollution by hydrocarbons, both chronic and occasionally catastrophic. The EU’s reliance on maritime transport means that the EU is as surrounded and penetrated by the risk of pollution from shipping as it is by the sea itself. But there are also other major threats to Europe’s seas. The European Com- 2 mission described these threats already in a communication of 2002,2 the main ones being: – climate change; – the impacts of commercial fishing; – the introduction of non-native species; and – pollution of various kinds only a proportion of which comes from shipping. Land based sources, agricultural, industrial and domestic, are also an impor- 3 tant part of the problem. The principal categories are:

1 See, with further references: Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, German Yearbook of International Law (48) 2005, pp. 223. 2 Towards a strategy to protect and conserve the marine environment, COM(2002)539 of 2 October 2002.

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metal and chemical waste, including long lasting chemicals; microbiological waste; litter; nutrients; and radionuclides. 4 Moreover, despite the EU having been engaged in the field for over 25 years, it is striking that existing monitoring and assessment programmes were neither complete nor sufficiently integrated. In other words, there was inadequate knowledge for good policy making, a fundamental weakness requiring a new kind of response. B. The EU Treaty and the Broader International Framework

EU policy responses to these threats are based on its powers and responsibilities under the EU Treaties. They also had to take into account, and indeed use, the broader international framework for maritime transport and the protection of the marine environment. EU policies have two main bases for action: The Treaty title on a common transport policy, including maritime transport (Article 90 to 100 TFEU) and the title on the environment (Article 191 to 193 TFEU). The ordinary legislative procedure applies in both cases allowing decision making by qualified majority and involving co-decision of the European Council and the European Parliament. 6 However, for environmental policy, certain specific exceptions, such as fiscal provisions, town and country planning and measures affecting the sources and structure of Member States’ energy supplies, are subject to the special legislative procedure involving unanimous decision making by the European Council unless, for fiscal matters, it first unanimously decides to move to qualified majorities (Article 192(2) TFEU). For these exceptional matters, consultation of the Parliament remains the rule rather than co-decision. 7 Both the transport and environmental Treaty bases have been used extensively. In addition, use has been made of the EU’s reserve power to achieve, in the course of the operation of the common market, a Treaty objective even in the absence of a specific legislative power. However, in this case the European Council acts unanimously and, after the entry into force of the Lisbon Treaty, in co-decision with the Parliament (Article 352 TFEU). This practice goes back to the period prior to the Single European Act (1986) when the EU at the time had no specific environmental powers but normally approached environmental issues as an aspect of the functioning or disfunctioning of the common market. It has been retained for actions which are a specific environmental application of the EU’s civil protection policy, including disaster response, for which there was no specific Treaty basis until the Lisbon Treaty under which civil protection measures are to be adopted under the ordinary legislative procedure involving 5

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co-decision of Parliament and European Council with qualified majority voting in the latter (Article 196 TFEU). The international framework for policy making is particularly complex in Eu- 8 rope. Many of its regional seas are subject to international conventions such as the 1976 Barcelona Convention (for the Protection of the Mediterranean Sea Against Pollution), the 1992 Helsinki Convention (covering the same objective for the Baltic Sea) or the 1992 OSPAR Convention (for the North-East Atlantic). These have offered some advantages in terms of focus on regional priorities and participation of countries not members of the EU. But the latter is a wasting asset as the EU expands and the conventions complicate the decision making process while often lacking effective enforcement machinery which weakens their effectiveness.3 At the global level, there are also a large number of conventions and arrange- 9 ments in place with little articulation between them. Again these instruments often lack really effective implementation and enforcement machinery but their existence can complicate the task of strengthening relevant policies in the EU due to differences in the assessments made in different contexts, lack of coherence in positions taken in different frameworks, duplication and disputes on competence. Many EU Members are reluctant to give up their traditional roles in interna- 10 tional frameworks in favour of more coordinated approaches, even when these are required by EU law. The immediate future is likely to see a continuing effort by the European Commission to extend EU action, formally and informally, in relevant international fora, including the IMO. History suggests that if the EU does so, progress will eventually be made. However, this progress will often be slow, uneven and controversial. C. Maritime Transport Under the Common Transport Policy

The policy measures on marine pollution were one of the foundations of the 11 original common market: The application to transport of the fundamental concept of an economic area throughout which enterprises and persons would be free to trade goods, travel to become economically active, provide services and move capital. While there was certain ambivalence about realising this objective in the transport field, especially in some national ministries of transport, resistance finally crumbled in the middle of the 1980s due to a combination of factors already described in the general introduction to this Commentary.4 The result of this profound economic, legal and political evolution was that 12 between the middle of the ‘80s and the middle of the ‘90s, in all modes of transport, new initiatives were taken to liberalise access to transport markets. Most of 3 Peters, The EC and Regional Organizations for the Protection of the Sea, pp. 149, in: Ehlers/ Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008). 4 See the general introduction to the commentary, Chapter 1, I.

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these were not only adopted but proved successful in practice, though in some cases subject to long transitions. And some specific gaps are not yet filled, e.g., the EU has so far failed three times in its efforts on the liberalisation of port services.5 Nevertheless, the EU now has a comprehensive regulatory framework for the provision of maritime transport services giving rights of access to nearly all markets, including those involving third countries; abolition of cargo reservation; the application of competition rules to carriers; and a State aids regime which appears to have partly halted the structural decline in EU owned and flagged shipping. 13 If the foundation for EU maritime policy is the regulatory framework for the market in maritime transport services, it was rapidly followed by the adoption of a highly developed regime designed to ensure the safety of maritime operations, including measures to prevent and respond to pollution.6 Among the reasons behind this development was and remains the peculiar risks to which the European peninsula is exposed by reason of its geography and need to import large quantities of oil. Unfortunately, on repeated occasions, starting notably with the grounding and oil spill of the Amoco Cadiz in 1978, this risk turned into a disastrous reality for the EU with important impacts in both the natural and political worlds. It led to the European Council rapidly adopting an action programme on the control and reduction of oil pollution at sea as part of the EU’s environmental policy. The most important concrete result of this programme was the creation of an EU information system on hydrocarbons discharged at sea permitting among other things a coordinated response to major incidents. This system has been developed over the years and continues to function in an effective manner.7 14 The EU Member States, individually and collectively in the IMO, and also through the intergovernmental arrangement known as the “Paris MoU”, agreed in 1982, sought to respond to this challenge. But the sequence of major accidents continued, and once the EU became responsible for the legal regime guaranteeing access for all EU ship operators to trades in European waters, inevitably the EU itself had to assume its share of responsibility for ensuring maritime safety in those waters.8 The start of this phase of policy making was the endorsement by European Council and Parliament of a programme, proposed by 5 See the introduction to Chapter 3 “A Liberalised and Competitive EU Market for Maritime Transport” (note 48 et seq.); van Hooydonk, The European Port Services Directive: The Good or the Last Try?, Journal of International Maritime Law 2005, pp. 188; van Hooydonk, Prospects after the Rejection of the European Port Services Directive, Il Diritto Marittimo 2004, pp. 851; Liu, Access to the Market of Port Services – the European Port Package II, pp. 247, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008). 6 For more details see Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 31. 7 Council Decision 2007/779/EC, OJ L314/9 of 1 December 2007. 8 See Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, German Yearbook of International Law (48) 2005, pp. 223.

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the European Commission in the 1993 Communication on a common policy on safe seas.9 Much of the programme was based on international standards that had been developed within the IMO and ILO. Among the early EU legislation adopted were Directives on: – dangerous and polluting goods bound for EU ports; – common rules and standards for port State control10 and for the classification societies to which flag States often effectively delegated the function of ensuring the seaworthiness of ships flying their flags;11 – safety management of roll-on/roll-off passenger ships; – safety standards for all passenger ships;12 – enforcement of seafarers’ working hours, many accidents having human error as one of their causes; and – the standards applicable to marine equipment. The incorporation of those legal acts into EU law added value in a number of 15 important ways. It permitted the closing of loopholes in the international rules, while a common approach to the possibilities for derogating from international standards allowed standards to be raised generally for the EU as a whole. Non– mandatory resolutions were given legal force. Domestic voyages were covered, particularly important in the case of passenger transport. More generally, the EU machinery for ensuring that its rules are properly applied by the Member States could now be utilised so that – over time – the standards would be better respected in practice, not just adopted on paper. Unfortunately, measures adopted in the early and middle nineties were insuf- 16 ficient to prevent the arrival of further tragedies, in particular, the sinking and oil spills of the tankers “Erika” in 1999 and “Prestige” in 2002, both causing significant economic and environmental damage.13 After the “Erika” sinking, measures included reinforcing the provisions already made as regards both port State control and classification societies. In relation to the former, the number of more thorough inspections of vessels thought to be particularly risky was substantially increased and a “blacklist” system introduced to exclude ships repeatedly found insufficient from all EU ports. The quality criteria for classification societies were reinforced as were the monitoring of their performance and sanctions for

9 COM(93)66 final of 24 February 1993. 10 See Chapter 4, VIII. of this Commentary and in particular, e.g., Molenaar, The EC Directive on Port State Control in Context, International Journal of Marine and Coastal Law 1996, pp. 241; Salvarani, The EC Directive on Port State Control: A Policy Statement, International Journal of Marine and Coastal Law 1996, pp. 225. 11 See Chapter 4, VII. of this Commentary and, e.g., Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487. 12 These were being reviewed by the Commission when, early in 2012, the grounding of the Cost Concordia on the Italian coast raised the political priority of the issue, the Commission announcing its intention to decide later on any necessary initiatives. 13 Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 43.

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failure to perform adequately.14 The Erika accident also served as a catalyst to accelerate the phasing out of single-hull tankers not only in European waters but also, through action in the IMO, on a world-wide basis, the basic date for final withdrawal being fixed at the end of 2015 instead of the deadline originally foreseen by the IMO of the end of 2026.15 17 Initiatives were also taken to improve traffic monitoring and information exchange through a system called “SafeSeaNet”.16 It serves to improve the machinery compensating those damaged by oil spills; and to implement international rules on polluting discharges from oil tankers, including illegal discharges on the high seas and criminal sanctions for infringements. This latter provision provoked a highly charged debate on the criminalisation of seafarers and whether the EU was respecting international law in particular the Law of the Sea as codified by the UNCLOS and the IMO’s convention for the prevention of marine pollution (MARPOL).17 However, not just the European Commission, but an overwhelming majority of the EU Members , many of whom have a record of consistent insistence on the need for the EU to avoid any conflict between its maritime rules and international law, voted in favour of the measure, rejecting the argument that there was a conflict. The issue was referred to the CJEU on a reference for a preliminary ruling from the High Court in London, known as the “Intertanko” case.18 However, in a controversial judgement the CJEU avoided ruling on the real legal substance of the compatibility issues.19 D. The Creation of the European Maritime Safety Agency (EMSA) 18

Perhaps the most important EU innovation resulting from the two oil tanker casualties of the “Erika” and the “Prestige” was the accelerated creation and functioning of the European Maritime Safety Agency (EMSA).20 The arrival on the European scene of such an organisation would add a new dimension to EU maritime activities by giving it the specialised technical and administrative ca-

14 See further details in Chapter 4, VII. of this Commentary, see also Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487. 15 See further details in Chapter 4, XIII. of this Commentary on Regulation 530/2012 of 13 June 2012 on the accelerated phasing-in of double-hull or equivalent design requirements for single-hull oil tankers; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige (2012), pp. 185. 16 See the general introduction to the commentary, Chapter 1, I. (note 69 et seq.). 17 See further details in Chapter 4, VI. of this Commentary and, in particular: Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 401. 18 See further details in Chapter 4, VI. (note 45 et seq.); see also Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), pp. 59. 19 The Queen on the Application of the International Association of Independent Tanker Owners and others v. Secretary State for Transport, Case 308/06, 3 June 2008; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), pp. 59. 20 See Güner-Özbek, The European Maritime Safety Agency ”EMSA“, pp. 71, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Lorenzon, Safety and Compliance, pp. 360, in: Baatz (ed.), Maritime Law (3rd ed. 2014).

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pacity to become involved in the application and further development of its maritime safety regime which the European Commission would have almost certainly found impossible to provide on its own. EMSA was originally set up to provide technical and scientific advice, and a 19 high level of expertise, to both the European Commission and the Member States in order to help them apply legislation on maritime safety and pollution properly, to monitor its implementation and to evaluate its effectiveness.21 In order to carry out EMSA’s functions effectively, its officials may visit the Member States and report on their findings to the European Commission and the other Member States. Some of the key areas in which EMSA has been engaged are strengthening port State control, assessing classification societies and the establishment and management of the vessel traffic monitoring and information system. In addition, in late 2003, EMSA was given additional responsibilities for: – oil pollution response, complementing Member State responsibilities; – maritime security; and – ensuring proper standards for seafarers’ training in third countries.22 The oil pollution response mission led to the rapid preparation of an Agency 20 action plan which focusses on operational assistance, cooperation and coordination and information, with EMSA seeking to develop itself as an accessible centre of knowledge on all aspects of marine pollution associated with shipping. The operational assistance led to the conclusion of a number of stand-by contracts under which EMSA finances the equipment of specialised vessels to supplement the response capacity of the Member States in the Baltic, in the Atlantic and in the Mediterranean and from 2009 the Black Sea. From 2007, under Directive 2005/35/EC on ship source pollution,23 it has been supplemented by the deployment of a satellite imaging system – known as “CleanSeaNet” – for the detection and tracking of illegal discharges.24 Beyond specific measures directed at different aspects of the maritime safety 21 and pollution problem, the common transport policy has allowed more systemic approaches to the problem as a whole.25 Infrastructure and system development, as well as their integration, have constituted an important activity for more than ten years.26 The EU has at its disposal a number of instruments in this area in addition to legislation in the classical form of Regulations and Directives, though these still have a role to play. Among these instruments have been re21 Regulation (EC) 1406/2002 establishing the European Maritime Safety Agency, OJ L208/1 of 5 August 2002. 22 Regulation (EC) 724/2004, OJ L129/1 of 29 April 2004. 23 Directive 2005/35/EC of 7 September 2005 on ship-source pollution and on the introduction of penalties for infringements, OJ L255/11 of 30 September 2005, see more details in Chapter 4, VI. and generally Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), pp. 54. 24 See also the general introduction to the commentary, Chapter 1, I. (note 78). 25 See Christodoulou-Varotsi, Maritime Safety Law and Policies of the European Union and the United States of America (2008), pp. 29. 26 See more details in Chapter 1, I., B. 5. (note 51 et seq.).

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search and development projects under the EU’s framework programmes, including long term technological development, and the integration of traffic monitoring, information and management systems. These projects have been used in synergy with network development under the guidelines for the transEuropean transport networks (“TEN-T”) and legislation of the traditional kind. 22 An important example is Directive 2002/59/EC27 (as amended by Directive 2009/17/EC and European Commission Directive 2014/100/EU)28 establishing a vessel traffic monitoring and information system.29 This system is also linked to Directive 2010/65/EU on reporting formalities for ships arriving in and/or departing from ports of the Member States.30 This measure established the main features of an EU-wide system embodying mandatory notification of port authorities by ships bound for them and monitoring by States of ships entering mandatory ship reporting systems and their compliance with their rules. Obligations have been introduced for the use by ships of automatic identification systems (AIS) and voyage data recorders (VDRs), these devices having been developed and validated in part under the research programme. Obligations also cover: – the necessary equipment and staffing of coastal stations, including cooperation to ensure interconnection and interoperability; – information exchange as regards ships, incidents and accidents; – measures to be taken in the case of bad weather, incidents and accidents, including the establishment and communication of plans on places of refuge; and – monitoring and evaluatingof the effectiveness of the system. 23 Developments in this context are fundamentally transforming the technical environment in which ships navigate in European waters, and indeed beyond. Already periodic coordinated surveillance programmes have confirmed what many have suspected: Discharges of oil and other noxious substances by ships at sea continue at an unacceptable level despite the different measures taken over a number of years to make them illegal. The satellite surveillance system “CleanSeaNet”, deployed by EMSA in April 2007, monitors European waters detecting oil slicks through satellite-based synthetic aperture radar (SAR). A report on the system’s first eighteen months of operation indicated that 24 EU

27 Directive 2002/59/EC of 27 June 2002 establishing a vessel traffic monitoring and information system, OJ L208/10 of 5 August 2002 as amended by Directive 2009/17/EC of 23 April 2009, OJ L131/101 of 28 May 2009. 28 See OJ L308/82 of 29 October 2014, the Commission Directive replaces the former Annex III of Directive 2002/59/EC OJ. 29 See further details in Chapter 4, IX. 30 Directive 2010/65/EU of 20 October 2010 on reporting formalities for ships arriving in and/or departing from ports of the Member Stes and repealing Directive 2002/2/EC Text with EEA relevance, OJ L283/1 of 29 October 2010.

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coastal States were users of the system.31 In 2008 Member States verified 698 oil pollution indications of which around 200 were confirmed to be mineral oil. The “CleanSeaNet” system is being integrated with existing systems for the 24 identification and positioning of ships made available by EMSA through the other network called “SafeSeaNet”32 and reinforced through other innovations including long range ship identification (LRIT), an electronic map-based presentation of shipping surveillance data (STIRES) and easy access to port State control data (THETIS).33 These developments not only hold out the prospect of a technical revolution in policing and managing European seas with major implications for maritime governance. They also raise new legal issues, not least the approach of national courts to the evidence provided by these technical systems. In 2013, the Regulation under which EMSA operates was amended to take 25 account of experience gained in the 10 years since its foundation.34 The key changes were an extension of its responsibility to include an oversight role concerning pollution from offshore oil and gas operations and the use of its surveillance systems to prevent and repress piracy and armed robbery at sea, notably in connection with EU NAVFOR, Operation ATALANTA.35 The “evolution” EU legislation on EMSA looks as follows:

© EMSA

© EMSA

26 31 CleanSeaNet, 18 Months of Operations, European Maritime Safety Agency, 2009.

32 See the general introduction to the commentary, Chapter 1, I. (note 69 et seq.).

A time bar like this evidences that over the last 10 years, the EU’s legal and administrative ma33 Ibid. chinery for developing and100/2013 applying of maritime safety andamending pollution policy has changed 34 Regulation (EU) No 15 January 2013 Regulation (EC) No fundamen1406/2002 tally. It is now much more robust, with a capacity for developing itself in the future. Just over a establishing a European Maritime Safety Agency, OJ L39/30 of 2 February 2013. decade ago the could be summarised asHorn one in Member States were the main 35 Tonelli, Thesystem EU Fight Against Piracy in the ofwhich Africa:the The External Action at Stake, pp. actors, largely on their own responsibility, while the IMO, theand ILOOther and re53,acting in: Andreone/Bevilacqua/Cataldi/Cinelli (eds.),cooperating Insecurity atin Sea: Piracy Risks gionally under the Paris MoU on Port State Control. to Navigation (2013). 27

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The Community institutions, including the European Commission, were only beginning to become involved and operated at the margins of the system, on limited issues and often informally. This has transformed into an extensive and growing legal framework governing many of the safety related activities of the EU Member States. Advantage is being taken of the possibilities offered by the EU’s research programmes and its policy on trans-European transport networks, including budgetary support. 28 The European Commission’s role as initiator of new measures has grown enormously as has its responsibility for ensuring that the rules in force are properly applied. The European Commission

Chapter 4, I.

A time bar like this evidences that over the last 10 years, the EU’s legal and administrative machinery for developing and applying maritime safety and pollution policy has changed fundamentally. It is now much more robust, with a capacity for developing itself in the future. Just over a decade ago the system could be summarised as one in which the Member States were the main actors, acting largely on their own responsibility, while cooperating in the IMO, the ILO and regionally under the Paris MoU on Port State Control. 27 The Community institutions, including the European Commission, were only beginning to become involved and operated at the margins of the system, on limited issues and often informally. This has transformed into an extensive and growing legal framework governing many of the safety related activities of the EU Member States. Advantage is being taken of the possibilities offered by the EU’s research programmes and its policy on trans-European transport networks, including budgetary support. 28 The European Commission’s role as initiator of new measures has grown enormously as has its responsibility for ensuring that the rules in force are properly applied. The European Commission and the EU Members are now supported and to a real extent evaluated by EMSA as a small but expert specialised agency.36 Moreover, a specific consultative structure, consisting of the European Commission and the Member States and known as the Committee on Safe Seas (COSS), has been put in place to facilitate rule and decision making, including the adoption of delegated decisions and Regulations. This institutional framework is likely to ensure that the EU is a much more significant force in the world of maritime safety and pollution in the future. 26

E. Responsibilities for Flag States under EU Law and the “Erika III” Package 29

In late 2005, a new phase of policy development was announced by the European Commission in the form of a third package of proposals (“Erika III”) to complete the legislative framework on safety on which it had been consulting since 2004.37 Key elements included: – a complete reworking and reinforcement of the rules on port State control;38 – strengthening of the rules on classification;39 – compulsory insurance for civil liability; – a coherent system for investigation of marine accidents and casualties;40 and 36 Lorenzon, Safety and Compliance, pp. 361, in: Baatz (ed.), Maritime Law (3rd ed. 2014). 37 See Chuah, The Third Maritime Safety Package – Objectives and Challenges, Journal of International Maritime Law 2009, p. 271; Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 49; Vatankhah, The Contribution of the EC to Maritime Safety in view of the “Third Maritime Safety Packageʺ of the European Commission, pp. 41, in: Ehlers/ Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008). 38 See further details in Chapter 4, VIII. of this Commentary. 39 See further details in Chapter 4, VII. of this Commentary. 40 See further details in Chapter 4, X. of this Commentary.

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completion of the rules and procedures on vessel traffic monitoring,41 including those concerning places of refuge. But the most important, and probably most controversial, initiative was legislation on the responsibility of flag States, to be accompanied by complementary initiatives to improve flag State responsibility at the international level. Historically, the foundation for the legal Regulation of vessels and their operations has been the power of sovereign States to set and enforce rules in relation to ships flying their flags, especially when they are on the high seas. The role of port or coastal States was essentially a complementary one addressing the effects of a ship’s operation on their territories. Paradoxically, the EU had so far approached maritime safety not by systematically and directly addressing the Member States’ responsibilities as flag States. Rather, by a step by step process, the EU’s emphasis has been at least as much, and probably more, on the EU Member States’ role as port States, especially in the field of enforcement. One reason for this emphasis has been the need to address the reality of a highly international, indeed globalised shipping industry, with the incidental advantage of ensuring a degree of equivalence of treatment of vessels whatever their flags and ownership. But it has become increasingly clear that an enduring weakness of the maritime safety regime is the failure of some flag States, within and outside the EU, to fulfil all their responsibilities, as shown by the detention rates of the Paris MoU.42 In addition, the current system has become very complex, with multiple layers of responsibility and administrative intervention. A thorough implementation of flag State responsibilities could hold out the prospect of simplifying the system, by reducing the impact of formalities and interventions at other levels in relation to vessels flying the flags of States which are known to be doing their jobs properly. The core of a European Commission proposal on flag State compliance was the introduction of an audit process for checking on the adequacy of the systems put in place by the Member States’ maritime administrations to ensure that ships flying their flags comply with mandatory EU rules which in their turn incorporate the relevant IMO instruments. EMSA was to play an important monitoring role. To avoid disadvantaging the operators of EU-flagged ships and so facilitate the adoption of such a system, complementary initiatives would be needed to promote action within the IMO to reinforce effective flag State responsibility at the international level; to conclude agreements with third States applying an equivalent regime; and to address specifically, through focussed port State control, potential problems posed by ships which might leave EU registers for registers without an equivalently stringent flag State regime. –

41 See further details in Chapter 4, IX. of this Commentary. 42 See the Annual Reports of the Paris Memorandum of Understanding. These Annual Reports evidence significant improvements in the performance of most EU Member States, especially of those with the most important registers.

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30

31

32

33

Chapter 4, I.

Progress in the European Council was most rapid on the proposals on vessel traffic monitoring,43 port State control44 and accident investigation45 on which it reached political agreements in June 2007. Political agreements were also reached in December 2007, though with more difficulty, on the proposals on passenger liability46 and classification societies.47 But, as expected, the most important proposal on the responsibility of flag States was sufficiently controversial to prevent significant progress being made for some time. 35 The passage of time since the last major accident causing pollution seems to have led to a significant loss of political momentum. But the principal reticence of the majority of Member States as regards both the proposals on flag State responsibility and civil liability was primarily motivated by their concerns about adopting regional legislation in fields in which international rules existed under the IMO regime. These concerns were naturally most strong concerning those li34

43 Commission Directive 2014/100/EU and Directive 2009/17/EC of 23 April 2009 amending Directive 2002/59/EC establishing a Community vessel traffic monitoring and information system, OJ L131/101 of 28 May 2009. The main features of the amendments are to ensure that the maritime data exchange system (SafeSeaNet) becomes the exclusive standard throughout the EU; to establish a European LRIT centre at EMSA for collecting and distributing long range information on the identity and position ships; to equip progressively all fishing vessels over 15 metres long with automatic identification systems (AIS); to establish detailed rules concerning the accommodation of ships in need of assistance in places of refuge, notably, by the designation of an independent authority for evaluating the situation of ships in difficulty and deciding whether and where the ship can be sheltered; and to ensure the adoption of information and prevention measures concerning ice formation creating a serious risk for shipping. 44 Directive 2009/16/EC of 23 April 2009 on port State control (Recast), OJ L131/57 of 28 May 2009. The amended system ensures the inspection of all ships calling in the EU, the frequency of inspections depending on the risk profile of particular ships; strengthen the regime for banning substandard ships; add the publication of a list of companies operating substandard ships to existing black lists of flag States and banned ships. The THETIS information system developed by EMSA is used to make the inspection regime effective, see the general introduction to the commentary, Chapter 1, I. (note 79). 45 Directive 2009/18/EC of 23 April 2009 establishing the fundamental principles governing the investigation of accidents in the maritime transport sector and amending Council Directive 199/35/EC and Directive 2002/59/EC of the European Parliament and of the Council, OJ L131/114 of 28 May 2009. This measure generalised and systematised the Member States’ approach to implementing IMO principles on maritime accident investigation including the independence of the investigatory authority and cooperation when several countries are involved. 46 Regulation (EC) 392/2009 of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents, OJ L131/24 of 28 May 2009. The measure ensures harmonised application of the IMO’s Athens Convention and supplements it in a number of ways, notably to improve the protection available to passengers and align the regime more closely with those applying to passengers travelling by air and rail. 47 Regulation (EC) 391/2009 of 23 April 2009 on common rules and standards for ship inspection and survey organisations (Recast), OJ L131/11 of 28 May 2009 and Directive 2009/15/EC of 23 April 2009 on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations (Recast), OJ L131/47 of 28 May 2009. Besides clarifying existing provisions, the new texts strengthen the inspection procedures of recognised organisations; introduce an independent body to certify the organisations’ quality management; and empower the Commission to be more effective in its supervisory role by fining organisations in breach of their obligations.

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mited aspects of the proposals which might be thought by some to be inconsistent with the international regime, for example, a requirement for liability insurance for all vessels in the exclusive economic zone (EEZ) of EU Members. But they were also more general in nature, for example, as regards require- 36 ments not in contradiction with the international rules but considered to be going beyond them. Such regional rules were considered to be inappropriate in principle. The last but not the least objection was the fear that detailed EU legislation would transfer extensive competence to the EU under the “AETR doctrine” of the CJEU, especially as regards the Member States’ own roles as flag States.48 On the other hand, a minority of Member States saw the merits of addressing 37 the central responsibility of flag States and recognized that the international rules were subject to significant weaknesses, notably the voluntary nature of the IMO audit system (until the end of 2015) and the failure of many Member States to ratify the latest versions of the international conventions on liability. This group included France which, since the Erika and Prestige disasters, had been leading the call for more effective EU rules on safety and was acting as president of the European Council in the critical final phase of the co-decision procedure in the second half of 2008. The Parliament was largely supportive of the European Commission proposals and sought to link the fate of the substance of the liability and flag State proposals with those on which the European Council had already adopted common positions. The final outcome was a compromise in which the two proposals were finally 38 agreed in December 2008 but focussed more narrowly on the existing international regimes,49 and with the European Council seeking to limit the effect of the adoption of the proposals on the Member States’ competence in the IMO. Nevertheless it is important to note that EU Members have an obligation under EU law to subject their maritime administrations every seven years to an IMO audit. The EU Members also committed to joint action to make the IMO regime mandatory for all which was achieved by the end of 2015. F. EU Marine Environmental Policy

EU environmental policy measures addressing marine pollution were first 39 adopted relatively early.50 Without any specific basis for action in the Treaty, in 48 Case 22/70 Commission v. Council (AETR/ERTA), 1971 ECR, p. 263; see more on the “AETR doctrine“ in the context of maritime transport: Ringbom, The EU Maritime Safety Policy and International Law (2008), pp. 65; generally Craig/de Búrca, EU Law, pp. 309; Chalmers/Davies/Monti, European Union Law, pp. 632. 49 Directive 2009/20/EC of 23 April 2009 on the insurance of shipowners for maritime claims, OJ L131/128 OF 28 May 2009. This requires all ships flying EU flags or bound for EU ports to be insured against damage to third parties, the level of cover to be in conformity with 1996 version of the IMO Convention on limitation of liability for maritime claims. Also Directive 2009/21/EC of 23 April 2009 on compliance with flag State requirements, OJ L131/132 of 28 May 2009. 50 See generally Power, EC Shipping Law (2nd ed., 1998), pp. 449.

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40

41

42

43

1978, the European Council adopted an action programme on the control and reduction of oil pollution caused by hydrocarbons discharged at sea. It was probably not a coincidence that a few months earlier, just prior to the European Council of the first half of that year, the “Amoco Cadiz” had devastated the coast of Brittany. Policy making triggered by marine disasters has been a regular feature of the world’s approach to maritime safety and the EU makes no exception. It is also probably worth recalling that at that time the exploitation of hydrocarbon resources under the North Sea was becoming significant. The action programme itself strongly emphasised the collection of information and studies to establish what resources were already available to the Member States to evaluate the risks and to respond to emergencies. Second, there was to be an evaluation of how to improve the effectiveness of the Member States’ systems and cooperation among them. Insurance regimes were to be evaluated and a research programme was developed. In 1981, the first concrete result came with the establishment of an EU information system for the control and reduction of polluting hydrocarbons discharged at sea. This system, which among other things permits a coordinated response to major incidents, has been developed over the years into a broad framework for cooperation between national agencies. It was further strengthened in October 2001 as a result of a rapid review of the Member State’s civil protection systems following the events of 11 September 2001. A new EU mechanism to facilitate reinforced cooperation in civil protection assistance interventions was set up to provide support in emergencies and to facilitate cooperation.51 The mechanism allows a common response to any emergency inside or outside the EU by coordinating requests and offers of assistance among 30 participating States. In the maritime field, the mechanism is able to take into account the capabilities of EMSA. An updated European Council Decision for the mechanism was adopted in late 2007,52 the European Council in December 2006 having agreed a substantial increase in funding within the scope of the financial framework for 2007 to 2013. Regional agreements have also been used to promote and intensify cooperation between States having a particular interest in regional seas, emphasising the pooling of resources to respond more effectively to incidents. Those most relevant to the EU, and to which it is party, are the Conventions of Helsinki (1974, 1992) on the Baltic, Barcelona (1976) on the Mediterranean, Bonn (1983) on the North Sea and OSPAR (1992) on the Northeast-Atlantic. The Helsinki (HELCOM) and Bonn Conventions are generally considered to have been the most ef-

51 Council Decision 2001/792/EC of 23 October 2001 establishing a Community mechanism to facilitate reinforced cooperation in civil protection assistance interventions, OJ L297/7 of 15 November 2001. 52 Council Decision 2007/779/EC of 8 November 2007 Establishing a Community Civil Protection Mechanism (recast), OJ L314/9 of 1 December 2007.

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fective in practice. However, these arrangements also bring with them complexities and difficulties concerning compliance.53 In addition to these arrangements for cooperation, over the last thirty years, a considerable number of specific legislative measures have been adopted by the EU in the environmental field designed to eliminate, or at least reduce, particular environmental impacts, some of which concern the sea. Most of these instruments did not have the elimination or reduction of marine pollution as their main purpose but some, particularly those addressing water quality, have had important beneficial effects, including improvements in the marine environment. More than a dozen such measures have been adopted since the late nineteen seventies, some updating earlier ones. Examples include the Directives on drinking water, bathing water, groundwater, surface water, urban waste water, nitrates in water, other dangerous substances, and emissions from large industrial installations. Similarly, the considerable body of EU legislation phasing out the marketing, use or disposal of hazardous substances, including waste, has included a substantial number contributing to marine pollution such as those on heavy metals, hazardous waste including that resulting from ship-breaking and the biocides used in anti-fouling paints. Assessing the impact of all of these measures is far from easy. While in some cases, like the bathing water Directives, the positive effects on the sea are quite clearly established, for others the picture is far from clear. This is partly because in some areas monitoring mechanisms have been inadequate or even absent. In this connection, it is interesting to note that the European Environmental Agency has not been given the specific monitoring and control functions of EMSA. It is responsible for collecting information, assessing the state of the environment and the effectiveness of policy in general as well as providing technical and scientific support. All of this is done through the establishment of a network with the relevant agencies in the Member States. Where monitoring has been done, it shows that Member States’ compliance has been very uneven, including their reporting. But the weakness of impact assessment is also in part the result of the complexity of the water cycle and the difficulty of measuring the effects of any given measure. In addition to these difficulties, by the 1990s, there was a growing constituency arguing that the whole approach of adopting specific legislative measures prescribing at EU level uniform limits or end-points throughout an expanding EU was inappropriate. While it may have been the best, or at least the most practical, way to start making environmental policy at EU level, it needed to be adapted to take better account of regional differences and the roles of regulators at national, regional and local level. This view in favour of a more decentralised approach to the subsidiarity criterion first found expression at the highest political level at the Edinburgh Euro53 See further Peters, The EC and Regional Organizations for the Protection of the Sea, pp. 149, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008).

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45

46

47

Chapter 4, I.

pean Council in 1992 and has continued to influence environmental policy making up to the present. It led to a re-examination of the whole strategy on water quality and, in particular, to the Water Framework Directive of 2000, which came into force in 2003.54 While leaving most of the existing legislative measures in force for the time being, it puts in place a more systemic approach based on long term river basin management designed to improve the environmental status of water, globally and in the long term, the first global review of the plans being scheduled for 2021. 48 In 2002, the European Commission published a communication as part of its execution of the EU’s sixth Environmental Action Programme on developing a thematic strategy for the protection and conservation of the marine environment.55 This was its first attempt to make a global diagnosis of the state of Europe’s marine environment and discuss how an EU policy might be developed to protect and improve it. Among the main threats identified was pollution, including pollution caused by dangerous substances, nutrients, litter and radionuclides, from land based sources, from off-shore installations and from shipping. Not surprisingly, it was strongly influenced by the way in which the EU’s environmental policy had been evolving in general, and its water policy in particular. In 2005, the discussion of this communication came to an end and the European Commission made a formal proposal for a Directive to implement a thematic marine strategy.56 49 The European Commission started from two fundamental premises. First, it found that the present institutional and legal framework is inadequate by reason of the absence of measures specifically designed to address many aspects of the problem taken as a whole; because of the weakness of the regional and international conventions as regards their enforcement; and because of the lack of articulation between the many different instruments in place. Second, and in many ways the most surprising, the European Commission found that, nearly fifty years after the foundation of the EU and twenty after the adoption of a specific Treaty basis for environmental policy, the knowledge base for marine policy making was inadequate: Existing sources of information are neither complete nor integrated which makes it impossible to discuss rationally, much less develop and adopt, a robust but cost-effective programme of measures. 50 Accordingly, as with the Water Framework Directive, the European Commission proposal was designed to put in place a set of processes to achieve good environmental status of the EU’s marine waters by 2021. And, again like the Water Directive, it sought to do so by a framework approach which was very 54 Directive 200/60/EC of 23 October 2000 establishing a framework for Community action in the field of water policy, OJ L371/1 of 22 December 2000. 55 COM(2002)539 of 2 December 2002. 56 See generally Juda, The European Union and Ocean Use Management: The Marine Strategy and the Maritime Policy, Ocean Development & International Law 2007, pp. 259, at 265; Markus/Schlacke, Die Meeresstrategie-Rahmenrichtlinie der Europäischen Gemeinschaft, Zeitschrift für Umweltrecht 2009, pp. 464.

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different from the classical forms of Regulation with which the EU first began environmental policy making. The approach was to be ecosystem- and knowledge-based, involving stakeholders and authorities from the regions and sub-regions concerned as well as the existing international arrangements, some of which have already agreed to contribute to the strategy. The main features of the strategy were the following:57 The Directive would 51 not fix new limits or end-points but would define only general objectives at EU level. Instead, it would establish European Marine Regions and possible subregions as management units for implementing the strategy which would have a designated competent authority in each Member State. These would have a duty to cooperate with each other, with relevant bodies in other States and also within the structures of the relevant regional conventions. These authorities would have first to establish the current environmental status of the marine region in question and a definition of the good environmental status to be achieved in the future incorporating clear environmental targets. These would have to cover at least a standard list of characteristics. The authorities would also have to establish a programme of cost-effective measures, subject to prior impact assessments, to achieve the targets and mechanisms for their monitoring and assessment. Again the programme would have to cover at least a specified list of matters. Special targets and measures can be prescribed for particular areas having characteristics that make it impossible for the general targets to be achieved in the time available. The diagnosis, the programme and the evaluation mechanisms would be sub- 52 mitted to the European Commission for approval. Regular reports would be required on the implementation of the plan with periodic evaluations by the European Commission which would be in the public domain. The Member States would also have to make directly available to the public information on the establishment and progress of their programmes. They would also have to involve interested parties in the development of their plans from the outset through appropriate consultation mechanisms. Since the approach was based on that of the Water Framework Directive 53 which was agreed relatively quickly and appears to be being implemented in its early stages without major difficulties,58 the prospects for the adoption of the marine environment strategy appeared to be good. Like the Water Framework Directive itself, it marked a significant evolution in the governance structures being developed by the EU to handle complex, long term systemic problems for which classical legislative solutions involving the fixing of uniform limits, endpoints or objectives have proved to have serious limitations. If successful, it also

57 Juda, The European Union and Ocean Use Management: The Marine Strategy and the Maritime Policy, Ocean Development & International Law 2007, pp. 259, at 267. 58 Water Framework Directive: Making It Work, House of Lords, European Union Committee, 19 July 2007.

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held out the prospect of codifying and simplifying the existing body of specific requirements. 54 Indeed, in December 2007, the European Council and European Parliament reached an agreement in second reading following the completion of the first reading a year earlier.59 In the first reading, both institutions accepted the general approach but differed on where to place the emphasis. The European Council was concerned to avoid an unconditional legal obligation to achieve good environmental status regardless of cost, not least because it might lead to condemnation by the CJEU and even to financial penalties. The Parliament was more concerned to strengthen and clarify the specific results that States would have to achieve and shorten the dates for achieving them. In the second reading, both sides showed willingness to accommodate the other leading to amendments by common agreement, for example, to put the emphasis on the obligation of Member States to take the measures identified by the process as being necessary rather than on the end status itself. Specific provision was made for an exception to take account of disproportionate costs, but subject to explicit justification and only after the initial assessment of the environmental status. G. Maritime Transport and Broader Environmental Protection

The maritime transport sector has also been affected by broader EU environmental policies than those addressing pollution of the sea itself. For example, action has been taken, based on standards contained in the IMO’s MARPOL 73/78 Convention (Annex VI) to limit the sulphur in marine diesel;60 to address the disposal of hazardous waste which can include ship-breaking; and to phase out the use of certain marine paints containing biocides.61 In recent years, action has continued to strengthen the regulatory regime on atmospheric pollution, especially particulates, sulphur and nitrous oxides. The European Commission accepts that the maritime sector should be regulated at world level in the IMO, notably through strengthening MARPOL Annex VI. But it has also indicated that, if progress cannot be made sufficiently quickly, it would propose new regional measures. This happened, e.g., in 2015 when the EU passed Regulation EU/ 757/2015 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport.62 56 In October 2008, the IMO adopted amendments to Annex VI strengthening restrictions on emissions of sulphurous and nitrous oxides. Sulphur was to be reduced progressively from the former global level of 4.5% to 3.5% by 2012 and 55

59 Directive 2008/56/EC of 17 June 2008 establishing a framework for Community action in the field of marine environmental policy (Marine Strategy Framework Directive), OJ L164/19 of 25 June 2008. 60 See further details in Chapter 4, II. 61 Directive 2005/33/EC as regards the sulphur content of marine fuels, OJ L191/59 of 22 July 2005. 62 See further details in Chapter 4, XIV.

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to 0.5% by 2020. A feasibility review concerning the availability of acceptable fuels is to be completed no later than 2018. It might result in extension of the 0.5% limit on to 2025. Nevertheless, stricter standards are already included for Sulphur Emission Control Areas (SECAs) in Europe, like the Baltic Sea, the English Channel and the North Sea. Following a European Commission proposal in 2011,63 the EU has adopted legislation to implement the latest amendments to MARPOL Annex VI adopted by the IMO: By 2015, sulphur has been reduced to 0.1% in the European SECAs and by 2020 for passenger ships generally. Current discussions are focussing on the fair enforcement of the SECA provisions and the need to avoid negative effects on short sea shipping and passenger transportation possibly leading to a shift of traffic to road haulage. More recently, as the shipping industry’s contribution to carbon dioxide emis- 57 sions has attracted increasing attention and other sectors have been subjected to new disciplines in the context of policy to address global warming, discussion has started on possible initiatives in this field.64 As a first step, in December 2008, the European Council and Parliament reached agreement on the European Commission's proposed climate change package, including so-called "effort sharing". This package sets binding targets for each Member State to reduce greenhouse gas emissions from sources not subject to the EU's emission trading system, including therefore those from shipping. They are to be reduced by 20% between 2013 and 2020. The EU’s negotiating position for the UN’s Copenhagen Conference in December 2009 included an offer to reduce shipping’s emissions from 2005 levels by 20% by 2020.65 Discussions werealso being held to explore whether to increase these targets to 30%. The means for achieving these goals have been left open for the time being but possibilities include new levies or taxes or emissions trading, possibly to be negotiated in the framework of the IMO. In early 2012, the European Commission launched a consultation on how the EU might adopt measures to reduce greenhouse from ships in the absence of an adequate international agreement on the subject, announcing its intention to make proposals before the end of the year. As stated above, three years later the EU unilaterally passed Regulation EU/757/2015 on on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport. H. Emerging Areas: Ship Recycling and the Regulation of Offshore Oil and Gas

As regards ship recycling, in 2012, the European Commission proposed the 58 adoption of a Regulation to give binding legal effect to the IMO’s 2009 Hong 63 Proposal for a Directive amending Directive 1999/32/EC as regards the sulphur contentof marine fuels, COM(2011)439 final of 15 July 2011. 64 See Commission Communication ‘Greening of Transport’, COM(2008)433 final of 8 July 2007. 65 Council Conclusions on the EU position for the Copenhagen Climate Conference (7-18 December 2009), 21 October 2009.

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Kong Convention for the Safe and Environmentally Sound Recycling of Ships, though imposing more stringent requirements on European flagged vessels and shipowners.66 This policy area has been subject to some heated discussions67 but the work on the new EU Regulation on Ship Recycling – resulting in Regulation EU/1257/2013 – was finally completed at the end of 2013.68 59 Also in 2013, the EU passed completely new legislation relating to safety in the offshore oil and gas industry. In 2011, the European Commission stressed that approximately thousand offshore oil and gas platforms were operating in European waters.69 Most of those offshore installations are still located in the North Sea. But there is also a potential for more offshore drilling in the Mediterranean Sea and in other European sea areas in the future.70 60 The European Commission warned that the likelihood of a major offshore accident in European waters still remained “unacceptably high” referring to 14 past major accidents in global offshore oil and gas operations since the 1980s (e.g., well blow-outs and total loss of production platforms).71 Two of the most prominent European offshore disasters of the past have been the accidents of the ”Alexander Kielland” of 1980 and of the “Piper Alpha” of 1988.72 Nevertheless and rather surprisingly, the safety of offshore oil and gas operations was not subject to any specific EU legal act and left completely to the national legislator until 2013.

66 COM(2012)118 final, 23 March 2012; see generally Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013), p. 52. 67 See, e.g., the front page of Lloyd’s List of 13 May 2013 “EU beaching ban could cost owners millionsʺ; generally and with more details on the EU’s political objectives in this policy area: Engels, European Ship Recycling Regulation (2013), pp. 62. 68 Regulation (EU) No 1257/2013 of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC, OJ L330/1 of 10 December 2013. 69 As of 2011, there were located within the EU: 486 offshore installations in the UK, 181 in the Netherlands, 61 in Denmark, 2 in Germany, 2 in Ireland, 123 in Italy, 4 in Spain, 2 in Greece, 7 in Romania, 1 in Bulgaria and 3 in Poland. Additionally, drilling operations have recently started in Cyprus. In Malta, offshore licences have already been awarded, see European Commission: MEMO/11/740 of 27 October 2011 (“Commission proposes new rules on the safety of offshore oil and gas activities”), 6. 70 Apart from the traditional exploration countries UK and Norway, interest in offshore oil and gas is developing throughout the EU as, all in all, 13 EU Member States (UK, the Netherlands, Denmark, Germany, Ireland, Italy, Spain, Greece, Romania, Bulgaria, Poland, Malta and Cyprus) have awarded offshore oil and gas licences, see European Commission Press Release IP/11/1260 of 27 October 2011, p. 2. 71 Ibid, p. 1. 72 See Greg Gordon, “The Deepwater Horizon disaster: the regulatory response in the United Kingdom and Europe”, in Richard Caddell/Rhidian Thomas, Shipping, Law and the Marine Environment in the 21st Century: Emerging Challenges for the Law of the Sea – Legal Implications and Liabilities (Witney: Lawtext Publishing Ltd., 2013), 181-210 (at 187); see also Lloyd’s List of 9 July 2013, p. 8 (“Piper Alpha remembered 25 years on”).

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In response to the “wake up call” of the 2010 “Deepwater Horizon” disaster73 61 and – less prominently, also as a reaction to the 2009 Montara oil spill74 – the European Commission had prepared legislative action in this policy area since 2011. One of the reasons for this initiative is also the fact that – since “Deepwater Horizon” – the tolerance of the general public for environmental damage has reached an all-time low.75 Initially, the Commission had intended to institute a directly binding EU Regulation. However, a number of EU Members (above all, the UK and the Netherlands) but also the EEA Member State Norway opposed the far-reaching legal effects of imposing an EU Regulation.76 The intra-EU conciliation efforts finally resulted in the more flexible instrument of a Directive, i.e., resulting in Directive 2013/30/EU on safety of offshore oil and gas operations which entered into force on 18 July 2013.77 All in all, the Directive introduces a licensing scheme, documentary rules, updated and extended provisions on the liability for environmental damage (as defined and regulated under the Environmental Liability Directive 2004/35/EC),78 rules for a competent authority within EU Member States, rules on transparency and information sharing as well as cooperation between EU Members and some provisions on offshore oil and gas operations outside of the EU.

73 Out of the extensive literature available on this accident, see generally: Melissa K. Merry, Framing Environmental Disaster – Environmental Advocacy and the Deepwater Horizon Oil Spill, (London/New York, Routledge, 2014), 77 (et seq); Sergei Vinogradov, “The Impact of the Deepwater Horizon: The Evolving International Legal Regime for Offshore Accidental Pollution Prevention, Preparedness, and Response”, Ocean Development & International Law, 44:4 (2013), 335-362; Greg Gordon, “The Deepwater Horizon disaster: the regulatory response in the United Kingdom and Europe”, in Richard Caddell/Rhidian Thomas, Shipping, Law and the Marine Environment in the 21st Century: Emerging Challenges for the Law of the Sea – Legal Implications and Liabilities (Witney: Lawtext Publishing Ltd., 2013), 181-210. 74 See Stephen Tromans, “Pollution from Offshore Rigs and Installations” in Bariş Soyer/ Andrew Tettenborn (eds.), Offshore Contracts and Liabilities (Informa Law, London 2014), 253-273 (at 257). 75 See: Interview with Eero Ailio, Deputy Head of Unit Retail Markets, Coal and Oil at the European Commission, available at: http://www.dnv.com/industry/oil_gas/publications/ updates/ Oil_and_Gas_Update/2013/02_2013/Preventing_major_offshore_accidents_in_Europe.asp [last access: 15 March 2015]. 76 Greg Gordon, “The Deepwater Horizon disaster: the regulatory response in the United Kingdom and Europe”, in Richard Caddell/Rhidian Thomas, Shipping, Law and the Marine Environment in the 21st Century: Emerging Challenges for the Law of the Sea – Legal Implications and Liabilities (Witney: Lawtext Publishing Ltd., 2013), 181-210 (203 et seq). 77 Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC, OJ L 178/66 of 28 June 2013. 78 Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, OJ L 143/56 of 30 April 2004.

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I. The Prospect of an EU Integrated Maritime Policy

An important step in the development of EU policies addressing maritime pollution was the follow-up to the publication in 2006 of a European Commission green paper on the development of an integrated maritime policy.79 This green paper had the ambition to address all aspects, actual and potential, of EU policy concerning the sea. It sought to integrate and build on what had already been done. The follow up took the form of a so-called ”Blue Paper” and action plan adopted by the European Commission in 2007 from which it appears that this exercise will not substantially modify the approaches to marine pollution already set out in the third maritime safety package and the proposed Directive on a thematic strategy for the protection and conservation of the marine environment.80 63 At the same time, the action plan emphasised again the limitations of the EU’s collective knowledge and understanding of the sea, even in its own geographical region. It makes a number of suggestions for action in this regard, including greater research commitment and coordination, the creation of a European Marine Observation and Data Network, state of the art mapping of European coastal waters and the establishment of a European atlas of the seas. It also suggests further adaptation of governance structures at all levels in the interest of more integrated and effective policy making and implementation.81 Latest steps in this area were the adoption of a Regulation establishing a Programme to support the further development of the EU’s Integrated Maritime Policy and the EU’s “Limassol Declaration” under the EU European Council Presidency of Cyprus in 2012.82 62

79 Koivurova, A Note on the European Union’s Integrated Maritime Policy, Ocean Development & International Law 2009, pp. 171. 80 An Integrated Maritime Policy for the European Union, SEC(2007)1278 of 10 October 2007. 81 See Council Conclusions on the Integrated Maritime Policy, 24 June 2013. 82 Regulation EU/1255/2011 establishing a Programme to support the further development of an Integrated Maritime Policy OJ L321/1 of 5 December 2011.

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II. Commentary on Directive 1999/32/EC as regards the sulphur content of marine fuels, as amended by Directive 2012/33/EC A. Introduction and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Text and Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1. Article 1: Purpose and scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2. Article 2: Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3. Article 3: Maximum Sulphur Content of Heavy Fuel Oil . . . . . . . . . . . 56 4. Article 4: Maximum Sulphur Content in Gas Oil . . . . . . . . . . . . . . . . . . . . 61 5. Article 5: Change in the Supply of Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 6. Article 6: Sampling and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 7. Article 7: Reporting and Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 8. Article 8: Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9. Article 9a: Exercise of the Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 10. Articles 10-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 C. Final Comments and Remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

A. Introduction and Overview

The aim of the Council Directive 1999/32/EC of 26 April 1999, commonly 1 known as the Sulphur Directive, is to reduce the sulphur content of certain liquid fuels as well as to amend Directive 93/12/EEC for reasons of clarity.1 Directive 1999/32/EC has been amended by Directive 2005/33/EC and 2012/33/EU.2 These amendments streamlined European policies with the evolution of Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL), an instrument of the International Maritime Organization (IMO). The provisions of Annex VI on alternative compliance methods were largely taken over. Evidently, the limits of sulphur content considered in the European governing texts are lower than the ones set by the relevant MARPOL Annex VI Regulation 14; therefore, this is a typical case of a ‘gold plating’ in the European regulatory pattern.3 1 See point 25 of the preamble of Directive 1999/32/EC. 2 Member states were required to bring these revised requirements into effect through their national legislation by 18 June 2014. This means that by the date of the publication of this work, Directive 2012/33/EU should be in force at all levels in the EU. 3 ‘Gold plating’ is a term describing the incorrect transposition of regulations and laws in a national system. The term is used in the European Union Law. In practice, when national bodies exceed the terms of European Union Directives when implementing them into the national legal framework, then this is a case of gold plating. Gold plating could be, in some cases, the result of protectionism or of addressing specific needs and priorities of a member state. One should critically assess the term and scrutinize the background of the legislation, considering also the ’minimum harmonization’ and ’maximum harmonization’ practices. Minimum harmonization implies that the agreement on legislation was drafted in a way that allows current national legislation to remain in place. Sensitive topics, such as consumer protection, environmental and health issues, have been addressed on this basis. Nevertheless, gold plating by a member state shatters the harmonized application of law in the EU. The practice of maximum harmonization has been recently adopted with the aim of mitigating the risks of gold plating as well as the inefficiencies of minimum harmonization. Under maximum harmonization, the national law may not exceed the terms of the European legislation. This practice amplifies deregulating policies. Often,

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The European environmental policy is predominantly based on the Environmental Action Programme.4 The Clean Air for Europe (CAFE) programme established a long-term, integrated strategy to tackle air pollution and to protect against its effects on human health and the environment. Considering the work carried out under the CAFE programme, the Commission has fixed targets for reducing certain pollutants, mainly sulphur oxides (SOx), nitrogen oxides (NOx) and particulate matter (PM),5 and has also strengthened the legislative framework for combating air pollution in two ways: first, by improving European environmental legislation and, second, by taking account of concerns about air quality in related policies. This policy initiative is based on Articles 191 to 193 of the Treaty on the Functioning of the European Union (TFEU) as well as on the Convention on Long-range Transboundary Air Pollution of 1979 of the United Nations Economic Commission for Europe. 3 Concerns about the emissions of SOx and NOx from ships were reported in 2005,6 as they were expected to exceed those of all land-based sources in the EU by 2020. Further action was needed to improve human health and the environment. As per the EU Maritime Transport Strategy 2009–2018, the European Commission (EC), EU member states and the European maritime industry should work together towards the long-term objective of ‘zero-waste, zero-emission’ maritime transport.7 Last but not least, the White Paper (2011) clearly states that the environmental record of shipping can and must be improved by technology as well as better fuels and operations.8 4 The issue of air emissions is one of the most acute in the policy and regulatory agenda of the International Maritime Organization (IMO) as well as of the EC. Market, technological and policy developments, such as the United Nations Framework Convention on Climate Change (UNFCC), challenge the decision mechanisms and the regulatory bodies of IMO and EU in environmental issues. In contrast to other regulatory actions, environmental policies seem to be more articulate yet more convoluted; this is the case especially of air emissions from ships.9 Sulphur emissions (SOx) are classified as non-greenhouse gases (nGHG), along with the nitrogen oxides (NOx). These emissions are regulated 2

4 5 6 7 8 9

European legislative texts, such as Directives and Regulations, contain a mixture of clauses reflecting minimum and maximum harmonization, as a result of the political negotiation in the various bodies. Decision No 1600/2002/EC of the EP and the Council of 22 July 2002 laying down the Sixth Community Environment Action Programme. These oxides and the PM are products of the combustion and contained in the exhaust gases of marine engines. See section 4.2.2.3 of the Communication from the Commission to the Council and the European Parliament-thematic strategy on air pollution, 21.9.2005, COM/2005/0446 final. See also http://ec.europa.eu/transport/themes/strategies/2018_maritime_transport_strategy_en.h tm, visited on 10/12/14. See Section 2.3, White Paper, Roadmap to a Single European Transport Area-towards a competitive and resource-efficient transport system, 28/3/2011, COM/2011/0144 final. Roe M. (2013) Maritime Governance and Policy-Making. Springer Verlag, p. 2 and pp. 20–22.

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internationally, as Annex VI of MARPOL addresses this issue.10 Greenhouse gas (GHG) emissions, such as carbon dioxide (CO2), also attract the interest of IMO and EU; as the topic of GHG is linked with energy efficiency, any regulatory action faces conflicting interests, means, objectives and results. Sulphur is naturally found in small quantities in oil and coal. Sulphur emis- 5 sions have been identified as the main cause of acid rain and of the major causes of air pollution and degradation of the quality of life in many urban areas as well as in industrial zones and regions. Briefly stated,11 SOx and particulate matter emission controls apply to all fuel oil, as defined in MARPOL,12 combustion equipment and devices on board; therefore, they include both main and all auxiliary engines together with items such as boilers and inert gas generators. These 11 ofcontrols life in many urban areas asthose well as in industrial zones emission and regions. Brieflyareas stated,(ECA) SOx and divide between applicable within control 12 combustion particulate matter emission controls apply to all fuel oil, as defined in MARPOL, established to limit the emission of SOx and particulate matter and those appliequipment and devices on board; therefore, they include both main and all auxiliary engines together cable outside such areas, and are primarily achieved by limiting the maximum with items such as boilers and inert gas generators. These controls divide between those applicable sulphur content of the fuel(ECA) oils established when loaded, bunkered, and of subsequently used matter within emission control areas to limit the emission SOx and particulate on those board.applicable These fuel oil such sulphur limits (expressed in terms by oflimiting % m/m-i.e. by sulphur and outside areas, and are primarily achieved the maximum content oils when and subsequently board. These weight)of13the arefuel subject to aloaded, seriesbunkered, of step changes over the used yearson(see Table andfuel oil 14 (expressed in terms of % m/m-i.e. by weight)13 are subject to a series of step changes sulphur limits Figure). 14 over the years (see Table and Figure).

MARPOL Annex VI and European Sulphur Regulation Limits

Outside an ECA Inside an ECA EU Ports an ECA EU Ports 4.50% m/mOutside prior toan ECA 1.50% m/m Inside prior to 0.10% m/m after 1/1/2012 1/7/2010 1/1/2010 to 1/1/2012 1.50% m/m prior to 1/7/2010 0.10% m/m after 1/1/2010 3.50%4.50% m/m m/m after prior 1/1/2012 1.00% m/m after to 3.50% m/m after 1/1/20121/7/2010 1.00% m/m after to 1/7/2010 0.50% m/m after 1/1/2020 0.10% m/m after to 0.50% m/m after 1/1/20201/1/2015 0.10% m/m after to 1/1/2015

6 Regulation 14 of MARPOL VI requires a study to be completed by 2018in order to determine the 10 Regulation 13oil is focused NOx and 0.5% Regulation 14 on SOx. availability of fuel to meeton the global sulphur limit specified in paragraph 1.3. A 11 A detailed analysis is available in Schinas O. (2014) The Issueofof0.5% Air Emissions, in Contempocorrespondence group shall determine the global availability sulphur fuel oil; the results of rary Marine and Maritime Policy, ed. Jingjing Xu, Nova Publishers, p. 119–148. the analysis should be submitted to Marine Environment Protection Committee (MEPC) 68 in 2015 12 Regulation 2(9) of MARPOL Annex VI. and address: 13 should The term ‘m/m’ indicates the percentage on a mass basis-i.e. a percentage of mass. This is the standard of stating the sulphur result; see also Articles 3 and 4 of Directive - means any new ECAs that may betest established 1999/32/EC. In some relatively older sources, the test results could be expressed ‘in weight’. - projected global economic activity 14 Regulation 14(1) and 14(2) of MARPOL Annex VI. - use of alternative fuels such as biofuels and LNG

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11

A detailed analysis is available in Schinas O. (2014) The Issue of Air Emissions, in Contemporary Marine and Maritime Policy, ed. Jingjing Xu, Nova Publishers, p. 119–148. 12

Regulation 2(9) of MARPOL Annex VI.

13

The term ‘m/m’ indicates the percentage on a mass basis-i.e. a percentage of mass. This is the standard means of stating the sulphur test result; see also Articles 3 and 4 of Directive 1999/32/EC. In some relatively older sources, the test results could be expressed ‘in weight’. 14

Regulation 14(1) and 14(2) of MARPOL Annex VI.

Chapter 4, II.

Regulation 14 of MARPOL VI requires a study to be completed by 2018in order to determine the availability of fuel oil to meet the global 0.5% sulphur limit specified in paragraph 1.3. A correspondence group shall determine the global availability of 0.5% sulphur fuel oil; the results of the analysis should be submitted to Marine Environment Protection Committee (MEPC) 68 in 2015 and should address: – any new ECAs that may be established – projected global economic activity – use of alternative fuels such as biofuels and LNG – availability of abatement technologies – actual and planned refinery capacities 7 It shall be noted that within EU waters, the reduction to a maximum sulphur content of 0.50% m/m with respect to the fuel oil used will take effect on 1 January 2020, irrespective of the outcome of the IMO’s 2018 review of that implementation date, and despite the effort and the goal of the European policy-makers to streamline the various fuel oil sulphur limits and timelines with MARPOL Annex VI regulation 14, as amended in 2008. 8 The establishment of the ECA is justified on the basis of Section 5 of the United Nations Convention on the Law of the Sea (UNCLOS)15 and MARPOL defines certain sea areas as special areas in which, for technical reasons relating to their geophysical and ecological condition and to their sea traffic, the adoption of special mandatory methods for the prevention of sea pollution is required. All annexes of MARPOL consider special areas.16 The ECA currently established are: – Baltic Sea area-as defined in Annex I of MARPOL (SOx only) – North Sea area-as defined in Annex V of MARPOL (SOx only) – North American area (SOx, and NOx and PM) – United States Caribbean Sea area (SOx, and NOx and PM) 9 The proviso of special areas and of ECA has introduced a severe regional approach into the maritime policy, thereby dismantling partially the international framework of regulating maritime and marine issues. This issue is highly political and in the interest of European policy-makers, and demands deep and thorough strategic analysis. History and the evolution of international relationships suggest that a common global regulatory framework should apply in issues related to safety, security, and environmental protection among others, in order to foster international shipping and international trade. Simply put, different regional technical requirements deem ships and fleets inappropriate for servicing 6

15 United Nations Convention on Law Of the Sea III, 1982, entered into force on 16 November 1994; see Part XII of UNCLOS and note Article 212 of Section 5. 16 Updated information is provided in the website of IMO and particularly in http:// www.imo.org/OurWork/Environment/PollutionPrevention/SpecialAreasUnderMARPOL/ Pages/Default.aspx (visited on 27/11/14) or in any official IMO publication on Status of multilateral conventions and instruments.

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these regions, which distorts international competition and free trade. Nevertheless, the right of coastal states to protect their interests is reserved in the Law of the Seas.17 So far, the adoption and implementation of rules has an international character, despite some unilateral actions.18 Currently, some coastal areas, countries and regions, such as the State of California, are placing even stricter controls on ship emissions in coastal areas and in ports. They are implementing new regulations outside the IMO framework, since these local authorities have the power and consider that there is a health and environmental urgency to controlling ship-sourced emissions. In some ports, there is also a goal to stop all emissions from ships at the dock by requiring the use of shore power while the ship is alongside (commonly referred to as ‘cold ironing’, ‘alternate marine power’, ‘shore supply’ or ‘shore power’).19 Even so, it continues to be recognized that the IMO is still the most effective forum for addressing air pollution from ships on a worldwide basis. As part of this process, countries are now submitting to the IMO requests to have their coastal waters declared as ECA. Such action may prompt other countries and, potentially, the EU to consider submitting proposed ECAs along their coastal areas and adjacent seas to IMO for adoption.20 The 0.1% sulphur limit in ECAs after 2015 and in the EU ports since 2010 10 sparked the interest of many researchers,21 stakeholders and technology experts to explore the issue further, highlight potential risks and benefits, and assess the available technologies. Various research teams have derived different results.22 At the same time, the European Marine Safety Agency (EMSA) conducted another study,23 solely focused on sulphur issues. The results of the reports are summarized below:

17 Under the term Law of the Seas, the UNCLOS is understood; see above. 18 E.g. the Oil Pollution Act 1990 of the United States and the ‘Erika’ packages of the EU of 2000, 2002 and 2009. 19 Cold ironing is the practice of providing shore power to a ship; as a result, the ship may shut down its main and auxiliary engines while at port. The main benefits are fuel savings, and reduction, if not elimination, of air emissions and noise levels. 20 See also Schinas, O., Bani, J. (2012), Detailed Briefing Note under the title: The Impact of a Possible Extension at EU Level of SECAs to the Entire European Coastline. Note prepared for the needs of the European Parliament, Directorate General for Internal Policies; Policy Department B: Structural and Cohesion Policies; Transport and Tourism, doi:10.2861/84453. 21 This is an effect of the Directive 2005/33/EC amending Directive 1999/32/EC under analysis. 22 See the report of Miola, A. Ciuffo, B. Giovine, E., Marra, M. (2010), Regulating air emissions from ships, The state of the art on methodologies, technologies and policy options, Joint Research Centre, Institute for Environment and Sustainability, ISBN 978-92-79-17733-0; Tables 2 and 3 in pages 16 and 17 demonstrate the different results of various studies. 23 European Maritime Safety Agency (2010), The 0.1% sulphur in fuel requirement as from 1 January 2015 in SECAs; An assessment of available impact studies and alternative means of compliance. Technical Report, 13 December 2010.

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1.

2.

3. 4.

Since fuel will be more expensive, the operation of the ships will be more expensive and operators will absorb the costs that cannot be passed over to the final consumer of the service.24 Modal shift implications are still uncertain; as some short sea routes might be affected, the environmental burden from the emissions of land-based modes will be higher. This argument implies a reverse effect of the regulation. When considering wider benefits (environment and health), the rules are clearly cost-effective Operators can choose among various technological alternatives,25 such as: 1. The installation and use of dual fuel systems-i.e. two independent fuel systems (storage and piping) should be available on board in order to accommodate the two different grades of fuel (e.g. fuel with high and fuel with low sulphur content) 2. The installation of an exhaust gas cleaning system (ECGS)26 that allows the consumption of bunkers with high sulphur content. It should be highlighted that the amended Directive 2012/33/EU is supportive of the use of duly approved EGCS as an alternative, equivalent means of compliance. This is even though, in such cases, the use of fuel oils exceeding 3.5% m/m sulphur is restricted to only those EGCS systems operating on a closed loop basis. 3. The consumption of liquefied natural gas (LNG). This solution implies: a. A conversion and the installation of specialized equipment on board might be necessary b. Long-term financial benefits for the operators, only if the LNG has a reasonably lower price than fuel oil c. Sufficient number of bunkering stations available along the main trade routes

24 Most operators expect higher prices of regulated bunkers. This expectation is logical and true as per the reported statistics. Extensive statistical evidence is provided by Schinas, O., Stefanakos, Ch. (2013) The Cost of SOx Limits to Marine Operators; Results from Exploring Marine Fuel Prices, In: TransNav, the International Journal on Marine Navigation and Safety of Sea Transportation, Vol. 7, No. 2, pp. 275–281, 2013 doi:10.12716/1001.07.02.15, and its update in Schinas, O., Stefanakos, Ch. Research Results on Forecasting Bunker Prices, HANSA International Maritime Journal-2014-No. 7, pp. 52–53. The impact of sulphur regulation for operators is explicitly depicted in Schinas, O., and C.N. Stefanakos. (2012) Cost assessment of environmental regulation and options for marine operators., Transportation Research Part C: Emerging Technologies. 25:81–99. 2012. doi:10.1016/j.trc.2012.05.002. 25 A multi-criteria decision model based on industrial experience and findings, suggesting also that the one-dimensional accounting or financial approach is fundamentally insufficient is presented by Schinas, O., Stefanakos, Ch. (2014) Selecting Technologies Towards Compliance with MARPOL Annex VI; the Perspective of Operators, In: Transportation Research Part D: Transport and Environment, Special Issue: Emission Control Areas and their Impact on Maritime Transport, Volume 5, pp. 28–40, doi:10.1016/j.trd.2013.12.006. 26 Most common EGCSs are scrubbers. Scrubber systems are an assorted group of air pollution control devices that can be used to remove or neutralize some particulates and/or gases from industrial and marine exhaust gas streams.

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4.

The financial impact is difficult to assess accurately; yet, some developments are rationally expected: a. Short and medium routes will be worse effected, as the ships might have to use the more expensive regulated fuels, or they might have to change fuels more often; therefore, an increase in the operations’ complexity and the effort of the crew is expected b. General cargo and container ships will be more severely effected, as they operate at higher speeds and, therefore, have a higher unit consumption c. Low-value goods are more vulnerable to price increase, as the transport cost will be higher; therefore, the impact on the final price will be higher 5. The societal benefits are also extremely difficult to assess: a. Only a few studies have quantified the benefits b. Health benefits are substantial27 c. Environmental benefits will appear; a significant reduction in acidification within ECAS with 25% and even higher for particles 65– 85% is expected d. In 2013, the Commission reported that the impacts of the revised sulphur directive is estimated as the following:28 i. Reduction of the annual 50,000 premature deaths caused by burning high-sulphur marine fuels ii. billion of annual health benefits iii. billion of costs for the shipping industry for switching fuels or exhaust filters to meet the new limits The issue of alternative fuels and alternative compliance methods sparks de- 11 bates and friction among stakeholders, and particularly among operators and policy-makers. Regulation 4 of MARPOL Annex VI considers LNG as alternative fuel. The use of LNG leads to almost full abatement of SOx and particulate matter, a sufficient drop in NOx (80–90%) and a decline of circa 30% of CO2.29 Regulation 4 of Annex VI states that the Administration of a Party may allow any fitting, material, appliance or apparatus to be fitted in a ship or other procedures, alternative fuel oils, or compliance methods used as an alternative to that required by this Annex if such fitting, material, appliance or apparatus or

27 The study of ENTEC on behalf of the Maritime Coast Guard Agency (2009), Impact Assessment for the revised Annex VI of MARPOL, suggests benefits that are two to four times higher than the increase in the cost of transport; only in the UK is a calculated yearly benefit of £309–622 million reported. See also in the study of EMSA, 2010, as above. 28 Klimke T. (2013), The way towards zero emission waterborne transport, Presentation, GreenWeek 2013, http://ec.europa.eu/environment/archives/greenweek2013/sites/default/files/conte nt/presentations/7-4_klimke.pdf, visited on 15/12/14. 29 The literature on this subject is vast; data were retrieved from Schinas, O (2013), The Issue of Air Emissions: Policy and Operational Considerations, in Jingjing Xu (Ed.) Contemporary Marine and Maritime Policy, Nova Science Publishers.

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other procedures, alternative fuel oils, or compliance methods are at least as effective in terms of emissions reductions required by this Annex.30 In practice, this proviso pertains to scrubbers, LNG as bunker fuel, averaging and other lowflashpoint fuels, such as methanol. The International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGS code)31 formally regulates LNG and will come into force on 1/1/2016. However, one should be careful, as IGS refers to ships carrying LNG as cargo, and in Chapter 16, there is the proviso of using vapour or boil-off gas as fuel. Ships not carrying LNG as cargo and ships using these alternative fuels are not yet formally regulated, as the International Code of Safety for Gas-fuelled Ships (IGF code) is currently under preparation.32 The code with the necessary amendments of SOLAS will be ready in the coming years and focuses mainly on the ship itself, while the ship-shore bunkering procedure is only marginally addressed. Apparently, the main focus is on LNG, but the scope may be extended to other low-flashpoint fuels. The bunkering of the LNG is a rather complicated issue and many interested groups and entities deal with this matter. The International Association of Ports and Harbours (IAPH) has launched a relevant initiative dealing with bunkering procedures and pertinent issues in ports.33 An ISO working group under the ISO’s Technical Committee 67 (ISO TC 67 WG 10) was initiated by Norway. The aim of this working group is to develop international technical specifications for the bunkering of LNG- and gas-fuelled ships and the technical specifications thereof, the staff involved and the overall risk of the LNG bunkering activity. The final result will be a technical report and not an ISO standard.34 12 The EC has also invested time and effort for addressing the issue of LNG bunkering. The proposal for the revision of the 1999 and 2005 directives was published along with the ‘Sustainable Waterborne Transport Toolbox’ in 2011 with the objective of reducing compliance costs and addressing the issue of the regulatory framework of LNG,35 especially the absence of common rules for the distribution and bunkering of LNG to ships. Moreover, the EC’s Clean Power for Transport Package establishes a common framework of measures to ensure 30 In force since 1/7/2010; refer to the 2009 guidelines for exhaust gas cleaning systems, adopted by res. MEPC.184(59.). 31 The IGS code is applicable from 1 January2016 for all ships constructed from 1 July 1986 to 1 July 2016. The purpose of this code, as stated in the preamble, is to provide an international standard for the safe carriage by sea in bulk of liquefied gases and certain other substances listed in Chapter 19 of the code, by prescribing the design and construction standards of ships involved in such carriage and the equipment they should carry so as to minimize the risk to the ship, to its crew and to the environment, depending on the nature of the products involved. 32 See Resolution MSC.285(86), adopted on 1/6/2009, on the Interim Guidelines on Safety for Natural Gas-fuelled Engine Installations in Ships and Resolution A.1061(28) of the 28th Session of the Assembly on the High-level Action Plan of the Organization and Priorities for the 2014–2015 Biennium, adopted on 4/12/13. 33 See http://wpci.iaphworldports.org, last visited on 14 September 2015. 34 See http://www.lngbunkering.org/lng/bunkering/standardisation/bunkering-standards, last visited on 14 September 2015. 35 The revision that delivered Directive 2012/33/EU.

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the deployment of EU alternative fuels infrastructure and to break the oil dependence of transport,36 and provides guidance for the technological development, the policy framework for investment and market development for electricity, hydrogen, biofuels, synthetic fuels, LNG, compressed natural gas (CNG) and liquified petroleum gas (LPG). Apparently, the most critical issue for the successful introduction of LNG as 13 alternative fuel is the availability of bunkering spots. There is an effort to have publicly accessible LNG refuelling points in the EU for maritime and inland waterway transport provided in all maritime ports of the TEN-T core network by 31 December 2020. The subject of LNG bunkering infrastructure is technically more complex than originally estimated and there is definitely no technical solution suitable for all cases. Recent reports analyse the subject and reveal also the technical, operational and regulatory challenges.37 Considering all the above issues and results, it is obvious that any sulphur 14 regulation will trigger concerns and objections from many stakeholders, since an increase in the cost of transport is implied and trading practices might be affected. This is indirectly considered in the Directive 2012/33/EC, as exemptions are considered for practical reasons; for example, until 1 January 2020, the 1.5% m/m maximum sulphur limit with respect to fuel oil used within EU waters by passenger ships operating on regular services to or from EU ports outside ECA is retained.38 The requirement of using bunkers with less than 0.1% by mass in EU ports does not apply to ships that switch off all engines and use shore-based electricity while at berth. At the same time, while the social benefits overwhelm the apprehensions, the 15 lack of quantification is blurring the message received by the public and several groups of interest. It is the view of the author that the regulation on n-GHG is only the beginning of a regulatory evolution that will also cover GHG and other relevant issues, and will impact not only the operations and economics of ships, but also international relations and capital markets, as there are many marketbased measures for the abatement of GHG currently in force or under discussion in the appropriate forums.

36 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; Clean Power for Transport: A European alternative fuels strategy, 24/1/2013, COM/2013/017 final. 37 Regarding the issue of infrastructure, the study of DNV-GL is enlightening; see DNV-GL, Liquefied Natural Gas (LNG) Bunkering Study, Maritime Administration, Report No.: PP087423-4, Rev 3, 3 September 2014 available also in http://www.marad.dot.gov/documents/DNVLNGBunkeringStudy3Sep14.pdf. 38 See Article 2 of Directive 1999/32/EC as amended by Directive 2012/33/EU.

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B. Text and Commentary Article 1 Purpose and scope 1.

The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. Reductions in the emissions of sulphur dioxide resulting from the combustion of certain petroleum-derived liquid fuels shall be achieved by imposing limits on the sulphur content of within the territory of the Member States. The limitations on the sulphur content of certain petroleum-derived liquid fuels as laid down in this Directive shall not, however, apply to: 1. petroleum derived liquid fuels used by seagoing ships, except those fuels falling within the definition in Article 2(3), marine gas oil used by ships crossing a frontier between a third country and a Member State; 2. fuels intended for processing prior to final combustion; 3. fuels to be processed in the refining industry.

2.

The article clearly states the policy objective of the directive. The aim is to reduce emissions of SOx that result from the combustion of certain types of fuels and, thereby, to reduce the harmful effects on man and the environment. Special attention should be given to the word certain, as it is implied that only some fuels are related or linked with the negative impact of sulphur content.39 17 As this article has been severely revised in 2005 and 2012, the amended text is provided below in order to enable the analysis. 16

1. Article 1: Purpose and scope 18 1.

19 2.

The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. Reductions in emissions of sulphur dioxide resulting from the combustion of certain petroleum-derived liquid fuels shall be achieved by imposing limits on the sulphur content of such fuels as a condition for their use within Member States’ territory, territorial seas and exclusive economic zones or pollution control zones The limitations on the sulphur content of certain petroleum-derived liquid fuels as laid down in this Directive shall not, however, apply to: 1. fuels intended for the purposes of research and testing; 2. fuels intended for processing prior to final combustion; 3. fuels to be processed in the refining industry; 4. fuels used and placed on the market in the outermost regions of the Community provided that the relevant Member States ensure that, in those regions:

39 See also Article 2 on definitions as amended, below.

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• air quality standards are respected, • heavy fuel oils are not used if their sulphur content exceeds 3% by mass; 5. fuels used by warships and other vessels on military service. However, each Member State shall endeavour to ensure, by the adoption of appropriate measures not impairing the operations or operational capability of such ships, that these ships act in a manner consistent, so far as is reasonable and practical, with this Directive; 6. any use of fuels in a vessel necessary for the specific purpose of securing the safety of a ship or saving life at sea; 7. any use of fuels in a ship necessitated by damage sustained to it or its equipment, provided that all reasonable measures are taken after the occurrence of the damage to prevent or minimise excess emissions and that measures are taken as soon as possible to repair the damage. This shall not apply if the owner or master acted either with intent to cause damage, or recklessly; 8. without prejudice to Article 3a, fuels used on board vessels employing emission abatement methods in accordance with Articles 4c and 4e. The first paragraph of the scope was not revised. Yet, Paragraph 2 of this arti- 20 cle has been significantly amended in 2005 with the introduction of new paragraphs, and slightly revised in 2012. One should be very careful with this article, as the amendments expand into the new articles introduced in 2005 and 2012, concepts and processes, and include many revisions of the initial text. The 2005 amendment extended the application of the directive in territorial waters, exclusive economic zones (EEZ) and pollution control zones. Moreover, the application limits were explained better-namely by clarifying the fuels and their uses. 1. Article 1(2) of Directive 2012/33/EU clearly states that the reduction of 21 SOx resulting from the combustion of fuels, which are products of petroleum refining, shall be achieved by imposing limits on the sulphur content.40 These limits should not be violated, so that only fuels with the appropriate sulphur content must be used in the territory, territorial seas, EEZ and pollution control areas of the member states. Therefore, it is technically streamlined with the provisos of MARPOL and the regulatory steps taken by the IMO.41 2. Moreover, Article 1(2) implies that all fuels are subjects of the Directive 22 2012/33/EU, as the following exceptions are contemplated: 1. Fuels intended for research and testing42 2. Fuels intended for processing prior to final combustion-i.e. fuels that will be treated accordingly before used 40 Directive 2012/33/EU. 41 See previous section. 42 See comments in Article 2 regarding the case of ships at berth.

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3. 4.

Fuels to be processed in the refining industry Fuels used and placed in the outermost regions of Europe, provided that the air quality standards are respected and the content of sulphur does not exceed 3% by mass in heavy fuel oil (HFO)43 5. Fuels used by warships44 6. Fuels that will be used for securing the safety of the ship or saving lives at sea 7. Fuels used in ships in damaged conditions, provided that owners and the master have not acted intentionally or recklessly 8. Fuels used on board vessels employing emission abatement methods in accordance with Articles 3a, 4c and 4e of Directive 2012/33/EU. 23 Article 1(2)h leads to Articles 3a, 4c and 4e;45 these articles briefly address the issues of maximum sulphur content in marine fuel, emission abatement methods and of the trials of the new emission abatement methods in a few words in terms of the core of this regulation. Article 2 Definitions 1.

2.

3.

4.

For the purpose of this Directive: heavy fuel oil means: – any petroleum-derived liquid fuel falling within CN code 2710 00 71 to 2710 00 78,46 or – any petroleum-derived liquid fuel, other than gas oil as defined in points 2 and 3, which, by reason of its distillation limits, falls within the category of heavy oils intended for use as fuel and of which less than 65% by volume (including losses) distils at 250°C by the ASTM D86 method. If the distillation cannot be determined by the ASTM D86 method, the petroleum product is likewise categorised as a heavy fuel oil; gas oil means: – any petroleum-derived liquid fuel falling within CN code 2710 00 67 or 2710 00 68, or – any petroleum-derived liquid fuel which, by reason of its distillation limits, falls within the category of middle distillates intended for use as fuel and of which at least 85% by volume (including losses) distils at 350°C by the ASTM D86 method. Diesel fuels as defined in Article 2(2) of Directive 98/70/EC of the European Parliament and of the Council of 13 October 1998 relating to the quality of petrol and diesel fuels and amending Council Directive 93/12/EEC(9) are excluded from this definition. Fuels used in non-road mobile machinery and agricultural tractors are also excluded from this definition; marine gas oil means fuels intended for marine use which meet the definition in point 2 or which have a viscosity or density falling within the ranges of viscosity or density defined for marine distillates in Table I of ISO 8217 (1996); ASTM method means the methods laid down by the American Society for Testing and Materials in the 1976 edition of standard definitions and specifications for petroleum and lubricating products;

43 The limit set is substantially less than those of Regulation 14 of MARPOL; see Figure. 44 It is interesting to note that the directive suggests that warships and military service vehicles shall comply with this directive, so long as this does not impair their operational capacity. Nevertheless, there is the issue of enforcement. 45 See detailed analysis in p., p. and p. 46 The Combined Nomenclature (CN) is a method for designating goods and merchandize that was established to meet the requirements of both, the Common Customs Tariff and the external trade statistics of the community. The CN is also used in intra-community trade statistics.

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combustion plant means any technical apparatus in which fuels are oxidised in order to use the heat generated; critical load means a quantitative estimate of exposure to one or more pollutants below which significant harmful effects on sensitive elements of the environment do not occur according to current knowledge.

Article 2 provides all the necessary definitions; this article was also exten- 24 sively revised in 2005 and 2012, where the definitions of heavy fuel oil and gas oil, marine diesel oil and marine gas oil are provided. The revised definitions streamline the directive with the technical norms and codes, better clarifying the fuels considered in this regulation.47 Article 1(2)d of Directive 2005/33/EC inserts also definitions that link Directive 1999/32/EC with MARPOL and, specifically, with MARPOL Annex VI and the concept of ECA. Moreover, the definitions of passenger ships and of passengers, as per the International Convention for the Safety Of Life At Sea (SOLAS), are repeated.48 Following the amendments of 2005 and 2012, the new provisos of this article are presented below. 2. Article 2: Definitions

1.

2.

25 heavy fuel oil means: • any petroleum-derived liquid fuel, excluding marine fuel, falling within CN code 2710 19 51 to 2710 19 68, 2710 20 31, 2710 20 35, 2710 20 39, or,49 or • any petroleum-derived liquid fuel, other than gas oil as defined in points 2 and 3, which, by reason of its distillation limits, falls within the category of heavy oils intended for use as fuel and of which less than 65% by volume (including losses) distils at 250°C by the ASTM D86 method. If the distillation cannot be determined by the ASTM D86 method, the petroleum product is likewise categorised as a heavy fuel oil 26 gas oil means: • any petroleum-derived liquid fuel, excluding marine fuel, falling within CN code 2710 19 25, 2710 19 29, 2710 19 47, 2710 19 48, 2710 20 17 or 2710 20 19, or • any petroleum-derived liquid fuel, excluding marine fuel, of which less than 65% by volume (including losses) distils at 250°C and of which at least 85% by volume (including losses) distils at 350°C by the ASTM D86 method.

47 See Article 1(2) of Directive 2012/33/EU. 48 See Protocol of 1988 Relating to the International Convention for the Safety Of Life At Sea, 1974, Part A, Chapter I General Provisos, Regulation 2(e) and 2(f.). 49 The Combined Nomenclature (CN) is a method for designating goods and merchandize that was established to meet the requirements both of the Common Customs Tariff and of the external trade statistics of the community. The CN is also used in intra-community trade statistics.

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Diesel fuels as defined in point 2 of Article 2 of Directive 98/70/EC of the European Parliament and of the Council of 13 October 1998 relating to the quality of petrol and diesel fuels are excluded from this definition.50 Fuels used in non-road mobile machinery and agricultural tractors are also excluded from this definition; 27 3. marine fuel means any petroleum-derived liquid fuel intended for use or in use on board a vessel, including those fuels defined in ISO 8217; 28 4. marine diesel oil means any marine fuel as defined for DMB grade in Table I of ISO 8217 with the exception of the reference to the sulphur content; 29 5. marine gas oil means any marine fuel as defined for DMX, DMA and DMZ grades in Table I of ISO 8217 with the exception of the reference to the sulphur content; 30 6. MARPOL means the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto; 31 7. Annex VI to MARPOL means the annex, entitled ‘Regulations for the Prevention of Air Pollution from Ships’ that the Protocol of 1997 adds to MARPOL; 32 8. Ox Emission Control Areas means sea areas defined as such by the IMO under Annex VI to MARPOL; 33 9. passenger ships means ships that carry more than 12 passengers, where a passenger is every person other than: 1. the master and the members of the crew or other person employed or engaged in any capacity on board a ship on the business of that ship, and 2. a child under one year of age; 34 10. regular services means a series of passenger ship crossings operated so as to serve traffic between the same two or more ports, or a series of voyages from and to the same port without intermediate calls, either: 1. according to a published timetable, or 2. with crossings so regular or frequent that they constitute a recognisable schedule; 35 11. warship means a ship belonging to the armed forces of a State bearing the external marks distinguishing such ships of its nationality, under the command of an officer duly commissioned by the government of the State and whose name appears in the appropriate service list or its equivalent, and manned by a crew which is under regular armed forces discipline; 36 12. ships at berth means ships which are securely moored or anchored in a Community port while they are loading, unloading or hotelling, including the time spent when not engaged in cargo operations;

50 OJ L 350, 28.12.1998, p. 58.

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13. inland waterway vessel means a vessel particularly intended for use on an inland waterway as defined in Council Directive 82/714/EEC of 4 October 1982 laying down technical requirements for inland waterway vessels (11), including all vessels which carry: 1. a Community inland navigation certificate, as defined in Directive 82/714/EEC, 2. a certificate issued pursuant to Article 22 of the Revised Convention for the Navigation of the Rhine; 14. placing on the market means supplying or making available to third persons, against payment or free of charge, anywhere within Member States’ jurisdictions, marine fuels for on-board combustion. It excludes supplying or making available marine fuels for export in ships’ cargo tanks; 15. outermost regions means the French overseas departments, the Azores, Madeira and the Canary Islands, as set out in Article 299 of the Treaty; 16. emission abatement method means any fitting, material, appliance or apparatus to be fitted in a ship or other procedure, alternative fuel, or compliance method, used as an alternative to low sulphur marine fuel meeting the requirements set out in this Directive, that is verifiable, quantifiable and enforceable. The definitions of marine diesel oil and marine gas oil of 2005 were replaced by Article 1(2)b of Directive 2012/33/EU; the new definitions take into account the technical evolution: – Marine diesel oil means any marine fuel as defined for DMB grade in Table I of ISO 8217 with the exception of the reference to the sulphur content – Marine gas oil means any marine fuel as defined for the DMX, DMA and DMZ grades in Table I of ISO 8217 with the exception of the reference to the sulphur content One should also note that, in MARPOL Annex VI, no similar definition is given in Regulation 2 or Regulation 14 (on sulphur oxides) nor even in other articles, such as Regulation 13 (on nitrogen oxides). Nevertheless, the definition of passenger ships (see paragraph 3f of this Article) are exactly the same as the ones stated in SOLAS. A definition that attracts interest is the ‘regular services’, as stated in Article 2(d)3g. In the IMO regulatory pattern, the term ‘regular services’ is not defined or considered generally, but only in special cases,51 highlighting exemptions that are locally granted or considered. Article 2(d)3g defines regular services as a series of passenger ship crossings, operated so as to serve traffic between two or more ports or a series of voyages from and to the same port without intermediate

51 E.g. in Circular Letter No. 1891, Agreement concerning specific stability requirements for roro passenger ships undertaking regular scheduled international voyages between or to or from designated ports in north-west Europe and the Baltic Sea, SL95REGAG01.

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38

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41

42

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calls, either on the basis of a published timetable or regular and frequent crossings that constitute a recognizable schedule. 44 Article 2, as amended in 2005, also inserted definitions on terms that attract the interest of operators, policy-makers, and enforcement officers as well of service providers, such as the classification societies. The term ship at berth is considered, meaning ships that are securely moored or anchored in a community port while they are loading, unloading or hotelling, including the time spent when not engaged in cargo operation. This term automatically raises concerns with legal, technical and operational implications. As the text is interpreted, a ship is at berth irrespective of whether cargo is worked or not. 45 This applies in all ports of the EU except the ports of outmost regions,52 where local air-quality standards apply. The regulation applies also in Norway. Iceland as a member of the European Economic Area (EEA) enjoys free trade with the EU and shall also enact legislation similar to that passed in the EU, but is yet to implement the regulation and has not ratified MARPOL Annex VI.53 This has led to a controversy: Since the requirement is stated as ‘ships at berth in EU ports’, it would be considered that if a ship anchors within EU waters but outside a port zone controlled by a competent port, coastal or navigation authority, then the requirement does not apply. This is an issue that affects the operation of the ship when awaiting orders or waiting for or conducting repairs at sea. The commission clarifies this controversy;54 it is noted that the term ‘port’ is not defined within the context of the sulphur directives and, hence, is potentially subject to interpretation by individual member states. As the term ‘port’ is not clearly defined and the overall objective is to restrict the sulphur emissions from stationary ships, then coastal facilities, such as shipyards and stations, should be considered for inclusion as ‘ports’. 46 Apart from the definition of the crucial term ‘port’ and its repercussions on chartering, employment, operations as well as its implications for the International Safety Management Code (ISM), most probably, the most interesting condition and concept in the new Article 3i is the ‘securely’ moored or anchored ship.55 This implies that ships engaged in ship-to-ship transfer operations are not subjects of this directive unless they are anchored. It seems that the policy-makers focus on this issue due to the environmental burden from ships at the vicinity of ports and urbanized coasts, as a response to CAFE and related action programmes on the quality of air. There is scientific evidence regarding the impact

52 See the definition in Article 1(2)b, as inserted 3l. 53 IMO, Status of Conventions as at 28 July 2014. 54 European Commissions FAQ – http://ec.europa.eu/environment/archives/air/pdf/marine_faq.p df. 55 Introduced with Directive 2005/33/EC.

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of air emissions on coastal populations.56 Considering also the commercial aspects of the terms arrived ship, port, safe port, berth and safe berth, one should include the condition securely moored or anchored in relevant interpretations. Hence, the ship might be considered as arrived, once the command Finished With Engines is given or even when the anchoring team stands down along with other commonly considered conditions.57 The definitions of a ‘port’ and of a ‘berth’ are thoroughly discussed in the lit- 47 erature on maritime law. This directive provides no specific definition for the term ‘port’ or for similar wording, such as ‘anchorage’; therefore, it is expected that the national law of every member state might address the issue of the definition of the legal implications. However, many relevant questions are raised due to the superseding nature of the European regulation over the national one. Should one expect that the provisos of the ‘at berth’ requirements apply in an anchorage outside or close to the port? When a ship is at anchor awaiting a pilot, is it necessary to comply with the at-berth requirements, and use fuels with 0.1% m/m sulphur content? Both questions should be answered by the local authorities and, normally, local authorities issue guiding notes and clarify relevant questions as well. In that respect, the local practice, local navigational risks and perils determine the guidance and decisions of local authorities regarding the ‘holding period’ of this type. Most probably, this subtle point might determine the ’‘usual’ condition of the deck and engine teams; if the teams are on ‘stand by’, then the ship might not be considered ‘safely and securely’ anchored or at berth; however, this is subject to the interpretation of the locally applicable law. Such questions should always be considered and seen through a prism of operational realities and necessities. It is possible that a ship could move from a regulated position, from the condition ‘at berth’, to a non-regulated anchorage. In this case, it might be easier, safer and more convenient to use distilled fuels instead of commencing a changeover procedure, despite the higher price of the distilled fuels. Concluding this analysis, one should also reply to the questions related to the 48 quality of fuels: Could a residual fuel or only gas oil be used ‘at berth’? The directive does not determine the fuel quality; the sulphur content is only stipulated. In practice, however, only distillate-grade fuels, which meet the 0.1% m/m maximum sulphur limit, are available. From an operational point of view, it must be clarified that only those engines, boilers, incinerators or other combustion devices that are to be used while the ship is at berth need to be changedover to a 0.1% m/m maximum-sulphur fuel oil. Subsequently, attention is also 56 See also the studies considered in the EMSA Study of 2010, see Footnote, the work of James J. Corbett, James J. Winebrake, Erin H. Green, Prasad Kasibhatla, Veronika Eyring, and Axel Lauer, Mortality from Ship Emissions: A Global Assessment, Environmental Science & Technology 2007 41 (24), 8512–8518, as well as the note of Schinas and Bani (2012), see Footnote. 57 As per the English law, the ship is arrived once the Notice of Readiness is issued and the ship is at a safe berth or in a safe port.

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essential, if not compulsory, for intermittently operated combustion machinery with separate, stand-alone, ready-use tanks, such as incinerators, to ensure that the fuel in those tanks is duly compliant. Considering modern propulsion plants, where the main engine is used not only for propulsion but also for the production of electric supply power, then, when the ship is at berth, the main engine should consume fuels compliant to the regulation. This approach is also understood for other auxiliary systems. For example, if it is necessary to heat residual fuel oil in order to maintain readiness, then the auxiliary engines or boilers used should consume low-sulphur (0.10% m/m) while at berth with residual oil. Article 1(2)a clearly states the exemption of the purpose of research and testing.58 What is understood under this term? Is it understood only as research and development work or also the verification of performance of an engine after repair or an overhaul? This is an issue for the member state to determine. In the amendment of 2012, this point is not clarified. As shipyards are considered to be ports, the issue of testing engines with residual fuels should have been discussed and clarified with the local competent authorities. Apparently, the requirements apply also to main and auxiliary boilers. It is immaterial to consider the use or the size of the boilers; small boilers used for the heating of water or large boilers used for the heating of cargo on tank ships are subject to this regulation. As significant issues can be associated with the ‘on load’ use of fuels in such boilers, reference should be made to the recommendations of the manufacturers and to all relevant statutory and classification requirements. It is not only an issue of compliance but also of safety. Furthermore, there is no indication of exempting other systems, such as the inert gas generators from the provisos of this regulation. Commonly, these units include a water wash stage, where most of the SOx is removed from the resulting inert gas stream, and the gases are not directly vented to the atmosphere, unless they are in purge mode. 49 The 2005 amendments to the directive mention inland waterways introduced controls on the sulphur content of fuel oils used by inland waterways vessels not on inland waterways as an area of operation.59 The subsequent Directive 2009/30/EC removed all references to inland waterways vessels, and these are now subject to separate requirements. 50 In the revision of 2012, point 3m that was introduced in 2005, provides the definition of the emission abatement method. As emission abatement method, any fitting, material, appliance or apparatus to be fitted in a ship or other procedure, alternative fuel, or compliance method is understood, used as an alternative to low-sulphur marine fuel meeting the requirements set out in this directive that is verifiable, quantifiable and enforceable. The amendment introduced the 58 See Directive 2005/33/EC. 59 See Article 1(2)d, new paragraph 3j.

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word ‘quantifiable’ and expanded the term ‘technology’ in ‘systems’, ‘procedures’ and ‘alternative fuels’. At this point, it would be interesting to contemplate some technical issues. As stated,60 one of the technical and operational alternatives is the use of dual fuel systems. Nevertheless, the use of a different fuel, other than the one considered when designing and manufacturing the engine or the boiler might lead to technical failures and substantial safety risks and issues. The quality of bunkers is determined by a set of chemical and physical properties, such as viscosity, lubricity, thermal power, flash point, etc. Fuels like marine gas oil (MGO) and marine diesel oil (MDO) comply with the sulphur limit and have better chemical and physical properties than the commonly used marine bunkers, such as HFO. Therefore, some of the points below should be considered:61 – attention to pre-heating control, due to the lower viscosity – engine starting problems, commonly attributed to poor lubricity – unacceptable or undesirable blend components – potential power shortfall – fuel separation and cleaning actions – resetting of all relevant safety control systems In most cases, the primal concern is fuel separation and cleaning procedures. 51 Theoretically, fuels of different qualities should be stored on board separately. The limits set by MARPOL and the directive further imply that there are separate piping systems, settling and daily tanks available, as any blending or any changeover of fuels might lead to a fuel mix that does not respect the limits set.62 However, many ships do not offer this possibility, and any conversion, refitting or technical alteration might be not possible or financially feasible or reasonable. Thus, particular care will be required during the loading, storage, transfer or treatment of all fuels on board should be foreseen, and this is also an implication that should be considered and effectively treated under the provisos of the ISM code. As there is no mention of exemption or different treatment for ships that cannot handle fuels of different quality, it is derived that it might be possible for these ships to use only fuels with a maximum sulphur content of 0.1% m/m at sea and at ports of the EU. This development deems the operation of these ships, usually ships engaged in short-sea and coastal trades, uncompetitive vis-a-vis other modes or ships. The financial outcome is determined on the 60 See note 11, above. 61 The list is indicative and not exhaustive. 62 Those ships using separate fuel oils to comply with MARPOL Annex VI, when entering or leaving an ECA shall carry a written procedure showing how the fuel oil changeover is to be done, allowing sufficient time for the fuel oil service system to be fully cleansed and rinsed of all fuel oils exceeding the applicable limits. The volume of low-sulphur fuel oils in each tank as well as the date, time, and position of the ship when any fuel-oil-changeover operation is completed prior to the entry into an ECA or commenced after exit from an ECA, shall be recorded in a logbook prescribed by the administration. The issue of logbooks and procedures is analysed in Article 4b.

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percentage of time spent in an ECA and the number of calls in EU ports; it is clear, however, that the voyage and possibly the operational and capital costs are higher than those of the ships operating outside of the regulated areas and ports. This is a point that created and still creates friction among various groups and stakeholders. Some operators considered using fuels of other qualities or purposes on board, such as automotive-type fuels, as a response mainly to the lack of available MGO and MDO in their local markets. Generally, automotive fuels contain less sulphur than the limit requires; however, severe safety and regulatory issues raise. The flash-point of the automotive fuels is less than the statutory minimum of 60°C;63 therefore, they are unfit for marine use. Operators should be careful with the selection and use of fuels on board, as violation of safety and environmental regulations is possible, and the use of these fuels might be detrimental to the seaworthiness of their vessel. This implies also, that the changeover procedures should be approved by the administration in order to meet ISM requirements. These written but not necessarily or specially approved procedures shall ensure that the correct sequence of operations is undertaken and shall provide guidance as to the time required for the procedure to be undertaken. The latter also provides assistance to the local authorities, when inspecting and questioning the length of time taken for the changeover. 52 In most cases, the primal concern is fuel separation and cleaning procedures. Theoretically, fuels of different qualities should be stored on board separately. The limits set by MARPOL and the directive further imply that there are separate piping systems, settling and daily tanks available, as any blending or any changeover of fuels might lead to a fuel mix that does not respect the limits set.64 However, many ships do not offer this possibility, and any conversion, refitting or technical alteration might be not possible or financially feasible or reasonable. Thus, particular care will be required during the loading, storage, transfer or treatment of all fuels on board should be foreseen, and this is also an implication that should be considered and effectively treated under the provisos of the ISM code. As there is no mention of exemption or different treatment for ships that cannot handle fuels of different quality, it is derived that it might be possible for these ships to use only fuels with a maximum sulphur content of 0.1% m/m at sea and at ports of the EU. This development deems the operation of these ships, usually ships engaged in short-sea and coastal trades, uncompetitive vis-a-vis other modes or ships. The financial outcome is determined on the 63 See SOLAS, Chapter 2, Part C and the necessary amendments for all sorts of ships, as well as Directive 2006/87/EC for inland waterways in the EU. 64 Those ships using separate fuel oils to comply with MARPOL Annex VI, when entering or leaving an ECA shall carry a written procedure showing how the fuel oil change-over is to be done, allowing sufficient time for the fuel oil service system to be fully cleansed and rinsed of all fuel oils exceeding the applicable limits. The volume of low-sulphur fuel oils in each tank as well as the date, time, and position of the ship when any fuel-oil-change-over operation is completed prior to the entry into an ECA or commenced after exit from an ECA, shall be recorded in a logbook prescribed by the administration. The issue of logbooks and procedures is analysed in Article 4b.

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percentage of time spent in an ECA and the number of calls in EU ports; it is clear, however, that the voyage and possibly the operational and capital costs are higher than those of the ships operating outside of the regulated areas and ports. This is a point that created and still creates friction among various groups and stakeholders. Some operators considered using fuels of other qualities or purposes on board, such as automotive-type fuels, as a response mainly to the lack of available MGO and MDO in their local markets. Generally, automotive fuels contain less sulphur than the limit requires; however, severe safety and regulatory issues raise. The flash-point of the automotive fuels is less than the statutory minimum of 60°C;65 therefore, they are unfit for marine use. Operators should be careful with the selection and use of fuels on board, as violation of safety and environmental regulations is possible, and the use of these fuels might be detrimental to the seaworthiness of their vessel. This implies also, that the changeover procedures should be approved by the administration in order to meet ISM requirements. These written but not necessarily or specially approved procedures shall ensure that the correct sequence of operations is undertaken and shall provide guidance as to the time required for the procedure to be undertaken. The latter also provides assistance to the local authorities, when inspecting and questioning the length of time taken for the change-over. There is no time stipulated in the directive for the change-over, as this time 53 depends on the fuel mixes, the particular machinery arrangements and the change-over procedures. Whatever procedures are to be followed should commence as soon as is reasonably possible prior to departure and after arrival. In most cases, a change-over in the grade of fuel oil in the system is planned. In practice, this means an adjustment of the rate of change-over from a heated residual fuel oil to compliant gas oil. This change of the rate must be in accordance with engine manufacturer’s guidance due to safety reasons. A reference in the ISM safety management system is also expected. Typically, the instructions advise a rate of mixing considering also thermal loading and the differential expansion of heated components. In any case, the critical indicator is the content of the fuel mix in sulphur; it is possible to have a successful change-over, when the compliant fuel flushes the supply system and the sulphur levels are acceptable without any thermal loading consideration. In any case, classification societies, manufacturers and technical experts provide sufficient information and guidance. It is needless to stress that operational pragmatism and requirements might lead to innovative propulsion plants that were not considered in the past, although these are technically not novel. Assume a diesel-electric propulsion plant equipped with four engines; two of the engines might operate with residual fuel and two of them with distilled fuel. Depending on the area of operation, the ship is using the set of engines with the appropriate fuel. Such a solution might be plausible for ships frequently entering an ECA or a port. This is a typical tech65 See SOLAS, Chapter 2, Part C and the necessary amendments for all sorts of ships, as well as Directive 2006/87/EC for inland waterways in the EU.

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no-economic trade-off; it is meaningful only if compliance at a relatively lower cost is achieved. 54 The MEPC in 2011 considered fuel oil characteristics and parameters addressing air quality, ship safety, engine performance and crew health, but it was not possible to reach a consensus on and conclude proposals to prevent the supply of off-specification bunkers via a possible new mechanism for the quality control of marine fuels. This was attributed to the lack of sufficient information and data being available relative to the revised specification of marine fuels (ISO 8217:2010). In MEPC(67), in 2014, it was agreed to develop guidelines addressing responsibilities for those controlling and authorizing local fuel oil suppliers (e.g. criteria for the operation of local bunker suppliers and audit/ inspection of the local suppliers) as well as on the possibility of blending fuels on board supply barges and during delivery to the ship. In addition, one should be careful with the specification and testing methods of fuels. As per the ISO 8217:2005 specification, the DMA grade is limited to 1.5% m/m maximum sulphur content and the DMB and DMC grades to 2% m/m. Consequently, to be compliant, any of these fuel grades must be ordered with a tighter sulphur specification of 0.1% m/m at the maximum. Marine fuels are tested on the basis of ISO 8754:1992, a standard that has been subsequently revised to ISO 8754:2003. Their differences are not considered as significant in terms of the result obtained. Article 3 Maximum sulphur content of heavy fuel oil 1. 2.

3.

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Member States shall take all necessary steps to ensure that as from 1 January 2003 within their territory heavy fuel oils are not used if their sulphur content exceeds 1.00% by mass. Provided that the air quality standards for sulphur dioxide laid down in Directive 80/779/ EEC(10) or in any Community legislation which repeals and replaces these standards and other relevant Community provisions are respected and the emissions do not contribute to critical loads being exceeded in any Member State, a Member State may authorise heavy fuel oils with a sulphur content of between 1.00 and 3.00% by mass to be used in part or the whole of its territory. Such authorisation shall apply only while emissions from a Member State do not contribute to critical loads being exceeded in any Member State. (i) Subject to appropriate monitoring of emissions by competent authorities paragraphs 1 and 2 shall not apply to heavy fuel oils used: 1. in combustion plants which fall within the scope of Directive 88/609/EEC, which are considered new plants in accordance with the definition given in Article 2(9) of that Directive and which comply with the sulphur dioxide emission limits for such plants set out in Article 4 of and Annex IV to that Directive; 2. in other combustion plants, which do not fall under the scope of (a), where the emissions of sulphur dioxide from the plant are less than or equal to 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis; 3. for combustion in refineries, where the monthly average of emissions of sulphur dioxide averaged over all plants in the refinery (excluding combustion plants which fall under the scope of (a)), irrespective of the type of fuel or fuel combination used, are within a limit to be set by each Member State, which shall not exceed 1,700 mg/Nm3. (ii) Member States shall take the necessary measures to ensure that any combustion plant using heavy fuel oil with a sulphur concentration greater than that referred to in para-

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4. 5.

graph 1 shall not be operated without a permit issued by a competent authority, which specifies the emission limits. The provisions of paragraph 3 shall be reviewed and, if appropriate, revised in the light of any future revision of Directive 88/609/EEC. If a Member State avails itself of the possibilities referred to in paragraph 2, it shall, at least 12 months beforehand, inform the Commission and the public. The Commission shall be given sufficient information to assess whether the criteria mentioned in paragraph 2 are met. The Commission shall inform the other Member States. Within six months of the date on which it receives the information from the Member State, the Commission shall examine the measures envisaged and, in accordance with the procedure set out in Article 9, take a decision which it shall communicate to the Member States. This decision shall be reviewed every eight years on the basis of information to be provided to the Commission by the Member States concerned in accordance with the procedure set out in Article 9.

Article 3 of Directive 1999/32/EC has been replaced by Article 1(3) of Direc- 55 tive 2005/33/EC, which has been also revised by Article 1(3) of Directive 2012/33/EU. Directive 2012/33/EU introduces also Article 3a, as per Article 1(4). Following these amendments, the provisos currently in force are the following: 3. Article 3: Maximum Sulphur Content of Heavy Fuel Oil

1. 2.

Member States shall ensure that heavy fuel oils are not used within their ter- 56 ritory if their sulphur content exceeds 1% by mass. Until 31 December 2015, subject to appropriate monitoring of emissions by 57 competent authorities, paragraph 1 shall not apply to heavy fuel oils used: 1. in combustion plants which fall within the scope of Directive 2001/80/EC of the European Parliament and of the Council of 23 October 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants (12), which are subject to Article 4(1) or (2) or Article 4(3)(a) of that Directive and which comply with the emission limits for sulphur dioxide for such plants as set out in that Directive; 2. in combustion plants which fall within the scope of Directive 2001/80/EC, which are subject to Article 4(3)(b) and Article 4(6) of that Directive and the monthly average sulphur dioxide emissions of which do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis; 3. in combustion plants which do not fall under points (a) or (b), and the monthly average sulphur dioxide emissions of which do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis; 4. for combustion in refineries, where the monthly average of emissions of sulphur dioxide averaged over all combustion plants in the refinery, irrespective of the type of fuel or fuel combination used, but excluding plants which fall under points (a) and (b), gas turbines and gas engines, Orestis Schinas

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do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis. As from 1 January 2016, subject to appropriate monitoring of emissions by competent authorities, paragraph 1 shall not apply to heavy fuel oils used: 1. in combustion plants which fall within the scope of Chapter III of Directive 2010/75/EU of the European Parliament and of the Council (13), and which comply with the emission limits for sulphur dioxide for such plants as set out in Annex V to that Directive or, where those emission limit values are not applicable according to that Directive, for which the monthly average sulphur dioxide emissions do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis; 2. in combustion plants that do not fall under point (a), and the monthly average sulphur dioxide emissions of which do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis; 3. for combustion in refineries, where the monthly average of emissions of sulphur dioxide averaged over all combustion plants in the refinery, irrespective of the type of fuel or fuel combination used, but excluding plants falling under point (a), gas turbines and gas engines, do not exceed 1,700 mg/Nm3 at an oxygen content in the flue gas of 3% by volume on a dry basis. Member States shall take the necessary measures to ensure that no combustion plant using heavy fuel oil with a sulphur concentration greater than that referred to in paragraph 1 is operated without a permit issued by a competent authority, which specifies the emission limits.

58 3.

Article 3a Maximum sulphur content in marine fuel Member States shall ensure that marine fuels are not used within their territory if their sulphur content exceeds 3.50% by mass, except for fuels supplied to ships using emission abatement methods subject to Article 4c operating in closed mode.

59

Article 3a was introduced by Article 1(4) of Directive 2012/33/EU, and clarifies the issue of maximum sulphur content in marine fuel. As per this article, member states shall ensure that marine fuels are not used within their territory if their sulphur content exceeds 3.5% by mass, except for fuels supplied to ships using emission abatement methods subject to Article 4c operating in closed mode.

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Article 4 Maximum sulphur content in gas oil 1.

2.

3.

4.

5.

Member States shall take all necessary steps to ensure that gas oils, including marine gas oils, are not used within their territory as from: – July 2000 if their sulphur content exceeds 0.20% by mass, – 1 January 2008 if their sulphur content exceeds 0.10% by mass. By way of derogation from paragraph 1, Spain, for the Canary Islands, France, for the French Overseas Departments, Greece, for the whole or part of its territory, and Portugal, for the archipelagoes of Madeira and Azores may authorise the use of gas oils for marine use with a sulphur content in excess of the limits set out in paragraph 1. Provided that the air quality standards for sulphur dioxide laid down in Directive 80/779/EEC or in any Community legislation which repeals and replaces these standards and other relevant Community provisions are respected and the emissions do not contribute to critical loads being exceeded in any Member State, a Member State may authorise gas oil with a sulphur content between 0.10 and 0.20% by mass to be used in part or the whole of its territory. Such authorisation shall apply only while emissions from a Member State do not contribute to critical loads being exceeded in any Member State and shall not extend beyond 1 January 2013. If a Member State avails itself of the possibilities referred to in paragraph 3, it shall, at least 12 months beforehand, inform the Commission and the public. The Commission shall be given sufficient information to assess whether the criteria mentioned in paragraph 3 are met. The Commission shall inform the other Member States. Within six months of the date on which it receives the information from the Member State, the Commission shall examine the measures envisaged and, in accordance with the procedure set out in Article 9, take a decision which it shall communicate to the Member States.

Article 4 of Directive 1999/32/EC has also been severely revised by the Arti- 60 cle 1(4) of Directive 2005/33/EC and by Article 1(5) of Directive 2012/33/EU. Following these amendments the currently provisos in force are the following: 4. Article 4: Maximum Sulphur Content in Gas Oil

Member States shall ensure that gas oils are not used within their territory if 61 their sulphur content exceeds 0.10% by mass. Article 4a Maximum sulphur content of marine fuels used in territorial seas, exclusive economic zones and pollution control zones of Member States, including SOx Emission Control Areas and by passenger ships operating on regular services to or from Union ports 1.

2.

Member States shall take all necessary measures to ensure that marine fuels are not used in the areas of their territorial seas, exclusive economic zones and pollution control zones falling within SOx Emission Control Areas if the sulphur content of those fuels by mass exceeds: 1. 1.00% until 31 December 2014; 2. 0.10% as from 1 January 2015. This paragraph shall apply to all vessels of all flags, including vessels whose journey began outside the Union. The Commission shall have due regard to any future changes to the requirements pursuant to Annex VI to MARPOL applicable within SOx Emission Control Areas, and, where appropriate, without undue delay make any relevant proposals with a view to amending this Directive accordingly. Member States shall take all necessary measures to ensure that marine fuels are not used in the areas of their territorial seas, exclusive economic zones and pollution control zones if the sulphur content of those fuels by mass exceeds:

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3.

4.

5.

6. 7.

8.

9.

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1. 3.50% as from 18 June 2014; 2. 0.50% as from 1 January 2020. This paragraph shall apply to all vessels of all flags, including vessels whose journey began outside of the Union, without prejudice to paragraphs 1 and 4 of this Article and Article 4b. The application dates for paragraph 1 shall be as follows: 1. for the Baltic Sea area referred to in regulation 14(3)(a) of Annex VI to MARPOL, 11 August 2006; 2. for the North Sea: – 12 months after entry into force of the IMO designation, according to established procedures, or – 11 August 2007 whichever is the earlier; 3. for any other sea areas, including ports, that the IMO subsequently designates as SOx Emission Control Areas in accordance with regulation 14(3)(b) of Annex VI to MARPOL: 12 months after the date of entry into force of the designation. Member States shall be responsible for the enforcement of paragraph 1 at least in respect of: – vessels flying their flag, and – in the case of Member States bordering SOx Emission Control Areas, vessels of all flags while in their ports. Member States may also take additional enforcement action in respect of other vessels in accordance with international maritime law. Member States shall take all necessary measures to ensure that marine fuels are not used in their territorial seas, exclusive economic zones and pollution control zones falling outside SOx Emission Control Areas by passenger ships operating on regular services to or from any Union port if the sulphur content of those fuels exceeds 1.50% by mass until 1 January 2020. Member States shall be responsible for the enforcement of this requirement at least in respect of vessels flying their flag and vessels of all flags while in their ports. Member States shall require the correct completion of ships’ logbooks, including fuelchangeover operations. Member States shall endeavour to ensure the availability of marine fuels which comply with this Directive and inform the Commission of the availability of such marine fuels in its ports and terminals. If a ship is found by a Member State not to be in compliance with the standards for marine fuels which comply with this Directive, the competent authority of the Member State is entitled to require the ship to: 1. present a record of the actions taken to attempt to achieve compliance; and 2. provide evidence that it attempted to purchase marine fuel which complies with this Directive in accordance with its voyage plan and, if it was not made available where planned, that attempts were made to locate alternative sources for such marine fuel and that, despite best efforts to obtain marine fuel which complies with this Directive, no such marine fuel was made available for purchase. The ship shall not be required to deviate from its intended voyage or to delay unduly the voyage in order to achieve compliance. If a ship provides the information referred to in the first subparagraph, the Member State concerned shall take into account all relevant circumstances and the evidence presented to determine the appropriate action to take, including not taking control measures. A ship shall notify its flag State, and the competent authority of the relevant port of destination, when it cannot purchase marine fuel which complies with this Directive. A port State shall notify the Commission when a ship has presented evidence of the nonavailability of marine fuels which comply with this Directive. Member States shall, in accordance with regulation 18 of Annex VI to MARPOL: 1. maintain a publicly available register of local suppliers of marine fuel; 2. ensure that the sulphur content of all marine fuels sold in their territory is documented by the supplier on a bunker delivery note, accompanied by a sealed sample signed by the representative of the receiving ship;

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10.

take action against marine fuel suppliers that have been found to deliver fuel that does not comply with the specification stated on the bunker delivery note; 4. ensure that remedial action is taken to bring any non-compliant marine fuel discovered into compliance. Member States shall ensure that marine diesel oils are not placed on the market in their territory if the sulphur content of those marine diesel oils exceeds 1.50% by mass.

Article 4b Maximum sulphur content of marine fuels used by ships at berth in Union ports 1.

2.

3.

Member States shall take all necessary measures to ensure that ships at berth in Union ports do not use marine fuels with a sulphur content exceeding 0,10% by mass, allowing sufficient time for the crew to complete any necessary fuel-changeover operation as soon as possible after arrival at berth and as late as possible before departure. Member States shall require the time of any fuel-changeover operation to be recorded in ships’ logbooks. Paragraph 1 shall not apply: 1. whenever, according to published timetables, ships are due to be at berth for less than two hours; 2. to ships which switch off all engines and use shore-side electricity while at berth in ports. Member States shall ensure that marine gas oils are not placed on the market in their territory if the sulphur content of those marine gas oils exceeds 0.10% by mass.

Article 4c Emission abatement methods 1.

2.

3. 4. 5.

Member States shall allow the use of emission abatement methods by ships of all flags in their ports, territorial seas, exclusive economic zones and pollution control zones, as an alternative to using marine fuels that meet the requirements of Articles 4a and 4b, subject to paragraphs 2 and 3 of this Article. Ships using the emission abatement methods referred to in paragraph 1 shall continuously achieve reductions of sulphur dioxide emissions that are at least equivalent to the reductions that would be achieved by using marine fuels that meet the requirements of Articles 4a and 4b. Equivalent emission values shall be determined in accordance with Annex I. Member States shall, as an alternative solution for reducing emissions, encourage the use of onshore power supply systems by docked vessels. The emission abatement methods referred to in paragraph 1 shall comply with the criteria specified in the instruments referred to in Annex II. Where justified in the light of scientific and technical progress regarding alternative emission abatement methods and in such a way as to ensure strict consistency with the relevant instruments and standards adopted by the IMO, the Commission shall: 1. be empowered to adopt delegated acts in accordance with Article 9a amending Annexes I and II; 2. adopt implementing acts laying down the detailed requirements for monitoring of emissions, where appropriate. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 9(2).

Article 4d Approval of emission abatement methods for use on board ships flying the flag of a Member State 1.

Emission abatement methods falling within the scope of Council Directive 96/98/EC (14) shall be approved in accordance with that Directive.

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Emission abatement methods not covered by paragraph 1 of this Article shall be approved in accordance with the procedure referred to in Article 3(2) of Regulation (EC) No 2099/2002 of the European Parliament and of the Council of 5 November 2002 establishing a Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) (15), taking into account: 1. guidelines developed by the IMO; 2. the results of any trials conducted under Article 4e; 3. effects on the environment, including achievable emission reductions, and impacts on ecosystems in enclosed ports, harbours and estuaries; and 4. the feasibility of monitoring and verification.

Article 4e Trials of new emission abatement methods Member States may, in cooperation with other Member States, as appropriate, approve trials of ship emission abatement methods on vessels flying their flag, or in sea areas within their jurisdiction. During those trials, the use of marine fuels meeting the requirements of Articles 4a and 4b shall not be mandatory, provided that all of the following conditions are fulfilled: the Commission and any port State concerned are notified in writing at least six months before trials begin; permits for trials do not exceed 18 months in duration; all ships involved install tamper-proof equipment for the continuous monitoring of funnel gas emissions and use it throughout the trial period; all ships involved achieve emission reductions which are at least equivalent to those which would be achieved through the sulphur limits for fuels specified in this Directive; there are proper waste management systems in place for any waste generated by the emission abatement methods throughout the trial period; there is an assessment of impacts on the marine environment, particularly ecosystems in enclosed ports, harbours and estuaries throughout the trial period; and full results are provided to the Commission, and made publicly available, within six months of the end of the trials.

1. 2. 3. 4. 5. 6. 7.

Article 4f Financial measures Member States may adopt financial measures in favour of operators affected by this Directive where such financial measures are in accordance with State aid rules applicable and to be adopted in this area.

62

As per the original and amended text of this article, the focus lies on gas oil, marine fuels and their sulphur content. Inevitably, a matter of definition comes up; since gas fuels, whether LNG, LPG, CNG or their blends, are not ‘liquid fuels’ per se, in the manner in which they are used by the engine or other devices, these would appear to fall outside the scope of this directive and, hence, would be usable. As these gas fuels have negligible sulphur content, they could be considered a viable alternative; therefore, it could be acceptable to use a mix of these gas fuels and a gas oil, or residual fuel oil, with a sulphur content above 0.1% m/m, in order to achieve compliance and an economic benefit. In practice, this blending arrangement should be complied with the abatement technology requirements (continuous equivalency-even at minimum loading-and having a

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continuous emission monitoring system fitted).66 Such an arrangement should also be approved by the administration of each member state of the EU in whose ports that arrangement is to be used. The directive indicates that in undertaking that approval, any relevant IMO guidelines should be taken into account, including the guidelines of Regulation 14(1) and 14(4) of MARPOL Annex VI.67 The amended Article 4a clarifies the application of limits on ships as there is 63 no clear mention in the previous articles 1, 2, and 3. This article states that the requirements apply to all ships irrespective of flag, ship type, date of construction or tonnage, and trade. A recent press release of the Baltic and International Maritime Council (BIMCO) reveals the complexity of this issue, especially when a ship is found by a member state not to be in compliance with the standards for marine fuels that comply with this directive. In the BIMCO press release,68 a case where charterers obtained an exemption for using non-compliant fuels without the consent of the owners is reported. This case raises two important concerns: Is it possible for the charterers and, generally, for a party other than the ship’s owner or manager, to apply for an exemption? Is it necessary to have the consent of the owners? Apparently, the decision of the charterers impacts the trading capacity of the ships and the decision-making capacity of the owners. A ship that arrives without sufficient compliant fuels in an ECA port with an exemption, might be delivered to the owners, and any sanctions by the authorities will be against the ship-i.e. the owners, and not the charterers. The same source reports also that the competent authority confirmed that the ship owner or the owner’s representative, such as the master or agent, must apply for an exemption due to non-availability of the compliant fuel, as per the provisos of MARPOL and the sulphur directive that consider them liable for any relevant violation. Moreover, it is interesting to point out the provisos of paragraphs 5a, where the ship must present a record of the actions taken to attempt to achieve compliance, and 5b, where the ship must provide evidence that it attempted to purchase marine fuel that complies with this directive in accordance with its voyage plan and, if it was not made available where planned, that attempts were made to locate alternative sources for such marine fuel and that, despite best efforts to obtain marine fuel which complies with this directive, no such marine fuel was made available for purchase, vis-á-vis the following proviso of this article, where the ship shall not be required to deviate from its intended voyage or to delay unduly the voyage in order to achieve compliance. Similar controversies and irregularities remain to be investigated and reported. Article 4b introduces two interesting implications of this regulation: the is- 64 sues of changeover and cold ironing. The change-over requirement does not ap66 Namely: continuous equivalency, even at minimum loading, and installation of a continuous emission monitoring system; see p. and Annex II of Directive 2012/33/EU. 67 See Annex I of Directive 2012/33/EU. 68 BIMCO News Article 23/2/2015 https://www.bimco.org/news/2015/02/23_non-availability_of_compliant_fuel.aspx.

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ply to ships at berth for less than two hours. The idea behind the time window of two hours addresses the cases of ferries and ships engaged in scheduled services, as per the published timetable;69 therefore, there is no general exemption for ships that will be ‘at berth’ for less than two hours. 65 The issue of cold ironing deserves some attention; apparently, there are clear benefits for the population leaving close to the port and the employees on board, at the port and at the vicinity. Although the technology is mature and well-established, the investment depends on the expected traffic and the average consumption of the ships at berth-i.e. the investment risk relates to the appropriate dimensioning of the technical solution. Assuming that a cruise ship is at berth, then an average load of 40MW is estimated. If the port is capable of accommodating five cruise ships, then a system for 200MW should be considered. However, if only one or two ships are regularly using the berth and the shore connection, then the system is under-utilized and the investment might be deemed unreasonable, unjustifiable or inappropriate. The stepwise approach of installing transformers for 40W per line increases the cost and lessens any social and financial benefit. In addition, the selected transfer voltage and, therefore, the installed cables affect the cost as well as the number of transformers. So far, these systems are not standardized; hence, it is difficult for the port managers to determine the most suitable technical solutions at the lower possible costs. It is, however, expected to have more ports offering or demanding cold ironing to the ship operators due to the substantial improvement of the air in the port and the vicinity. The issue of cold ironing is closely related with the emissions of GHG and nGHG; therefore, there is an emerging set of incentives and regulations at the regional or the local level. The regulations of the California Air Resources Board (CARB) require that auxiliary diesel engines must be shut down and gridbased power must be used for specified percentages of fleet visits. Moreover, the fleet’s at-berth auxiliary engine power generation (kW-hrs) must be reduced by the same percentages. As per the CARB regulations, vessel operators may employ any combination of technologies to achieve equivalent reductions. Other ports encourage reducing GHG and nGHG emissions with financial incentives, such as the reduction of port dues. Finally, many claim that the benefits of using grid-based power are manifold, since renewable power sources might be deployed as well; these arguments are not always valid, and one should be very careful when assessing a solution from a technical, social, economic and environmental point of view. 66 The analysis of Article 4b would not be complete unless the issue of the logbooks is addressed too. The Directive is not specific hence whichever logbook is specified or is the appropriate for recording the relevant procedures. This should be one of the logbooks that is countersigned by either the master or the chief engineer. Although national law and regulations determine the entries and the in69 See Article 2(3)g.

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formation recorded in the logbooks, the interest of the directive lies predominantly with time instances, and more specifically with the following ones: – the time at which the ship is considered to be ‘secured at berth’70 – the time at which the first action (as given in the relevant procedures) is taken – the necessary time for the effective changeover71 – the time before the departure, where several systems should be operative especially when the ship is engaged in a regular service.72 Obviously, along with the time, the ship’s positions together with details of 67 the tanks involved and fuel used are also monitored. As there is no other manifested deviation or difference from the regulation of MARPOL, these entries provide evidence to all sorts of engaged officers, inspectors, surveyors and auditors, and verify not only the quality of the fuel used, but also the time of the commencement of the operation and the necessary time intervals of the changeover procedure. Article 4c was originally introduced by Article 1(5) of Directive 2005/33/EC, 68 which was replaced by Article 1(7) of Directive 2012/33/EU, and clarifies the issue of emission abatement methods. As per this article: 1. Member states shall allow the use of emission abatement methods by ships of all flags in their ports, territorial seas, exclusive economic zones and pollution control zones, as an alternative to using marine fuels that meet the requirements of Articles 4a and 4b, subject to paragraphs 2 and 3 of this article. 2. Ships using the emission abatement methods referred to in paragraph 1 shall continuously achieve reductions of sulphur dioxide emissions that are at least equivalent to the reductions that would be achieved by using marine fuels that meet the requirements of Articles 4a and 4b. Equivalent emission values shall be determined in accordance with Annex I. 3. Member states shall, as an alternative solution for reducing emissions, encourage the use of onshore power supply systems through docked vessels. 4. The emission abatement methods referred to in paragraph 1 shall comply with the criteria specified in the instruments referred to in Annex II of Directive 2012/33/EU. 5. Where justified in the light of scientific and technical progress regarding alternative emission abatement methods and in such a way as to ensure strict consistency with the relevant instruments and standards adopted by the IMO, the commission shall:

70 See Article 2(3)g. 71 See Article 2(3)g. 72 See Article 2(d)3g.

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1.

be empowered to adopt delegated acts in accordance with Article 9a amending Annexes I and II 2. adopt implementing acts laying down the detailed requirements for the monitoring of emissions, where appropriate. These implementing acts shall be adopted in accordance with the examination procedure referred to in Article 9(2). It shall be noted that the term abatement is not provided in the MARPOL Annex VI, Regulation 2 on Definition. The term is introduced in the following Article 2. 69 The directive allows for approved abatement technology to be used in order to achieve the SOx limits. Practically, only the use of scrubbers, as EGCS, can be considered. Even so, to be acceptable, such devices must:73 – be fitted with continuous emission monitoring equipment – continuously at least achieve the required equivalency74 – provide evidence that the wash water from such systems would have no impact on local ecosystems 70 The approval of the directive indicates that any relevant IMO guidelines should be taken into account.75 With regard to EGCS, there are the current guidelines of MEPC.170(57) and MEPC.184(59). Be that as it may, it should be noted the final approval, in relation to the requirements of the directive, is subject to the satisfaction of the relevant department of the administration of each member state of the EU in whose ports that equipment is to be used. This approach, therefore, differs from the approach of MARPOL Annex VI, where a port state would accept the flag state’s approval of such equipment, provided that this was based on the relevant IMO guidelines. In practice, not substantial issues and problems are expected, as the manufacturers of abatement systems seek to acquire an international approval. 71 Article 4d was introduced by Article 1(8) of Directive 2012/33/EU, and clarifies the issue of the approval of emission abatement methods for use on board ships flying the flag of a member state. This article states: 1. Emission abatement methods falling within the scope of Council Directive 96/98/EC shall be approved in accordance with that directive.76 2. Emission abatement methods not covered by paragraph 1 of this article shall be approved in accordance with the procedure referred to in Article 3(2) of Regulation (EC) No 2099/2002 of the European Parliament and of the Council of 5 November 2002 establishing a Committee on Safe Seas and the Prevention of Pollution from Ships (COSS),77 taking into account: 1. guidelines developed by the IMO 2. the results of any trials conducted under Article 4e 73 74 75 76 77

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effects on the environment, including achievable emission reductions, and impacts on ecosystems in enclosed ports, harbours and estuaries 4. the feasibility of monitoring and verification Article 4e was also introduced by Article 1(8) of Directive 2012/33/EU, and 72 clarifies the issue of the trials of new emission abatement methods. As per this new article, member states approve the emission abatement methods on ships flying their flag or in the seas of their jurisdiction. Member states may also cooperate towards a common approval scheme. During those trials, the use of marine fuels meeting the requirements of Articles 4a and 4b shall not be mandatory, provided that all of the following conditions are fulfilled: 1. the commission and any port state concerned are notified in writing at least six months before trials begin 2. permits for trials do not exceed 18 months in duration 3. all ships involved install tamper-proof equipment for the continuous monitoring of funnel gas emissions and use it throughout the trial period 4. all ships involved achieve emission reductions that are at least equivalent to those which would be achieved through the sulphur limits for fuels specified in this directive 5. there are proper waste management systems in place for any waste generated by the emission abatement methods throughout the trial period 6. there is an assessment of impacts on the marine environment, particularly ecosystems in enclosed ports, harbours and estuaries throughout the trial period 7. full results are provided to the commission, and made publicly available, within six months of the end of the trials Considering the provisos of Articles 2, 3 and 4 as amended in 2005 and 2012, 73 the use of alternative fuels towards compliance might be contemplated. The options are: 1. Dual fuel systems, such as CNG or LNG and diesel 2. Hydrogen 3. Biodiesel Hydrogen is not yet technologically mature as it has a low energy density and 74 the production of hydrogen incurs high costs; however, technological advances should provide efficient solutions in the near future. Biodiesel is not an option either, as it does not reduce NOx emissions without additional abatement technology. However, the consideration of biodiesel blends could be possible. The strict ‘at berth’ requirements are not specifically limited or only oriented towards petroleum-based liquid fuel oils and, hence, biodiesel, which contains inherently negligible sulphur, could be used. Nevertheless, there are many technical concerns with regard to the use of biodiesel and its blends in marine fuel oil systems; long-term storage stability, component corrosion, propensity to microbial spoilage, the suitability of an individual ship’s machinery and ancillary

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equipment are only some of the concerns. When everything else has been taken into consideration, the Bunker Deliver Note (BDN) covering that fuel, whether 100% biodiesel or a blend, should provide the exact information on the fuel’s actual sulphur content. 75 Dual fuel systems seem to offer a viable technical alternative. Engine manufacturers market a dual-fuel four-stroke engine, which is able to run on natural gas and light fuel oil; if necessary, the engine can be switched between the two fuels during operation and the usage of heavy fuel oil is also possible subject to small modifications. Manufacturers claim a thermal efficiency of 47%, which is significantly higher than can be reached with any other gas engines. Sox and NOx emissions produced in a dual-fuel engine is only a few per cent of the amount produced in a conventional two-stroke engine. The carbon dioxide emissions are also significantly lower and the operational costs are slightly smaller. However, a higher specific fuel oil consumption increases, thus making operation slightly more expensive.78 Article 5 Change in the supply of fuels If, as a result of a sudden change in the supply of crude oil, petroleum products or other hydrocarbons, it becomes difficult for a Member State to apply the limits on the maximum sulphur content referred to in Articles 3 and 4, that Member State shall inform the Commission thereof. The Commission may authorise a higher limit to be applicable within the territory of that Member State for a period not exceeding six months; it shall notify its decision to the Council and the Member States. Any Member State may refer that decision to the Council within one month. The Council, acting by a qualified majority, may adopt a different decision within two months.

5. Article 5: Change in the Supply of Fuels 76

This article has not been revised neither in 2005 nor in 2012, aims to include some of the MARPOL Annex VI Regulation 18 provisos, and reveals the concerns on fuel availability. Although the text is clear, the question of fuel availability on the basis of MARPOL and of the Sulphur Directive, as a justification or argument of non-compliance is raised. As these two instruments are separated and not intertwined,79 one should interpret them in a different way; in MARPOL, the fuel availability clause is not considered as a relaxation of the requirements. Directive 1999/32/EEC as amended, does not provide a detailed explanation of the line to be taken in a such a case. Other national instruments, such as the California Regulated Water regulations, clarify the subject matter in a better way. Experience suggests that effective, proportionate and dissuasive action is expected by the commission. 78 See Wahlström J. et al. (2006). Ship emissions and technical emission reduction potential in the Northern Baltic Sea. Report of the Finnish Environment Institute. 79 See as an example of intertwined instruments, any directive or regulation that inserts an IMO instrument into the European regulatory framework, such as Regulation 782/2003 on the antifouling protection.

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Article 6 Sampling and analysis 1.

2.

Member States shall take all necessary measures to check by sampling that the sulphur content of fuels used complies with Articles 3 and 4. The sampling shall commence within six months of the date on which the relevant limit for maximum sulphur content in the fuel comes into force. It shall be carried out with sufficient frequency and in such a way that the samples are representative of the fuel examined. The reference method adopted for determining the sulphur content shall be that defined by: 1. ISO method 8754 (1992) and PrEN ISO 14596 for heavy fuel oil and marine gas oil; 2. EN method 24260 (1987), ISO 8754 (1992) and PrEN ISO 14596 for gas oil. The arbitration method will be PrEN ISO 14596. The statistical interpretation of the verification of the sulphur content of the gas oils used shall be carried out in accordance with ISO standard 4259 (1992).

Article 6 has been replaced by Article 1(6) of Directive 2012/33/EU, as fol- 77 lows: 6. Article 6: Sampling and Analysis

1.

2.

3.

Member States shall take all necessary measures to check by sampling that 78 the sulphur content of fuels used complies with Articles 3, 3a, 4, 4a and 4b. The sampling shall commence on the date on which the relevant limit for maximum sulphur content in the fuel comes into force. It shall be carried out periodically with sufficient frequency and quantities in such a way that the samples are representative of the fuel examined, and in the case of marine fuel, of the fuel being used by vessels while in relevant sea areas and ports. The samples shall be analysed without undue delay. The following means of sampling, analysis and inspection of marine fuel 79 shall be used: 1. inspection of ships’ log books and bunker delivery notes; and, as appropriate, the following means of sampling and analysis: 2. sampling of the marine fuel for on-board combustion while being delivered to ships, in accordance with the Guidelines for the sampling of fuel oil for determination of compliance with the revised MARPOL Annex VI adopted on 17 July 2009 by Resolution 182(59) of the MEPC of the IMO, and analysis of its sulphur content; or 3. sampling and analysis of the sulphur content of marine fuel for onboard combustion contained in tanks, where technically and economically feasible, and in sealed bunker samples on board ships. The Commission shall be empowered to adopt implementing acts concern- 80 ing: 1. the frequency of sampling; 2. the sampling methods; 3. the definition of a sample representative of the fuel examined. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 9(2). Orestis Schinas

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The reference method adopted for determining the sulphur content shall be ISO method 8754 (2003) or PrEN ISO 14596 (2007). In order to determine whether marine fuel delivered to and used on board ships is compliant with the sulphur limits required by Articles 3a, 4, 4a and 4b the fuel verification procedure set out in Appendix VI to Annex VI to MARPOL shall be used. 82 The issue of sampling and verification of the sulphur content is complicated and thorny; frequently, it is also controversial. Normally, the relevant BDN, which under MARPOL Annex VI reg. 18 are required to be retained on board for a minimum of 3 years from the date of delivery, along with the Oil Record Book detailing into which tanks the fuel was to be loaded, would be considered for inspection. Nevertheless, the BDN only shows the sulphur content of the fuel as received, not as consumed. It is possible that storage, piping, transfer and treatment equipment might be contaminated by fuels containing more sulphur than allowed-e.g. due to a changeover process, resulting in a mix that is not compliant. As a result, the inspector may require a sample of the fuel oil being used to be drawn, which would then be analysed to verify that the fuel was compliant, as per the provisos of this directive. 83 Moreover, there is an issue with the uniformity of BDN-i.e. with the available information provided. As per Regulation 18 of MARPOL Annex VI, the following information should be included in the BDN provided to the receiving ship: – Name and IMO number of receiving ship – Port – Date of commencement of delivery – Name, address and telephone number of marine fuel oil supplier – Product name(s) – Quantity (metric tons) – Density at 15ºC (kg/m3)80 – Sulphur content (% m/m)81 – A declaration signed and certified by the fuel oil supplier’s representative that the fuel oil supplied is in conformity with Regulation 14(1) or (4)(a) and Regulation 18(1) of Annex VI. 84 There is no specific format for a BDN. Bunker suppliers may, therefore, use their own stationery provided that all the required information is included. According to the International Council on Combustion Engines (CIMAC), the requirements for BDN documentation to prove compliance with sulphur emission regulations contain an inherent problem.82 CIMAC reports that the IMO calls for suppliers to certify that ‘the fuel oil supplied is in conformity with the applicable paragraph of regulation 14.1 or 14.4 and regulation 18.3 of this Annex.’ As per

80 Fuel oil should be tested in accordance with ISO 3675 or ISO 12185. 81 Fuel oil should be tested in accordance with ISO 8754. 82 See http://shipandbunker.com/news/world/488067-review-finds-inherent-problem-in-imo-bdn -declaration, visited on 19 December 2014.

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the same source, this reference to regulation 14.1 or 14.4 is inappropriate for two reasons: 1. Relevant guidelines permit ships to comply with alternative SOx reduction methods, such as the use of exhaust gas scrubber; consequently, it must be recognized that it is fully acceptable that the sulphur content of the fuel oil as supplied is higher than that as given by regulation 14.1 or 14.4, and 2. The regulations refer to fuel oil used on board ships rather than fuel supplied to ships, even though suppliers have no way to know or to control whether a vessel operator will use the fuel as is or mix it with other fuel oils on board, or whether a changeover procedure is the appropriate one when entering or leaving an ECA. Apart from CIMAC, a large number of countries and professional groups, 85 such as the Institute of Marine Engineering, Science and Technology (IMarEST), intervene in the discussion within the IMO framework and ask for wording that reflects operational pragmatism and the reality of the situation. Therefore, an amendment to Regulation 18.3 of MARPOL Annex VI is suggested. Originally, the last paragraph of Appendix V of MARPOL Annex VI requires that the BDN should have ‘A declaration signed and certified by the fuel oil supplier’s representative that the fuel oil supplied is in conformity with the applicable paragraph of regulation 14.1 or 14.4 and regulation 18.3 of this Annex; the proposed addition by IMarEST reads: ‘If the receiver of the fuel oil identifies that the fuel oil is intended to be used in combination with an approved equivalent means of compliance in accordance with Regulation 4 of MARPOL Annex VI, the declaration shall certify that the fuel oil supplied is in conformity with regulation 18.3 of this Annex.’ The proposal was put to the 67th meeting of the MEPC 67 recently to add text to the BDN to reflect situations where the buyer would be using abatement technology, or scrubbers, to meet sulphur emission regulations.83 Clause 6.1 relates Articles 3 and 4 of the directive and specifies the com- 86 mencement of the sampling procedure. No grace period is given or implied. Inspections focus on logbooks and BDN; other technical means could be deployed determining the content of sulphur in the exhaust gases. A beam sent across the gas plume can verify compliance. The data can be stored and assist control and enforcement officers to monitor the quality of the exhaust gases when arriving, at berth, when departing or when sailing in an ECA. More technologically advanced and accurate alternatives might be developed, as the quality of the exhaust gases in GHG and nGHG is high in the agenda and there is a global interest. 83 It was agreed in MEPC 67 to forward the proposed amendment to the Sub-Committee on Pollution Prevention and Response (PPR); PPR is scheduled to meet in January 2015. If the January PPR session comes to an agreement on the amendment, this could be put forward to MEPC 68 in May in 2015 for approval, due to the urgency of the deadline of 1/1/2015 for the 0.1% limit.

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Port state control (PSC) may test and verify the so-called MARPOL sample taken during delivery to the ship in accordance with IMO guidelines, which suggest it should be taken at the receiving vessel’s inlet manifold. PSC officers may also take samples for analysis of the sulphur content of marine fuel for on-board combustion contained in tanks, which means an ‘in-use’ sample of the sample from a fuel tank. Sulphur verification procedures should use Articles 3a, 4, 4a and 4b set out in Appendix VI to MARPOL Annex VI. Differences in the verification standards and procedures cause consternation in the industry, as the global harmonization of standards is jeopardized; therefore, it is of vital importance to determine the quality of fuels on the basis of a globally agreed standard. As per recent Implementation Decision of the EU,84 rules concerning inspections, sampling methods and frequency, as well as reporting, are issued. This document clarifies the enforcement pattern, considering also the limits of 0.1% of sulphur as from 1 January 2015. It is stated that sampling of marine fuel on board ships should be carried out either by analysing a fuel spot sample from the ship’s fuel service system, or by analysing the relevant sealed bunker samples on board. This Implementation Decision aims at identifying bunker suppliers, who regularly provide non-compliant fuels as well as ship operators violating the set limits. Last but not least, Member States should execute a minimum number of inspections. The number of inspections to ships calling the ports of a Member State depends on the proximity to an ECA.85 Generally, Member States must carry out inspections on at least one-tenth of the ships calling each year, and test the fuel on at least 20–40% of the inspected ships. Finally, Member States should also report annually the results of the inspections.86 This Implementation Decision proves and indicates the significance of the sulphur Directive to European policy-makers. Article 7 Reporting and review 1.

2.

On the basis of the results of the sampling and analysis carried out in accordance with Article 6, Member States shall by 30 June of each year supply the Commission with a short report on the sulphur content of the liquid fuels falling within the scope of this Directive and used within their territory during the preceding calendar year. This report shall include a summary of derogations granted pursuant to Article 3(3). On the basis inter alia of the annual reports submitted in accordance with paragraph 1 and the observed trends in air quality and acidification, the Commission shall, by 31 December 2006, submit a report to the European Parliament and to the Council. The Commission may submit with its report proposals aimed at revising this Directive and in particular the limit values laid down for each fuel category and the exceptions and derogations provided for in Article 3(2) and (3), and Article 4(2) and (3).

84 Commission Implementing Decision (EU) 2015/253 of 16 February 2015 laying down the rules concerning the sampling and reporting under Council Directive 1999/32/EC as regards the sulphur content of marine fuels. 85 See Article 3, ibid. 86 See Article 7, ibid.

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The Commission shall consider which measures could be taken to reduce the contribution to acidification of the combustion of marine fuels other than those specified in Article 2(3) and, if appropriate, make a proposal by the end of 2000.

Article 7 of Directive 1999/32/EC has also been severely revised by Article 88 1(7) of Directive 2005/33/EC and by Article 1(10) of Directive 2012/33/EU. Following these amendments, the currently provisos in force are the following: 7. Article 7: Reporting and Review

1.

2.

3.

4.

5.

Each year by 30 June, Member States shall, on the basis of the results of the sampling, analysis and inspections carried out in accordance with Article 6, submit a report to the Commission on the compliance with the sulphur standards set out in this Directive for the preceding year. On the basis of the reports received in accordance with the first subparagraph of this paragraph and the notifications regarding the non-availability of marine fuel which complies with this Directive submitted by Member States in accordance with the fifth subparagraph of Article 4a(5b), the Commission shall, within 12 months from the date referred to in the first subparagraph of this paragraph, draw up and publish a report on the implementation of this Directive. The Commission shall evaluate the need for further strengthening the relevant provisions of this Directive and make any appropriate legislative proposals to that effect. The Commission may adopt implementing acts concerning the information to be included in the report and the format of the report. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 9(2). By 31 December 2013 the Commission shall submit a report to the European Parliament and to the Council which shall be accompanied, if appropriate, by legislative proposals. The Commission shall consider in its report the potential for reducing air pollution taking into account, inter alia: annual reports submitted in accordance with paragraphs 1 and 1a; observed air quality and acidification; fuel costs; potential economic impact and observed modal shift; and progress in reducing emissions from ships. The Commission shall, in cooperation with Member States and stakeholders, by 31 December 2012, develop appropriate measures, including those identified in the Commission’s staff working paper of 16 September 2011 entitled “Pollutant emission reduction from maritime transport and the sustainable waterborne transport toolbox” promoting compliance with the environmental standards of this Directive, and minimising the possible negative impacts. The Commission shall be empowered to adopt delegated acts in accordance with Article 9a concerning the adaptations of Article 2, points 1, 2, 3, 3a, 3b

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90

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and 4, point (b) of Article 6(1a) and Article 6(2) to scientific and technical progress. Such adaptations shall not result in any direct changes to the scope of this Directive or to sulphur limits for fuels specified in this Directive. 94 This article describes the steps towards the evolution of the Sulphur Directive. Data collected from the member states will be compiled by the commission and will provide the basis for the subsequent steps. The so-called ‘EU sustainable toolbox approach’ aims to:87 – ensure regulatory certainty for safe and secure use and implementation of clean ship technology (scrubbing technology, SSE and alternative fuels [notably LNG]) – facilitate green infrastructure development – identify innovative financial solutions and mechanisms at EU, national and industry level – foster research, development and innovation, enhancing international cooperation 95 The first progress report on the implementation of the Commission Staff Working Paper was issued in June 2013.88 In the ‘toolbox’ and the ‘first progress report’, the commission focuses mainly on the alternative fuels and specifically the issue of infrastructure. There is a strong impression, if not certainty, that LNG is promoted as alternative fuel and, especially, for ships.89 The commission claims that the environmental record of shipping must be further improved by both cleaner fuels and technology and operational measures. This raises concerns considering the current gold plating introduced by this Sulphur Directive vis-á-vis the framework and provisos of MARPOL Annex VI. Moreover, it is claimed that the commission, the EU member states and marine industry stakeholders are increasing efforts towards identifying cost-effective measures to ensure compliance with environmental standards, in order to achieve the long-term objective of ‘zero-waste, zero-emission’ EU shipping.90

87 Commission Staff Working Paper, `Pollutant emission reduction from maritime transport and the Sustainable Waterborne Transport Toolbox` of 16 September 2011, SEC(2011)1052 final, http://ec.europa.eu/environment/air/transport/pdf/ships/sec_2011_1052.pdf. 88 Report from the Commission to the European Parliament and the Council, First Progress report on the implementation of the Commission Staff Working Paper ‘Pollutant emission reduction from maritime transport and the Sustainable Waterborne Transport Toolbox’, COM 475, 28/6/2013. 89 See Clean Power for Transport Package, adopted by the commission on 24 January 2013, and specifically LNG Action Plan: Actions towards a comprehensive EU framework on LNG for shipping, SWD (2013)4 final. 90 See also some remarks on this issue in the last Section.

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Article 8 Amendments to Directive 93/12/EEC 1.

2.

Directive 93/12/EEC is amended as follows: 1. in Article 1, paragraph 1(a) and paragraph 2 are deleted; 2. in Article 2, the first subparagraph of paragraph 2 and paragraph 3 are deleted; 3. Articles 3 and 4 are deleted. Paragraph 1 shall apply as from 1 July 2000.

8. Article 8: Amendments

This article is deleted, as per Article 1 (11) of Directive 2012/33/EU.

96

Article 9 Advisory Committee The Commission shall be assisted by a committee of an advisory nature composed of the representatives of the Member States and chaired by the representative of the Commission. The representative of the Commission shall submit to the committee a draft of the measures to be taken. The committee shall deliver its opinion on the draft, within a time limit which the chairman may lay down according to the urgency of the matter, if necessary by taking a vote. The opinion shall be recorded in the minutes; in addition, each Member State shall have the right to ask to have its position recorded in the minutes. The Commission shall take the utmost account of the opinion delivered by the committee. It shall inform the committee of the manner in which its opinion has been taken into account.

This article has been replaced, as per Article 1 (12) of Directive 2012/33/EU, 97 as follows: 1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers.91 2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply. Where the committee delivers no opinion, the Commission shall not adopt the 98 draft implementing act and the third subparagraph of Article 5(4) of Regulation (EU) No182/2011 shall apply. One should be careful, as this text replaces also the text of Article 1 (8) of 99 Directive 2005/33/EC. Moreover, Article 9a is inserted: 9. Article 9a: Exercise of the Delegation

1. 2.

The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. The power to adopt delegated acts referred to in Article 4c(4) and Article 7(4) shall be conferred on the Commission for a period of five years from

91 OJ L 55, 28.2.2011, p. 13.

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17 December 2012. The Commission shall draw up a report in respect of the delegation of power not later than nine months before the end of the fiveyear period. The delegation of power shall be tacitly extended for periods of an identical duration, unless the European Parliament or the Council opposes such extension not later than three months before the end of each period. 3. The delegation of power referred to in Article 4c(4) and Article 7(4) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the powers specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 5. A delegated act adopted pursuant to Article 4c(4) and Article 7(4) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council. 100 Apparently, the commission aims to accelerate the adoption of instruments and enable the swift adoption of technologies considered by the IMO. The links to Article 4c(4) and 7(4) support this view, as in these articles, the consideration of ‘scientific and technical progress’ as well as the need of streamlining and of consistency with the instruments of the IMO are highlighted. One could also consider this article as an effort to harmonize the voice of European states, members to the IMO and of the EU, which empowers also the voice of the EU as a supranational institution in the IMO. Moreover, one could also praise the interest of the EC to enforce environmental policies to the benefit of people. On the other hand, this could be an inkling of the intention of the commission to supersede the EU member states in the decision-making process of the IMO as well as to promote European priorities over national ones. Article 10 Transposition Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive before 1 July 2000. They shall immediately inform the Commission thereof. When Member States adopt these provisions, these shall contain a reference to this Directive or shall be accompanied by such reference at the time of their official publication. The procedure for such reference shall be adopted by Member States. Member States shall communicate to the Commission the text of the provisions of national law which they adopt in the field covered by this Directive.

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10. Articles 10-13

This article seems to be identical to the relevant transposition articles of many 101 other directives. Following also the last revision of 2012, the member states shall comply by 18 June 2014. The transposition should not be a complicated issue in theory, as there is a standard procedure for the incorporation of new legislation by the member states, as per the international conventions. Nevertheless, the issue of air emissions is technically not fully clarified, as has been shown in the introduction. Different enforcement approaches by the member states might raise unnecessary or even unjustifiable operational barriers, thus violating wider policies of the EU. Article 11 Penalties Member States shall determine the penalties applicable to breaches of the national provisions adopted pursuant to this Directive. The penalties determined must be effective, proportionate and dissuasive.

This article has been replaced by the new Article 1(14) of the Directive 102 2012/33/EU. As per the revision, member states shall determine the penalties applicable to breaches of the national provisions adopted pursuant to this directive; hence, they may differ from country to country in particular form and detail. Moreover, the penalties determined must be effective, proportionate and dissuasive, and may include fines calculated in such a way as to ensure that the fines at least deprive those responsible of the economic benefits derived from their infringement and that those fines gradually increase for repeated infringements. This rationale encourages compliance and institutes violations as being more costly than conceived. The new text focuses clearly on the economic benefit derived from the infringement and aims also to discourage repeated violations; ultimately, a ship could be banned from a port or country. Article 12 Entry into force This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

The Directive 1999/32/EC was published and became effective on 11 May 103 1999. The Directive 2005/33/EC came into force in August 2005, and Directive 2012/33/EU came into force in December 2012.

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Article 13 Addressees

This Directive is addressed to the Member States. As with other measures in the field of environmental protection, no exception is made for member states having no special port, coastal, marine or maritime interests. 105 The analysis would not be complete without mentioning that the annex to Directive 1999/32/EC is replaced by the annex to Directive 2012/33/EU, as per Article 1(15) of Directive 2012/33/EU. The content of the new annex is discussed in the analysis of Article 4. 104

C. Final Comments and Remarks

Analysis of the sulphur regulation reveals the complexity of the issue of air emissions. Apparently, the regulation of air emissions and, especially, of sulphur is effective and beneficial to society;92 yet, there are many technical, operational and enforcement issues that should be addressed. The relative frequent amendments of the Sulphur Directive as well as the evolution of MARPOL Annex VI reveal the complexity of this topic. 107 Despite the efforts of consultants and experts to clarify the provisos of the regulations to the operators, there are still points that need special attention, such as the issues of ‘ship at berth’ and the use of alternative fuels, which also have further implications, especially when considering the ISM code and commercial practice. Therefore, it is strongly suggested for policy-makers to issue a new instrument that possibly replaces all existing ones, updates and clarifies the existing provisos, and inserts new ones for the areas that are still vague. The role of the member states is also essential in this procedure;93 Member states should also have a common approach and enforcement policies. Stricter interpretation or enforcement by a member state may unnecessarily distort local and regional trade. 108 In the author’s opinion, operators and their agents or advisors should be very careful with the following points and concepts used or emerging from the interpretation of the Sulphur Directive: 109 – ship at berth: The provisos of this directive impact the concept of ‘arrived’ ship, as one more condition is introduced. It is a complicated topic, where the member states should also contribute, as all relevant operations take place in their territorial waters and local navigation is controlled by local competent authorities. The efficient legal and regulatory addressing of this subject requires understanding of 106

92 See note 11, above. 93 See Article 7.

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the usual operating procedures of ships as well as pragmatism. Otherwise, compliance is at risk and might be compromised. – changeover procedure: The changeover procedure should be carefully planned, prescribed and conducted while personnel on board and ashore contribute to safe and secure operations. The implications of ISM as well as the guidance of manufacturers and other experts should be taken into account. Effective monitoring of the procedure and the availability of samples and data may lessen the burden of proof of compliance and reduce the inspection time or even the chance of undue delay. – fuels, blends and alternatives: Compliance demands low-sulphur fuels and harsh retrofitting or conversion decisions of existing ships. It is possible that the investment will not pay out unless the remaining technical and economic life of the ship is relatively long and the price difference between high- and low-sulphur fuels is high. Blending of fuels is not an undemanding option, due to safety considerations and limitations of the existing propulsion plants. Alternative fuels, such as LNG, can be considered; however, these solutions bear a high commercial risk. There is a risk associated with the availability of infrastructure; at least in the EU and major shipping hubs, it is expected that this problem will be solved by 2020. This ambitious goal might create a new market segment, as the LNG-fuelled ships might have lower voyage costs, but higher capital expenses. Nevertheless, their total daily costs will differ from those of the conventional ships. The other risk is the availability of an after-market. If these ships operate in the EU and a few other regions, then their second-hand value will be diminished, when no aged ships will operate in these regions, and in the rest of the world, LNG bunkering will be an issue. In short, there is a high risk, if not the curse of the pioneer, investing in ships operating with alternative fuels. – abetment technology: So far, the most successful solution for the abatement of SOx are scrubbers. However, scrubbers do not address CO2 and NOx issues; therefore, the abatement technical solution should be designed and installed during the construction of the ship. – cold ironing: As stated, the technology is mature, but the successful outcome of the investment depends on the effective forecasting of the marine traffic. This is a clear example of the intrinsic difficulty of investing in new concepts without a globally accepted standard and abatement solution. European ports will invest in technical solutions that might be financially and socially unjustifiable, thereby wasting taxpayers’ money. In many cases, there is also a shortage of supply, thus making the option of cold ironing even less attractive to ship operators and port managers. The GHG implications could offer a way out in many ports; yet, the market-based measures for the abatement of CO2 should be in place. Orestis Schinas

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EU policy objectives: The long-term objective of ‘zero-waste, zero-emission’ EU shipping is very ambitious and implies higher standards for the ships registered under an EU flag or operating along the coastline of Europe. This overregulation implies that higher standards apply that make operations and the ships, as financial and technical assets, more expensive to acquire and possibly more complicated to operate. Given the intention of the EC to shift cargoes from land to sea as well as the need for low freight rates to boost the competitiveness of the European economy, this effort of overregulation might lead to adverse results. 115 The above subjective views are provided intentionally at the end of the analysis of the sulphur directive, aiming at highlighting the different views and assessments of technical and regulatory evolution. Environmental regulation offers a unique battlefield of ideas and arguments, of not only scientific grounds, but also of moral and ethical views; therefore, the final outcome is a repercussion of trade-offs, compromise and political planning. As a result, the role of independent third-party technical advisors is indispensable for the scientific and objective evolution of the regulation.

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Brinkmann

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III. Commentary on Directive 2000/59/EC of 27 November 2000 on Port Reception Facilities for Ship-Generated Waste and Cargo Residues A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. International Law Requirements, according to MARPOL 73/78 . . . . . . . .

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C. General Requirements of Port Reception Facilities under Annexes I, IV and V of MARPOL 73/78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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D. Implementation of MARPOL 73/78 in EU Member States prior to Directive 2000/59/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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E. Purpose of Directive 2000/59/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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F. The Financial Model of Directive 2000/59/EC . . . . . . . . . . . . . . . . . . . . . . . . . . .

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G. The Concept of Transparency in the Development of a European Port Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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H. Enforcement Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Article 6, Notification of Waste and Residues. . . . . . . . . . . . . . . . . . . . . . . . 2. Article 7, Delivery of Ship-Generated Waste. . . . . . . . . . . . . . . . . . . . . . . . . 3. Article 10, Delivery of Cargo Residues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Article 5, Waste Reception and Handling Plans . . . . . . . . . . . . . . . . . . . . . .

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I. National Implementation of Directive 2000/59/EC. . . . . . . . . . . . . . . . . . . . . . .

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J. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Introduction

In its basic document for a Coherent Programme on the Enhancement of Mar- 1 itime Safety and Pollution Prevention of 1993 (A Common Policy on Safe Seas) the European Commission has addressed the failure of Member States to comply with internationally binding standards on port reception facilities as one, though not the major of the factors of coastal water pollution.1 Even though reception facilities were not expressly mentioned in the pertain- 2 ing action programme of Annex 1 of that document, the Commission has generally put an emphasis on the convergent application of initiatives of the International Maritime Organisation (IMO) in the community, which includes port reception facilities. In this respect the programme states: Under international rules, all parties are obliged to provide and maintain facilities in their ports for the discharge of waste, including bunker oil. However, it is a fact that in the community the level of port reception facilities differs sharply from one port to another. Port facilities in this respect have the potential to give rise to deflection of trade for instance through weak application of the law to encourage access to the port. This is, however, also a fact potentially leading to unlawful discharges at sea.2

Furthermore, the programme states the aim of

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…. ensuring that community ports install adequate reception installations aligned to the specific waste discharges required by the type of shipment operations;

1 COM (93) 66 final, Part. II, Chapter 3 iv, para. 114. 2 Chapter 3 iv, 115.

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As a matter of fact, the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, (MARPOL 73/78) already requires the setting up of an infrastructure for reception facilities concerning oil (MARPOL 73/78, Annex I), waste water (MARPOL 73/78, Annex IV) as well as garbage and cargo residues (MARPOL 73/78, Annex V). It is the intention of Directive 2000/59/EC of the European Parliament and of the Council of 27 November 2000 on Port Reception Facilities for Ship-generated Waste and Cargo Residues4, therefore, to facilitate a uniform and compulsory application by Member States of the environmental standards as provided for in the MARPOL Convention. B. International Law Requirements, according to MARPOL 73/78

Next to pollution from land-based sources, marine pollution to a large extent occurs through the dumping of waste and other illegal substances from vessels when trading on the oceans. The origins of international law making for the protection of the seas against vessel based pollution goes back to the 1950-ies and was concerned with the spilling of oil, be it from oil cargoes or vessel bunkers and lubricants. The predessesor of MARPOL 73/78 had been the International Convention for the Prevention of Pollution of the Seas through Oil, 1954, which was superseded by the MARPOL 73/78 Convention.5 In relation thereto the scope of application of MARPOL 73/78 was broadened so as to include all possible types of pollution from ships. 6 Article 211 of the Law of the Sea Convention 1982 (UNCLOS) ratified the international standard, thus, already in place by requiring States, acting through the competent international organisation or general diplomatic conference, to establish international rules and standards to prevent, reduce and control pollution of the marine environment from vessels from all different sources. Article 211 requires a State to take action in two separate ways, firstly, through the adoption of laws and regulations for the prevention, reduction and control of pollution of the marine environment from vessels flying their flag or of their registry and, secondly, through exercising sovereign rights within their territory by adoption of laws and regulations for the prevention, reduction and control of marine pollution from foreign vessels, namely through the instrument of Port State Control (PSC). 7 This approach was reflected already in Article 3 (1) a) and b) of the MARPOL 73/78 Convention. The Convention creates technical standards and docu5

3 Chapter 3 iv, 119. 4 OJ L 332/81, 28.12.2000. 5 See Article 9 (1) of the MARPOL 73/78 Convention.

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mentation requirements for vessels irrespective of the flag they fly or the registry in which they are entered. Contracting States are required to implement those standards either through their national ship safety organisations as part of Flag State jurisdiction or as part of territorial jurisdiction through the instrument of PSC which requires national ship safety organisations to review the appropriateness of documentation on board of ships when calling at their ports. The technical standards are set out in a total of six Annexes of the MARPOL 8 73/78 Convention. Each of them is addressing a different source of pollution from ships. Annex I is concerned with oil pollution from ships; Annex II regulates pollution through liquid substances from bulk cargoes; Annex III regulates pollution from cargoes packed in containers and other means of packaging; Annexes IV is concerned with liquid waste water and Annex V concerns cargo residues and garbage and Annex VI regulates different kinds of emissions from vessels. In addition to the technical standards and documentation requirements for 9 vessels, each of Annexes I, IV and V contain directions to the Contracting States for the establishment of port reception facilities, i.e. relating to oil, liquid waste water, cargo residues and ships’ garbage. The requirement to create port reception facilities applies independently from the actual scope of cargo operation in port. In this regard the obligations of the Contracting States under Annexes I, IV and V of the MARPOL 73/78 Convention are different from the requirements to provide reception facilities for liquids from bulk cargoes where Contracting States are only obliged to make sure that ports and, most importantly, terminal operators have in place reception facilities in sufficient number and size for cargo operations actually carried out. It is a requirement of the Convention, therefore, in Annexes I, IV and V that the reception facilities for oil, liquid waste and garbage remain in place at the vessels’ call at their ports, irrespective of the individual time and volume of cargo operations. C. General Requirements of Port Reception Facilities under Annexes I, IV and V of MARPOL 73/78

Clearly the most comprehensive regulation for port reception facilities of 10 MARPOL 73/78 is contained in Annex I with respect to oil residues. Chapter 6, Rule 38 (a) 1 of Annex I requires Contracting States to establish oil reception facilities in all ports where oily residues such as bilge water or sludge may be left behind. Rule 38 (a) 2 nominates types of ports for which reception facilities are re- 11 quired, namely ports with terminals for crude oil, ports for bulk cargoes consisting of oil other than crude oil, ports with ship repair and tank cleaning facilities. Rule 38 (a) 3 regulates the size of the reception facilities. In general, it is required that all relevant oil residues falling under Rule 38 (a) 2 can be taken over capacitywise by the port reception facility. The number and size of the reception

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facilities shall be dependent generally on the requirements of the vessels calling at the port and shall be sufficient so as to avoid unreasonable delays for the vessels when using such facilities. 12 The requirements of MARPOL Annex IV and Annex V follow a similar scheme. Chapter 4, Rule 12.1 of Annex IV also states for waste water that the reception facilities for vessels trading in the internal waters of a Contracting party shall be of a number and size to suit the vessels’ requirements so as to avoid undue delays of the vessels. The same applies for reception facilities for cargo residues as well as ships’ garbage in Rule 8.1 of Annex V. There are no technical details prescribed, nor are there any documentation requirements imposed on Contracting States for the implementation of their corresponding obligations. Consequently, Contracting States of MARPOL 73/78 have a wide discretion of how to comply with the requirements of the Convention. D. Implementation of MARPOL 73/78 in EU Member States prior to Directive 2000/59/EC 13

No particulars are referred to in the basic document on the Enhancement of Maritime Safety and Pollution Prevention of 1993 (A Common Policy on Safe Seas) with respect to the alleged lack of implementation of the requirements of MARPOL 73/78 relating to waste reception facilities as aforementioned. For Annex V, however, which has come into effect on 31st of December 1988, the leading in German commentary on public maritime law reports of a well received model introduced by the Hanseatic City of Bremen according to which ships were provided with sufficient plastic bags for their garbage when calling at the port. Costs were covered by general public port dues. It is to be assumed, therefore, that various other opportunities have existed in different European ports prior to Directive 2000/59/EC. E. Purpose of Directive 2000/59/EC

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Article 1 of Directive 2000/59/EC describes its purpose as to reduce the discharge of ship-generated waste and cargo residues into the sea, especially illegal discharges and thereby enhancing the protection of the marine environment from ships using ports in the Community, by improving the availability and use of port reception facilities for ship-generated waste and cargo residues. Following the philosophy of Annexes I, IV and V of MARPOL 73/78 according which port reception facilities are an indispensable part of marine protection policy since the early 1970s, Directive 2000/59/EC is putting an emphasis on the enhancement of the quantity of port reception facilities without prescribing the way ahead in any further detailThe Directive 2000/59/EEC relies on a commercial approach which is related to a broader financing of port reception facilities. While formally the “polluter pays” principle is stated to govern the use of port

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reception facilities,6 actually a cost distribution scheme is introduced by the Directive which, instead of attributing the costs to the individual user, splits the costs over the community of users collectively. Thereby vessels calling at the port will have to bear a share of the costs without regard of their actual use of the said reception facilities. Behind that strategy was a fear that application of the pure “polluter pays” principle might discourage vessel operators from using port reception facilities. As opposed to that, Directive 2000/59/EC intends to create incentives for vessel owners to use port reception facilities in the port (as an alternative to dumping waste into the seas). This is supposed to be achieved by cost neutrality of the vessel’s use of the port reception facilities. To a lesser extent only, fees may be generated by the Member States on the basis of types and quantities of ship-generated waste. F. The Financial Model of Directive 2000/59/EC

Article 4 para 1 of the Directive requires Member States to ensure the availability of port reception facilities adequate to meet the needs of the ships normally using the port without causing undue delay. In this respect Directive 2000/59/EC concurs with the principles set out in Annexes I, IV and V of MARPOL 73/78. There are no fixed requirements on the size, capacity or technical standards of the port reception facilities. In the same way as MARPOL 73/78, Directive 2000/59/EC rather generally makes reference to the type and number of vessels, their operational requirements as well as their need for a speedy service in port. Given the vagueness of the quantity and quality standards for Member States to create port reception facilities in their ports, the financial model introduced by Directive 2000/59/EC gains importance as a tool to broaden the scope of port reception facilities on a market-oriented and commercial basis. As a rule, port reception facilities shall be created and built up by Member States through the income generated by vessels calling at their ports. As a guiding principle Article 8 (1) of the Directive, firstly, requires Member States to ensure that the costs of port reception facilities for ship-generated waste, including the treatment and disposal of the waste, shall be covered through the collection of fees from ships. It is not foreseen, therefore, that port reception facilities shall be provided for and financed by a tax based approach of Member States as part of their public duties. On the contrary, in the philosophy of Directive 2000/59/EC the “cost covered” principle shall make waste disposal in ports through port reception facilities – essentially – self-financing. Secondly, the amount of waste disposal is irrelevant for the calculation of fees. For this purpose Article 8 (2) a imposes a duty on Member States to require all ships calling at the ports of a Member State to contribute significantly to the 6 See Recital (14), Directive 2000/59/EC, OJ L 322/81, 28.12.2000.

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costs of the port reception facilities irrespective of their actual use of those facilities. 19 Fees may differentiate generally between category, type and size of the ship. Member States may also decide whether disposal fees are made part of the port dues or whether they choose to introduce a separate waste disposal fee. As opposed to Article 8 (2) a, Article 8 (2) b allows the introduction of an element of actual causation of waste disposal. Article 8 (2) c introduces incentives for environmental protection in that port reception facility fees may be reduced corresponding to the level of avoidance of waste from the respective vessel through means of environmental management, design, equipment and operation. Article 9 of the Directive, finally, allows exemptions for vessels that are regularly calling on a specific ships route. 20 However, any of these elements are applicable only on a secondary level and only if no incentive is created thereby to prefer waste disposal at sea. G. The Concept of Transparency in the Development of a European Port Law

According to Article 8 (3) of the Directive a requirement of transparency of the fees claimed for port reception facilities is created. The requirement of transparency in the development of an European port law is closely related to the "user pays"-principle. 22 Acknowledging that more than 90% of the EU trade with third countries and almost 30% of the intra-community trade was handled through the EU sea ports, under Commissioner Neil Kinnock a program was developed in the Green Paper for the enhancement of fair competition between and within ports. The tool to achieve such increase competition in the view of the Commission was by creation of common rules for the financing of the sea ports and maritime infrastructure, the attribution of the relevant infrastructure costs to individual users as well as the liberalization of port services. 23 The policy prospects set out in the Green Paper partly reversed previous attempts of the European Parliament directed to induce the Commission to release guidelines on State Aid in sea ports as the most appropriate way to improve transparency in the European sea ports' markets.7 24 The attempt of the Commission to introduce a uniform regime for port dues in all Member States provoked criticism from interested parties, who - understandably - argued that the legal and commercial structure of the multitude of ports 21

7 Jarzembowski, Grünbuch der Europäischen Kommission über Seehäfen und Seeverkehrsinfrastruktur aus Sicht des europäischen Parlaments, in: Beiträge zum deutschen und europäischen Seehafenrecht, Schriften zum See- und Hafenrecht, Vol. 7, 2001, p. 90.

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within the European Community8 was just too diverse as to be amenable to a uniform regime for the attribution of infrastructure costs.9 On 13th February 2001 the Commission adopted a Communication to the European Parliament and to the Counsel "reinforcing quality service in sea ports: a key for European transport" (the so-called "Port Package"). In the Port Package the attempt to implement transparency in port dues was dropped. A corner stone of the Communication was a proposal for a Directive of the European Parliament and of the Counsel on "Market Access to Port Services". In order to remove existing trade barriers the Commission proposed to combine issues of transparency of financial relations, including State funding, with a highly controversial regime for the granting of concessions to port operators and other providers of port services accompanied by equally controversial regulations on the right of a vessel's crew to engage in cargo operations by way of "self handling". The proposal has led to an extensive debate. On 20th November 2003, after almost 3 years of an inter-institutional legislation process the European Parliament rejected the compromise text by 229 votes against, 209 in favor and 16 abstentions.10 Instead of reconsidering those policy issues the late Commissioner Loyola de Palacio decided to reintroduce the Port Package with only slight amendments in October 2004. This Port Package II was ultimately rejected by a vast majority of the Members of the European Parliament.11 While the criticism concentrated on the access to port service provisions of both versions of the port package, the (limited) regulations on financial transparency did receive the backing of almost all commentators. After the failure of the Port Packages the Commission has expressed the intent to rapidly release guidelines on financial transparency in ports independently from any aspects of market access to port services, an approach, which was highly welcomed by the industry.12 The release of guidelines on State Aid for port infrastructure was originally expected for autumn 2008. It took however until 2013, before the European Commission put the European seaports back on the political agenda of the European Union and proposed a strategy to develop their competitiveness together

8 According to ESPO, Cross Roads to Transport Networks (www.espo.be), more than 1000 sea ports exist in the European Union all of which essentially with a different legal and commercial structure. 9 See Heitmann, Staatliche Beihilfen für Seeverkehrs-Infrastruktur (Art. 92 EGV) in: Beiträge zum deutschen und europäischen Seehafenrecht, Schriften zum See- und Hafenrecht, Vol. 7, 2001, p. 113, 121. 10 See Explanatory Memorandum to a Proposal for a Directive of the European Parliament and the Counsel on Market Access to Port Services (presented by the Commission) on 13th October 2004, COM (2004) 654 final. 11 532 rejections out of 677, 120 votes in favor and 25 abstentions. 12 See ZDS Zentralverband der deutschen Seehafenbetriebe e.V., Konsultationsverfahren der EU – Kommission zur künftigen EU-Seehafenpolitik, Positionspapier des ZDS, II. BeihilfenLeitlinien (2. EU Hafenworkshop 18./19. Januar 2007 in Hamburg).

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with an action plan combining legislative and non-legislative measures.13 The main measures addressed again referred to the reduction of legal uncertainties in the access to the market of port services but also to transparency in port funding. As part of that approach the Commission proposed the so-called “Port Transparency Regulation”.14 Similar to Port Packages I and II the Port Transparency Regulation proposes to combine measures for the enhancement of access to the market of port services with transparency aspects both in relation to public funding as well as port charges. Based on this, the initiative received similar criticism from stakeholders as the previous Port Packages.15 29 The draft regulation addresses various aspects of transparency in the financial relations between providers and users of port services as well as port infrastructure, including the financial relations between public authorities and entities providing port services (Article 12), the transparency of port service charges (Article 13) and port infrastructure charges (Article 14). Insofar, it also relates to the collection of ship-generated waste and cargo residues according to Directive 2000/59/EC.16 According to its Article 17 Member States are required to ensure that an effective mechanism is in place to handle complaints arising from the application of the Regulation, most importantly the users of the port. This dispute resolution mechanism shall be independent from the application of anti-trust laws which, dependent on the size of the port and its competitive environment, may not always come into place. 30 In its present form the draft Port Transparency Regulation follows an unlimited “user pays” approach which may not be compatible with the current Directive. The standard of transparency on port service charges and port infrastructure charges does not go significantly beyond the requirements of Article 8.3 of Directive 2000/59/EC in that it requires them to be transparent and non-discriminatory. However, other than in Article 8 (2) a of Directive 2000/59/EC, Art. 13 (1) of the draft Port Transparency Regulation always demands port service dues to be proportionate to the costs involved. H. Enforcement Rules 31

A major part of provisions of Directive 2000/59/EC relates to the uniform enforcement of MARPOL 73/78 within Member States. Article 12 (1) a requires Member States to take necessary measures to ensure that masters, providers of port reception facilities and other persons concerned are adequately informed of 13 Communication from the Commission, Ports: an Engine for Growth, COM (2013) 295 final. 14 Proposal for a Regulation of the European Parliament and of the Council establishing a framework on Market Access to Port Services and Financial Transparency of Ports, 2013/0157 (COD), 24.10.2014. 15 See Response from the European Seaports Organisation (ESPO) to the Regulation Proposal establishing a Framework on Market Access to Port Services and Financial Transparency of Ports (www.espo.be). 16 See Art. 1 (2) f; Art. 2 (10) of the Proposal.

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the requirements addressed to them under the Directive and that they are complied with. This refers, most prominently, to Article 6 (notification), Article 7 (delivery of ship-generated waste) and Article 10 (delivery of cargo residues) as far as masters of ships calling at a Community port are concerned as well as Article 5 (waste reception and handling plans) with regard to port authorities. According to those provisions duties shall be imposed on stakeholders by Member States which are complementary to MARPOL 73/78 so as to facilitate Member States an efficient enforcement of their duties as Contracting States of MARPOL 73/78, most importantly in the framework of PSC. 1. Article 6, Notification of Waste and Residues

Article 6 introduces a requirement of notification for the use of port reception 32 facilities at least 24 hours prior to arrival of the ship. If the port of call is not known, notification shall be given by the master as soon as he has received instruction where to proceed and if the voyage is less than 24 hours, such notification shall be given prior to departure latest 24 hours before estimated arrival. Member States have discretion in the way to introduce such notification requirement. In particular, Member States are free to decide whether notification shall be granted to the relevant port authority or directly to the port reception facility. The notification requirement of Article 6 has become part of the harmonisa- 33 tion requirements under the National Single Window Directive 2010/65/EU.17 The notification of waste and cargo residues according to Article 6 of Directive 2000/59/EC is part of the list of reporting formalities referred to in the Annex of Directive 2010/65/EU. 2. Article 7, Delivery of Ship-Generated Waste

According to Article 7.1 the master shall be required to deliver all ship-gener- 34 ated waste to a port reception facility before leaving of the port. Other than MARPOL 73/78 does it not differentiate between the type of waste, be it oil, liquid waste or garbage. However, according to Article 7.2 the obligation to deliver waste shall be limited and the vessel may proceed to the next port if there are sufficient dedicated storage capacities for the ship-generated waste on board of the vessel which has and will accumulate during the intended voyage. The relevant information shall be provided together with the details notified in accordance with Article 6. There is an exemption applicable for vessels trading in scheduled traffic, such as liner trades, if, in accordance with Article 6 and Article 7 (1), there is sufficient evidence that the regular ports of call provide sufficient port reception facilities en route.

17 See Recital (3), Directive 2010/65/EU of the European Parliament and of the Council of 20 October 2010 on the reporting formalities for ships arriving in and/or departing from ports of the Member States and repealing Directive 2002/6/EC, OJ L 283/1, 29.10.2010.

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3. Article 10, Delivery of Cargo Residues 35

A similar obligation for the delivery of all ship related cargo residues is contained in Article 10, however, without the possibility to use other ports if storage capacities are in place on board of the vessel. 4. Article 5, Waste Reception and Handling Plans

36

According to Article 5.1 port operators shall be required to put up waste reception and handling plans allowing stakeholders’ compliance with Articles 6, 7 and 10. The requirements for such plans are set out in detail in Annex I of Directive 2000/59/EC. They shall, in particular, address the procedures for the reception and collection of ship-generated waste and cargo residues and provide mechanisms for proper information of the stakeholders. Waste reception and handling plans shall be re-evaluated and approved every three years according to Article 5.3. I. National Implementation of Directive 2000/59/EC

National implementation was due according to Article 16 of Directive 2000/59/EC by latest 28 December 2002, subject only to liquid waste as referred to in Article 2 (c) where implementation was suspended until 12 months after entry into force of Annex IV of MARPOL 73/78. According to Article 17 of the Directive a reporting and evaluation process with respect to the implementation of the Directive and, thus, the availability of port reception facilities within Member States was initiated. 38 In Germany jurisdiction for the implementation of Directive 2000/59/EC is divided between enforcement measures, namely those connected to PSC, for which federal jurisdiction is granted according to para. 1 no. 4 of the German Law for Competences at Sea (Seeaufgabengesetz) on the one hand and to the financing and maintenance of port reception facilities on the other hand. As ports are generally falling under the territorial jurisdiction of the local states,18 state law applies for the implementation of all duties of the Member States under Directive 2000/59/EC other than enforcement measures. 39 For the major German ports Hamburg and Bremen, the States of the Free and Hanseatic City of Hamburg, respectively the Free Hanseatic City of Bremen have implemented state legislation introducing the obligation of ship masters to deliver vessel related waste and cargo residues into port reception facilities.19 The State of Bremen regulates specifically that vessel commands have to comply with the notification requirements of the Directive through the use of the lo37

18 Beckert/Breuer, Öffentliches Seerecht, p. 577 (1621.). 19 § 5 Hamburgisches Schiffsentsorgungsgesetz (HmbSchEG), dated 17. December 2002, § 7 Bremisches Gesetz über Hafenauffangeinrichtungen für Schiffsabfülle und Ladungsrückstände (Brem GHSL), dated 19. November 2002.

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cal ship information systems.20 Owners of port facilities are obliged to create plans for the removal of waste from their premises corresponding to the Directive which require the approval of the competent authorities.21 For the implementation of the financial scheme of the Directive the relevant law of the State of Bremen creates a public law right of the ship owner for the removal of all waste deriving from ship operation by payment of the dues set out in the corresponding tariff.22 Both state laws make clear through the use of specific wording (“Abgabe”)23 that the dues applicable for the use of port reception facilities in the port of Hamburg and Bremen are payable as a local tax which is unrelated to the amount of waste and cargo residues actually delivered but that the dues are falling due at the call of any vessel. The tariffs shall be fixed so as to compensate for a substantial part of all the 40 costs accruing in the port including, but not limited to, costs of the financing of port reception facilities, the collection, transportation, storage and final removal of waste and residues from ships as well as relevant labour and administration costs.24 It is expressly stated in the state laws that tariff rates shall generally cover all costs; any uncovered costs shall be levelled out within three years at the latest.25 J. Summary

Directive 2000/59/EC translates public international law standards into EU 41 secondary law and provides a financial scheme for the financing of port reception facilities, thereby enhancing the level of protection against pollution from ships. As such the success of the Directive remains under continued scrutiny of the Commission.26 Most recently, in late 2015, the Commission has updated Annex II of Directive 2000/59/EC via Commission Directive (EU) 2015/2087.27 Additionally, parts of the operational provisions have been introduced into more recent legislative acts, such as the National Single Window Directive 2010. For the transparency discussion within a developing European port law the Directive is an early example, though a unique one through its departure from the “polluter pays” principle.

20 21 22 23 24 25 26 27

§ 6 Brem GHSL. § 4 Hmb SchEG; § 5 Brem GHSL. § 10 Brem GHSL. § 7 Hmb SchEG; § 9 (1) Brem GSL. § 8 (2) Hmb SchEG; § 11 (1) Brem GSL. § 8 (3)Hmb SchEG; § 11 (2) Brem GSL. ZDS Monitor 10/15 – EU Seeverkehrsstrategie 2018 (www.zds-seehaefen.de). OJ L 302/99, 18.11.2015.

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Pimm

Michael

IV. Commentary on Directive 2001/96/EC Establishing Harmonised Requirements and Procedures for the Safe Loading and Unloading of Bulk Carriers 1

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Directive 2001/96/EC of the European Parliament and of the Council of 4 December 2001 establishing harmonised requirements and procedures for the safe loading and unloading of bulk carriers (the “Directive”) effectively gives legislative force in the European Union to the Code of Practice for the Safe Loading and Unloading of Bulk Carriers (the “BLU Code”), adopted by the International Maritime Organisation in 1997 by its resolution A.862(20). The background to the BLU Code was a series of shipping casualties involving large bulk carriers (including, in some cases, their disappearance without trace), beginning with the loss in 1980 of the Derbyshire. These losses were widely believed to have been caused by sudden and catastrophic structural failure. Studies had implicated various possible causes, two of which related to loading and unloading operations, namely excessive stresses induced in the structure of a partly loaded vessel and the straightforward risk of physical damage to the vessel’s structure, caused by careless use of heavy equipment, such as grabs. While the Directive is closely based upon the Code, it does not simply reproduce it wholesale by way of an annex and it adopts a somewhat different structure. The two areas covered by the Code are (i) harmonised procedures for co-operation and communication between ships and terminals, and (ii) suitability requirements for both. To that end, the Code requires terminals to appoint responsible representatives; provide information books to masters; introduce quality management systems; allocate responsibilities between the master and terminal representative; follow the procedures required by the Code and the applicable conventions (such as SOLAS) when preparing, agreeing and conducting operations; notify deficiencies; halt unsafe operations, and report any damage occurring. The Directive applies generally to all bulk carriers and the ports they use,1 apart from vessels using only their own gear, and ports where dry bulk operations are the exception, although it should be noted that it does not presently apply to grain cargoes.2 The definitions (in Article 3), while numerous, are straightforward and for the most part adopt definitions in other conventions or legislation. Article 4 requires Member States to ensure that terminal operators check the suitability of vessels by reference to Annex 1, which is based on Section 2 of the 1 Article 2. 2 The BLU Code did not originally cover grain cargoes, to which another IMO code of practice applies, the International Grain Code. The BLU Code was extended to cover grain with effect from 1 January, 2007, but the Directive has yet to be amended to reflect this. Other amendments were made, with effect from 1 January, 2011, to take account of the mandatory International Maritime Solid Bulk Cargoes (IMSBC) Code.

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Code, and covers matters such as the size, design and identification of hatch covers and openings and the condition of relevant machinery and equipment. Article 5 contains the requirements in relation to the terminals themselves, by reference to Annex II, which is based upon Section 2.3 of the Code. The requirements are straightforward, and concern the availability of suitable berths, certification and maintenance of equipment, the use of qualified personnel and the provision of safety training, protective equipment and adequate rest periods. The same Article requires terminal representatives to be appointed, information books to be prepared and made available to masters, and a quality management system to be developed, certified to ISO 9001:2000 standards or equivalent3 and subject to regular audit. Article 6 provides a temporary derogation from the QMS requirement for new terminals, provided they have an appropriate plan. Article 7 requires Member States to ensure that certain “principles” are respected and applied regarding the respective responsibilities of vessel masters and terminal representatives, based upon the principles listed in Section 4 of the Code. While described as principles, which is the language used in the Code, these provisions are quite prescriptive and leave little room for interpretation in many cases. They are summarised briefly below. The master, apart from having general responsibility for the safety of loading and unloading operations on his vessel, is obliged to provide the advance information prescribed in Annex III (based on Section 3.2 of the Code); to ensure that he has a completed cargo declaration form (Appendix 5 of the Code), and to perform the specific duties listed in Annex IV, which cover matters such as the supervision and co-ordination of cargo and ballast operations, the adequacy of personnel to adjust mooring lines, information to be given to the terminal representative, compliance with the agreed loading plan and other precautions to be taken. The terminal representative, for his part, is to provide the information required by Annex V (which is taken from Section 3.3 of the Code). This consists of a detailed list of parameters, including matters such as the characteristics of the berth, type of equipment, loading and unloading rates, access arrangements, speed of approach, availability of tugs, restrictions of draft, air draft or ballast discharge, with additional information, in the case of loading operations, concerning the cargo to be loaded. There is also an obligation to provide any specific information requested by the master. The other responsibilities of the terminal representative are to check that the master has the information in the cargo declaration form; to notify both the master and the Port State Control authorities of any deficiencies which could endanger the cargo operation, and to perform the specific duties listed in Annex VI. Like the corresponding list of duties of the master, this is taken from Section 4.1 of the Code and goes into considerable de3 The current equivalent would be ISO 9001:2008, which is due to be replaced in late 2015 by ISO 9001:2015. See the commentary to Article 8 of Directive 2009/21/EC on Compliance with Flag State Requirements.

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tail. The terminal representative’s duties to some extent duplicate those of the master and include general obligations to take precautions to avoid damage and report it if it occurs, to keep the ship upright or minimise any necessary list, to alert the master to any high impact loads which are likely, to ensure that the operations proceed to an agreed plan, with weights and disposition duly recorded, and that cargo is trimmed as required, along with various other specific requirements, such as avoiding hot work (such as welding) in the vicinity. Article 8 sets out the procedures which are to be followed during bulk cargo operations, based upon those listed in Section 4 of the Code. These include signature of a loading plan and safety checklist in the prescribed form; setting up lines of communication; adherence to the plan, and written confirmation by master and terminal representative of its satisfactory completion. Article 9 requires Member States to ensure that their authorities halt loading operations which are considered to be unsafe and intervene in the event of disagreements between masters and terminal representatives. Article 10 requires any damage to be reported by the terminal representative to the master and repaired if necessary. Where the damage affects the structural capability or integrity of the hull or essential systems of the vessel, there is an obligation to inform both the flag administration and the Port State Control authorities, the latter having the responsibility to decide whether immediate repair is necessary. In practice such decisions are delegated to classification societies as “recognised organisations” (see the commentary on Directive 2009/16/EC on Port State Control). Article 11 requires Member States to verify regularly (including by unannounced inspections) that terminals and their representatives comply with the requirements of the Directive, and to report the results to the Commission at three year intervals, together with an assessment of the effectiveness of these procedures. The Commission is required (by Article 12) to provide an evaulation report with an assessment as to whether continued reporting by Member States is necessary.4 The remainder of the Directive concerns formal matters such as notification of the Directive to the IMO; the applicable procedures for amendment; the requirement for effective, proportionate and dissuasive penalties to be introduced, and the usual provisions for implementation and entry into force and the fact that the Directive is addressed to Member States.

4 At the time of writing, no such report appears to have been provided, or at least to be publicly available.

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Commentary on Regulation EC/782/2003 on the Prohibition of Organotin Compounds on Ships

Schinas

Orestis

V. Commentary on Regulation EC/782/2003 on the Prohibition of Organotin Compounds on Ships A. Introduction and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Introduction and Overview

The aim of Regulation 782/2003 of the European Parliament, and of the 1 Council of 14 April 2003, is the ratification by European Union (EU) member states of the International Convention on the Control of Harmful Anti-fouling Systems on Ships adopted on 5 October 2001. The regulation also aims at its immediate implementation on ships flying the flag of a member state or operating under the authority of a member state as well as on ships entering a port or an offshore facility of a member state. Regulation (EC) No 782/2003 on the prohibition of organotin compounds on ships is supplemented by Directive 76/769/EEC that prohibits the marketing and use of organostannic compounds within the EU as amended by commission Directive 2002/62/EC. As anti-fouling systems (AFSs) triggered the regulation under analysis and set the international technical and regulatory framework, a detailed presentation of the AFS convention can assist the analysis of the European regulatory initiative. The AFS convention was adopted at the International Conference on the Con- 2 trol of Harmful Anti-fouling Systems on Ships, 2001. The conference was organized and hosted by the International Maritime Organization (IMO) in London in October that year. As per Article 2(b) of the convention on the IMO, the council of the organization decided—at its 20th extraordinary session in November 1999—to convene a diplomatic conference to consider the adoption of a draft international convention on the control of harmful AFSs. This decision was endorsed by an assembly of the organization at its 21st regular session by resolution A.877(21) of 25 November 1999. In total, 75 member states of the IMO participated.1 Even when the IMO convention was not in force in 2002, the EU's commis- 3 sion Directive 2002/62/EC of 9 July 2002 and Regulation 782/2003 prohibited organotin compound tributylin (TBT) anti-fouling on EU ships from January 2003 and TBT products that were already applied had to be sealed off before 1 July 2008.2 The importance of the AFS convention and of the EU policy initiatives is significant. It is estimated that international maritime transport consumes

1 The Final Act of the International Conference on the Control of Harmful Anti-fouling Systems for Ships, 2001. 2 Directive 2002/62/EC amended Directive 76/769/EC.

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600,000 tonnes of paints a year, 13% of which comprises hull anti-fouling paints. Detailed statistics per ship are provided below (see Figure 1).3

Figure 1: Use of Anti-fouling Paints

Figure 1: Use of Anti-fouling Paints

4 4 The convention entered into force on 17 September 2008 following Panama’s

accession to theentered AFS convention on17 17September September2008 2007.following Since 17 September The convention into force on Panama’s accession to the 2008,convention ships are on no 17 longer permitted to apply or reapply organotin compounds AFS September 2007. Since 17 September 2008, ships are no longer permitted to or reapply that act as biocides their For ships already thatapply act as biocidesorganotin on their compounds AFSs. For ships already coatedon with anAFSs. organotin coated with an organotin compound, particularly TBT, a barrier coat must be applied to prevent compound, particularly TBT, a barrier coat must be applied to prevent them them from leaching. The AFS convention did not impact competition among manufacturers since from leaching. The AFS convention did not impact competition among manuall major coatings manufacturers claimed to have ceased production and destroyed existing facturers since all major coatings manufacturers claimed to have ceased produc4 stock. tion and destroyed existing stock.4 5

As the convention came into force in 2008 and EU Regulation 782 in 2003, the ban on TBT-based coatings on ships sailing under flags of EU member states As convention came into in 2008 EU Regulation in 2003,bodies the ban on TBThadthe been applied earlier. Thisforce highlights theand commitment of the782 European based coatings on ships measures sailing under of EU member states had applied earlier. This to promptly implement for flags environmental protection. Thebeen European highlights the commitment of the European bodies to promptly implement measures for ban is not an action without precedence; Japan outlawed the coatings before the environmental protection. The European ban is not an action without precedence; Japan 5 AFS convention was drawn up. As the AFS convention is applicable world5 5

outlawed the coatings before the AFS convention was drawn up. As the AFS convention is applicable worldwide, the use of banned coatings is nowadays rather unlikely. Six years after the 3 Sources: Theinto European Directorate General Internal Policies of the Union, Poli-yards to either date of entry force,Parliament, it seemsthe unlikely for even small manufacturers or repair cy Department Structural and Cohesion Policies, and a note on the external costs of maritime have or use2008. supplies of the banned products. transport, 4 IMO Vega, International Convention on the Control of Harmful Anti-fouling Systems on Ships,

6 2001, final comment; see also Lloyd’s Register – Fairplay Weblinks, 18 September 2008. 5 Focus on IMO, 2002, Anti-fouling Systems, p.17.

The structure of the AFS convention is similar to that of other IMO conventions. The articles determine the legal and contractual provisions as well as the principal technical requirements. Orestis Schinas 650 Detailed technical requirements are stated in the regulations of the annexes. The key features of the convention are:

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IMO Vega, International Convention on the Control of Harmful Anti-fouling Systems on Ships, 2001, final comment; see also Lloyd’s Register – Fairplay Weblinks, 18 September 2008.

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Focus on IMO, 2002, Anti-fouling Systems, p.17.

Commentary on Regulation EC/782/2003 on the Prohibition of Organotin Compounds on Ships

wide, the use of banned coatings is nowadays rather unlikely. Six years after the date of entry into force, it seems unlikely for even small manufacturers or repair yards to either have or use supplies of the banned products. The structure of the AFS convention is similar to that of other IMO conventions. The articles determine the legal and contractual provisions as well as the principal technical requirements. Detailed technical requirements are stated in the regulations of the annexes. The key features of the convention are: a) Article 3: Application; b) Article 4: Controls on AFSs; c) Article 5: Controls of Annex 1 waste materials; d) Article 6: Process for proposing amendments to controls on AFSs; e) Article 7: Technical groups; f) Article 8: Scientific and technical research and monitoring; g) Article 9: Communication and exchange of information; h) Article 10: Survey and certification; i) Article 11: Inspection of ships and detection of violations; j) Article 12: Violations; and k) Article 13: Undue delay or detention of ships. The remaining articles provide information, definitions and set out the entry into force of provisions and depository requirements of the AFS convention. a) Article 1: General obligations; b) Article 2: Definitions; c) Article 14: Dispute settlement; d) Article 15: Relationship to international law; e) Article 16: Amendments; f) Article 17: Signature, ratification, acceptance, approval and accession; g) Article 18: Entry into force; h) Article 19: Denunciation; i) Article 20: Depository; and j) Article 21: Languages. The annexes provide necessary technical requirements for the enforcement of the regulation: a) Annex 1: Controls on AFSs; b) Annex 2: Required elements for an initial proposal; c) Annex 3: Required elements for a comprehensive proposal; and d) Annex 4: Surveys and certification requirements for AFSs. The AFS convention is supplemented with resolutions issued by the Marine Environment Protection Committee (MEPC) of the IMO: a) MEPC.101(48): Survey and certification of AFSs on ships, adopted by resolution; b) MEPC.104(49): Brief sampling of AFSs on ships, adopted by resolution; c) MEPC.105(49): Inspection of AFSs on ships, adopted by resolution; Orestis Schinas

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d) MEPC.207(62): Guidelines for the control and management of ships’ biofouling to minimize the transfer of aquatic species; and e) MEPC.208(62): Guidelines for the inspection of AFSs on ships. The AFS convention sets explicitly: a) Requirements regarding the phasing out of the use of harmful TBT as biocides in anti-fouling paints (Article 4); b) requirements regarding the disposal of wastes from the removal of TBTbased paints in a safe and environmentally sound manner (Article 5); c) the establishment of a mechanism to prevent the potential future use of other harmful substances in AFSs (Article 6); and d) requirements regarding surveys and certifications of ships’ AFSs (Article 10 and Annex 4). The AFS convention applies to (Article 3): a) Ships flying the flag of a state party to the AFS convention (party); b) ships not entitled to fly their flag but which operate under their authority; c) all ships that enter a port or shipyard, or an offshore terminal of a party; and d) the convention is not applicable to any warship, naval auxiliary or other ship owned or operated by a party and used, for the time being, only for government non-commercial service purposes. However, such ships should act in a manner consistent with the convention. This exception highlights the interest of the parties in protecting the environment even in the context of a fleet involved in national security and not subject to IMO provisions. All necessary definitions are provided in Article 2. The definitions of an ‘AFS’, a ‘ship’, the ‘AFS declaration’, the ‘AFS statement of compliance’ and ‘interim period’ are considered important for this analysis and, therefore, mentioned in the following section. An AFS is defined a ‘coating, painting, surface, treatment, surface, or device that is used on a ship to control or prevent [the] attachment of unwanted organisms’. Fouling is generally the accumulation of unwanted material and microorganisms on solid surfaces to the detriment of hull resistance, when flowing through the water, or a function, such as the cooling of an engine, as this material blocks the intake size of sea-chests. The IMO’s definition of fouling as ‘an unwanted growth of biological material—such as barnacles and algae—on a surface immersed in water’ also elucidates and clarifies the aims of policymakers.6 Generally, ships travel faster and consume less fuel when their hulls are clean and smooth. This is only possible either when a newbuilding is delivered or after the dry-docking and cleaning of the underwater parts of an existing ship. In those conditions, hulls are free from fouling organisms—such as algae, barnacles, or mollusks. The extent of fouling depends on the hull form, the speed, and many other operating and design parameters. It can be easily assumed that an

6 Focus on IMO, Anti-fouling Systems, 2002, p. 3.

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unprotected shell plate of 1 Sq m may gather almost 150 kg of fouling in less than six months.7 That means, a typical barge 195 ft long and 35 ft wide and at 9 ft draft has an underwater surface of almost 4,140 Sq ft (385 Sq m). If unprotected, it will gather around 58 tonnes of fouling. Anti-fouling substantially reduces the extent of this problem and decreases the resistance of the hull—i.e., less propulsion required to achieve the desired speed. This also implies a reduction in fuel consumption. A small amount of fouling increases the resistance of the hull with available literature estimating this increase at 20 per cent or more.8 Higher values are not excluded, but are considered extreme and unusual. One should, however, note that the convention stresses on the issue of organ- 14 otin compounds that are reported in Annex 1 and prohibited by Article 4.9 Early AFSs contained arsenical and mercurial compounds as well as pesticides. Later, the 1960s saw the availability of AFSs containing metallic compounds and, in particular, TBT.10 These systems were efficient but harmful to the environment. Scientific evidence and research proved that organotin compounds persist in water and sediments—killing sea life other than the targeted ones, i.e. organisms attached to the hulls of ships—and may enter the food chain, magnifying the harmful impact. TBT was manifested as the cause of all related damage and harm. Studies and scientific research claim that TBT is more harmful than other coatings, such as copper-based ones.11 The listing of controlled AFSs in Annex 1 as well as the provisos of Article 6 imply the possible inclusion of other substances and AFSs in the future. Article 16 provides the mechanism for an amendment to the convention. 15 Article 2(9) of the convention provides a convenient definition of a ship: 1) A ship means a vessel of any type whatsoever operating in the marine environment and includes hydrofoil boats, air-cushion vehicles, submersibles, floating craft, fixed or floating platforms, floating storage units (FSUs) and floating production storage and off-loading units (FPSOs); practically, all ship types and offshore facilities are covered by this definition; and the convention applies to ships over 400 GT (gross tonnage)and

7 Focus on IMO, Anti-fouling Systems, 2002, p. 3. 8 The bibliography on hull resistance is vast; indicatively, see Bertram V (2000) Practical Ship Hydrodynamics, Butterworth-Heinemann, Fig. 3.9, pp.76–77. 9 See the preamble of the convention and the special mention in Chapter 17 of Agenda 21 of the United Nations Conference on the Environment and Development 1992, informally known as the ‘Earth Summit’, as well as the related resolutions of the IMO and of the MPEC. 10 Organotin compounds are chemical compounds based on tin with hydrocarbon substituents. Tin is a chemical metallic element; its symbol is Sn. 11 Japanese submission to Correspondence Group, as referred to in MPEC 40/11/1.

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over 24 m long.12,13 The length limit implies that many states have issued rules, regulations and instructions applying to these generally small and non-convention vessels.14 Many states prohibit the use of organotin-based AFSs also for these vessels without exceptions, such as for aluminium structures or fishing vessels.15 16 Annex 4 of the regulation outlines the requirements on surveys and certification: i) All ships of 400 GT and above in international trade must have a TBT-free, anti-fouling coating on their hull or must apply an approved sealer coat. The administration issues the International Anti-fouling System Certificate (certificate);16 ii) ships less than 400 GT need only an AFS declaration (declaration) that can be issued by a ship owner himself based on information provided by the paint manufacturer;17 and iii) further details of the hull coating are listed in the supplement of the international AFS certificate or in the AFS declaration. 17 The controls are set out in Article 4 of the AFS convention: a) The convention prohibits and/or restricts the use of harmful anti-fouling paints used on ships of Article 3(1a) and 3(1b); b) parties to the convention should prohibit and/or restrict the application, reapplication and installation of such AFSs on ships of Article 3(1c) while in a party’s port, shipyard or offshore terminal facility; c) the systems to be prohibited or controlled are listed in Annex 1 of the convention; and d) a proviso for the phasing-out period was also considered for ships bearing an AFS that is controlled through an amendment to Annex 1. Following entry into force of the convention, these ships may retain that system until the 12 Regulation 1(1) of Annex 4 of the AFS convention. 13 The limit of 400 GT is set in Regulation 1 of Annex 4 of the convention. It does not set any length limits. Under Article 2(6) of the AFS convention, the length is defined as in International Convention on Load Lines 1966 (LL66). Article 2(8) of LL66 and Article 2(8) of the International Convention on Tonnage Measurement of Ships 1969 provide the following definition: length means 96 per cent of the total length on a waterline at 85 per cent of the least moulded depth measured from the top of the keel, or the length from the fore side of the stem to the axis of the rudder stock on that water line, if that be greater. In ships designed with a rake of keel the waterline on which this length is measured shall be parallel to the designed waterline. In both conventions, Article 4(1b) exempts ships less than 24 m long from having to comply with these provisions. Therefore, only ships of over 400 GT and over 24 m long are subject to the AFS convention. 14 Non-convention vessels are those that do not have to comply with specific or all chapters of the International Convention for the Safety of Life at Sea (SOLAS) and Load Lines 66 Conventions. They are either cargo ships of less than 24 m in length or passenger ships of less than 12 m and with a maximum tonnage of 500 GT. 15 See p. 19, IMO Focus ‘Anti-fouling Systems’, 2002. 16 Regulation 1 of Annex 4 of the AFS convention. 17 Regulation 5 of Annex 4 of the AFS convention.

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next scheduled renewal of that system, but in no event for a period exceeding 60 months. The phase-out period effectively expires in 2014. Article 4 should be closely considered with Annex I of the convention for the application or reapplication of harmful AFSs. Annex I provides in a tabular form control measures, the application and the effective date. This information is summarized as follows: a) By 1 January 2003, organotins compounds, which act as biocides, cannot be applied or reapplied in AFSs (a partial ban). b) By 1 January 2008 ships either (a total ban): i) shall not bear such compounds on their hulls or external parts or surfaces; or ii) shall bear a coating that forms a barrier to such compounds to leaching from the underlying non-compliant AFSs. c) Considering the wording of Annex I (see point [a] of the above paragraph), it seems that organotin compounds that do not act as biocides are permitted. TBT is too toxic and, therefore, an effective biocide; yet, the main problem is its persistence in the marine environment. Contemporary and state-of-theart technology suggests the following characteristics of an efficient and acceptable biocide:18 i) broad spectrum of activity; ii) low mammalian toxicity; iii) low water solubility; iv) no bioaccumulation in the food chain; v) not persistent in the environment; vi) compatible with paint raw material; and vii) a favourable price-performance ratio. The AFS convention and the ban on TBT-based coatings have attracted the interest of the IMO and of the EU and, therefore, of classification societies. The recognized organizations (ROs),19 mainly classification societies acting as ROs, might conduct inspections and surveys on behalf of states that are parties to the convention. This also implies that these ROs might issue a list of TBT-free AFSs and provide type approvals. As ships over 400 GT and above should carry international AFS (IAFS) certificates and ships between 24 m and up to 400 GT should carry a declaration of compliance, the commercial interests as well as the enforcement burden are apparent. The rule is clear and straightforward, so enforcing officers (surveyors and inspectors) and ship officers as well as personnel ashore can get clear working instructions. Regulation 782/03 prohibits the use of TBT-based coatings earlier than the AFS convention and recognizes any IAFS certification or statement of compli18 The characteristics are quoted from p.3 of the IMO Focus on Anti-fouling Systems, 2002. 19 See paragraph 17 (e).

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18

19

20

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ance (SoC). Considering the European policy pillars and the experience on maritime safety, and the security and environmental protection track record of European policymakers, this was expected. 22 Most classification societies have informed the owners on time and recommended compliance and, therefore, the securing of satisfactory documentation. Consequently, owners should have been informed by competent authorities of the flag states (registries) as well as from classification societies. These societies issue such documentation if only the applicable flag administration authorizes them. This is based on the principles outlined in the AFS convention and in the Resolution of MEPC102(48).20,21 However, one should be careful since there is no necessarily common approach by all members of the International Association of Classification Societies (IACS).22 Currently, the unified requirements consider the AFS as the basis for surveys and certification.23 The ‘documentation’ is issued predominately by reviewing the submitted information; surveys and spot check sampling are not often conducted unless deemed necessary. The information required by owners is commonly an attestation of the applied AFS or of the removed one. Attestation furnished by the AFS manufacturer with the following information to be included in the record of the AFS is commonly attached to the certificate: a) The type of the AFS; wording such as organotin-free, self-polishing type; organotin-free, ablative type; organotin-free, conventional, biocide-free silicon-type paint should be expected. If the AFS contains no active ingredients, it should have wording such as biocide-free; b) the AFS manufacturer's name; c) the name and colour of the AFS; d) the active ingredient(s) and its(their) chemical abstract service registry number(s) (CAS number); and e) a copy of the purchase order or contract linking the identified AFS with the ship to which it is be (or has been) applied. 23 Moreover, evidence related to the material provided by the paint manufacturer or the yard or the owner is also requested. This evidence might be a safety data sheet of the material, declarations and chemical analysis, etc. For newbuildings, surveys are conducted in the construction yard while for existing ships they are carried out at the first dry-docking after the compliance date or when owners change. Additionally, a survey is planned when ships undergo extensive repairs and repaint jobs.24 In most cases, the survey does not include a check of the surface preparation, corrosion protection properties, or the hygiene and safety of 20 Article 10 and Annex 4. 21 Guidelines for survey and certification of AFSs on ships. 22 The unified requirements of IACS are considered as the minimum requirements and each member remains free to set more detailed and stringent requirements. 23 See Table 1, p.10 of Z23 of the Unified Requirements (UR Z; Survey and Certification), available at www.iacs.org.uk (accessed on 29 November 2015). 24 Most commonly when over 25 per cent of the wet surface is repainted or repaired.

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the applied method,25 but boils down to a verification of whether or not the material is TBT-free or included in the appropriate lists. This verification includes three steps: a) All non-compliant AFS is removed or a sealer coat is applied; b) an AFS applied or to be applied should be compliant; and c) testing of samples, if necessary, should be done preferably of wet ones. If the material is included in an approved list, then sampling is usually not 24 necessary. The certifications are either the IAFS's or an SoC depending on the authority given by the administration. These certificates are valid until either the next repaint job, or a change of ownership or when a change in the AFS is planned. The ROs provide lists of verified AFSs and the type approval information. IMO reports alternative AFSs that can replace TBT-based systems.26 The ship type, age, and operating speed are only some of the parameters to be taken into account when applying an AFS. Some states report improvements because of the application of the AFS convention and of national prohibition. The reported efficacy needs further scientific research and substantiation.27 The evolution of policy-making implies that further regulation is expected re- 25 garding the systems. Should one expect additional toxic chemicals or copper oxides to be prohibited in the future? Are there any clear indications? This is not known yet. However, the issue of fouling attracts the interest of the industry and policymakers as it relates to the consumption of bunkers. The consumption issue is also linked to air emission policies—particularly of carbon dioxide (CO2), the major greenhouse gas. In short, the more fouled the hull, the higher the consumption and, therefore, the higher the emission of CO2. Furthermore, the effectiveness of an AFS is also linked to the transport of organisms on a ship’s hull, similarly to the environmental concerns of organisms transported through ballast water. Both concerns, i.e. the abatement of CO2 and the elimination of the transfer of organisms, suggest further AFS-related policy activity and action. It could also lead to the drafting of a clear set of requirements for an effective AFS. B. Text and Commentary Article 1 Objective The purpose of this Regulation is to reduce or eliminate adverse effects on the marine environment and human health caused by organotin compounds, which act as active biocides in antifouling systems used on ships flying the flag of, or operating under the authority of, a Member State, and on ships, regardless of the flag they fly, sailing to or from ports of the Member States.

25 Articles 5 and 6 of the AFS convention diktat. 26 See p. 18, IMO Focus ‘Antifouling Systems’, 2002. 27 See p. 20, IMO Focus ‘Antifouling Systems’, 2002.

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The purpose of the regulation is to lessen the environmental impact caused by organotin compounds used in the AFSs of ships. In practice, all ships are targeted; ships flying the flag of a member state of the EU as well as ships of other nationalities sailing to or from ports of member states. The objective of the regulation (Article 1) is completely harmonized with the statements in the preamble of the AFS convention. Article 2 Definitions 1. 2.

3. 4.

5. 6.

7.

8.

9.

10.

27

For the purpose of this Regulation: "anti-fouling system" means a coating, paint, surface treatment, surface, or device that is used on a ship to control or prevent attachment of unwanted organisms; "gross tonnage" means the gross tonnage calculated in accordance with the tonnage measurement regulations contained in Annex 1 to the International Convention on Tonnage Measurement of Ships, 1969, or any successor Convention; "length" means the length as defined in the International Convention on Load Lines, 1966, as modified by the Protocol of 1988 relating thereto, or any successor Convention; "ship" means a vessel of any type whatsoever operating in the marine environment and includes hydrofoil boats, air-cushion vehicles, submersibles, floating craft, fixed or floating platforms, floating storage units (FSUs) and floating production storage and off-loading units (FPSOs); "AFS-Convention" means the International Convention on the control of harmful anti-fouling systems on ships, adopted on 5 October 2001, irrespective of its entry into force; "recognised organisation" means a body recognised in accordance with the provisions of Council Directive 94/57/EC of 22 November 1994 on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations(8); "AFS-Certificate" means the certificate issued to ships in conformity with the provisions of Annex 4 to the AFS-Convention or, during the interim period, a certificate issued in accordance with the format laid down in Annex II to this Regulation, when it is issued by the administration of any Member State or by a recognised organisation acting on its behalf; "AFS-Declaration" means a declaration drawn up under the provisions of Annex 4 to the AFS-Convention or, during the interim period, a declaration signed by the owner or the owner's authorised agent and drawn up in accordance with the format laid down in Annex III to this Regulation; "AFS-Statement of Compliance" means a document recording compliance with Annex 1 to the AFS-Convention, issued by a recognised organisation on behalf of the administration of a Member State; "interim period" means the period beginning on 1 July 2003 and ending on the date of entry into force of the AFS-Convention.

The definitions provided in Article 2 of the regulation are identical with either those of the convention or with those stated in the articles of the convention. The definitions of an AFS (§ 2.1), GT (§ 2.2), length (§ 2.3) and a ship (§ 2.4) are identical in both texts. The terms are defined in accordance with the provisos of other IMO instruments, such as the Tonnage 1969 and the LL66 Load Lines 1966 Conventions (LL66).28 This simplifies the enforcement of the convention

28 See also fn. 12.

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as the surveyors and inspectors engaged for the control of compliance are familiar with the terms, thus avoiding misunderstandings or misinterpretations. The links of the convention with other instruments are apparent in many arti- 28 cles. The term, AFS convention (§ 2.5), provides a clear association with the IMO instrument (see introductory text in p.2). The term RO (§ 2.6) is defined as in the Council Directive 94/57/EC of 22 November 1994, on common rules and standards for ship inspection and survey organizations, and for the relevant activities of maritime administrations. Article 2 of Directive 94/57/EC provides the definitions: a) An 'organization’ means a classification society (CS) or another private body carrying out safety assessment work for an administration (Article 2[e]). b) An 'RO’ means an organization recognized in conformity with Article 4 (Article 2[f]); Article 4 of Directive 94/57/EC has been amended by Article 3 of Directive 2001/105/EC of 19 December 2001.29 c) The terms ‘AFS certificate’ (§ 2.7), ‘AFS declaration’ (§ 2.8) of the regulation correspond to the definitions given previously. d) The ‘AFS SoC’ (§ 2.9) is a document issued by an RO and records compliance with Annex 1 of the AFS convention. e) ‘Interim period’ (§ 2.10) is introduced in the regulation aiming to bridge any time gap between the entry into force of the regulation and of the AFS convention. As the convention is currently in force, these two terms do not attract real interest. Interim period is described as the period beginning from 1 July 2003 until the end of the date of entry into force of the AFS convention. As per Article 3, the ban of organotin compounds came into effect from 1 July 2003. Article 3 Scope 1.

2.

This Regulation shall apply to: (a) ships flying the flag of a Member State, (b) ships not flying the flag of a Member State but operating under the authority of a Member State, and (c) ships that enter a port or offshore terminal of a Member State but do not fall within points (a) or (b). This Regulation shall not apply to any warship, naval auxiliary or other ship owned or operated by a State and used, for the time being, only on government non-commercial service.

29 As per the CODE FOR RECOGNIZED ORGANIZATIONS (RO Code), Resolution MSC. 349(92), adopted on 21 June 2013, in the Preamble and Part 1 – General, applicable from 1 January 2015, Article 2, the RO Code applies to all organizations being considered for recognition or that are recognized by a flag state to perform, on its behalf, statutory certification and services under mandatory IMO instruments and national legislation; and to all flag states that intend to recognize an organization to perform, on their behalf, statutory certification and services under mandatory IMO instruments.

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The links and bonds to the convention and other IMO instruments are also evident in many other articles. Article 3 on the ‘scope’ of the regulation is almost identical to the Article 3 ‘application’ of the convention, as the regulation is applied to: 1) Ships flying the flag of a member state; 2) ships not flying the flag of a member state, but operating under the authority of a member state; and 3) ships not falling under the abovementioned categories that enter a port of offshore terminal of a member state. 30 The regulation does not apply to any warship or ship owned by the government and used for government services (see also 1[d], p.5) The application limits are similar to those in the LL66. 29

Article 4 Prohibition of the application of organotin compounds which act as biocides As from 1 July 2003, organotin compounds which act as biocides in anti-fouling systems shall not be applied or re-applied on ships. However, during the interim period this provision shall only apply to ships referred to in points (a) or (b) of Article 3(1).

31

Article 4 is also similar to Article 4 of the AFS convention.30 The proviso on the application during the interim period does not apply from 2008, the year of entry into force of the convention. Article 5 Prohibition of the bearing of organotin compounds which act as biocides 1.

2.

3.

32

Ships entitled to fly the flag of a Member State as from 1 July 2003, and whose anti-fouling system has been applied, changed or replaced after that date, shall not bear organotin compounds which act as biocides in anti-fouling systems on their hulls or external parts and surfaces, unless they bear a coating that forms a barrier to such compounds to prevent them leaching from the underlying non-compliant anti-fouling system. As from 1 January 2008 the ships referred to in Article 3(1) shall either not bear organotin compounds which act as biocides in anti-fouling systems on their hulls or external parts and surfaces, or bear a coating that forms a barrier to such compounds leaching from the underlying non-compliant anti-fouling system. Paragraphs 1 and 2 shall not apply to fixed and floating platforms, FSUs and FPSOs constructed prior to 1 July 2003 that have not been in dry-dock on or after that date.

Article 5 prohibits anti-fouling containing organotin compounds that act as biocides; all ships flying the flag of a member state of the EU must not use a non-compliant AFS. Should such organotin compounds be used, then a protective coating forming a barrier to such compounds and preventing them from 30 See points 1 (b) and 3 (b), p.8 of the previous section.

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leaching should also be applied. Ships flying the flag of a member state should comply after 1 July 2003, while ships not flying the flag of a member state but operating under the authority or call a port or offshore terminal of a member state should comply from 1 January 2008. Fixed and floating platforms, FSUs, and FPSO facilities that were constructed prior to 1 July 2003 and had not been dry-docked after that date were excluded. Older facilities were designed or exempted from dry-docking for relatively long periods (normally no longer than 10 years). Recent constructions are designed for longer periods but have to comply with the AFS convention.31 This effectively means that all ships and floating facilities are either subject to the convention or compliant with the technical requirements. Article 6 Survey and certification 1.

2.

3.

The following shall apply as regards the survey and certification of ships flying the flag of a Member State: (a) Ships of 400 gross tonnage and above, excluding fixed or floating platforms, FSUs and FPSOs, shall be surveyed and certified as from 1 July 2003 in accordance with the requirements laid down in Annex I, before the ship is put into service for the first time, or when the anti-fouling systems are changed or replaced. (b) Ships of 24 metres or more in length, but less than 400 gross tonnage, excluding fixed or floating platforms, FSUs and FPSOs, shall carry an AFS-Declaration to demonstrate compliance with Articles 4 and 5. If necessary, the Commission, in accordance with the procedure referred to in Article 9(2), may establish a harmonised survey and certification regime for these ships. (c) Member States may establish appropriate measures for ships not covered by points (a) and (b) in order to ensure compliance with this Regulation. The following shall apply as regards the recognition of certificates, declarations and statements of compliance: (a) as from 1 July 2003, Member States shall recognise any AFS-Certificate; (b) until a year after the date referred to in point (a), Member States shall recognise any AFS-Statement of Compliance; (c) as from 1 July 2003, Member States shall recognise any AFS-Declaration. These declarations shall be accompanied by appropriate documentation (such as a paint receipt or a contractor invoice) or contain an appropriate endorsement. If the AFS-Convention has not entered into force by 1 January 2007, the Commission, in accordance with the procedure referred to in Article 9(2), shall adopt appropriate measures in order to allow ships flying the flag of a third State to demonstrate their compliance with Article 5.

The survey and certification procedures outlined in Article 6 and Annex I of 33 the regulation are similar to the provisos of Article 10 of the convention and its Annex 4 as well as of the resolution of MEPC.102(48) of the IMO on the guidelines of the survey and certification of AFSs on ships. Annex I of the regulation 31 The units of Petroleo Brasileiro (Petrobras), with a capacity of 80,000 barrels of light oil and 2 million cubic metres of gas per day, operating in location Block BMS-40, Santos Basin are designed for 15 years of deployment without dry-docking. Available at http://www.offshoretechnology.com/projects/bauna-and-piracaba-oil-and-gas-fields/ (accessed on 15 September 2015).

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has references to both mentioned IMO documents.32 The introduced survey and certification system for ships flying the flag of a member state stipulates that: 1. Ships of 400 GT and above must be surveyed, irrespective of the voyage; 2. ships of 24 m or more in length, but less than 400 GT, must simply carry a declaration of compliance with the regulation or with the AFS convention. No particular survey or certificate is specified in the regulation to avoid overburdening the administrations in member states; 3. floating platforms, FSUs and FPSOs are excluded from the scope of the abovementioned points; 4. no community survey or certification is envisaged for ships of less than 24 m in length, i.e. mainly pleasure craft and fishing boats; and 5. member states may establish measures for ships not covered by the preceding points in order to ensure compliance with the regulation. 34 Member states shall recognize all AFS certificates and declarations; the latter should be substantiated through appropriate evidence or documentation. This proviso enables and facilitates the harmonization of surveys and certificates of the world fleet, and also sets the application and enforcement limits. The regulation has foreseen the following dates for the recognition of certificates and SoCs: 1. As from 1 July 2003, member states must recognize any AFS certificate issued by or on behalf of a member state; 2. as from 1 July 2004, member states must recognize any AFS SoC issued on behalf of a member state; 3. as from 1 July 2003, member states must recognize any AFS declaration.Adoption of appropriate measures in order to allow ships flying the flag of a third State was foreseen in case the AFS- convention has not entered into force by 1 January 2007 – this was clarified with Commission Regulation (EC) 536/2008. Article 7 Port State control During the interim period Member States shall apply control provisions equivalent to those laid down in Directive 95/21/EC to ships of 400 gross tonnage and above flying the flag of a Member State. With regard to the inspections and detection of breaches, Member States shall be guided by the provisions of Article 11 of the AFS-Convention. If the AFS-Convention has not entered into force by 1 January 2007, the Commission, in accordance with the procedure referred to in Article 9(2), shall establish appropriate procedures for these controls.

35

In Article 7, the regulation deals with the enforcement issue—a direct mention of Directive 95/21/EC that establishes common criteria for control of ships 32 Please note a typing error: in the earlier copies of the regulation, there is a link to MEPC.101 (48). The error was corrected in latter versions.

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by the port state and harmonizes procedures on inspection and detention,33 taking proper account of the commitments made by the maritime authorities of member states under the Paris Memorandum of Understanding (MoU) on Port State Control. During the interim period,34 ships over 400 GT flying the flag of a member state are subject to inspection by competent authorities of the member states,35,36 i.e. by the Port State Control (PSC). Article 7 stipulates that during the interim period, member states shall apply control provisions equivalent to those laid down for ships of 400 GT and above flying the flag of a member state and includes a clear reference to Article 11 of the AFS convention concerning inspections and detection of breaches.37 The following two IMO guidelines were not explicitly mentioned in the European regulation at first: 1. Resolution MEPC.105(49): 'Guidelines for inspection of anti-fouling systems on ships'; and 2. Resolution MEPC.104(49): 'Guidelines for brief sampling of anti-fouling systems'. A possibility to adopt appropriate procedures for these controls was foreseen 36 in case the AFS convention did not enter into force by 1 January 2007. All inspections and detections of contravention issues should be considered based on Article 11 of the convention. Article 8 Adaptations In order to take account of developments at international level and in particular in the International Maritime Organisation (IMO), or to improve the effectiveness of this Regulation in the light of experience, the references to the AFS-Convention, to the AFS-Certificate, to the AFS-Declaration and to the AFS-Statement of Compliance and/or the Annexes to this Regulation, including relevant IMO guidelines in relation to Article 11 of the AFS-Convention, may be amended in accordance with the procedure referred to in Article 9(2).

The regulation aims at enhancing cooperation among administrations regard- 37 ing violations. In Article 8, on adaptation, there is a clear link to Article 11 of the AFS convention. Paragraphs 11(3) and 11(4) of the convention state the obligation of information of violations and the right of action, such as detention. Investigation reports and related evidence should be communicated between the concerned parties of the convention. Regulations or directives, as EU legislative instruments, may themselves create a legal basis for further delegated rule and decision-making. Often, the commission extends its power, after consulting member states in some committees and informing the European Parliament in 33 Council Directive 95/21/EC of 19 June 1995, Official Journal L 157, 07/07/1995 P. 0001– 0019. 34 Article 2, paragraph 10 of the regulation; also see article. 35 The limit of 400 GT is imposed in Regulation 1 of Annex 4 of the AFS convention. 36 Article 4 on ‘Inspection Bodies’ and Article 2 (5) on the definition of ‘Inspectors’ of Council Directive 95/21/EC. 37 See Directive 95/21/EC.

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accordance with a council decision laying down the procedures for the exercise of implementing the powers conferred on.38 Article 9 Committee 1.

The Commission shall be assisted by the Committee on Safe Seas and the Prevention of Pollution from Ships established by Article 3 of Regulation (EC) No 2099/2002 of the European Parliament and of the Council of 5 November 2002 concerning the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) and amending the regulations on maritime safety and the prevention of pollution from ships(9), hereinafter referred to as "the COSS". Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. The COSS shall adopt its rules of procedure.

2.

3.

38

This extension of interest and power is evident, considering the evolution of policies and the interest of the commission in topics such as safety, PSC, etc. A regulation (2002) on the COSS was adopted aimed at creating a single consultative committee in the safety area to replace a number of existing ones and to constitute in the future the sole forum for consulting member states on draft delegated decisions in the field of maritime safety.39 As per Article 9, the COSS should assist the commission on the implementation of the AFS convention and the regulation. This also implies an effort to harmonize surveys and inspections, especially by competent authorities of member states, executing the PSC tasks. Article 10 Evaluation By 10 May 2004, the Commission shall report to the European Parliament and the Council on the state of ratification of the AFS-Convention and provide information on the extent to which organotin compounds, which act as biocides in anti-fouling systems on ships, are still used on ships not flying the flag of a Member State operating to or from Community ports. In the light of this report the Commission may propose, if necessary, amendments to ensure accelerated reduction of the contribution by ships not flying the flag of a Member State to the presence of harmful anti-fouling compounds in the waters under the jurisdiction of Member States.

39

Article 10 should be jointly considered with Article 9 of the regulation. As per Regulation 536/2008 of the commission, the COSS contributed towards establishing measures in order to allow ships to demonstrate compliance,40 for the procedures of PSC and for amending—for updating purposes—the AFS statement of compliance and of Annex I of Regulation 782/2003. The aim of the regulation is to avoid any case of favourable treatment from ships flying the flag of a state that was not a party to the AFS convention before its entry into force. 38 Council Decision 1999/468, OJ L184/23 of 17.7.1999, amended by Council Decision 2006/512/EC, OJ L200/11 of 22.7.2006. 39 Regulation 2009/2002, OJ L324/1 of 29.11.2002. Security matters are considered in a different committee. 40 See Preamble (9) of Commission Regulation No 536/2008.

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Regulation (EC) 536/2008 amended Regulation 782/2003 for ships flying the flag of a third state: 1) Ships flying the flag of a third state had to carry an SoC—during the interim period (before the convention entered into force); 2) IAFS certificates (parties to the convention); and 3) an SoC (non-parties). The adoption of the regulation as well as the implementation of Article 9 on 40 the role of the COSS, and the need to keep up with these environmentally sensitive issues, led to a survey conducted by the European Maritime Safety Agency (EMSA). A questionnaire was prepared by the EMSA in cooperation with the EC and circulated in early 2009. The aim was to meet the specific request from the EC to undertake an inventory on the implementation of Regulation (EC) 782/2003, as supplemented, and the level of compliance by ships. The responses were analysed and summarized in a report, which was distributed to member states and discussed by the COSS (at its 15th meeting in March 2010). Questions included those on the national legislation and its scope, the ways of conducting surveys and certification, inspections, practices related to sampling and sanctions. The results of the survey yielded the following points: 1) Compliance: a) Most ships calling in the EU ports seem to comply with the regulation and the convention, with the compliance rate estimated to range between 90 per cent and 100 per cent; b) most recorded deficiencies relate to documentation; and c) member states not yet party to the convention have faced some problems regarding both flag state and port state implementation after the convention entered into force. 2) Inspections: a) The number of government bodies involved in the implementation ranges from one to four; b) a brief sampling remains the most problematic issue, particularly related to inspections; c) there are comprehensive inspection regimes in place for ships flying own flags; d) the supplementing commission regulation and the entry into force of the convention seem to have solved some of the implementation problems; e) very little additional guidance regarding inspection has been developed; f) no specific criteria are used by EU member states to select ships for compliance inspections as the existing PSC framework and targeting procedures are used; g) the entry into force of the convention stimulated a more systematic approach to inspections, and a more consistent application of sanctions; and

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h) a significant number of inspections have taken place through the PSC, flag state control and other methods. 3) Statistics: a) Little or no difference in the inspection regimes for ships flying the flag of a non-EU state which is a party to the convention and non-EU states that are not a party to the convention; b) warning, detention and fines were the most common sanctions; c) significant variations can be noted concerning the commencement of the inspections on AFS compliance; and d) once inspections had been implemented, the timelines (by flag) had usually been followed. Article 11 Entry into force This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States.

41

The directive was published in the official journal on 9 May 2003 and, therefore, came into force on 10 May 2003. As with other measures in the field of marine environment protection, no exception was made for member states with no related vested interests.

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Jessen

Henning

VI. Commentary on Directive 2005/35/EC on ship-source pollution and on the introduction of penalties, including criminal penalties, for pollution offences (as amended by Directive 2009/123/EC) A. Preliminary Remarks and Introduction to the Legal Act . . . . . . . . . . . . . . . . .

1

B. Text and Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Article 1 – Purpose and Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Article 2 – Legal Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Article 3 – Spatial and Substantive Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Article 4 – Infringements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Articles 5, 5a and 5b – Exceptions and Criminal Offences. . . . . . . . . . a) Exceptions under Article 5 of Directive 2005/35/EC . . . . . . . . . . . . . b) Criminal Offences under Articles 5a and 5b of Directive 2005/35/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Article 6 – Enforcement Measures Against Ships in EU Ports. . . . . . 7. Article 7 – Enforcement Measures Against Ships in Transit . . . . . . . . 8. Articles 8, 8a, 8b and 8c – Administrative and Criminal Penalties 9. Article 9 – Compliance with International Law / Safeguards . . . . . . . 10. Article 10 – Accompanying Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Article 11 – Feasibility Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Article 12 – Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Article 13 – Committee Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Article 14 – Provision of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Article 15 – Amendment Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Article 16 – Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. Article 17 – Entry into Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. Article 18 – Addressees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 8 16 23 30 40 41 59 64 69 78 85 90 98 103 111 119 121 123 127 128

Literature: Churchill/Lowe, The Law of the Sea (3rd ed., 1999); Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209; Gahlen, Ships Revisited: A Comparative Study, JIML (20) 2014, pp. 252; Güner-Özbek, The European Maritime Safety Agency “EMSA“, pp. 71, in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea (2008); Herlin-Karnell, The Ship-Source Pollution Case C-440/05, Commission v. Council, European Public Law, Vol. 14, No. 4, 2008 (available online at SSRN: http://ssrn.com/abstract=2198083 [last access: May 2015]; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige (2012); Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/Pawlik/Neumann (eds.), The Human Element in Container Shipping (2012); Jessen, Was ist ein „Schiff“? – Eine aktuelle Definitionsfrage mit versicherungsrechtlicher Relevanz für Offshore-Anlagen, Versicherungsrecht 2014, pp. 670; König, The EU Directive on Ship-Source Pullution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767, in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes (2007); Kojima, ShipSource Pollution and Public International Law, pp. 91, in: Mejia (ed.), Selected Issues in Maritime Law and Policy, Liber Amicorum Proshanto K. Mukherjee; Liu, The European Union’s Role in the Prevention of Vessel-Source Pollution and its International Influence, The Journal of International Maritime Law (15) 2009, pp. 411; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities (3rd ed. 2013); Molenaar, Coastal State Jurisdiction over Vessel-Source Pollution (1998); Mukherjee, The Penal Law of Ship-Source Marine Pollution: Selected Issues in Perspective pp. 463, in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes (2007); Pellegrino, The Introduction of

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Chapter 4, VI. Penalties for Ship-source Pollution in Community Law: Recent Developments, European Transport (48) 2011, pp. 99; Pozdnakova, Criminal Jurisdiction over Perpetrators of Shipsource Pollution: International Law, State Practice and EU Harmonisation (2013); Proelss, The European Court of Justice and Its Role in (Re-)Defining EU Member Statesʼ Jurisdiction over Ships, in: Ringbom (ed.), Jurisdiction over Ships – Post-UNCLOS Developments in the Law of the Sea, pp. 422; Rainey, What is a “ship” under the 1952 Arrest Convention?, LMCLQ (Vol. 1) 2013, pp. 50; Ringbom, The EU Maritime Safety Policy and International Law (2008); Tan, Vessel-Source Marine Pollution (2006); Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54, in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law (2010).

A. Preliminary Remarks and Introduction to the Legal Act

The United Nations Convention on the Law of the Sea (UNCLOS) provides States with a broad – but not unlimited – prescriptive jurisdiction to implement and enforce “generally accepted” and “applicable international rules and standards” in their ports and coastal waters, see especially Article 211 UNCLOS.1 Legal tension may arise, however, when individual States or a supranational organisation such as the EU which is also a party to UNCLOS2 seek to enforce even stricter standards (as compared to “generally accepted” and “applicable international rules and standards”). 2 Out of concern about the “over-frequent illegal operational discharges of polluting substances from ships at sea”,3 and in the aftermath of major accidental oil spills (especially the devastating “Erika” and “Prestige” casualties) a regional EU “sanctions regime” for vessel-related pollution violations has been introduced via Directive 2005/35/EC4 which differs – to some extent – from the applicable international rules, in particular in relation to the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78).5 During the legislative procedure, the three biggest EU flag States (Malta, Cyprus and Greece) had unsuccessfully expressed their individual opposition against the act. Generally, various industry voices had expressed concerns that the EU legis1

1 Article 211 UNCLOS is an extensive provision but see, e.g. its fifth paragraph stating that “Coastal States, for the purpose of enforcement as provided for in section 6, may in respect of their exclusive economic zones adopt laws and regulations for the prevention, reduction and control of pollution from vessels conforming to and giving effect to generally accepted international rules and standards established through the competent international organization or general diplomatic conference.”. 2 Council Decision 98/392/EC of 23 March 1998 concerning the conclusion by the European Community of the United Nations Convention of 10 December 1982 on the Law of the Sea and the Agreement of 28 July 1994 relating to the implementation of Part XI thereof, OJ 1998 L 179/1 of 23 June 1998. 3 European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements Brussels, COM(2008) 134 final of 11 March 2008, p. 2. 4 Directive 2005/35/EC of 7 September 2005 on ship-source pollution and on the introduction of penalties for infringements, OJ L255/11 of 30 September 2005. 5 See generally on the issue of jurisdiction under the MARPOL regime: Tan, Vessel-Source Marine Pollution, pp. 184.

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lative actions would add to the serious global problem known as “criminalization of seafarers” instead of mitigating it.6 The Directive forms part of the comprehensive body of EU legislation in the 3 maritime safety policy area.7 It lays down rules on the conditions for the imposition of sanctions and makes specific provision as to the circumstances in which the sanctions shall be of a criminal nature. Admittedly, this instrument was not driven primarily by legal rationality.8 Rather, Directive 2005/35/EC was mostly driven by political sentiment and expediency.9 This weakness of the Directive is still evident even more than a decade after its adoption (see in particular the commentaries on Articles 4, 5 and 8 to 12 as exemplary provision which all evidence some weak points and insignificant progress in achieving the Directive’s objectives). The applicable EU rules were originally established through the Directive it- 4 self and accompanied by Council Framework Decision 2005/667/JHA (of 12 July 2005, annulled on 23 October 2007).10 In 2003, the Commission had presented the proposal for the Directive, based on Article 100(2) TFEU (ex Article 80(2)) and the proposal for the Framework Decision, based on Articles 35, 37 and 40(2)(b) TFEU (ex Articles 29, 31 and 34(2)(b)) “to strengthen the criminal-law framework for the enforcement of the law against ship-source pollution”.11 The proposal for the Directive provided that certain ship-source pollution occurrences should be considered a criminal offence, subject to criminal penalties. The proposal for the Framework Decision mainly aimed at approximating the levels of criminal penalties. With these two measures, the European Commission proposed that the provi- 5 sions on the nature (criminal) and type (custodial or financial) of penalties should appear in the Community instrument and the provisions on the levels of criminal penalties in the intergovernmental instrument.12 At the time of the negotiations on the drafts, this splitting between the first pillar (i.e. the Community framework) and the third pillar (i.e. justice and home affairs) for criminal-law

6 For further references on this problem see: Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/Pawlik/ Neumann (eds.), The Human Element in Container Shipping (2012); Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209 (235 et seq.). 7 See generally: Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54 (at 69 et seq.), in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law. 8 See generally: Ringbom, The EU Maritime Safety Policy and International Law, p. 317. 9 Mukherjee, The Penal Law of Ship-Source Marine Pollution: Selected Issues in Perspective pp. 463 (at 492), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes. 10 Council Framework Decision 2005/667/JHA to strengthen the criminal law framework for the enforcement of the law against ship-source pollution, OJ 2005 L 255/164; for details see, e.g., Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 56. 11 European Commission, COM(2008) 134 final of 11 March 2008, p. 2. 12 Ibid.

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matters was a controversial issue between the EU institutions.13 Eventually, the two instruments were adopted in 2005 to introduce a precise definition of vessel-related infringements along with the rule that they will “be subject to effective, proportionate and dissuasive penalties, which may include criminal or administrative penalties” (see Article 8(1) of the original text of the Directive). The provisions on the nature, type or levels of criminal penalties were included in the parallel Framework Decision 2005/667/JHA. 6 However, in 2007, Framework Decision 2005/667/JHA was annulled by the CJEU14 resulting in a “legal vacuum” between 2007 and 2009 until amendments were incorporated into the original Directive 2005/35/EC via Directive 2009/123/EC.15 The Framework Decision had raised several problematic issues under EU law given that the details of criminal law had traditionally been considered to lie outside the scope of the Community’s competence.16 Nevertheless, Directive 2005/35/EC itself also called for a thorough legal analysis as to whether the EU measures corresponded to the international framework for enforcing pollution violations.17 In a(n) (in)famous judgement of 2008 (preliminary ruling) – relating to the so-called “Intertanko case”18 (discussed as part of the commentaries on Articles 4 and 5 of the Directive) – the CJEU itself had de-

13 Ibid. 14 C-440/05 – Commission v Council, ECJ Judgment of 23 October 2007 (Grand Chamber) C.M.L.R. (22) 2008, pp. 1; on the proceedings see, e.g., Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 56; Herlin-Karnell, The Ship-Source Pollution Case C-440/05, Commission v. Council, European Public Law, Vol. 14, No. 4, 2008 (available online at SSRN: http://ssrn.com/abstract=2198083 [last access: May 2015]. 15 Directive 2009/123/EC of the European Parliament and of the Council of 21 October 2009 amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements, OJ L 280/52 of 27 October 2009; see Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, pp. 64. 16 On this problem, see in particular: Ringbom, The EU Maritime Safety Policy and International Law, p. 318, stressing the fact that “the development of the two measures took place in the midst of an institutional disagreement between the Commission and the Council as to the scope of the Community’s competence in criminal matters with respect to environmental law. [Earlier,] the adoption of Council Framework Decision 2003/80/JHA on the protection of the environment through criminal law (OJ 2003 L 29/55) had led the Commission to bring the Council to the ECJ, which eventually took the side of the Commission and annulled the act on the grounds that “the entire framework decision, being indivisible, infringes [now] Article 53 TEU (ex Article 47 EU) as it encroaches on the powers which [now] Article 192 TFEU (ex Article 175 EC) confers on the Community”, (Case C-176/03 Commission v. Council ECR [2005] I-7879, para. 53.). As a consequence, the Commission [successfully] sought to annul Framework Decision 2005/667/JHA (Case C-440/05 Commission v. Council).”. 17 Ringbom, The EU Maritime Safety Policy and International Law, p. 318. 18 See the reference for the preliminary ruling to the ECJ by English High Court of Justice (Administrative Court): OJ 2006 C 261/7 of 28 October 2006; these proceedings were brought by the International Association of Independent Tanker Owners (Intertanko), the International Association of Dry Cargo Shipowners (Intercargo), the Greek Shipping Co-operation Committee, Lloyd’s Register and the International Salvage Union against the UK Secretary of State for Transport concerning the implementation of Directive 2005/35/EC.

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clined to rule on the legal compatibility of Directive 2005/35/EC with both UNCLOS and MARPOL.19 The general reasoning applied in “Intertanko” in 2008 was confirmed six 7 years later in another preliminary ruling.20 This case of the “MSC Orchestra”, however, had no UNCLOS dimension at all to it and it related specifically to the compatibility of the EU’s “Sulphur Directive”21 with MARPOL Annex VI (on the prevention of air pollution from ships). Moreover, in the “Intertanko” case the CJEU had to concede that MARPOL Annexes I and II were ratified by all EU Members, thus generating – at least potentially – consequences for the interpretation of EU law. In contrast to that, three land-locked EU Members (Austria, the Czech Republic and Hungary) had still not ratified MARPOL Annex VI in 2014. In this context, the CJEU held in the “MSC Orchestra” that to interpret the provisions of EU law in the light of an obligation imposed by an international convention which did not (yet) bind all EU Members would amount to extending the scope of that obligation to those EU Members which were not (yet) contracting parties to such an agreement. As a result, the CJEU was not required to interpret the “EU Sulphur Directive” in the light of MARPOL Annex VI at the time. B. Text and Commentary Article 1 Purpose 1.

2.

The purpose of this Directive is to incorporate international standards for ship-source pollution into Community law and to ensure that persons responsible for discharges of polluting substances are subject to adequate penalties, including criminal penalties, in order to improve maritime safety and to enhance protection of the marine environment from pollution by ships. This Directive does not prevent Member States from taking more stringent measures against hip-source pollution in conformity with international law.

19 Case C-308/06, Judgment of the Court (Grand Chamber) of 3 June 2008, OJ C183/3 of 19 July 2008; see further details infra section 5.; see also Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, pp. 219; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige, p. 138; Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209 (228 et seq.). 20 Case C-537/11, Judgment of the Court (Fourth Chamber) of 23 January 2014, OJ 93/3 of 29 March 2014 (request for a preliminary ruling from the Tribunale di Genova) — Mattia Manzi, Compagnia Naviera Orchestra v Capitaneria di Porto di Genova. 21 Specifically: Article 4a(4) of Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC (OJ 1999 L 121/13), as amended by Directive 2005/33/EC (OJ 1991 L 191/59); see the specific commentary section in Chapter 4, II. discussing the material contents of the “Sulphur Directive”.

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1. Article 1 Directive 2005/35/EC – Purpose and Objectives

Generally, Recital (1) of the Directive recalls that the EU’s maritime safety policy is aimed at a high level of safety and environmental protection and is based on the understanding that all parties involved in the transport of goods by sea have a responsibility for ensuring that ships used in EU waters comply with applicable rules and standards. This is also why “legal persons” (see Article 2(5) of the Directive) are possible perpetrators to be sanctioned by the regime as established by Directive 2005/35/EC as well. Moreover, while preparing and negotiating the text of the original Directive, the European Commission had stressed that the existent civil liability regimes on oil pollution did not generate enough deterrent effects and were “of limited value for helping to prevent accidents from happening in the first place”.22 As a result, Recital (7) of the Directive combines both of those aspects by stressing that “neither the international regime for the civil liability and compensation of oil pollution nor that relating to pollution by other hazardous or noxious substances provides sufficient dissuasive effects to discourage the parties involved in the transport of hazardous cargoes by sea from engaging in substandard practices; the required dissuasive effects can only be achieved through the introduction of penalties applying to any person who causes or contributes to marine pollution; penalties should be applicable not only to the shipowner or the master of the ship, but also the owner of the cargo, the classification society or any other person involved.” 9 In addition, Recital (15) of the Directive stresses that the incorporation of international ship-source pollution standards into EU law cannot be sufficiently achieved by the EU Members. Consequently, if the objectives could be better achieved at EU level, the EU may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 TEU, mindful of the principle of proportionality, i.e., the Directive does not go beyond what is necessary in order to achieve those objectives. 10 The purpose and objective of the act is to incorporate international shipsource pollution standards into EU law and the establishment of “adequate” penalties — criminal or administrative — for violations of them in order to ensure a high level of safety and environmental protection in maritime transport. Thus, the central objective of Directive 2005/35/EC is to transpose into EU law the international standards introduced by the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78)23 related to the prohibition of polluting discharges into the sea and to specify the sanctions to be imposed. In sum, the Directive serves to approximate the definition of ship-source 8

22 European Commission: “Proposal for a Directive of the European Parliament and of the Council on ship-source pollution and on the introduction of sanctions, including criminal sanctions, for pollution offences”, COM (2003) 92 final, pp. 5; see also Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 212. 23 See the reference in Article 2(1) of the Directive.

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pollution offences committed by natural or legal persons, the scope of their liability and the criminal nature of penalties that can be imposed for such criminal offences by natural persons.24 The rationale for the act was the assumption (mainly by the European Commission and the European Parliament) that the implementation and application of MARPOL 73/78 evidenced some practical and legal discrepancies among the EU Members. This is also evidenced by Recital (3) of the Directive. The Directive itself addresses the need to collect more empirical data and to carry out more legal assessments within its own context (see Articles 11 to 14 of the Directive). From the 2003-2005 perspective, some intra-EU practical discrepancies w related in particular to the imposition of “adequate” penalties for discharges of polluting substances from ships. As a result, the European Commission accentuated a need to enhance harmonised MARPOL 73/78 implementation at the EU level via Directive 2005/35/EC. This also reflected the view of the Commission that – under public international law – it would be perfectly legal for the EU and its Members to even exceed generally accepted and internationally applicable rules and standards (as established by UNCLOS and as further specified by MARPOL 73/78) – as long as those do not explicitly form maximum standards. As a result, Article 1(2) of the Directive clarifies that Member States are not prevented from applying even more stringent measures against ship-source pollution as long as those measures are “in conformity with international law”. Generally, coastal States are permitted to adopt national rules and standards in regulating certain activities such as polluting discharges at sea which are more stringent that “generally accepted international rules and standards”. However, the legality of those laws under public international law always depends on the construction of coastal States’ varying competencies in different maritime zones under the Law of the Sea as codified by UNCLOS.25 Thus, a legal measure of a coastal State might be lawful for the territorial sea while the legality of the same measure could be called into question for the EEZ or even the High Seas. In any case, a coastal State generally has unrestricted sovereignty to adopt and apply rules concerning foreign vessels in its internal waters and ports.26 If certain provisions of the Directive – namely Articles 4 and 5 of the Directive – would not be “in conformity with international law” themselves – corresponding excessive Member State legislation would also contravene public in24 See on the Directive in general, e.g.: Liu, The European Union’s Role in the Prevention of Vessel-Source Pollution and its International Influence, The Journal of International Maritime Law (15) 2009, pp. 411; Pellegrino, The Introduction of Penalties for Ship-source Pollution in Community Law: Recent Developments, European Transport (48) 2011, pp. 99; Kojima, ShipSource Pollution and Public International Law, pp. 91, in: Mejia (ed.), Selected Issues in Maritime Law and Policy, Liber Amicorum Proshanto K. Mukherjee; Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54 (at 57), in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law. 25 See Churchill/Lowe, The Law of the Sea, p. 347. 26 Ringbom, The EU Maritime Safety Policy and International Law, p. 409.

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12

13

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ternational law. Legal scholars who have taken the view that the Directive itself, in fact, violates UNCLOS and MARPOL obligations have identified this multiplication effect as “most discouraging”.27 However, this is (only) part of a debate evidencing diverging legal opinions among legal scholars.28 15 Nevertheless, it impedes the general harmonisation objectives of the Directive if EU Members would rely frequently on Article 1(2) of the Directive to individually introduce more stringent measures against ship-source pollution. Thus, it may be argued that Article 1(2) of the Directive is a declaratory provision which might be reserved for certain local necessities or as another legal possibility to legitimize the adoption of immediate legal measures in cases of severe marine casualties. Article 2 Definitions For the purpose of this Directive: ‘Marpol 73/78’ shall mean the International Convention for the Prevention of Pollution from Ships, 1973 and its 1978 Protocol, in its up-to-date version; ‘polluting substances’ shall mean substances covered by Annexes I (oil) and II (noxious liquid substances in bulk) to Marpol 73/78; ‘discharge’ shall mean any release howsoever caused from a ship, as referred to in Article 2 of Marpol 73/78; ‘ship’ shall mean a seagoing vessel, irrespective of its flag, of any type whatsoever operating in the marine environment and shall include hydrofoil boats, air-cushion vehicles, submersibles and floating craft. ‘Legal person’ shall mean any legal entity in possession of such status under applicable national law, other than States themselves or public bodies in the exercise of State authority or public international organisations.

1. 2. 3. 4.

5.

2. Article 2 Directive 2005/35/EC – Legal Definitions 16

Four out of the five legal definitions of Article 2 of the Directive refer to the framework of the International Convention for the Prevention of Pollution from Ships, 1973 and the Protocol of 1978 related thereto (MARPOL 73/78). Article 2(1) of the Directive clarifies the conventional meaning of “MARPOL 73/78” itself. All EU Member States are Parties to MARPOL 73/78. By this convention the IMO has established – and continuously updated over decades – the most important internationally agreed pollution prevention rules for almost all shiprelated aspects which are potentially harmful to the environment (practically only excluding internal ship-related noise which is currently covered in the context of maritime labour law while external ship-related noise is currently unregulat-

27 Mukherjee, The Penal Law of Ship-Source Marine Pollution: Selected Issues in Perspective pp. 463 (at 496), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes. 28 See also Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54 (at 73), in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law: “[EU] Member States remain in default of their MARPOL obligations and the following question requires to be answered: Do [EU] Member States need to denounce MARPOL?”.

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ed). For easier reference, the Directive itself has an Annex attached to it which includes the relevant provision of MARPOL Annexes I and II. Article 2(2) of the Directive refers to all “polluting substances” which are 17 covered by MARPOL Annexes I and II. As a result, all different legal definitions of oil (Annex I) and noxious liquid substances (NLS) carried in bulk (Annex II) are covered by the Directive. The MARPOL Convention itself (also Article 2(2) MARPOL 73/78) broadly defines “harmful substances” as meaning “any substance which, if introduced into the sea, is liable to create hazards to human health, to harm living resources and marine life, to damage amenities or to interfere with other legitimate uses of the sea, and includes any substance subject to control by [MARPOL 73/78]”. Thus, the term “harmful substances” covers and includes all “polluting substances” under MARPOL Annexes I and II. Article 2(3) of the Directive directly refers to the legal definition of “dis- 18 charge” under MARPOL 73/78 (Article 2(3)). ”Discharge” in relation to harmful substances (or effluents containing such substances) means “any release howsoever caused from a ship and includes any escape, disposal, spilling, leaking, pumping, emitting or emptying” (Article 2(3)(a) MARPOL 73/78). Negatively, pursuant to Article 2(3)(b)(i)-(iii) MARPOL 73/78, “discharge” does not include: – dumping within the meaning of the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, done at London on 13 November 1972; or – release of harmful substances directly arising from the exploration, exploitation and associated offshore processing of sea-bed mineral resources; or – release of harmful substances for purposes of legitimate marine scientific research into pollution abatement or control. Article 2(4) of the Directive legally defines the meaning of a “ship” for the 19 purposes of the Directive. This provision also borrows from Article 2(4) MARPOL 73/78 which defines a “ship” to mean “a vessel of any type whatsoever operating in the marine environment and [including] hydrofoil boats, air-cushion vehicles, submersibles, floating craft and fixed or floating platforms.” Generally, the question whether a certain floating construction is (still or already) a “ship” – from a legal point of view – can be quite tricky. This question has caused already some legal debate, even the United States Supreme Court has addressed the matter repeatedly.29 29 See Cope v Vallette Dry Dock Co., 119 U.S. 625 (1887); Evansville & Bowling Green Packet Co. v Chero Cola Bottling Co., 271 U.S. 19 (1926); Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527 (1995); Steward vs. Dutra Construction Company, 543 U.S. 481 (2005); Lozman v. City of Riviera Beach, 133 S. Ct. 735, 2013 AMC 1 (2013); see generally: Jessen, Was ist ein „Schiff“? – Eine aktuelle Definitionsfrage mit versicherungsrechtlicher Relevanz für Offshore-Anlagen, Versicherungsrecht 2014, pp. 670; Gahlen, Ships Revisited: A Comparative Study, JIML (20) 2014, pp. 252; Rainey, What is a “ship” under the 1952 Arrest Convention?, LMCLQ (Vol. 1) 2013, pp. 50.

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In comparison to the broad MARPOL 73/78 legal definition the Directive has included another element, i.e., “any seagoing vessel, irrespective of its flag”. Moreover, in contrast to the MARPOL 73/78 legal definition, Directive 2005/35/EC leaves out the final part of the MARPOL 73/78 definition, i.e. “fixed or floating platforms”. Thus, Directive 2005/35/EC clarifies three aspects for the purposes of EU law: 1. Inland waterway barges are generally not covered by the Directive – as long as they are not “seagoing” (like so-called “sea river vessels”, some of them operaring in the Baltic Sea); 2. “fixed or floating platforms” – in particular offshore oil and gas installations – are also not covered by Directive 2005/35/EC. However, these installations are now broadly covered by Directive 2013/30/EU on the safety of offshore oil and gas operations.30 3. Third, the Directive applies universally to all commercially-operated ships falling under the technical definition of Article 2(4) of the Directive. This is also reiterated by Article 3(2) of the Directive which exempts all kinds of “state vessels” from the substantive scope of the act. 21 The final definition as stated in Article 2(5) of the Directive is not transferred from MARPOL 73/78. Rather, the legal definition of a “legal person” under the Directive is inspired from the annulled Council Framework Decision 2005/667/JHA which had introduced common penalties with regard to “legal persons“ (without specifically defining them). Council Framework Decision 2005/667/JHA was originally designed to cover exclusively the liability of legal persons and penalties to be issued against them. As a result, the original text of Directive 2005/35/EC made no reference to “legal persons” and their respective liability at all. Via the amendments affected by Directive 2009/123/EC31 some provisions of the annulled Framework Decision 2005/667/JHA – specifically relating to “legal persons” – were integrated into the amended text of Directive 2005/35/EC (see Articles 5a, 5b, 8a, 8b and 8c of the Directive). In particular, the liability of legal persons (Article 8a) and the penalties for legal persons (Article 8b) are now covered by the Directive. This necessitated the inclusion of a new legal definition of a “legal person” into the amended text of the Directive which now practically includes any form of (private) legal personality as recognised under the legal order of any EU Member State. 22 The legal definition of Article 2(5) of the Directive only excludes “the States themselves, public bodies in the exercise of State authority or public international organisations”. For example, Recognised Organisations (ROs) acting in ac20

30 Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC, OJ L 178/66 of 28 June 2013. 31 Directive 2009/123/EC of the European Parliament and of the Council of 21 October 2009 amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements, OJ L 280/52 of 27 October 2009.

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cordance with Regulation EC/391/2009 and performing statutory functions on behalf of EU flag States (see Directive 2009/15/EC) do not fall under the definition of Article 2(5) of Directive 2005/35/EC. However, the legal definition of Article 2(5) is met at the same time if the very same entity performs private classification services (as a classification society for a shipowner).32 Thus, it is indispensable to identify on a case-by-case basis the professional capacity under which the relevant legal person operates Article 3 Scope 1.

2.

This Directive shall apply, in accordance with international law, to discharges of polluting substances in: (a) the internal waters, including ports, of a Member State, in so far as the Marpol regime is applicable; (b) the territorial sea of a Member State; (c) straits used for international navigation subject to the regime of transit passage, as laid down in Part III, section 2, of the 1982 United Nations Convention on the Law of the Sea, to the extent that a Member State exercises jurisdiction over such straits; (d) the exclusive economic zone or equivalent zone of a Member State, established in accordance with international law; and (e) the high seas. This Directive shall apply to discharges of polluting substances from any ship, irrespective of its flag, with the exception of any warship, naval auxiliary or other ship owned or operated by a State and used, for the time being, only on government non-commercial service.

3. Article 3 Directive 2005/35/EC – Spatial and Substantive Scope

First, Article 3(1) of the Directive addresses the spatial scope of the act. This 23 provision is of utmost importance for the further understanding of Articles 5, 6 and 7 of the Directive. Generally, the Directive covers any unjustified “discharge” of “polluting sub- 24 stances” (see the applicable legal definitions in Article 2(2) and (3) of the Directive). Using UNCLOS terminology on the designation of maritime zones, the spatial scope of the Directive is applicable to all seagoing vessels entering the internal waters and ports of EU Members, extending also to EU Members’ territorial waters, straits, their exclusive economic zones (EEZ) and even into all areas which are high seas (Part VII UNCLOS), thus an area “to which no State may validly purport to subject any part of it to its sovereignty” (see Article 89 UNCLOS). As a result, all shipping-related maritime zones are referred to in Article 3(1) of the Directive creating a very broad geographical reach. Only the continental shelf and the “Area”, i.e. the deep seabed, are not covered by Directive 2005/35/EC.

32 On this important distinction of competencies and tasks, see Chapter 4, VII. which addresses the coherent pieces of legislation of both Regulation EC/391/2009 and Directive 2009/15/EC on common rules and standards for ship inspection and survey organisations (and for the relevant activities of maritime administrations).

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Of course, the reference to the high seas in Directive 2005/35/EC should not be misinterpreted as an EU claim of sovereignty over the high seas. Rather, the Directive is a regional instrument implementing and respecting Part XII UNCLOS (in particular Section 7).33 Article 9 of the Directive includes applicable “safeguards”34 and the term “in accordance with international law” in Article 3(1) of the Directive generally implies that EU flag States may only exercise sovereignty over vessels flying their own flags on the high seas. Any kind of direct enforcement action against foreign-flagged vessels will thus generally be restricted to the internal waters of EU coastal States (including their ports) and – in more extreme cases – to their territorial sea (see Article 25 UNCLOS). Nevertheless, Article 7 of the Directive includes sub-provisions on enforcement measures by coastal States with respect to ships in transit. Again, any enforcement measures by EU coastal States will be subject to Part XII (Section 7) UNCLOS. Consequently, actions like unilateral boardings of foreign-flagged vessels by EU law enforcement agencies as a reaction to discharge violations are not envisioned. Rather, information exchange and further coordinated action shall enable the next port State (regardless of within or outside the EU) to take administrative and possibly even criminal action against the perpetrators. 26 Taking into account recent amendments to MARPOL Annexes I and II, the spatial extension of the Directive to the high seas generates interesting legal effects. Recent amendments to MARPOL Annexes I and II cover navigation in polar waters resulting in the adoption of the “International Code for Ships Operating in Polar Waters (“IMO Polar Code” on pollution prevention measures).35 Some areas of the polar waters as regulated by the new “IMO Polar Code” are globally considered as high seas, thus falling also under Part VII UNCLOS as well. The environmental provisions of the “IMO Polar Code” also cover the prevention of pollution by oil, thus affecting changes to MARPOL Annex I: Any discharge into the sea of oil or oily mixtures from any ship is prohibited. Additionally, oil fuel tanks must be separated from the vessel’s outer shell. In relation to MARPOL Annex II, any discharges into the sea of noxious liquid substances (NLS) or mixtures containing such substances is prohibited. 27 The relevant sections are set out in Part II-A of the “IMO Polar Code” in which Chapters 1 and 2 both address the prevention of pollution by oil and control of pollution by noxious liquid substances (NLS) in bulk. In accordance with 25

33 For a comprehensive shortened list of the applicable UNCLOS provisions see MandarakaSheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 57. 34 See commentary section 9. 35 In May 2015, the IMO’s Marine Environment Protection Committee (MEPC) adopted the environmental requirements of the mandatory IMO Polar Code and the associated MARPOL amendments to make the Code mandatory. This follows the adoption, by the Maritime Safety Committee (MSC) in December 2014 of the Polar Code and related amendments to make it mandatory under the International Convention for the Safety of Life at Sea (SOLAS). The Polar Code will enter into force on 1 January 2017. It covers the full range of design, construction, equipment, operational, training, search and rescue and environmental protection matters relevant to ships operating in waters surrounding the two poles.

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Article 4 of Directive 2005/35/EC, the EU Members shall ensure that shipsource discharges of polluting substances, including minor cases of such discharges, into any of the areas referred to in Article 3(1) of the Directive are regarded as infringements if committed with intent, recklessly or with serious negligence. As a result, the “IMO Polar Code” amendments introduce changes to the MARPOL regime which also affect EU law, i.e., through the application of Directive 2005/35/EC by the EU Member States. In substance, Article 3(2) of the Directive generally provides that the act ap- 28 plies to “discharges of polluting substances from any ship, irrespective of its flag.” Thus, this provision also interoperates with the legal definitions of Article 2(1) to (4) of the Directive, namely “discharges”, “polluting substances” and “ship” which are all borrowed from “MARPOL 73/78”. In this context, it is important to recall first that the Directive refers only to “discharges” (as defined in Article 2(3) of the Directive). Other potentially serious violations of marine environmental law – for example marine littering as regulated by MARPOL Annex V or serious omissions concerning safety procedures and technical matters – are not covered by the Directive. Thus, only discharge violations in the context of MARPOL Annexes I and II are potential “infringements” in accordance with Article 4 of the Directive. Additionally, there is a negative element to the legal definition of a “ship” 29 since the term excludes “any warship, naval auxiliary or other ship owned or operated by a State and used, for the time being, only on government non-commercial service”. These exceptions follow the lines of public international law (see Articles 29 to 32 UNCLOS and Article 3(3) MARPOL 73/78) which also exclude any kind of “state vessels”. However, Article 3(3) MARPOL 73/78 also urges that “each Party shall ensure by the adoption of appropriate measures not impairing the operations or operational capabilities of such ships owned or operated by it, that such ships act in a manner consistent, so far as is reasonable and practicable, with the present Convention.” Article 4 Infringements 1.

2.

Member States shall ensure that ship-source discharges of polluting substances, including minor cases of such discharges, into any of the areas referred to in Article 3(1) are regarded as infringements if committed with intent, recklessly or with serious negligence. Each Member State shall take the necessary measures to ensure that any natural or legal person having committed an infringement within the meaning of paragraph 1 can be held liable therefor.

4. Article 4 Directive 2005/35/EC – Infringements

Recital (2) of the Directive recalls that the material standards in all EU Mem- 30 ber States for discharges of polluting substances from ships are based upon MARPOL 73/78. In fact, MARPOL 73/78 generally imposes a general prohibition on all vessel discharges that deviate from the conditions for discharging as

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32

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set forth in MARPOL Annexes I and II. This is also evidenced by Article 4(2) of the MARPOL 73/78 Convention stating itself that “any violation of the requirements of the present Convention within the jurisdiction of any Party to the Convention” is forbidden and must be sanctioned accordingly. The EU claims, however, that the applicable rules “are being ignored on a daily basis by a very large number of ships sailing in [EU] waters, without corrective action being taken”. While it is probably true that MARPOL 73/78 discharge violations still occur quite frequently, no empirical data or reference to statistics of internationally coordinated port State control is furnished for this presumption. Nevertheless, the EU takes the view that MARPOL 73/78 discharge violations are committed quite frequently. Although Council Framework Decision 2005/667/JHA – which set out (inter alia) detailed rules on criminal offences and penalties and which had been intended to strengthen the criminal law framework for the enforcement of the law against ship-source pollution – was annulled in 2007, Recitals (6) and (8) of the Directive still refer to that Decision. Without amendments to the text, those Recitals have been updated by the Recitals of Directive 2009/123/EC.36 Earlier references to the Framework Decision in the text of Article 4 of the Directive have been deleted via the amendments affected by Directive 2009/123/EC. Only discharge violations in the context of MARPOL Annexes I and II are “infringements” under Article 4 of the Directive if they are committed “with intent, recklessly or with serious negligence”. Since 2005, one of the core problems of the whole Directive has been created by the fact that – unlike Article 4 of the Directive – the MARPOL 73/78 regime does not refer to a criminal law standard of “serious negligence” anywhere.37 Some legal scholars – and also the applicants in the “Intertanko” case of the CJEU38 (as discussed in the commentary on Article 5 of the Directive – even argue that the expression “serious negligence” in Article 4 of the Directive is without any legal significance because it would create nothing but legal uncer-

36 See, e.g., Recital (2) of Directive 2009/123/EC. 37 Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige, p. 140. 38 Case C-308/06, Judgment of the Court (Grand Chamber) of 3 June 2008, OJ C183/3 of 19 July 2008; see Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 218; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 59; Proelss, The European Court of Justice and Its Role in (Re-)Defining EU Member Statesʼ Jurisdiction over Ships, in: Ringbom (ed.), Jurisdiction over Ships – Post-UNCLOS Developments in the Law of the Sea, pp. 422 (428 et seq.).

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tainty.39 While this view has some substance, especially if it the term “serious negligence” is construed isolated from any applicable criminal or civil law proceedings, national judges should still be able to apply legal criteria to distinguish certain forms of negligence, e.g., for the purpose of identifying an appropriate sentence for a particular perpetrator. For example, in Germany, serious negligence – also “officially” unknown in codified German law – has traditionally been characterized by judges as “letting aside aspects of due diligence in an extraordinary way” or “leaving out self-evident considerations, actually obvious to anyone”.40 In any case, it seems still appropriate to judge the term serious negligence also from the seriousness of the particular situation and not exclusively from the conduct of the party involved.41 In “Intertanko”, the CJEU itself ruled that the principle of legal certainty – 35 forming an integral part of EU law – had not been breached by the wording of Article 4 of the Directive because the provision (as implemented) is “to apply to an indeterminate number of situations that it is impossible to envisage in advance and not to specific conduct capable of being set out in detail in a legislative measure, of Community or of national law”.42 The CJEU itself outlined a legal definition for “serious negligence” to be understood as “entailing an unintentional act or omission by which the person responsible commits a patent breach of the duty of care which he should have and could have complied with in view of his attributes, knowledge, abilities and individual situation.”43 Finally, since the Directive still had to be transposed by the EU Members, it is for them to define more precisely – on the domestic level – infringements to the rules laid out by the Directive and the ensuing penalties. In any case, the EU Members must not adopt rules on criminal liability for ship-source pollution that are too general and too ambiguous in nature. In terms of personal liability, the MARPOL 73/78 regime only recognizes ei- 36 ther “intent to cause damage” or “recklessness”. Moreover, via the conjunction 39 See de la Rue, Pollution from Ships: EU Directive on Criminal Sanctions for Ship-Source Pollution, Paper presented at the International Colloquium on Maritime Legal Liability, Swansea, 14-15 September 2006: “The notion of “serious negligence” is not a legally established concept, but is uncertain and prone to mislead. In the Directive it is unaccompanied by any criteria or guidance as to what it is intended to mean. Experience shows that in a significant oil spill there is a risk of subjective elements impinging on the decision to prosecute, as the seriousness of alleged negligence may all too readily be judged by the consequences of the incident rather than the culpability of the defendant’s actions”, as cited by Mukherjee, The Penal Law of Ship-Source Marine Pollution: Selected Issues in Perspective pp. 463 (at 493), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes. 40 See, e.g., traditional German case law as referred to by: Röhl, Die Abgrenzung der groben von der einfachen Fahrlässigkeit, Juristenzeitung (JZ) 1974, pp. 521. 41 Obviously taking a different view: Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 61. 42 Case C-308/06, Judgment of the Court (Grand Chamber) of 3 June 2008, OJ C183/3 of 19 July 2008, para. 73; Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, pp. 60. 43 Case C-308/06, Judgment of the Court (Grand Chamber) of 3 June 2008, OJ C183/3 of 19 July 2008, para. 77.

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“and”, the term “recklessness” is coupled with subjective “knowledge that damage would probably result”. Even this expression only refers to one particular exceptional scenario (also named as the “damage exception”,44 discussed in more detail in the commentary relating to Article 5 of the Directive). Generally, MARPOL 73/78 does not address at all the degree of personal fault involved in pollution offences. Instead, MARPOL 73/78 seeks to combat broadly all occurrences of unjustified discharges no matter if they were committed negligently, accidently or intentionally. Further details on the long-standing legal debate on the applicable degree(s) of fault are integrated in the commentary on Article 5(2) of the Directive. 37 Until 2007, the annulled Council Framework Decision stipulated that “infringements” under Article 4 of the Directive had to be regarded as criminal offences. Since 2009, this is now achieved by Article 5a of the Directive which has been extracted from the annulled Council Framework Decision to be directly included in the amended text of the Directive. 38 However, Article 5a(2) of the Directive concedes that “minor cases”, i.e. “where the act committed does not cause deterioration in the quality of water” are no infringements (within the meaning of Article 4 of the Directive) to be regarded as criminal offences. This follows from Recital (9) of Directive 2009/123/EC which states (in its second sentence) that “less serious cases of illicit ship-source discharges of polluting substances that do not cause deterioration in the quality of water need not be regarded as criminal offences”. 39 Thus, generally Article 4 of the Directive has to be read in conjunction with Article 5a(2) of the Directive. The updated reduction of the applicable standard under criminal law is also a concession to principles of human rights law. In this context, Recital (16) of the Directive also recalls that Directive 2005/35/EC “fully respects the Charter of Fundamental Rights of the European Union”, thus any person suspected of having committed an “infringement” (within the meaning of Article 4 of the Directive) must be guaranteed a fair and impartial hearing. Above all, penalties to sanction vessel-source marine pollution must be proportional. This would not be the case if criminal penalties were imposed for a conduct that does not even amount to a substantial violation. Article 5 Exceptions 1.

2.

A discharge of polluting substances into any of the areas referred to in Article 3(1) shall not be regarded as an infringement, if it satisfies the conditions set out in Annex I, Regulations 15, 34, 4,1 or 4,3 or in Annex II, Regulations 13, 3.1.1 or 3.1.3 of Marpol 73/78. A discharge of polluting substances into the areas referred to in Article 3(1)(c), (d) and (e) shall not be regarded as an infringement for the owner, the master or the crew, if it satisfies

44 See, e.g., on this exception: König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 770), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes.

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Article 5a Criminal offences 1. 2. 3.

Member States shall ensure that infringements within the meaning of Articles 4 and 5 are regarded as criminal offences. Paragraph 1 shall not apply to minor cases, where the act committed does not cause deterioration in the quality of water. Repeated minor cases that do not individually but in conjunction result in deterioration in the quality of water shall be regarded as a criminal offence, if committed with intent, recklessly or with serious negligence.

Article 5b Inciting, aiding and abetting Member States shall ensure that any act of inciting, or aiding and abetting an offence committed with intent and referred to in Article 5a(1) and (3), is punishable as a criminal offence.

5. Articles 5, 5a and 5b Directive 2005/35/EC – Exceptions and Criminal Offences

In contrast to Articles 5a and 5b of the Directive, Article 5 was originally in- 40 cluded in the act since 2005. As a result of the 2007 annulment of Framework Decision 2005/667/JHA in 2007,45 in 2009, important amendments were incorporated into the act via Directive 2009/123/EC.46 The 2009 amendments – in fact, mostly “cut and paste” from the Framework Decision – are now clearly visible by their letters, i.e., Articles 5a-b and Articles 8a-c of the amended Directive. The 2009 amendments also included “numerical changes” to Article 5 of the Directive resulting from interim updates to Annexes I and II of MARPOL. a) Exceptions under Article 5 of Directive 2005/35/EC

Both paragraphs of Article 5 of the Directive generally acknowledge that 41 MARPOL Annexes I and II both justify certain discharges of oil and noxious liquid substances in three specific situations: 1. Regulations 4.1, 15, 34 MARPOL Annex I; Regulations 3.1, 13 MARPOL Annex II: Where it is necessary to secure the safety of a ship or safe life at sea; 2. Regulations 4.2, 15, 34 MARPOL Annex I; Regulations 3.2, 13 MARPOL Annex II: Where the discharges into the sea result from damage to a ship or its equipment as long as 45 Council Framework Decision 2005/667/JHA to strengthen the criminal law framework for the enforcement of the law against ship-source pollution, OJ 2005 L 255/164. 46 Directive 2009/123/EC of the European Parliament and of the Council of 21 October 2009 amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements, OJ L 280/52 of 27 October 2009.

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a.

“all reasonable precautions” were taken “after the occurrence of the damage or discovery” for the purposes of preventing or minimizing the discharge” and (i.e. cumulatively) b. the owner or the master did not act either with intent to cause damage, or recklessly and with knowledge that damage would probably result; 3. Regulations 4.3, 15, 34 MARPOL Annex I; Regulations 3.3, 13 MARPOL Annex II: Where approved by both the flag State and any government in whose jurisdiction it is contemplated the discharge will occur in order to combat a specific pollution incident in order to minimize the damage from marine pollution. 42 The discharges described in points 1 and 3 are also often qualified as “operational discharges” while the second situation addresses “accidental discharges”.47 These general discharge standards and are not altered in the Directive but reproduced in its Annex. However, the MARPOL-related exceptions under Article 5 of the Directive have to be read in conjunction with their spatial scope pursuant to Article 3 of the Directive:48 The exceptions established for “the ship safety or saving life at sea” and “combatting pollution” are applicable in all maritime zones because Article 5(1) of the Directive broadly refers to Article 3(1) of the Directive.49 Any discharge of polluting substances into any of the named maritime zones shall not be regarded as an “infringement” (see Article 4 of the Directive), provided the legal conditions of the applicable MARPOL provisions are met. 43 In contrast to that and diverging from the MARPOL 73/78 regime, the exception established for “damage to ship or equipment” – as referred to in Article 5(2) of the Directive – excludes the internal waters (thus excluding also EU ports) and, in particular, the territorial sea of EU coastal States. Thus, any accidental discharge in the territorial sea of EU Members committed with intent, recklessly or with serious negligence must – in principle – be sanctioned under the regime of the Directive. 44 Moreover, Article 5(2) of the Directive only names explicitly “the owner, the master or the crew” to be potentially privileged by the MARPOL exceptions.50 Consequently, Article 5(2) of the Directive is one of the key legal provisions to achieve the political objectives of the act: It shall serve as a deterrent by creat-

47 See, e.g., Mandaraka-Sheppard, Modern Maritime Law – Vol. 2: Managing Risks and Liabilities, p. 55 and p. 58; Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54, in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law. 48 See also Ringbom, The EU Maritime Safety Policy and International Law, pp. 401: “The Directive makes a distinction between the applicable rules depending on the coastal zone in which the discharge has taken place.”. 49 Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54 (at 63), in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law. 50 An earlier legal qualification for the term “crew” (“when acting under the master's responsibility”) has been deleted as part of the 2009 amendments to the Directive.

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ing a more stringent liability regime as compared to MARPOL 73/78, including other categories of natural and legal persons in the EU sanctions regime, such as cargo owners, charterers or classification societies in the personal scope of the Directive (see also Recital (7) of the amending Directive 2009/123/EC). The “Intertanko” case51 – as already referred to in the preliminary remarks to 45 this commentary section – could have solved some of the intricate questions on the legal compatibility of Directive 2005/35/EC with public international law (i.e. UNCLOS and MARPOL 73/78). However, the CJEU declined to rule on the compatibility question, thus limiting the overall relevance of this case for the legal interpretation of Articles 4 and 5 of the Directive. In “Intertanko”, the court categorized UNCLOS as part of the legal order of the EU, however, not as establishing rules intended to apply directly and immediately to individuals and to confer upon them rights or freedoms capable of being relied upon against States, irrespective of the attitude of the ship’s flag State. Thus, “the nature and the broad logic” of UNCLOS prevented the CJEU from being able to assess the validity of an EU measures in the light of UNCLOS. On MARPOL 73/78, the CJEU drew back to the position that the EU itself was not a party to MARPOL 73/78. The mere fact that Directive 2005/35/EC incorporates some specific rules of MARPOL 73/78 would not be sufficient to afford the Court the possibility of reviewing the Directive’s legality in the light of MARPOL 73/78. Thus, a lot of the challenges posed by the applicants of the “Intertanko” case 46 are left to academic debate and to the practical application by national law enforcement agencies of the EU Member States. Nevertheless, it is beneficial for the general understanding of Article 4 and 5 of the Directive to recall the four central industry arguments put forward against the legality of those provisions as part of the “Intertanko” case. One of those legal challenges has already been addressed in the commentary on Article 4 of the Directive, i.e. the alleged violation of the principle of legal certainty which was, eventually, declined by the CJEU stressing that the legislator must be able “to address an indeterminate number of situations, impossible to envisage in advance”.52 The other three industry arguments were specifically related to the legal com- 47 patibility of Directive 2005/35/EC with UNCLOS and MARPOL 73/78 addressing, in particular:53 – First, whether the exceptions of MARPOL Annexes I and II could legitimately be limited under EU law to “the owner, the master or the crew” in the maritime zones other than the territorial sea and the internal waters. 51 Case C-308/06, Judgment of the Court (Grand Chamber) of 3 June 2008, OJ C183/3 of 19 July 2008. 52 See, supra, section 4. 53 On those questions see also: König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 769), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes; Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 217.

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–

Second, the most difficult issue whether the EU could legitimately exercise prescriptive jurisdiction in relation to the territorial sea exceeding the standards of MARPOL 73/78. – Third, whether the EU could legitimately apply a “serious negligence” standard of liability, exceeding the standards of MARPOL 73/78 and possibly breaching the traditional right of innocent passage as granted by Articles 17 (et seq.) UNCLOS (not justified under Articles 21(1), 211(4) UNCLOS). 48 Addressing the first question, most commentators took the view – taking into account the corresponding combined objectives of the Directive, of MARPOL 73/78 and also of Section 7 of Part XII UNCLOS – that it would be strange, even illogical, if other persons but the “the owner, the master or the crew” could be categorically excluded from the scope of the sanctions regime.54 On the contrary, a modern pollution prevention regime must cover all potential perpetrators to discourage possible violations in the most efficient way. 49 UNCLOS is completely silent on this matter, thus, it does not limit States’ legal construction in either way. Nevertheless, UNCLOS mandates States to protect and preserve the marine environment (see Article 192 et seq. UNCLOS) and it probably does not envision incomplete legal rules on the domestic level. A more expansive view takes into account the realities of modern supply chains, expecting the highest environmental responsibility from all segments of the transportation and logistics industry and not only from actual sea carriers. From the perspective of the EU, Article 5(2) of the Directive simply fills a regulatory gap. Taking the opposite position is hardly arguable because only a “wide” personal scope fits into the general concept of existing international civil liability regime for oil pollution/bunker oil pollution. While often channelling civil liability to the owner,55 those regimes at least acknowledge and address charterers, servants and agents, pilots or salvors, i.e. other persons but the owner, the master and the crew.56 50 As a result, MARPOL 73/78 must be generally construed as merely referring to the most common (traditional) examples of persons who may be liable for accidental marine pollution.57 The MARPOL 73/78 rules of Annexes I and II as referred to in Article 5 of the Directive are, thus, not a conclusive list of legally covered persons. At the same time, it also makes sense to privilege the owner, the master and the crew in the EEZ and on the high seas because these are the

54 See further references at Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 227. 55 See Article III.1 of the International Convention on Civil Liability for Oil Pollution Damage, 1992. 56 See Article III.4 of the International Convention on Civil Liability for Oil Pollution Damage, 1992. 57 See also Ringbom, The EU Maritime Safety Policy and International Law, pp. 419: “[…], the master and owner are mentioned simply because they are the persons most likely to be charged with violating the Marpol standards, but if other persons are charged, they too should benefit from a similar defence.”.

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only persons – potentially – having to take immediate decisions in imminent emergency situations.58 It is a legal requirement under the applicable MARPOL 73/78 rules that the owner, the master and the crew must have done everything they could to prevent or minimize an accidental discharge. On the other hand, it would be completely illogical to exclude any administrative or criminal liability of, e.g., a cargo owner who recklessly (and with knowledge that damage would probably result) contributed to a marine pollution before the ship in question left its last port(s) of call. As a result, other persons but the owner, the master or the crew may also – and legitimately – be held liable for accidental marine pollution.59 Addressing the second challenge against the legality of Directive 2005/35/EC, even the owner, the master and the crew are not privileged (pursuant to Regulations 4.2, 15, 34 MARPOL Annex I and Regulations 3.2, 13 MARPOL Annex II) if damage to the ship or an equipment failure occurs in the territorial sea of EU Member States (or within their internal waters/ports) causing marine pollution, i.e. deterioration in the quality of water. This has also been characterized as appearing that “the concept of accident [has been] significantly abolished”.60 Consequently, a legal standard as established differently under MARPOL 73/78 is definitely exceeded by the EU Directive leaving the question of a possible justification for an “infringement” up to the details of EU Member States’ criminal law provisions. However, whether this excessive prescriptive jurisdiction of the Directive is legal – under public international law – depends on the answer to the question whether the applicable MARPOL 73/78 standards are maximum standards (thus not be exceeded by coastal States) or minimum standards (possible to be exceeded by coastal States). This question is also closely interrelated with the third challenge to the legality of the Directive, i.e., a possible violation of the traditional right to innocent passage by foreign vessels. Generally, unlike the rules relating to ports and internal waters, a coastal State’s jurisdiction in its territorial sea is restricted by the right of foreign vessels to innocent passage (see Article 17 UNCLOS). According to Article 21, 211(4) UNCLOS coastal States may, in the exercise of their sovereignty within their territorial sea, adopt laws and regulations for the prevention, reduction and control of marine pollution from foreign vessels, including vessels exercising the right of innocent passage. Such laws and regulations shall, however, not hamper innocent passage of foreign vessels. According to Article 21(2) UNCLOS, such laws and regulations of coastal States also exclude so-called “CDEM” rules (on 58 Admittedly, this is true for the territorial sea as well. 59 König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 779), in: Ndiaye/ Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes; Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 227. 60 Vanheule, Criminal Sanctions in relation to ship-source pollution, pp. 54 (at p. 71), in: Martinez Gutiérrez (ed.), Serving the Rule of International Maritime Law.

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construction, design, equipment and manning) – unless they are giving effect to generally accepted international rules or standards – because varying “CDEM” standards would have the capacity to “hollow out” the traditional right of innocent passage of foreign vessels. As a result, “CDEM” rules – a lot of them codified also in MARPOL Annexes I and II – are good examples of global maximum standards (thus not be exceeded by coastal States but exclusively by flag States). 55 Addressing the third challenge to the Directive, it cannot be honestly argued that the sanctions regime as established by the Directive “hampers” the right of innocent passage of foreign vessels. The interplay of Articles 4 and 5 of the Directive – i.e. a more stringent liability standard – does not prohibit foreign vessels per se from transiting EU Members’ territorial waters.61 The provisions merely criminalize conduct that is not necessary for innocent passage (i.e. illegitimate discharges of polluting substances in the territorial sea as a result of intentional, reckless or seriously negligent behaviour).62 Moreover, standards relating to the level of negligence and triggering criminal or administrative sanctions for pollution violations are only remotely connected to the actual innocent passage of ships, in fact, they are particularly unlikely to have any practical effects on innocent passage.63 Finally, Article 24 UNCLOS specifically confirms that not all acts which affect a vessels’ passage will necessarily amount to an interference with the traditional right of innocent passage.64 56 The remaining (second) challenge to the Directive is more tricky as compared to the third challenge because the discharge standards of MARPOL Annexes I and II could be construed both as maximum standards (not be exceeded by coastal States) or minimum standards (possible to be exceeded by coastal States). At first sight, neither view is legally compelling. The industry associations in the “Intertanko” case had, e.g., referred to the preamble of MARPOL 73/78 (specifically to paragraph 5) stating that the MARPOL 73/78 regime would establish “rules not limited to oil pollution having a universal purport”.65 However, the reference to the preamble should be supplemented with more legal arguments in order to establish a stronger case that the discharge standards of MARPOL Annexes I and II could – only – be construed as maximum standards. But further arguments of the industry were rather of a more practical na-

61 König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 781), in: Ndiaye/ Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige, p. 155. 62 Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 241. 63 Ringbom, The EU Maritime Safety Policy and International Law, pp. 411. 64 Ibid., p. 412. 65 Judgment of 30 June 2006, Case No. CO/10651/2005 [2006] EWHC 1577 (Admin), para. 36; see also Mukherjee, The Penal Law of Ship-Source Marine Pollution: Selected Issues in Perspective pp. 463 (at 494), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes.

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ture, above all, stressing the importance of global and uniform rules for shipping as the most international business. From a purely legal point of view, it speaks for the EU Directive that it is not 57 possible to argue for the existence of discharge standards as being maximum standards without reasonable legal doubts. Even the industry arguments in “Intertanko” did not generally rule out the possibility for States to apply more stringent discharge rules for vessels under their own flag, thus creating possible obstacles in the quest for uniform global rules for shipping as well. Additionally, a number of coastal States in the world would feel “uneasy” if they were asked to generally surrender any domestic legislation in excess of MARPOL 73/78 discharge standards. This general uneasiness would, however, turn into political resistance in the wake of a devastating marine casualty polluting wide parts of the coastline of a given coastal State. But this is exactly what happened in the EU in 1999 (“Erika”) and 2002 (“Prestige”). Moreover, a historic interpretation of the travaux préparatoires of UNCLOS 58 (1973 to 1982) – being a younger legal regime as compared to MARPOL 73/78 – has led a number of legal commentators to generally conclude that coastal States are permitted to adopt in the territorial sea national rules and standards regulating certain activities such as discharging polluting substances at sea which are more stringent as compared to the “generally accepted international rules and standards” as set out by Annexes I and II of MARPOL 74/78.66 Specifically, Articles 9(2) and 9(3) of the MARPOL 73/78 Convention67 have also been interpreted as leaving room for more extended legislative competences of both coastal and flag States, provided such competences are executed in accordance with UNCLOS.68 Article 5 of the Directive does not impinge on “CDEM” (maximum) technical standards but addresses more stringent “behavioural” standards and qualifies them with a stricter geographic approach. Thus, in sum, the EU – as a group of coastal States – could legitimately apply a more flexible (in fact, stricter) view on the regulation of discharge standards.

66 See e.g., Churchill/Lowe, The Law of the Sea, p. 347; Molenaar, Coastal State Jurisdiction over Vessel-Source Pollution, pp. 200 (identifying 17 States which impose national discharge standards in their territorial sea). 67 Article 9(2) of MARPOL 73/78 reads: “Nothing in the present Convention shall prejudice the codification and development of the law of the sea by the United Nations Conference on the Law of the Sea […] nor the present or future claims and legal views of any State concerning the law of the sea and the nature and extent of coastal and flag State jurisdiction.”; Article 9(3) of MARPOL 73/78 supplements that “the term “jurisdiction” in the present Convention shall be construed in the light of international law in force at the time of application or interpretation of the present Convention.”. 68 Ringbom, The EU Maritime Safety Policy and International Law, pp. 411; König, The EU Directive on Ship-Source Pollution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 776), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige, p. 144.

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b) Criminal Offences under Articles 5a and 5b of Directive 2005/35/EC 59

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As a consequence of the annulment of Council Framework Decision 2005/667/JHA on 23 October 2007,69 the European Commission amended Directive 2005/35/EC in the form of Directive 2009/123/EC. The respective amendments incorporated into the body of its text many elements that were part of the annulled Framework Decision. In particular, via the amendments, the liability for discharges were extended to cover also “legal persons” (as defined by Article 2(5) of the Directive) and it now obliges the EU Members to treat illegal discharges not only as infringements but also in some circumstances as criminal acts (Article 5a(1) of the Directive). Originally, Directive 2005/35 provided that the EU Members have to ensure that ship-source discharges of polluting substances will be treated as infringements if committed with “intent, recklessly or by serious negligence”. This has been amended by Directive 2009/123/EC which brought a clarification that not only all discharges have to be treated as infringements but actually in the majority of cases those infringements should be considered as criminal offences. Only those discharges that are minor and do not cause deterioration of the quality of water do not have to be treated as crimes (Article 5a(2) of the Directive). However, they could still be “infringements” in accordance with Article 4 of the Directive, but infringements of merely administrative nature. Finally, even minor cases could be treated as crimes if they are committed repeatedly and result in deterioration in the quality of water (Article 5a(3) of the Directive). Article 5b of the Directive mandates EU Members to ensure that any act of inciting, or aiding and abetting an offence committed with intent and referred to in Article 5a(1) and (3), is punishable as a criminal offence. To construe the legal terms “inciting, aiding and abetting” as well as “intent” EU Members will have to resort to the established understanding of those legal terms under their national criminal codes/laws. In all cases of criminal offences, the penalties imposed have to be “effective, proportionate and dissuasive” (see Articles 8, 8a and 8c of the Directive). Article 6 Enforcement measures with respect to ships within a port of a Member State 1.

If irregularities or information give rise to a suspicion that a ship which is voluntarily within a port or at an off-shore terminal of a Member State has been engaged in or is engaging in a discharge of polluting substances into any of the areas referred to in Article 3(1), that Member State shall ensure that an appropriate inspection, taking into account the relevant guidelines adopted by the International Maritime Organisation (IMO), is undertaken in accordance with its national law.

69 Council Framework Decision 2005/667/JHA to strengthen the criminal law framework for the enforcement of the law against ship-source pollution, OJ 2005 L 255/164.

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In so far as the inspection referred to in paragraph 1 reveals facts that could indicate an infringement within the meaning of Article 4, the competent authorities of that Member State and of the flag State shall be informed.

6. Article 6 Directive 2005/35/EC – Enforcement Measures Against Ships in EU Ports

As evidenced by both Articles 6(1) and 7(1) of the Directive, the enforcement of Directive 2005/35/EC is to be undertaken primarily while ships are moored within EU ports. In terms of “infringements” (Article 4 of the Directive) triggering possible enforcement actions by EU port States, Article 6(1) of the Directive does not differentiate where a pollution incident actually occurred (“[…] into any of the areas referred to in Article 3(1) [of the Directive]”). Consequently, an infringement which occurred in a maritime zone of another EU or non-EU Member or even on the high seas could be sanctioned by an uninvolved EU port State. It is enough that there are “irregularities or information” giving rise to a “suspicion” that a ship in question had been engaged in (or is engaging) in illegal discharges of polluting substances. Thus, under the Directive there is generally no legal requirement for the receipt of a request from a flag State or a coastal State actually affected by a marine pollution.70 Both the fact that Article 6(1) of the Directive does not recognize a legal requirement for requests of an affected or damaged party and the explicit reference to the high seas goes clearly beyond the scope of Articles 218(1), 218(2) and 220(1) UNCLOS.71 Articles 218(1) and 220(1) UNCLOS generally envision a violation of environmental rules which occurred in the internal waters, the territorial sea or the EEZ of a relevant port/coastal State – but not in the High Seas. Article 218(2) UNCLOS mandates that “no proceedings [pursuant to Article 218(1) UNCLOS] shall be instituted in respect of a discharge violation in the internal waters, territorial sea or exclusive economic zone of another State unless requested by that State, the flag State, or a State damaged or threatened by the discharge violation, or unless the violation has caused or is likely to cause pollution in the internal waters, territorial sea or exclusive economic zone of the State instituting the proceedings”. On the other hand, Article 6(1) of the Directive only requires the EU Members to ensure that “an appropriate inspection” is undertaken in accordance with national law, taking into account the relevant IMO Guidelines on Port State Control.72 As a result, there is only a positive obligation for EU Members to investigate the matter but no positive obligation to immediately institute administrative or even criminal proceedings. Consequently, the maritime administrations of the EU port States may exercise considerable discretion and remain free to 70 Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, pp. 247. 71 Ibid., p. 248. 72 See IMO Resolution A.1052(27), adopted on 30 November 2011, Procedures for Port State Control, 2011 (continuously updated since 1995).

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apply their criminal law provisions in implementation of the Directive. It is the legal duty of the EU Member States to assess individually whether criminal proceedings should be instituted against possible perpetrators in the spirit of the Directive. 68 Finally, Article 6(2) of the Directive is merely a declaratory recapitulation of Article 231 UNCLOS. Article 7 Enforcement measures by coastal States with respect to ships in transit 1.

If the suspected discharge of polluting substances takes place in the areas referred to in Article 3(1)(b), (c), (d) or (e) and the ship which is suspected of the discharge does not call at a port of the Member State holding the information relating to the suspected discharge, the following shall apply: (a) If the next port of call of the ship is in another Member State, the Member States concerned shall cooperate closely in the inspection referred to in Article 6(1) and in deciding on the appropriate measures in respect of any such discharge; (b) If the next port of call of the ship is a port of a State outside the Community, the Member State shall take the necessary measures to ensure that the next port of call of the ship is informed about the suspected discharge and shall request the State of the next port of call to take the appropriate measures in respect of any such discharge. Where there is clear, objective evidence that a ship navigating in the areas referred to in Article 3(1)(b) or (d) has, in the area referred to in Article 3(1)(d), committed an infringement resulting in a discharge causing major damage or a threat of major damage to the coastline or related interests of the Member State concerned, or to any resources of the areas referred to in Article 3(1)(b) or (d), that State shall, subject to Part XII, Section 7 of the 1982 United Nations Convention on the Law of the Sea and provided that the evidence so warrants, submit the matter to its competent authorities with a view to instituting proceedings, including detention of the ship, in accordance with its national law. In any event, the authorities of the flag State shall be informed.

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7. Article 7 Directive 2005/35/EC – Enforcement Measures Against Ships in Transit 69

In contrast to the Commission’s original proposal,73 the Directive even provides for (preparatory) “at-sea enforcement” of its rules by the EU Members – excluding in any case, however, internal waters and ports. Apparently, there the Directive presumes that EU coastal States – exercising unrestricted jurisdiction over their internal waters and ports – will always prosecute delinquent vessels and perpetrators if they detect illegal discharges of polluting substances.74 Thus, Article 7 of the Directive is only applicable in the territorial sea, in the EEZ and – notably – on the high seas, including also the special case of maritime straits.

73 European Commission: “Proposal for a Directive of the European Parliament and of the Council on ship-source pollution and on the introduction of sanctions, including criminal sanctions, for pollution offences”, COM (2003)92 final, p. 8: “UNCLOS implies some considerable limitations as to the methods of enforcing ship-source pollution laws for ships in transit in the coastal zones.”. 74 Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 248.

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Just like Article 6 before, Article 7 of the Directive goes beyond the law of the sea framework as regulated by Article 220 UNCLOS. The interplay of Articles 1, 7 and 9 of the Directive seeks to ensure that EU Members enforce the rules of the Directive in a manner which is still compatible with UNCLOS, in particular respecting the general rule of exclusive flag State jurisdiction. It has been pointed out, however, that Articles 1, 7 and 9 of the Directive do not generally exclude that the Directive might be enforced by EU Member States individually in a way which violates UNCLOS requirements.75 Additionally, the sub-sections of Article 7 of the Directive – in particular Article 7(2) – have been described as “somewhat puzzling […] and incoherent enforcement provisions”, suggesting that any EU Member which is enforcing the Directive in violation of UNCLOS probably acts in violation of the Directive at the same time.76 Technically, Article 7(1) of the Directive distinguishes between two different situations in which a ship is suspected of an illegal discharge of polluting substances but does not call at a port of the EU Member which holds the information relating to the suspected discharge: First, a ship calling at a EU port (Article 7(1)(a) of the Directive) and second, a ship being en route to a non-EU port (Article 7(1)(b) of the Directive). In the case of Article 7(1)(a) of the Directive, the respective EU Members shall “cooperate closely”. Although the verb “shall” seems to imply only an encouragement of close cooperation, in the EU context, it seems appropriate to assume that it is a legal duty to cooperate. In particular, this duty relates to an intra-EU exchange of information with regard to the imminent port State control and “in deciding on the appropriate measures in respect of any such discharge”. The latter part addresses possible joint agreement on a temporary detention of the vessel and the (bilateral) allocation of jurisdiction. In the case of Article 7(1)(b) of the Directive, the identical procedure as described under Article 7(1)(a) of the Directive shall apply, however, it cannot be assumed that there is a legal duty to cooperate under the Directive between an EU Member and a non-EU port State. Rather, there is an expectation of a comparable coordination and cooperation as both States shall agree on the “necessary measures to ensure that the next port of call of the ship is informed about the suspected discharge”. Most probably, there will not be any practical problems for EU States if the suspected vessel is en route to a port within the geographic realm of the so-called “Paris Memorandum of Understanding of Port State Control” which basically covers the whole Northern hemisphere of the globe (with the exception of the USA) and has introduced a close cooperation between the Members’ national maritime administrations (controlling more than

75 Ringbom, The EU Maritime Safety Policy and International Law, p. 422 (at footnote 165). 76 Ibid. and p. 423.

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18.000 vessels annually).77 However, adhering to Article 7(1)(b) of the Directive could be more difficult for EU Members if the suspected vessel is en route to a port State which is not participating in any of the established regional MoUs on Port State Control. 74 Article 7(2) of the Directive addresses, in fact, “at-sea enforcement” of the Directive by the EU Members. However, this provision is merely a regional EU recollection of obligations as established globally under Article 220(6) UNCLOS. The latter provision states: “Where there is clear objective evidence that a vessel navigating in [EEZ] or the territorial sea of a State has, in the [EEZ], committed a [discharge] violation resulting in a discharge causing major damage or threat of major damage to the coastline or related interests of the coastal State, or to any resources of its territorial sea or exclusive economic zone, that State may, subject to section 7, provided that the evidence so warrants, institute proceedings, including detention of the vessel, in accordance with its laws.” 75 A closer comparative analysis of both Article 7(2) of the Directive and Article 220(6) UNCLOS reveals that the EU language is slightly more compelling (“shall” instead of “may”) but this difference will not result in any practical changes in the application of the rules. The more interesting legal and practical aspect of Article 7(2) of the Directive is the fact that – only here – the EU completely concentrates on discharge violations in the EEZ. The drafting history of Article 7(2) of the Directive suggests that the provision was largely the result of a political compromise intended at making use at EU-level of an existing jurisdictional right under international law.78 However, practical examples of cases in which there is clear and objective evidence that foreign ships are polluting the EEZ to the extent of causing, or threatening to cause, major damage, are rather rare.79 76 In particular, the EU both refrains to address the high seas and the territorial sea as “enforcement areas” in Article 7(2) of the Directive – in contrast to, e.g., Article 6(1) of the Directive. On the one hand, this fits into the (updated) framework of the Directive which is “without prejudice to other liability systems for damage caused by ship-source pollution under EU, national or international law” (see Recital (11) of Directive 2009/123/EC). Possibly for this reason, the EU even eschews to address the most common at-sea enforcement situation, arising as a result of violations which have taken place in the territorial sea.80 On the other hand, Articles 27 and 220(2) UNCLOS do, in fact, provide coastal States with wide-ranging enforcement jurisdiction in respect of pollution violations committed in their territorial seas. Nevertheless, and rather surprisingly, the EU does not resort to these provisions but only to Article 220(6) UNCLOS. 77 For futher details see: https://www.parismou.org/ [last access: May 2015], reference is made, in particular to the Annual Report of the Paris MoU. 78 Ringbom, The EU Maritime Safety Policy and International Law, p. 433 (with detailed further references in footnote 170). 79 Ibid., p. 423. 80 Ibid.

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Consequently, EU at-sea enforcement via Article 7(2) of the Directive is likely to be of limited significance in practice. Finally, just like Article 6(2), Article 7(3) of the Directive is merely a declara- 77 tory recapitulation of information duties of the EU Members (and the EU itself) as established under Article 231 UNCLOS. Article 8 Penalties Each Member State shall take the necessary measures to ensure that infringements within the meaning of Articles 4 and 5 are punishable by effective, proportionate and dissuasive penalties.

Article 8a Penalties against natural persons Each Member State shall take the necessary measures to ensure that the offences referred to in Article 5a(1), and (3) and Article 5b are punishable by effective, proportionate and dissuasive criminal penalties.

Article 8b Liability of legal persons 1.

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Each Member State shall take the necessary measures to ensure that legal persons can be held liable for the criminal offences referred to in Article 5a(1) and (3) and Article 5b, committed for their benefit by any natural person acting either individually or as part of an organ of the legal person, and who has a leading position within the structure of the legal person, based on: (a) a power of representation of the legal person; (b) authority to take decisions on behalf of the legal person; or (c) authority to exercise control within the legal person. Each Member State shall also ensure that a legal person can be held liable where lack of supervision or control by a natural person referred to in paragraph 1 has made the commission of a criminal offence referred to in Article 5a(1) and (3) and Article 5b possible for the benefit of that legal person by a natural person under its authority. The liability of a legal person under paragraphs 1 and 2 shall not exclude criminal proceedings against natural persons involved as perpetrators, inciters or accessories in the criminal offences referred to in Article 5a(1) and (3) and Article 5b.

Article 8c Penalties against legal persons Each Member State shall take the necessary measures to ensure that a legal person held liable pursuant to Article 8b is punishable by effective, proportionate and dissuasive penalties.

8. Articles 8, 8a, 8b and 8c Directive 2005/35/EC – Administrative and Criminal Penalties

Article 8 of the Directive and the following “lettered” provisions of Articles 78 8a, 8b and 8c – inserted into the text of the Directive as part of the amendments affected by Directive 2009/123/EC – generally address penalties to be issued by the national law enforcement agencies of the EU Member States. Originally, the 2005 text of Article 8 of Directive 2005/35/EC had stated that penalties “which Henning Jessen

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may include criminal or administrative penalties”. As a result of the 2007 annulment of Framework Decision 2005/667/JHA this last half sentence has been deleted since 2009, thus granting more legal discretion to the EU Members when punishing “infringements” within the meaning of Articles 4 and 5 of the Directive by imposing “effective, proportionate and dissuasive penalties”. Still, Recital (3) of Directive 2009/123/EC stresses that “criminal penalties, which demonstrate social disapproval of a different nature than administrative sanctions, strengthen compliance with the legislation on ship-source pollution in force and should be sufficiently severe to dissuade all potential polluters from any violation thereof”. 79 In this context, Recital (4) of the Directive generally recalls that measures of a dissuasive nature form an integral part of the EU’s maritime safety policy. Dissuasive penalties ensure a link between the responsibility of each of the parties involved in the transport of polluting goods by sea and their exposure to a punishment with a deterrent effect. As a result, there is a need for effective, dissuasive and proportionate penalties to achieve effective protection of the marine environment. Those penalties can be criminal penalties for natural persons and administrative or legal penalties for legal persons as foreseen in the national legal order of the EU Members. 80 Furthermore, Recital (5) of the Directive stresses that it is essential to approximate, by way of the proper legal instruments, existing legal provisions, in particular on the precise definition of the infringement in question, the cases of exemption and minimum rules for penalties and on liability and jurisdiction. Consequently, the effectiveness, dissuasiveness and proportionality of sanctions, being a binding obligation for the EU Members to be transposed, is to be assessed with regard to the whole range of measures provided by the national legislator in view of compliance with the EU law. 81 Finally, Recital (9) of the Directive clarifies that penalties for discharges of polluting substances from ships are not related to the civil liability of the parties concerned and are thus not subject to any rules relating to the limitation or channelling of civil liabilities, nor do they limit the efficient compensation of victims of pollution incidents. In this context, pursuant to Recital (7) of the Directive the international regime for the civil liability and compensation of oil pollution (the CLC 1992) nor that relating to pollution by other hazardous or noxious substances (the HNS Convention, not in force) is discarded as not providing sufficient dissuasive effects to discourage the parties involved in the transport of hazardous cargoes by sea from engaging in substandard practices. As a result, under the logic applied by the Directive, dissuasive effects could only be achieved through the introduction of penalties applying to any person who causes or contributes to marine pollution. Those penalties should be applicable not only to the shipowner or the master of the ship but also to cargo owners, classification societies or any other person involved.

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While the penalty provisions of Article 8, 8a and 8c of the Directive are quite 82 self-explaining, Article 8b of the Directive – addressing the liability of “legal persons” – necessitates some further remarks.81 “Legal persons” are defined in Article 2(5) of the Directive, basically covering any kind of company structure. Recital (6) of Directive 2009/123/EC recalls that the EU Members “should also apply effective, proportionate and dissuasive penalties to legal persons throughout the EU because frequently ship-source pollution offences are committed in the interest of legal persons or for their benefit”. This legal expectation materializes in Article 8b of the Directive. The provision ensures that companies can also be held liable for conduct “committed for their benefit by any natural person acting either individually or as part of an organ of the legal person, and who has a leading position within the structure of the legal person”. A person likely to be considered to hold a “leading position” would be a per- 83 son with the authority to represent the company, to take decisions or to exercise control on its behalf (see Articles 8b(1)(a)-(c) of the Directive). Even if an infringement was directly and solely committed by a ship’s crew member, a ship master could be in a “leading position” as envisioned by Article 8b(1) of the Directive because of his key position for managing the ship and ensuring its safety.82 As clarified by Article 8b(3) of the Directive, the ship master himself might 84 also be subject to separate administrative and/or criminal liability, e.g., in accordance with Article 8a and in conjunction with Articles 5a(1), and (3) and Article 5b of the Directive. The same applies to any other persons involved as “perpetrators, inciters or accessories”. Finally, Article 8b(2) of the Directive also covers situations where a lack of supervision or control by a person in a “leading position” allowed subordinates to engage in illegal discharges. Article 9 Compliance with international law Member States shall apply the provisions of this Directive without any discrimination in form or in fact against foreign ships and in accordance with applicable international law, including Section 7 of Part XII of the 1982 United Nations Convention on the Law of the Sea, and they shall promptly notify the flag State of the vessel and any other State concerned of measures taken in accordance with this Directive.

9. Article 9 Directive 2005/35/EC – Compliance with International Law / Safeguards

Generally, Recital (12) of the Directive stresses that where there is clear, ob- 85 jective evidence of a discharge causing major damage or a threat of major damage, the EU Members should submit the matter to their competent authorities with a view to instituting proceedings in accordance with Article 220 UNC81 On this provision see also Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 227. 82 Ibid., p. 228, with further references.

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LOS(Enforcement by coastal States). This provision addresses the enforcement of rules by coastal states to preserve and protect the marine environment. For the sake of completeness, Article 218 UNCLOS (Enforcement by port States) should have been mentioned in this Recital as well because Article 218 UNCLOS is even more specific on the necessary communication to be established between port/coastal States and foreign flag States in the event of discharge violations. 86 Article 9 of Directive 2005/35/EC refers specifically to “Section 7 of Part XII UNCLOS” (entitled “Safeguards”).83 In this section, Article 231 UNCLOS specifically mandates that “States shall promptly notify the flag State and any other State concerned of any measures taken [pursuant to section 6] against foreign vessels, and shall submit to the flag State all official reports concerning such measures. However, with respect to violations committed in the territorial sea, the foregoing obligations of the coastal State apply only to such measures as are taken in proceedings. The diplomatic agents or consular officers and where possible the maritime authority of the flag State, shall be immediately informed of any such measures taken pursuant to section 6 against foreign vessels.” Thus, at least the second part Article 9 of Directive 2005/35/EC is a declaratory provision because all EU Members (and the EU itself as well) are already under an obligation under public international law to promptly notify flag States of vessels (and any other State concerned) in case measures are taken in accordance with the Directive, i.e., in accordance with national laws implementing the Directive. 87 However, the first part of Article 9 of the Directive is more problematic. In academic literature, it has already been criticised that the Directive itself does not suggest any solution on how to harmonise the requirements of Section 7 UNCLOS with the domestic rules of EU Members, i.e., in implementation of the Directive.84 The safeguards set forth in Section 7 of UNCLOS impose conditions and restrictions on the exercise of criminal jurisdiction by coastal and port States.85 Above all, Article 230(1) UNCLOS requires coastal and port States – in contrast to flag States – to impose only monetary sanctions for discharge violations outside their internal waters, “except for wilful and serious pollution in the territorial sea” (Article 230(2) UNCLOS). Nevertheless, the Directive mandates EU Members to potentially punish discharge violations by applying anoth-

83 On Article 9 of the Directive see also Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209 (at 231 et seq.). 84 See more extensively on this: Pozdnakova, Criminal Jurisdiction over Perpetrators of Shipsource Pollution, p. 250 and 252. 85 See generally on this UNCLOS section in relation to the Directive: König, The EU Directive on Ship-Source Pullution and on the Introduction of Penalties for Infringements: Development or Breach of International Law?, pp. 767 (at 784-785), in: Ndiaye/Wolfrum (eds.), Law of the Sea, Environmental Law and Settlement of Disputes.

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er standard than “wilful and serious” via instruments of their domestic criminal law, including custodial sentences. Notwithstanding Section 7 of Part XII UNCLOS, imposing custodial sen- 88 tences (or professional disqualifications) might still be lawful under public international law if an EU Member would not act in a capacity as a coastal or port State (respecting UNCLOS) but in a capacity as the State of nationality of the master and/or the State in which the shipping company is registered. This could also create possible problems of allocating jurisdiction in cases where two or more EU States (possibly even multiple coastal States) assert jurisdiction to prosecute the perpetrator of a certain marine pollution. However, only Article 7 of the annulled Framework Decision 2005/667/JHA had (i.e. until 23 October 2007) contained some guidelines on how to determine which State would be best suited to exercise criminal jurisdiction over a perpetrator of a marine pollution.86 In sum, the first part of Article 9 leaves EU Members in a state of legal uncer- 89 tainty. Multiple legal problems could arise while EU Members try to adhere to Section 7 of Part XII UNCLOS and to the Directive at the same time. There is, e.g., no exemplified reference to possible instruments of practical importance for national law enforcement agencies (like bonds or security) for the benefit of EU coastal and port States.87 Consequently, the lack of any harmonisation procedure (or at least further practical guidelines) for EU Members relating to the adherence to Section 7 of Part XII UNCLOS in implementation of the Directive is a general legal weakness of the Act. Article 10 Accompanying measures 1.

For the purposes of this Directive, Member States and the Commission shall cooperate, where appropriate, in close collaboration with the European Maritime Safety Agency and taking account of the action programme to respond to accidental or deliberate marine pollution set up by Decision No 2850/2000/EC and if appropriate, of the implementation of Directive 2000/59/EC in order to: (a) develop the necessary information systems required for the effective implementation of this Directive; (b) establish common practices and guidelines on the basis of those existing at international level, in particular for: – the monitoring and early identification of ships discharging polluting substances in violation of this Directive, including, where appropriate, on-board monitoring equipment, – reliable methods of tracing polluting substances in the sea to a particular ship, and – the effective enforcement of this Directive.

86 Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 254. The annulled Decision mentioned factors such as: The maritime zone where the offence had been committed or where the effects of the offence were felt; the territorial waters or EEZ where the delinquent ship was in transit; the nationality or place of residence of the perpetrator; the place of registration of any legal person involved; and the flag State of the delinquent ship. 87 Ringbom, The EU Maritime Safety Policy and International Law, p. 336; Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, p. 253.

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In accordance with its tasks as defined in Regulation (EC) No 1406/2002, the European Maritime Safety Agency shall: (a) work with the Member States in developing technical solutions and providing technical assistance in relation to the implementation of this Directive, in actions such as tracing discharges by satellite monitoring and surveillance; (b) assist the Commission in the implementation of this Directive, including, if appropriate, by means of visits to the Member States, in accordance with Article 3 of Regulation (EC) No 1406/2002.

10. Article 10 Directive 2005/35/EC – Accompanying Measures

Recital (10) of the Directive stresses that there is a need for further effective cooperation among Member States to ensure that discharges of polluting substances from ships are detected in time and that the offenders are identified. For this reason, EMSA88 has now assumed the key role in working with the EU Members in developing technical solutions and providing technical assistance relating to the implementation of the Directive and in assisting the Commission in the performance of any task assigned to it for its effective implementation. 91 The best example of accompanying measures adopted under Article 10(2)(a) of the Directive is the satellite surveillance system “CleanSeaNet” as deployed by EMSA in April 2007. 89 This system now monitors European waters detecting oil slicks through satellite-based synthetic aperture radar (SAR). 92 The first paragraph of Article 10 of the Directive addresses (in the broadest language) general accompanying measures to the sanctions regime. Already since 1978, earlier Community action in the field of accidental marine pollution had been based on three areas: – a Community Action Programme on the control and reduction of pollution caused by hydrocarbons discharged at sea;90 – a former Community Information System which was discontinued upon the entry into force of Decision No 2850/2000/EC91 as referred to in Article 10(1) of Directive 2005/35/EC;92 – a Community Task Force comprised of experts from the EU Members who are called on to provide practical assistance in the event of accidental marine pollution.93 93 Via Decision No 2850/2000/EC the EU has aimed to improve these three elements and has integrated them into a single framework for cooperation, initially 90

88 See Regulation (EC) 1406/2002 establishing the European Maritime Safety Agency, OJ L208/1 of 5 August 2002 (as amended) and the introductory remarks on the “evolution” of EMSA in the introduction to this section of the commentary, Chapter 4, I. (note 18 et seq.). 89 For more technical information, see http://www.emsa.europa.eu/operations/cleanseanet.html [last access: May 2015]. 90 OJ C 162 of 8 July 1978. 91 OJ L332/1 of 28 December 2000. 92 OJ L355 of 10 December 1981 and OJ L 77 of 22 March 1986. 93 See generally http://europa.eu/legislation_summaries/other/l28085_en.htm [last access: May 2015].

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covering the period from 1 January 2000 to 31 December 2006. A total of EUR 12.6 million was made available for the implementation of the Decision for this period.94 The single framework for cooperation has intended to supplement the EU 94 Members’ efforts at national, regional and local level to protect the marine environment, human health and coastlines against the risks of accidental or deliberate pollution at sea. It also served to reinforce cooperation and mutual assistance between Member States in this field, with a view to providing compensation for damages in accordance with the “polluter pays principle”95 and to improve the Member States’ capacity to intervene in the event of accidental spills of harmful substances at sea.96 The general reference to the long-standing single framework for cooperation 95 also explains why Article 10(1) of the Directive refers to Directive 2000/59/EC on port reception facilities for ship-generated waste and cargo residues.97 Generally, Recital (13) of the Directive stresses that both the enforcement of Directive 2005/35/EC and Directive 2000/59/EC on port reception facilities for ship-generated waste and cargo residues are joint key instruments in the set of measures to prevent ship-source pollution. The Commission had stressed this important technical correlation already in 2003.98 Directive 2000/59/EC aims to enhance the quantity and quality of port recep- 96 tion facilities without, however, originally prescribing a detailed way ahead for the future. The act mainly relies on a commercial approach which is related to a broader financing of port reception facilities. Thus, formally it also applies the “polluter pays principle” to govern the use of port reception facilities; however, it also introduces a cost distribution scheme splitting the costs over the community of users collectively.

94 See Article 4 of Decision No 787/2004/EC of the European Parliament and of the Council of 21 April 2004 amending Council Decision 96/411/EC and Decisions No 276/1999/EC, No 1719/1999/EC, No 2850/2000/EC, No 507/2001/EC, No 2235/2002/EC, No 2367/2002/EC, No 253/2003/EC, No 1230/2003/EC and No 2256/2003/EC with a view to adapting the reference amounts to take account of the enlargement of the European Union, OJ L 138/12 of 30 April 2004. 95 See generally Article 191 TFEU which sets out that the EU’s policy on the environment shall contribute to the pursuit of a number of objectives, stating in the first sentence of the provisions’ second paragraph: “Union policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Union. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.”. 96 See http://europa.eu/legislation_summaries/other/l28085_en.htm [last access: May 2015]. 97 Directive 2000/59/EC, OJ L 322/81 of 28 December 2000; see the separate commentary on this legal act in Chapter 4, III.. 98 European Commission: “Proposal for a Directive of the European Parliament and of the Council on ship-source pollution and on the introduction of sanctions, including criminal sanctions, for pollution offences”, COM (2003) 92 final, p. 3: “First, the occurrence of illegal discharges is promoted by lack of adequate waste reception facilities in ports. […].”.

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Since 2007, most of the objectives summarized in Article 10(1)(a) – (d) of the Directive (i.e. developing information systems and establishing common practices and guidelines on the basis of those existing at international level) have been gradually shifted to be performed by EMSA, especially following the adoption of Regulation EC/2038/200699 and Regulation EC/100/2013.100 For example, in 2007 and 2011, EMSA organised two workshops on the implementation of Directive 2005/35/EC. In 2010/2011, EMSA conducted a study on the practical implementation of the Directive (unpublished). As a result, drawing a legal line between both paragraphs of Article 10 of the Directive would hardly make sense in practice; rather those two provisions are now so closely interlinked that they could even be merged in case the Directive should be further amended in the future. Article 11 Feasibility Study The Commission shall, before the end of 2006, submit to the European Parliament and the Council a feasibility study on a European coastguard dedicated to pollution prevention and response, making clear the costs and benefits.

11. Article 11 Directive 2005/35/EC – Feasibility Study

Recital (11) of the Directive emphasizes that in order to prevent and combat marine pollution better synergies should be created between enforcement authorities such as national coastguard services. In this context, the European Commission was mandated to undertake a feasibility study on a European coastguard dedicated to pollution prevention and response, making clear the costs and benefits before the end of 2006. This study should, if appropriate, be followed by a proposal on a European coastguard. 99 Ten years after the Directive was passed, no “pan-European” coastguard still exists because both the European Commission and most of the EU Member States prefer to develop further coordinated action and are not too enthusiastic about passing on the competencies of national coastguards to a European coastguard.101 It has also been pointed out in literature that at least the establishment of EMSA has already created an “embryonic European Coastguard”102 and – as EMSA’s development has intensified over time but also taking into account budgetary restraints – EMSA continuously evolves as a supplementary actor to perform “coastguard-like” activities. 100 Initially, the European Parliament had called on the European Commission to present the feasibility study of a European coastguard service which resulted in Article 11 of the Directive. In view of the Parliament, a European coastguard 98

99 OJ L 394/1 of 30 December 2006 (corrigendum OJ L 30/12 of 3 February 2007). 100 OJ L 39/31 of 9 February 2013. 101 See Güner-Özbek, The European Maritime Safety Agency “EMSA“, p. 73 (at 97), in: Ehlers/Lagoni (eds.), Maritime Policy of the European Union and Law of the Sea. 102 Ringbom, The EU Maritime Safety Policy and International Law, p. 516.

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service would avoid a fragmented approach and could make an important contribution to taking swifter, more effective action against illegal practices, including illegal immigration and illegal discharges of oil at sea. When the publication of the feasibility study was delayed Members of the Parliament insisted on its publication in 2007 and 2008.103 Reflecting the enormous political difficulties of this topic, the actual feasibili- 101 ty study was published only a number of years later. In 2011, the Commission was careful to stress that “The idea of a European Coastguard has already been discussed between the European institutions. Certain Coastguard functions could benefit from coordination at European level or be performed more efficiently at European level […]. In full respect of the principles of subsidiarity and proportionality, the Commission will examine several options: structured cooperation between Member States, ad hoc or permanent coordination of Member States coastguards, handover of certain functions to EU bodies.”104

After that, the Commission procured the feasibility study also in response to 102 updated instructions as laid down in Regulation EU/100/2013, i.e. the 2013 revision of the EMSA founding regulation.105 The “Study on the feasibility of improved co-operation between bodies carrying out European Coast Guard functions” was finally published in mid-2014, i.e., almost eight years later as envisioned by Article 11 of Directive 2005/35/EC.106 This report identifies possible approaches for the European Commission and the Member States to enhanced coordination between more than 300 coastguard-related public authorities within the EU. A “true” European coastguard as envisioned by Article 11 of the Directive, however, is still not conceivable for many years to come. In late 2015, 103 See, e.g., written question by Corien Wortmann-Kool (PPE-DE) to the Commission of 6 July 2007 (E-3459/07); European Parliament Resolution of 20 May 2008 on an Integrated Maritime Policy for the European Union (2008/2009(INI), OJ C 279/30E of 19 November 2009 (“[…] 7. Welcomes the initiative by the Commission to start a European network for maritime surveillance and promote improved cooperation between Member States' coastguards; calls on the Commission to come up with the results of the feasibility study on a European coastguard, which was due to be published and presented to the Parliament and the Council by the end of 2006; […]”). 104 Commission Staff Working Document: Accompanying the White Paper – Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system, SEC(2011)391final of 28 March 2011, para. 264. 105 Recital 30 of Regulation EU/100/2013 states that, “Without prejudice to the objectives and tasks laid down in Regulation (EC) No 1406/2002, the Commission should prepare and submit, within one year of the date of entry into force of this Regulation, in close cooperation with relevant stakeholders, a feasibility study with a view to evaluate and identify the possibilities of enhancing coordination and cooperation of different coastguard functions. That study should take into account the existing legal framework and relevant recommendations from the appropriate Union fora as well as the current development of the Common Information Sharing Environment (CISE) and should fully respect the principles of subsidiarity and proportionality, making clear the costs and benefits to the European Parliament and the Council”. 106 See “Study on the feasibility of improved co-operation between bodies carrying out European Coast Guard functions”, Final Report (June 2014), available online at http:// ec.europa.eu/transport/modes/maritime/studies/doc/2014-06-icf-coastguard.pdf [last access: May 2015].

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the emerging migrant crisis in Europe inspired the European Commission to propose once more a European Border and Coast Guard “to bring together a European Border and Coast Guard Agency built from Frontex and the Member States’ authorities responsible for border management who will continue to exercise the day-to-day management of the external border”.107 Article 12 Reporting Every three years, Member States shall transmit a report to the Commission on the application of this Directive by the competent authorities. On the basis of these reports, the Commission shall submit a Community report to the European Parliament and the Council. In this report, the Commission shall assess, inter alia, the desirability of revising or extending the scope of this Directive. It shall also describe the evolution of relevant case-law in the Member States and shall consider the possibility of creating a public database containing such relevant case-law.

12. Article 12 Directive 2005/35/EC – Reporting

Generally, the Commission has to ensure that the provisions of the TFEU and the measures taken by the institutions pursuant thereto are fully and correctly applied. If the Commission considers that a Member State has failed to fulfil an obligation under the TFEU it shall deliver a reasoned opinion on the matter after giving the State concerned an opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the CJEU (see Article 258 TFEU (ex Article 226)). 104 After the 2009 amendments to Directive 2005/35/EC (which entered into force on 16 November 2009) affected EU Members had to bring into force their national laws, regulations and administrative provisions necessary to comply with the Directive by 16 November 2010 (see Article 16 of the Directive). Since then the EU Members were obliged to report to the Commission every three years about further details on the domestic application of the amended Directive by the competent authorities. 105 Apparently however, these Member State reports have – so far – not generated enough practical input for the Commission to draw up a specific report on the domestic application of Directive 2005/35/EC. An unpublished study of 2010/2011 (conducted by EMSA) had first revealed considerable variations in relation to the types and levels of sanctions imposed.108 Second, it only identified one case of an EU flag State in fact enforcing criminal sanctions (Poland) 103

107 European Commission – Press release IP/15/6327 (15 December 2015). 108 See Pozdnakova, Criminal Jurisdiction over Perpetrators of Ship-source Pollution, pp. 245 and 251, even referring to “enormous variations between national legal systems [of EU Members] in the severity of the punishments imposed” and to “particularly large differences in the levels of fines”.

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while France has been the most active jurisdiction for prosecutions as a coastal State in the past.109 Thus, in 2011, the Commission invited tenders for a new service contract re- 106 garding a proposal for an evaluation study on the Implementation of Directive 2005/35/EC (as amended).110 As part of this tender procedure, the Commission stressed that the EU had now adopted a comprehensive body of legislation in the maritime safety policy area.111 Recalling Article 8 of Directive 2005/35/EC, the effective application of the EU’s maritime safety legislation requires that in case of infringements effective, proportionate and dissuasive penalties (i.e. criminal penalties for natural persons and administrative or legal penalties for legal persons) are foreseen in the national legal order of the Member States. As a result, the Commission required the service contractor to assess the effectiveness, dissuasiveness and proportionality of those sanctions as a binding obligation for the EU Members to be transposed. This assessment should also be undertaken “with regard to the whole range of measures provided by the national legislator in view of compliance with the European legislation”.112 In sum, the purpose of the study was to provide the Commission with more 107 factual information, analysis and data on the legal and institutional framework of the Member States of the EU. The objective was to get a comprehensive view of the legal framework in this area in all Member States by: – assessing to what extent the provisions of the Directive have been correctly implemented by appropriate provisions in the national law of the Member States; – verifying to what extent the organisational and administrative arrangements have been put into place in the Member States in order to effectively ensure correct application and enforcement of the provisions of the Directive; – informing the Commission of any inadequacies in the national implementing provisions or in the national organisational and administrative arrangements to provide an analysis summarizing the findings of the conformity studies. In particular, the Commission considered it to be very useful to see how EU 108 standard wording is reflected in practice in the national legislations of the EU Members, especially as regards the definition of offences and the issue of the proportional, dissuasive and effective criminal penalties applied in this field. The study was also aimed to shed some more light on the inclusion into the pe109 Ibid., p. 237 (foonote 137). 110 Call for tender JUST/2011/JPEN/PR/1028/A4 (JUST/A/4/MPS/ARES(2011) 868245 of 10 August 2011). 111 See also generally: Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209 (at 215). 112 Call for tender JUST/2011/JPEN/PR/1028/A4 (JUST/A/4/MPS/ARES(2011) 868245 of 10 August 2011), p. 4.

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nal chain of all persons involved in an illegal vessel discharge. The definition of concepts of minor discharges and repeated minor discharges in national laws were also deemed to be important to assist the Commission in considering the effectiveness of the EU acquis as it stands and its enforceability. All in all, the study was to provide the necessary elements and analysis for future development in the field of maritime safety. 109 Since 2012, an independent consultant (Milieu Ltd.) started assessing how the organisational and administrative requirements stipulated in Directive 2005/35/EC (as amended) had been put in place in each EU Member State along with the extent to which these arrangements ensured proper enforcement of penalties against infringements. The finalized evaluation study – obviously not generally accessible to the public – provided the Commission with more factual information, analysis and data on the legal and institutional framework of the EU Member States created on the basis of Directive 2005/35/EC (as amended) as well as the application of such framework. The study also provided a comprehensive review of the legal framework in this area in all EU Member States by assessing the extent to which the provisions of Directive 2005/35/EC (as amended) had been correctly implemented through appropriate provisions in the national law of the Member States.113 110 According to the information officially disclosed by the private consultant the 2012 assessment involved not only a desk study and legal analysis, but also collection of data on both administrative and criminal cases of ship-source pollution in each of the Member States and interviews with national authorities and practitioners.114 This review verified the extent to which the organisational and administrative arrangements had been put into place in the EU Member States. Moreover, the study identified inadequacies in the national implementing provisions and the national organisational/administrative arrangements. The final report also included an overall comparative assessment of the way the EU Members have transposed and implemented the Directive. Article 13 Committee Procedure 1.

2.

The Commission shall be assisted by the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS), established by Article 3 of Regulation (EC) No 2099/2002 of the European Parliament and of the Council, of 5 November 2002. Where reference is made to this Article, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at one month.

113 See http://www.milieu.be/index.php?page=1421-11-ship-source-pollution [last access: May 2015]. 114 Ibid.

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13. Article 13 Directive 2005/35/EC – Committee Procedure

Articles 13, 14 and 15 of the Directives are procedural provisions for internal EU regulation and are “closely knit together”. The measures necessary for the implementation of Directive 2005/35/EC have to be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission.115 Article 13(1) of the Directive refers to Regulation EC/2009/2002 on the Committee on Safe Seas and Prevention of Pollution (COSS). Generally, the “COSS Regulation” was adopted in 2002 to create a single consultative committee in questions of maritime safety,116 replacing a number of existing legal instruments.117 Since 2002, the COSS forms the sole forum for consulting the EU Member States in the field of EU maritime safety. It represents a specific consultative structure, consisting of the Commission and the Member States and has been put in place to facilitate rule and decision making, including the adoption of delegated Decisions and Regulations. This institutional framework has enhanced the capabilities of the EU to be a much more significant and coordinated force in the global regulation of maritime safety and pollution prevention. Where reference is made to Article 13 of the Directive, Articles 5, 7 and 8 of Decision 1999/468/EC shall apply. Article 5 of Decision 1999/468/EC relates specifically to the regulatory procedure in the COSS. In these cases, the Commission is assisted by COSS being composed of the representatives of the Member States and chaired by the representative of the European Commission (Article 5(1) of Decision 1999/468/EC): The representative of the Commission has to submit to COSS a draft of the measures to be taken. The COSS delivers its opinion on the draft within a time-limit which the chairman lays down according to the urgency of the matter. Such an opinion shall be delivered by the majority laid down in Article 205(2) and (4) TFEU in the case of decisions which the Council is required to adopt on a proposal from the Commission. The votes of the representatives of the Member States within COSS shall be weighted in the manner set out in that Article. The chairman shall not vote (Article 5(2) of Decision 1999/468/EC). Generally, the Commission shall adopt the measures envisaged if they are in accordance with the opinion of COSS (Article 5(3) of Decision 1999/468/EC). If the measures envisaged are not in accordance with the opinion of COSS, or if no opinion is delivered, the Commission shall, without delay, submit to the Council a proposal relating to the measures to be taken and shall inform the European 115 Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission, OJ L 184/23 of 17 July 1999, p. 23 (as amended by Council Decision 2006/512/EC, OJ L200/11 of 22 July 2006). 116 The COSS was created by Art. 3 of Regulation (EC) No 2099/2002 of the European Parliament and of the Council, OJ L324/1 of 29 November 2002; maritime security matters are considered in a different committee. 117 See the introduction to this Brussels Commentary (Chapter 1, I.) and, specifically, the commentary on Article 31 of Directive 2009/16/EC on Port State Control (Chapter 4, VIII.)

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Parliament (Article 5(4) of Decision 1999/468/EC). If the European Parliament considers that a proposal submitted by the Commission pursuant to a basic instrument adopted in accordance with the procedure laid down in Article 251 TFEU exceeds the implementing powers provided for in that basic instrument, it shall inform the Council of its position (Article 5(5) of Decision 1999/468/EC). 115 The Council may act by qualified majority on the proposal within a certain timeframe. As laid down in Article 13(2) Directive 2005/35/EC (last sentence) this period is one month from the date of reference to the Council (in accordance with Article 5(6), first sentence, of Decision 1999/468/EC). If within this month the Council has indicated by qualified majority that it opposes the proposal, the Commission shall re-examine it. It may submit an amended proposal to the Council, re-submit its proposal or present a legislative proposal on the basis of the Treaty (Article 5(6), second sentence, of Decision 1999/468/EC). If on the expiry of that period the Council has neither adopted the proposed implementing act nor indicated its opposition to the proposal for implementing measures, the proposed implementing act shall be adopted by the Commission (Article 5(6), third sentence, of Decision 1999/468/EC). 116 In accordance with Article 7(1) Decision 1999/468/EC the COSS was allowed to adopt its own rules of procedure on the proposal of its chairman, on the basis of standard rules of procedure which had to be published in the Official Journal (OJ). The principles and conditions on public access to documents applicable to the Commission also apply to COSS (Article 7(2) Decision 1999/468/ EC). The European Parliament shall be informed by the Commission of COSS proceedings on a regular basis following arrangements which ensure that the transmission system is transparent and that the information forwarded and the various stages of the procedure are identified. To that end, the European Parliament shall receive – agendas for COSS meetings, – draft measures submitted to COSS for the implementation of instruments (adopted by the procedure provided for by Article 251 TFEU), – the results of votings, – summary records of the meetings and – lists of the authorities and organisations to which the persons designated by the EU Members to represent them belong. 117 The European Parliament shall also be kept informed whenever the Commission transmits to the Council measures or proposals for measures to be taken (Article 7(3) Decision 1999/468/EC). The references of all documents sent to the European Parliament are made public in a register set up by the Commission (Article 7(5) Decision 1999/468/EC). Additionally, pursuant to Article 7(4) of the Decision the Commission had to publish in the Official Journal (OJ) a list of all committees which assist the Commission in the exercise of implementing powers. This list has to specify, in relation to each committee, the basic instru-

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ment(s) under which the committee is established. Since 2000, the Commission also has to publish an annual report on the working of committees. This all has to be done “having regard to the provisions of Article 8” of the 118 Decision. This provision serves as a “watchdog” for the procedure if the Commission should exceed its implementing powers: If the European Parliament indicates, in a Resolution setting out the grounds on which it is based, that draft implementing measures, the adoption of which is contemplated and which have been submitted to a committee pursuant to a basic instrument adopted under Article 251 TFEU, would exceed the implementing powers provided for in the basic instrument, the Commission shall re-examine the draft measures (Article 8, first sentence, of the Decision). Taking the Resolution of the European Parliament into account and within the time-limits of the procedure under way, the Commission may submit new draft measures to the committee, continue with the procedure or submit a proposal to the European Parliament and the Council (Article 8, second sentence, of the Decision). The Commission shall inform the European Parliament and the committee of the action which it intends to take on the Resolution of the European Parliament and of its reasons for doing so (Article 8, third sentence, of the Decision). Article 14 Provision of information The Commission shall regularly inform the Committee set up by Article 4 of Decision No 2850/2000/EC of any proposed measures or other relevant activities concerning the response to marine pollution.

14. Article 14 Directive 2005/35/EC – Provision of Information

In 2000, an EU framework for cooperation in the field of accidental or delib- 119 erate marine pollution was set up by Decision No 2850/2000/EC.118 This Decision is discussed in some more detail in the commentary relating to Article 10 of Directive 2005/35/EC. Article 4 of Decision No 2850/2000/EC (in particular the second paragraph of 120 that decision) refers back to the application of Articles 4 and 7 of Decision 1999/468/EC (having regard to Article 8 thereof) which are discussed in the commentary relating to Article 13 of Directive 2005/35/EC. Article 15 Amendment procedure In accordance with Article 5 of Regulation (EC) No 2099/2002 and following the procedure referred to in Article 13 of this Directive, the COSS may exclude amendments to Marpol 73/78 from the scope of this Directive.

118 OJ L332/1 of 28 December 2000.

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15. Article 15 Directive 2005/35/EC – Amendment Procedure

As a matter of course, the EU cannot change the legal substance of international maritime conventions as negotiated and agreed by the IMO Members, including the 28 EU Member States. However, future amendments to international conventions like MARPOL 73/78 (as defined in Article 2(1) of Directive 2005/35/EC) can be excluded from the scope of Directive 2005/35/EC. 122 The regulatory procedure as described in the commentary relating to Article 13 of Directive 2005/35/EC applies to any steps aimed at excluding amendments to MARPOL 73/78 from the scope of the Directive. Generally, such exclusions will not apply to mere editorial updates to MARPOL 73/78 (such as renumbering). 121

Article 16 Implementation Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 1 April 2007 and forthwith inform the Commission thereof. When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

16. Article 16 Directive 2005/35/EC – Implementation

The original implementation deadline of 1 April 2007 was supplemented by Article 2 of Directive 2009/123/EC (amending Directive 2005/35/EC) stating that the EU Members shall bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by 16 November 2010 (i.e. one year after the amendments affected by Directive 2009/123/EC came into force). Already before 2010, the Commission had successfully instituted an infringement procedure against the United Kingdom for its failure to transpose the requirements of Directive 2005/35/EC into its national legal order.119 124 In sum, Directive 2005/35/EC (as amended by Directive 2009/123/EC) did not generally result in fundamental changes to the EU Members’ applicable rules on domestic criminal law. This is partly because all EU Members were already under an earlier obligation under public international law (i.e. as ratifying States to MARPOL 73/78) to institute “adequate” sanctions as addressed by the Directive(s). The problem under EU law is, however, whether EU Members have correctly transposed the “criminal law dimension” of Directive 2005/35/EC (as amended). Obviously, the Directive did not lead to substantial increases in the number of people being prosecuted or more severe penalties imposed. The level of fragmentation and complexity of the national legislation 123

119 See Case C-557/08 (Commission v United Kingdom), Judgment of the Court (Fifth Chamber) of 9 July 2009, OJ C205/12 of 29 August 2009.

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adopted in order to transpose the Directive complicates the assessment efforts to compare the level of harmonisation achieved in this area. Already in 2012, a related external evaluation report has been produced for 125 the Commission in accordance with Article 12 of the Directive.120 Apparently, this report is kept confidential by the Commission (already for a couple of years now) until some individual infringement procedures instituted by the Commission on its basis against some EU Members are finally settled. This evidences, in fact, that the implementation of Directive 2005/35/EC has been difficult for some individual EU Members in the past. To complete the picture of fragmented application and implementation EU 126 criminal law, already in 2006, the Baltic and International Maritime Council (BIMCO) published a “Study of Recent Cases involving the International Practice of Using Criminal Sanctions towards Seafarers” which identified some of the varying applicable sanctions in different EU States ranging from financial fines to multiple year imprisonment.121 In particular, Annex VI of the 2006 BIMCO report (“ECSA overview of Member States’ laws on criminal sanctions for ship-source pollution”) includes a summary of some the applicable criminal laws of the EU Members comparing the different national frameworks for financial penalties and possible terms for imprisonment.122 Additionally, HELCOM Recommendation 19/14 intended to harmonise the penalties for MARPOL 73/78 violations in the Baltic Sea region, specifying in para. I/8 that “[a] higher fine should be imposed on intentional violations than on negligent violations”.123 Article 17 Entry into force This Directive shall enter into force on the day following its publication in the Official Journal of the European Union.

17. Article 17 Directive 2005/35/EC – Entry into Force

The Directive entered into force on 1 October 2005. The amendments affect- 127 ed by Directive 2009/123/EC took effect from 16 November 2009.

120 See, supra, section 12. on Article 12 of the Directive. 121 See p. 9 of the 2006 BIMCO report, available online for download at, e.g., http:// www.vdks.org/pdf/bimco_study_march_2006.pdf [last access: May 2015]; see also Gonsaeles, The EU Regulatory Framework on Criminal Sanctions for Ship-source Pollution – A Consumer Law Perspective in Accordance with International Law, European Journal of Consumer Law 2011, pp. 209 (at 235 et seq.). 122 For some more recent case studies, see also Jessen, Criminalization of Seafarers in the Event of Maritime Accidents and Ship-source Environmental Pollution, pp. 117, in: Lemper/ Pawlik/Neumann (eds.), The Human Element in Container Shipping (2012). 123 As cited by Ringbom, The EU Maritime Safety Policy and International Law, p. 408 (footnote 107).

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Article 18 Addressees This Directive is addressed to the Member States.

18. Article 18 Directive 2005/35/EC – Addressees 128

The text of Article 18 of the Directive (and Article 4 of Directive 2009/123/EC) is the usual declaratory statement – concluding many EU Directives – which mandates the EU Member States to transpose the Directive within a certain timeframe (see Article 16 of the Directive) as its addressees.

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VII. Commentary on Regulation EC/391/2009 on Common Rules and Standards for Ship Inspection and Survey Organisations and Directive 2009/15/EC on Common Rules and Standards for Ship Inspection and Survey Organisations and for the Relevant Activities of Maritime Administrations A. Preliminary Remarks and Introduction to Both Acts . . . . . . . . . . . . . . . . . . . . . B. Text and Commentary: Regulation (EC) No. 391/2009 on Common Rules and Standards for Ship Inspection and Survey Organisations . . . . 1. Article 1 Regulation EC/391/2009 – Objectives of the Regulation a) First Sentence: The Public Law Context and the Applicable Legal Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Second Sentence: The Private Functions of ROs and the Applicable Legal Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Article 2 Regulation EC/391/2009 – Legal Definitions . . . . . . . . . . . . . a) Updates to the Legal Definition “International Conventions” in Article 2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Remaining Legal Definitions (Letters (d), (f) and (j)) . . . . . . . . . . . . 3. Article 3 Regulation EC/391/2009 – Requests for Initial Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraphs (1) and (2): Requests for Recognition and Assessment by Minimum Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraph (3): Refusal of Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Article 4 Regulation EC/391/2009 – Granting Initial Recognition a) Paragraphs (1) and (4): Granting Initial Recognition and Possible Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraph (2): Recognition after Assessment . . . . . . . . . . . . . . . . . . . . c) Paragraph (3): Recognition of the Parent Entity . . . . . . . . . . . . . . . . . d) Paragraph (5): Publication of the List of Recognitions within the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Article 5 Regulation EC/391/2009 – Failure to Comply with the Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Article 6 Regulation EC/391/2009 – Fines and Periodic Penalty Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraph (1): Grounds for Imposing Fines. . . . . . . . . . . . . . . . . . . . . . b) Paragraph (2): Grounds for Imposing Periodic Penalty Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Paragraph (3): Procedural Standards and Requirements. . . . . . . . d) Paragraph (4): Rule of Law and Effective Legal Remedies for ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Article 7 Regulation EC/391/2009 – Withdrawal of Recognition . . 8. Article 8 Regulation EC/391/2009 – Continuous Assessment of ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraph (1): Intervals of Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraph (2): Standards and Requirements for Assessments . . c) Paragraphs (3) and (4): Visits to ROs / Review of Quality Management Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Article 9 Regulation EC/391/2009 – Access to Information from ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Article 10 Regulation EC/391/2009 – Mutual Recognition Within Ship Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraph (1): Obligations of ROs under the EU Mutual Recognition Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraphs (1), last sentence, and (2): Intra-EU Information and Reporting Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 4, VII. c) Paragraphs (3) and (5): Global Cooperation Obligations of ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Paragraph (4): Reporting Obligations of ROs Relating to their Classed Fleet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e) Paragraph (6): In Particular – Transfers of Class . . . . . . . . . . . . . . . 11. Article 11 Regulation EC/391/2009 – QACE (Quality Assessment and Certification Entity). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraph (1): Setting up QACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraph (2): Observations of Audits by QACE . . . . . . . . . . . . . . . . c) Paragraphs (3) and (4): Procedural Autonomy of QACE. . . . . . . . d) Paragraphs (5) to (7): Transparency and Monitoring of QACE 12. Article 12 Regulation EC/391/2009 – Cross References to EU Legal Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraph (1): The Necessary Participation of the COSS. . . . . . . b) Paragraph (2): The Application of Articles 3, 7 and 8 of Decision 1999/468/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Paragraph (3): The Application of Articles 5, 7 and 8 of Decision 1999/468/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Paragraph (4): The Application of Articles 5a(1) to (4), 7 and 8 of Decision 1999/468/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Article 13 Regulation EC/391/2009 – Amendments and Updates . . 14. Article 14 Regulation EC/391/2009 – Adoption and Publication of Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Paragraphs (1) and (3): Preventive Technical Criteria . . . . . . . . . . b) Paragraph (2): Repressive Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Article 15 Regulation EC/391/2009 – Prior Recognitions. . . . . . . . . . . a) Paragraph (2): Example for the Extension of Recognition without Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Paragraph (2): Example for the Expiry of a Former Limited Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Article 16 Regulation EC/391/2009 – Verification of the Holder of Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. Article 17 Regulation EC/391/2009 – Information on the Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. Article 18 Regulation EC/391/2009 – Continuity with Directive 94/57/EC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. Article 19 Regulation EC/391/2009 – Entry into Force . . . . . . . . . . . . . C. Text and Commentary: Directive 2009/15/EC on Common Rules and Standards for Ship Inspection and Survey Organisations and for the Relevant Activities of Maritime Administrations . . . . . . . . . . . . . . . . . . . . . . . . . 1. Article 1 Directive 2009/15/EC – Objectives of the Directive . . . . . . 2. Article 2 Directive 2009/15/EC – Legal Definitions. . . . . . . . . . . . . . . . . a) Article 2(b): “Ship Flying the Flag of a Member State” . . . . . . . . . b) Article 2(c): “Inspections and Surveys”. . . . . . . . . . . . . . . . . . . . . . . . . . . c) Article 2(l): “Cargo Ship Safety Radio Certificate”. . . . . . . . . . . . . . 3. Article 3 Directive 2009/15/EC – Enforcement of the Directive . . . a) Article 3(1): Enforcement of “International Conventions” by the EU Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Article 3(2) and (3): Scope of EU Flag State Authorisations to ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Article 4 Directive 2009/15/EC – Equal Treatment of ROs by EU Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Article 4(1): Grounds for Refusal of EU Member States to Authorise ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Article 4(2): Reciprocal Treatment of ROs Located in the EU and in Third Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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258 258 260 263 266 270 272 273 285 291 292 296

Commentary on Regulation EC/391/2009 and Directive 2009/15/EC 5. Article 5 Directive 2009/15/EC – The “Working Relationship” between EU flag States and EU ROs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Articles 5(1) and (4): Setting out the “Working Relationship” . . b) Articles 5(2)(a), (c), (d) and (e): Minimum Requirements for the “Working Relationship” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Article 5(2)(b): The Minimum Liability Requirements of the “Working Relationship” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d) Article 5(3): Local Representation of the RO . . . . . . . . . . . . . . . . . . . . . 6. Article 6 Directive 2009/15/EC – Cross References to EU Legal Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Article 7 Directive 2009/15/EC – Amendments and Updates. . . . . . . 8. Article 8 Directive 2009/15/EC – Suspension or Withdrawal of Authorisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Article 9 Directive 2009/15/EC – Monitoring of ROs by EU Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Article 10 Directive 2009/15/EC – Reporting by EU Members as Port States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Article 11 Directive 2009/15/EC – Harmonised Rules and Procedures of ROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a) Article 11(1): Application of Harmonised Rules of ROs on EUflagged Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b) Article 11(2): Procedure on the Possible Application of “Equivalent Rules”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c) Article 11(3): Cooperation between ROs and EU Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Article 12 Directive 2009/15/EC – Information on the Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. Article 13 Directive 2009/15/EC – Compliance by EU Member States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Article 14 Directive 2009/15/EC – Repeal of Directive 94/57/EC and Continuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Article 15 Directive 2009/15/EC – Entry into Force. . . . . . . . . . . . . . . . . 16. Article 16 Directive 2009/15/EC – Addressees of the Directive . . . .

300 301 307 318 341 343 351 358 364 369 376 377 380 384 386 389 394 396 397

Literature: Basedow/Wurmnest, Third Party Liability of Classification Societies (2005); Beck, Liability of Marine Surveyors for Loss of Surveyed Vessel, Notre Dame Law Review (64) 1989, pp. 246; Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, pp. 487; Boisson, Classification Societies and Safety at Sea, Marine Policy 1994, pp. 363; Broad, Marine Classification Society Surveying (2009); de Bruyne, Liability of Classification Societies: Cases, Challenges and Future Perspectives, Journal of Maritime Law & Commerce (45) 2014, pp. 181; de Bruyne/Vanleenhove, An EU Perspective on the Liability of Classification Societies: Selected Current Issues and Private International Law Aspects, Journal of International Maritime Law (20) 2014, pp. 103; Clyne/Saville, Classification Societies and Limitation of Liability, Tulane Law Review (81) 2006/2007, pp. 1399; Daniel, Potential Liability of Marine Classification Societies to Non-Contracting Parties, University of San Francisco Maritime Law Journal (19) 2007, pp. 183; Dohms/Rieder, Commitment Decision in the ship classification case: Paving the way for more competition, Competition Policy Newsletter No. 1, 2010, pp. 41; Enge/Schwampe, Transportversicherung (2012); EPRS (European Parliamentary Research Services, Ex-Post Impact Assessment Unit), Third Maritime Safety Package: Ex-Post Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study No. PE 536.331 (December 2014); Grey, Classification Societies under Renewed Scrutiny, BIMCO Bulletin 2001, pp. 44; Höltmann, Schiffssicherheit und Meeresumweltschutz in der EU nach Erika und Prestige (2012); Honka, The Classification System and Its Problems with Special Reference to the Liability of Classification Societies, Tulane Maritime Law Journal (19) 1994, pp. 2; Hormann, Classification Soci-

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Chapter 4, VII. eties – What is Their Role, What is Their Future?, WMU Journal of Maritime Affairs 2006 (Vol. 5, No. 1), pp. 5; Hutchinson, Practical and Political Considerations, pp. 27, in: Lux (ed.), Classification Societies (1993); IACS, Classification Societies – What, Why and How? (2011), available online at http://www.iacs.org.uk/explained/default.aspx [last access: March 2015]; Klein, „Common Structural Rules“ – Klassifikationsgesellschaften stellen neue Regeln auf, Schiff & Hafen 2005, p. 47; Lagoni, The Liability of Classification Societies (2007); Lorenzon, Safety and Compliance, pp. 363, in: Baatz (ed.), Maritime Law (3rd ed.); Mansell, Flag State Responsibility (2010); Mizzi, The Third Maritime Safety Package: A Synopsis, Shipping & Trade Law (16 November 2009); Reuß/Pichon, The European Union’s Exercise of Jurisdiction Over Classification Societies, Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (ZaöRV) (67) 2007, pp. 119; Smith, On a flood tide: Classification societies and Canada’s marine industry in 2020, available online at (Article section): http://www.dieselduck.net/library/ [last access: March 2015]; Stopford, Maritime Economics (3rd ed., 2009); Witt, Obligations and Control of Flag States (2007).

A. Preliminary Remarks and Introduction to Both Acts

Historically, the private classification of commercial vessels is probably one of the most traditional service sectors of global shipping. The earliest roots of “classifying” and registering ships in handwritten books date back to the London market since 1764. As early as 1760, marine underwriters started to provide ship specific details and recorded hull and equipment conditions of commercial vessels.1 The need of a classification system for shipping emerged as marine insurers were seeking to determine the quality of vessels to categorize them for insurance purposes.2 Subsequently, private classification societies were established carrying out ship surveys and developing classification criteria. The majority of today’s renowned and globally active classification societies from Europe originate from the mid-19th century3 while most of their counterparts from other continents were established just a few years later. Since then classification has gradually emerged to become an integral part of the safety system of global shipping, additionally, the scope of class involvement has evolved through empirical risk assessment over more than a century.4 2 In the modern age of global shipping, classification societies now perform indispensable tasks for shipowners, flag States and other maritime stakeholders: The “classes” develop, apply and supervise technical rules and standards relating to the design, construction and assessment of ships (and other marine facilities, e.g. offshore platforms). No shipowner can insure a commercial vessel without proper classification, and – taking the rules of the International Mar1

1 See Lagoni, The Liability of Classification Societies (2007), p. 9. 2 See Basedow/Wurmnest, Third Party Liability of Classification Societies (2005), p. 5. 3 For example, the former alone-standing German-based classification society “Germanischer Lloyd” (GL) was established in 1867. Only in 2013, GL merged with the Norwegian classification society “Det Norske Veritas” (DNV), thus ending an era of more than 150 years of individually operating classification societies, traditionally linked to one specific home country. 4 See: First Report to the European Commission and the Member States (October 2012): Mutual Recognition within ship classification in accordance with Article 10.1 of Regulation (EC) No 391/2009, p. 12.

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itime Organization (IMO) on the fight against “substandard shipping” seriously5 – no single flag State can undertake all necessary and recurring surveys and statutory certifications of all of “its” ships without the administrative and technical assistance of private classification societies. In regulatory terms, classification societies are thus mostly referred to as “Recognised Organisations” (ROs) both within the IMO and under EU Law. The abbreviation “RO” is therefore a key legal term, however, defined variably – and to some extent conflicting – under the IMO regime6 and under the applicable EU Law as discussed in this commentary.7 Generally, the United Nations Convention on the Law of the Sea (UNCLOS) 3 stipulates in Article 94(1) that “Every State shall effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag.” Furthermore, Article 217(1) UNCLOS requires flag States to “[...] ensure compliance by vessels flying their flag or of their registry with applicable international rules and standards.” Consequently, flag States need to adopt, implement and enforce international Regulations. In maritime transportation, the “applicable international rules and standards” are the conventions established by specialized international organisations. The most prominent regulator in this area is, of course, the IMO.8 Jointly with the IMO, the International Labour Organisation (ILO) has also developed international standards on seafarer’s rights9 which have to be verified by external surveyors and which need to be certified by (or on behalf of) flag States in terms of adherence to the rules. Most of the IMO’s conventions require a variety of recurring technical surveys of ships and the issuance of statutory (i.e. public) certificates as evidence of compliance with international rules.10 However, the majority of flag States do not have the required technical exper- 4 tise, global coverage and staff to perform the required statutory surveys on their own.11 For practical reasons, flag States are allowed to delegate public tasks to private classification societies to carry out statutory surveys for them and even to issue a number of statutory certificates (via their inherent technical competen5 See generally on “substandard shipping”: OECD, The Cost to Users of Substandard Shipping (2001), pp. 8. 6 See Part II, 1.1 of the IMO’s “Code for Recognized Organizations” (RO Code): “Recognized organization (RO) means an organization that has been assessed by a flag State, and found to comply with this part of the RO Code.”. 7 See Article 2 (e) of Regulation EC/391/2009 (“Recognised organisation means an organisation recognised in accordance with this Regulation”) and Article 2(g) of Directive 2009/15/EC (“Recognised Organisation means an organisation recognised in accordance with Regulation (EC) No 391/2009”). 8 See Witt, Obligations and Control of Flag States (2007), p. 50, and, extensively: “Implications of the United Nations Convention on the Law of the Sea for the International Maritime Organization” (IMO Doc. LEG/MISC/7 of 19 January 2012). 9 I.e., the Maritime Labour Convention of 2006, globally in force and enforced since August 2013, see further Chapter 3, II. 10 Mansell, Flag State Responsibility (2010), p. 137. 11 See, e.g., IACS, Classification Societies – What, Why and How? (2011), p. 14.

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cy) on behalf of the relevant flag States. The competency of flag States to delegate public functions to private companies, as is the case with practically all flag States worldwide, also entails further legal obligations of the flag State under the IMO legal regime and also under EU Law: Not all public tasks may be delegated and, above all, flag States must supervise, monitor and evaluate the work of those classification societies acting on behalf of them. 5 Currently, there are twelve major classification societies which are members of the International Association of Classification Societies (IACS). In alphabetical order: – American Bureau of Shipping (ABS) – Bureau Veritas (BV) – China Classification Society (CCS) – Croatian Register of Shipping (CRS) – DNV GL AS – Indian Register of Shipping (IRS) – Korean Register of Shipping (KR) – Lloyd's Register of Shipping (LR) – Nippon Kaiji Kyokai (NK) – Polish Register of Shipping (PRS) – Registro Italiano Navale (Rina) – Russian Maritime Register of Shipping (RS) 6 It is the core group of these “classes” which has established the most important technical rules setting the requirements for the structural strength of vessels, for ship stability and for the suitability of the propulsion, steering, power generation as well as for other features and auxiliary systems built into ships. Historically, the International Load Line Convention of 1930 gave the first impulse for technical collaboration between different classification societies. Afterwards, the classification societies began to conduct regular conferences from 1939 leading to the establishment of the current IACS in 1968. Since then, IACS is a nongovernmental organization and achieved consultative status at the IMO in 1969 whereby it can participate in the development of IMO instruments.12 The private rules and standards defined by IACS members cover more than 90% of the world’s cargo tonnage.13 Its activities also include the supervision of its members, the standardisation of the rules and Regulations of its members, surveyor trainings and providing assistance to regulatory bodies.14 7 Notwithstanding the market dominance of the IACS organisations there are also about 90 other classification societies currently not eligible to become IACS members.15 Nevertheless, some of them are authorized by some flag 12 See: IACS Members – Safety as Common Goal, Hansa Maritime Journal 2008, p. 23. 13 IACS, Classification Societies – What, Why and How? (2011), p. 1. 14 See generally Begines, The EU Law on Classification Societies, Journal of Maritime Law & Commerce 2005, p. 487, at 500. 15 Mansell, Flag State Responsibility (2010), p. 139.

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States, even major flag States among them. For example, the world’s “biggest” flag State (Panama) does both authorize IACS members and non-IACS members. However, a majority of the non-IACS classification societies could also be qualified as “low-quality ROs” or “convenient ROs”.16 This demarcation is based on the general assumption of the quality of services that is inherent to IACS members and non-IACS members not meeting IACS standards. Thus, on a global level, there are currently more than 100 private organizations offering services under an official label marked as “classification societies” to the maritime industry.17 This evidences at least two effects: First, the global market for marine surveying and certification is generally not limited anymore to a handful of “traditional names” of the classification business. Rather, there has been an intense commercialization of those services including rigorous competition and even attempts of hostile takeovers between different classification societies. IACS members are situated in a competitive market and seek to acquire market share. The best example for this is the recent successful merger of two IACS members expanding their worldwide position, especially leading to a global coverage of several maritime and offshore branches and an enhanced surveyor network. Second, the process of commercialization includes both the private classifica- 8 tion functions performed for ship owner clients as well as the public functions – i.e. the statutory certification – performed on behalf of flag States. The main elements of statutory certification relate to almost all IMO-governed aspects of ship design (especially load lines, stability, propulsion, steering equipment, etc.), pollution control, accident and fire prevention, etc. The importance of this dual role of today’s classification societies, performing “twin functions” for both private and public clients (also in the area of offshore oil and gas or in “soft” sectors like maritime education) cannot be overemphasized.18 However, both functions of classification societies are essential to the global fight against “substandard shipping” as outlawed by the IMO, the EU and the international community.19 After years of coordinative work, the IMO has passed a “Code for Recog- 9 nised Organisations” (RO Code) which is in effect since 1 January 2015 to update, among other issues, existing minimum requirements for ROs working on 16 Ibid., p. 114. 17 Ibid., p. 139, based on the GISIS database of the International Maritime Organisation (IMO). Another source refers at least to 86 classification societies listed in the GISIS, see: Third Maritime Safety Package: Ex-Post Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study by EPRS (European Parliamentary Research Services), Ex-Post Impact Assessment Unit, PE 536.331 – December 2014, p. 65. 18 See, e.g., Honka, The Classification System and Its Problems with Special Reference to the Liability of Classification Societies, 19 Tulane Maritime Law Journal (1994), pp. 3; de Bruyne, Liability of Classification Societies: Cases, Challenges and Future Perspectives, 45 Journal of Maritime Law & Commerce (2014), pp. 181, at 182; Begines, The EU Law on Classification Societies, 36 Journal of Maritime Law & Commerce (2005), pp. 487. 19 See generally: Witt, Obligations and Control of Flag States (2007), p. 274.

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behalf of flag States.20 To some extent, the RO Code is also a global reaction to the dual role of classification societies as a source of practical problems. Regulation EC/391/2009 generally ties EU regulatory activity to the parallel global agenda of the IMO. Recital (4) of the Regulation states that the objective of equal levels of safety and of environmental protection and uniform establishment and application of the necessary professional standards for activities of classification societies “should be pursued through measures that adequately tie in with the work of the [IMO] and, where appropriate, build on and complement it. Furthermore, the Member States and the Commission should promote the development by the IMO of an international code for recognized organisations.” This has now been achieved. However, the commentary on Article 2(b) of the Regulation refers to some follow-up problems relating to “discrepancies” between the RO Code and the Regulation. 10 The “twin functions” of classification societies, invariably, create situations of conflicting interests. And, on a global level, major shipping accidents and marine casualties still happen quite frequently – both with IACS members and without IACS members involved as classification societies.21 Sometimes the results of national marine casualty investigations – especially in cases of structural failures – may point to the private organisation which has “officially” certified the statutory safety of the vessel, even if it is a highly reputable institution with a long history of “clean” certification activities. On the other hand, sometimes the possible reasons for a marine casualty can only be explained by using scientific data and research results of classification societies. The recent breaking apart and loss of the Japanese-flagged and Japanese-classed vessel “MOL Comfort” in 2013 is a good technical example for this.22 11 From a practitioner’s point of view, the most prominent legal topic in the area of classification services (and their impact) is the issue of a probable classification societies’ liability for wrongful technical surveying and certification services – both in relation to contractual partners and third-party interests. There is extensive academic literature available discussing the liability and possible

20 The RO Code was adopted by the IMO’s Marine Environment Protection Committee (MEPC), at its 65th session, by means of IMO Resolution MEPC.237(65) and by the IMO’s Maritime Safety Committee (MSC), at its 92nd session, by means of IMO Resolution MSC. 349(92). The Committees also adopted amendments to mandatory instruments which entered into force on 1 January 2015 by means of IMO Resolutions MEPC.238(65), MSC.350(92) and MSC.356(92) to make parts 1 and 2 of the RO Code mandatory under MARPOL annexes I and II, SOLAS and the 1988 Load Line Protocol. 21 For example, the “2014 Allianz Safety and Shipping Review” refers to an annual number of 93 large ship losses as well as 2.596 reported marine casualties, both in 2013. These numbers mean that – on a global scale – eight ships are lost per month while far more than 200 marine casualties happen every month. 22 See Lloyd’s List of 04 March 2015, title page („Tokyo calls for better class rules in final MOL Comfort report“).

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third-party liability of classification societies.23 This topic is, however, not at the center of the following commentary section. Additionally, the case law of different legal orders might support the high level of academic attention but – very often – disputes between classification societies and other legal stakeholders are settled amicably and are thus not officially reported.24 Additionally, Regulation EC/391/2009 remains silent on the issue of liability of classification societies. However, from a perspective of public law, the problem of liability is – at least – addressed in Article 5(2)(b) of Directive 2009/15/EC (and in its Recital (17)), i.e., as a minimum standard of the so-called “working relationship” between EU flag States and their RO’s. Since two major marine casualties occurred in European waters in 1999 12 (“M/V Erika”) and in 2002 (“M/V Prestige”) the EU intensified its maritime-related regulatory activity, especially via the so-called “Erika Packages I – III” between 1999 and 2009.25 But already in 1994, the former Directive 94/57/EC had stated that “… worldwide a large number of the existing classification societies do not ensure either adequate implementation of the rules or reliability when acting on behalf of national administrations as they do not have adequate structures and experience to be relied upon and to enable them to carry out their duties in a highly professional manner. “26 This quote stands in sharp contrast to a highly sophisticated self-Regulation 13 of the most advanced classification societies, both in quality and quantity. Nevertheless, by 2009, the EU agreed on an extensive recast of the former Directive

23 For recent discussions see, e.g., de Bruyne/Vanleenhove, An EU Perspective on the Liability of Classification Societies: Selected Current Issues and Private International Law Aspects, 20 Journal of International Maritime Law (2014), pp. 103; de Bruyne, Liability of Classification Societies: Cases, Challenges and Future Perspectives, 45 Journal of Maritime Law & Commerce (2014), pp. 181; Mansell, Flag State Responsibility (2010), pp. 117; Lagoni, The Liability of Classification Societies (2007), pp. 259. 24 A recent exception to the desire to keep those kinds of disputes confidential were the Italian proceedings relating to the vessel “Redwood” (Genoa Court of Appeal judgment of 12 November 2014) finally denying a liability of the involved classification society. Generally, there is only few case law available discussing the liability of classification societies, but the UK legal order as well as US law provide some good case studies. For examples of other legal orders, there is, e.g., only one German case available involving a classification society that has been decided by the German Federal Court, see BGH NJW-RR 1998, p. 1027, the case related to a new-building project and mainly dealt with negligent supervision of a shipyard by the classification society, see generally: Basedow/Wurmnest, Third Party Liability of Classification Societies (2005). 25 See generally Jenisch, The European Union as an Actor in the Law of the Sea: The Emergence of Regionalism in Maritime Safety, Transportation and Ports, 48 German Yearbook of International Law 2005, pp. 223; Reuß/Pichon, The European Union’s Exercise of Jurisdiction Over Classification Societies, 67 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (2007), pp. 119, at 125. 26 Introduction to Council Directive 94/57/EC on common rules and standards for ship inspection and survey organizations and for the relevant activities of maritime administrations; for an extensive discussion of this legal act see: Begines, The EU Law on Classification Societies, 36 Journal of Maritime Law and Commerce (2005), pp. 487; Lagoni, The Liability of Classification Societies (2007), p. 291.

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94/57/EC. The act was then split into a Regulation (EC/391/2009)27 and a Directive (2009/15/EC).28 Apart from updating the applicable EU Law, the major objectives of this split-up was to make the complicated and quite extensive rules more readable and to increase legal certainty for all stakeholders. The split also made for faster implementation of the new innovations introduced at EU level by the Regulation.29 14 Only Directive 2009/15/EC repeats (in its Recital (8)) again the general criticism, the deep concerns and the EU’s explicit reservations to the quality of the work of some classification societies on a global level, exactly as already done by its predecessor regime, as quoted above. Since 2009, both legal acts form “one coherent piece of legislation”, regulating the activities of RO’s at the EU level “in a consistent manner in accordance with the same principles and definitions.”30 Consequently, both the Regulation and the Directive are integrated in one comprehensive chapter of this commentary. In 2014, Regulation EC/ 391/2009 has been further supplemented and updated by Commission Regulation EU/788/201431 and Commission Implementing Regulation EU/ 1355/201432 while Directive 2009/15/EC has been updated via Commission Implementation Directive 2014/111/EU.33 15 Commission Regulation EU/788/2014 sets out specific legal details for the practical implementation of Articles 6 and 7 of Regulation EC/391/2009, thus its procedural relevance will be included in the commentary section relating to those two Articles.34 The two other implementation acts serve as legal updates to the interaction between the IMO regime and the applicable EU Law, taking into account the dynamic evolvement of some IMO Conventions, especially the creation of the RO Code and the IMO Instruments Implementation Code (III Code) of the IMO. Above all, the implementation acts of the Commission have identified a number of legal discrepancies between the IMO’s new “RO Code” and the applicable EU Law. Those discrepancies will be addressed at the relevant commentary sections of the applicable EU secondary law, in particular relating to Articles 2 and 10 of Regulation EC/391/2009,35 while the commentary on Article 2 of Directive 2009/15/EC can refer back to the relevant discussions under the Regulation).

27 OJ 2009 L 131 of 28 May 2009, p. 11-23. 28 See Recital (2) of both acts, OJ 2009 L 131 of 28 May 2009, p. 47-56. 29 See Mizzi, The Third Maritime Safety Package: A Synopsis, Shipping & Trade Law (16 November 2009). 30 See both Recitals (2) of Commission Implementing Regulation EU/1355/2014, OJ 2014 L 365 of 19 December 2014, p. 82 and Commission Implementing Directive 2014/111/EU, OJ 2014 L 366 of 20 December 2014, p. 83. 31 OJ 2014 L 214 of 18 July 2014, p. 12-24. 32 OJ 2014 L 365 of 19 December 2014, p. 82-86. 33 OJ 2014 L 366 of 20 December 2014, p. 83-87. 34 See commentary sections B.6. and 7.. on Articles 6 and 7 of the Regulation. 35 See commentary sections B.2. and 10..on Articles 2 and 10 of the Regulation.

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B. Text and Commentary: Regulation (EC) No. 391/2009 on Common Rules and Standards for Ship Inspection and Survey Organisations

In the following, the footnotes, Recitals and Annexes of the Regulation are omitted. Where appropriate, the text of this commentary section includes detailed references to the 24 Recitals of the Regulation and to its Annexes. Article 1 This Regulation establishes measures to be followed by organisations entrusted with the inspection, survey and certification of ships for compliance with the international conventions on safety at sea and prevention of marine pollution, while furthering the objective of freedom to provide services. This includes the development and implementation of safety requirements for hull, machinery and electrical and control installations of ships falling under the scope of the international conventions.

1. Article 1 Regulation EC/391/2009 – Objectives of the Regulation

The overall objectives of the Regulation are generally addressed in its 16 Recitals (3), (4) and (23) emphasizing that “ship inspection and survey organisations should be able to offer their services throughout the [EU] and compete with each other while providing equal levels of safety and of environmental protection. The necessary professional standards for their activities should therefore be uniformly established and applied across the [EU]” while pursuing the objectives “through measures that adequately tie in with the work of the IMO and, where appropriate, build on and complement it.” The latter objective is specifically addressed in the first sentence of Article 1 17 of the Regulation. a) First Sentence: The Public Law Context and the Applicable Legal Definitions

In contrast to Directive 2009/15/EC, the substance of Regulation EC/ 18 391/2009 is not directed at the EU Member States. Rather, the Regulation addresses directly the private classification societies as “organisations” which are “entrusted” – both within and outside the EU – to guarantee an internationally agreed level of ship safety. The first sentence of Article 1 of the Regulation refers to “inspection, survey and certification of ships for compliance with the international conventions on safety at sea and prevention of marine pollution”. Both sentences of the provision generally refer to the “dual function” of classification societies as described in the introduction to this section. Article 1, first sentence, refers to the public side of vessel certification while Article 1, second sentence, refers to the private dimension of classification. As a whole, the provision already adopts certain key legal terms which are 19 only defined in the following Article 2 of the Regulation. The “organisations”

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(as defined in Article 2(c) of the Regulation)36 partly fulfil public functions of international maritime law but only if they are “recognised organisations” (as defined in Article 2(e) of the Regulation). This is done by conducting vessel “surveys and inspections”.37 These contribute to issuing ship safety certificates by or on behalf of flag States in order to verify a vessel’s compliance with “international conventions on safety at sea and prevention of marine pollution”. Three of those conventions are explicitly highlighted in Article 1 (b) of the Regulation, i.e.: – the International Convention for the Safety of Life at Sea (SOLAS 74); – the International Convention on Load Lines (LL 66), and – the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). 20 Additionally, the term also includes “the protocols and amendments thereto, and the related codes of mandatory status in all Member States, in their up-todate version”. This qualification significantly widens the legal scope of the applicable IMO acts.38 However, there are also three explicit exceptions to the term “international conventions”: – Chapter XI-2 of the SOLAS 74 which is the “ISPS Code” (the International Ship and Port Facility Security Code); – paragraphs 16.1, 18.1 and 19 of part 2 of the “III Code” (the IMO Instruments Implementation Code), and – Sections 1.1, 1.3, 3.9.3.1, 3.9.3.2 and 3.9.3.3 of part 2 of the “RO Code” (the IMO Code for Recognized Organizations). 21 The first (security) exception is addressed under EU Law by Regulation EC/ 725/2004.39 Specifically, private “organisations” assisting flag and/or port states in verifying the requirements of the ISPS Code regime have to be “recognised security organisations” which is a special manifestation of ROs as discussed in this section of the commentary.40 The last two exceptions were only included by Commission Implementing Regulation EU/1355/2014 in late 2014 to identify legal discrepancies of the relevant rules with the requirements of Regulation EC/ 391/2009 itself. 22 Apart from the three explicit legal exceptions, the covered “international conventions” set out legal requirements which are also often referred to as statutory requirements for merchant ships as internationally agreed under the IMO regime. This also includes minimum criteria in terms of tonnage or passengers 36 An “organisation” is defined in Article 2 (c) of the Regulation as: „a legal entity, its subsidiaries and any other entities under its control, which jointly or separately carry out tasks falling under the scope of this Regulation”. 37 Strangely, this term only has a legal definition in Directive 2009/15/EC, see its Article 2 (c). 38 This could be specialised technical IMO code such as the “International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk” (IBC Code). 39 See the detailed commentary on this act in Chapter 5, II. 40 See the commentary section relating explicitly to Regulation EC/725/2004 on Enhancing Ship and Port Facility Security, Chapter 5, II.

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for the legal term “vessel”. Article 2(a) of the Regulation simply refers to the individual legal definitions of a “vessel” under the relevant IMO conventions. If the technical requirements are met (e.g., more than 500 gross tonnage under SOLAS) the majority of IMO conventions and codes require the issuance of ship safety certificates by flag States to verify that the requirements are individually adhered to by the operators of the relevant vessels.41 The flag State has the obligation to issue such statutory certificates by using an internationally agreed template of those certificates. The term “statutory certificate” is legally defined in Article 2(g) of the Regulation as “a certificate issued by or on behalf of a flag State in accordance with the international conventions”. In order to determine the technical compliance with the legal requirements of 23 the IMO regime, certain recurring on-board surveys (initial, annual, intermediate, renewal) are carried out by technical experts appointed or designated by flag States.42 In shipping practice, very often the ship surveys occur simultaneously with “class inspections” of the vessel, i.e., privately instigated by shipowners but, possibly, also by charterers, cargo interests, even by prospective buyers or insurers). When the classification society also acts as a RO for the flag State, the outcome of the “class inspection” might also be utilized to ascertain compliance with the respective statutory certificate. For this practical reason, the public survey frequencies and dates, as well as the certification requirements of the IMO’s conventions and codes have been harmonized via the IMO’s “Harmonized System of Ship Survey and Certification” (HSSC).43 Technically, the private classification societies were heavily involved in the early creation of the HSSC.44 Additionally, under the HSSC, specific survey guidelines were adopted in form of IMO Res. A.1053(27) aiming to assist flag States in the implementation process.45 All in all, the harmonised system leads to greater “efficiencies of scale” in terms of timing and general costs. Both shipowners’ needs and flag States’ obligations can be served simultaneously. Apart from some exceptions (e.g. security certificates as required by the ISPS Code) the members of the IACS claim that they only carry out statutory surveys on ships they also class themselves, i.e., there is no (or rather: they should not be) a “delegation of delegation” when classification societies act for flag States.

41 See, e.g., IMO Doc. FAL.2/Circ.123, MEPC.1/Circ.769, MSC.1/Circ. 1409 „Revised List of Certificates and Documents Required to be Carried on Board Ships” (28 September 2011). 42 For example, as part of the initial survey all related items for a respective certificate are inspected before the ship is put into service or the first time. 43 See IMO Res. A.883(21) „Global and Uniform Implementation of the Harmonized System of Survey and Certification” (25 November 1999). 44 IMO Res. A.718(17)16 „Early Implementation of the Harmonized System of Survey and Certification” (06 November 1991). 45 IMO Res. A.1053(27) „Survey Guidelines under the Harmonized System of Survey and Certification (HSSC), 2011” (20 November 2011).

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b) Second Sentence: The Private Functions of ROs and the Applicable Legal Definitions

The second sentence of the provision refers to the private functions performed by the “organisations” as classification societies for private clients, predominantly shipowners but also other maritime stakeholders like shipyards or prospective buyers of vessels. Ship classification is only one field of activity performed by certification enterprises, such as classification societies. The IACS itself defines the legal term “classification society” – which is nowhere mentioned in Regulation EC/391/2009 itself – in its own rules and standards. First, a classification society must publish and maintain its own rules relating to the design, survey and construction of ships. In developing those rules, a classification society typically relies on empirical experience gained from classing a wide variety of ship types over many years, coupled with scientific research that contributes towards the development of advanced technical requirements.46 Second, a classification society needs to demonstrate compliance with these rules. Third, a register of classed ships must be published. Fourth, the class has to be impartial and not be involved, for instance, in the manufacturing and operation of ships. Fifth, the society is obliged to operate as a RO, thus acting on behalf of flag States and it needs to be registered in the IMO’s Global Integrated Shipping Information System (GISIS) database.47 25 Traditionally, private classification societies developed their own rules and continuously maintain and publish them based on their up-to-date ship engineering knowledge and experience.48 The legal definition in Article 2(h) of the Regulation refers to those “class rules”. Ships built in accordance with classification societies’ own rules will be assigned a class designation upon satisfactory completion of the relevant surveys. The class rules contain a wide range of construction and maintenance requirements for the hull, steering and propulsion systems, electrical systems and other fundamental equipment parts such as anchoring and mooring fittings of ships.49 The most prominent set of private stan24

46 See: First Report to the European Commission and the Member States (October 2012): Mutual Recognition within ship classification in accordance with Article 10.1 of Regulation (EC) No 391/2009, p. 6. 47 IACS, Classification Societies – What, Why and How? (2011), p. 25; the GISIS database collects general information about the legal instruments of flag States to implement the IMO’s rules. Such transparency is a requirement as evidenced by IMO Res. A.739(18)(4) in conjunction with IMO Doc. MSC/Circ.1010/MEPC/Circ.382 (10 July 2001). According to GISIS data, flag States notified a rather striking total of 86 authorizations of classification societies to the IMO. Nine classification societies appearing in GISIS were not able to establish a single authorization by flag States, thus questioning their general reliability in matters of statutory certification. 48 Lagoni, The Liability of Classification Societies (2007), p. 20; Basedow/Wurmnest, Third Party Liability of Classification Societies (2005), p. 8. 49 IACS, Classification Societies – What, Why and How? (2011), p. 4.

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dards are the classes “common structural rules” as coordinated by the IACS.50 The IACS has also developed resolutions such as “unified requirements”, i.e. minimum technical requirements which have to be implemented in the rules of its members. Other minimum requirements defined by the IACS are “unified interpretations”, which implement IMO instrument requirements. Another IACS resolution (“Procedural Requirements”) handles technical related procedures.51 In sum, class rules are not generally “over-arching” technical standards of shipping, i.e., they do not apply to every single feature of a vessel. For example, lifesaving equipment, manoeuvring performance, ship building processes and ship design are not part of the rules as these regulatory topics are now predominantly part of the internationally coordinated public rules of the IMO regime.52 In general terms, the second sentence of Article 1 of the Regulation refers to 26 the interaction of existing and continuously updated class rules with the evolving and (likewise) continuously updated IMO regime as the “development and implementation of safety requirements for hull, machinery and electrical and control installations of ships falling under the scope of the international conventions”. The best example for this overlap and interaction between the public and the private sphere is the text of Reg. 1(2) of Annex I to the LL 1966 (the convention is explicitly mentioned in Article 2(b) of the Regulation, see above). Under the heading “Strength and intact stability of ships” the provision states that: “a ship which is designed, constructed and maintained in compliance with the appropriate requirements of an organization, including a classification society, which is recognized by the Administration or with applicable national standards of the Administration in accordance with the provisions of Regulation 2-1, may be considered to provide an acceptable level of strength.” Generally, under the LL 1966 “the Administration” (i.e. the flag State) shall satisfy itself that the general structural strength of the ship is sufficient for the draught corresponding to the freeboard assigned. Put in more simple words, this updated provision of the LL 1966 Convention still acknowledges that a ship which is built according to class rules is a priori sufficiently strong (also for public purposes) to withstand the perils of the open sea.53 Ship classification is still commercially necessary – even indispensable – for 27 various reasons. Above all, shipowners require a class certificate to be able to insure their ships.54 The classification certificate represents an industry standard

50 See Klein, „Common Structural Rules“ – Klassifikationsgesellschaften stellen neue Regeln auf, Schiff & Hafen 2005, p. 47; Lloyd’s List of 08 July 2013, p. 5 („All power to class societies as IACS pursues common structural rules“). 51 Lagoni, The Liability of Classification Societies (2007), p. 24; IACS, Classification Societies – What, Why and How? (2011), pp. 11. 52 IACS, Classification Societies – What, Why and How? (2011), p. 7. 53 See Hormann, Classification Societies – What is Their Role, What is Their Future?, WMU Journal of Maritime Affairs 2006 (Vol. 5, No. 1), p. 8. 54 Stopford, Maritime Economics (3rd ed., 2009), p. 660; Enge/Schwampe, Transportversicherung (2012), pp. 227.

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to demonstrate the condition of ships and their proper construction.55 For ships in service, the classification societies carry out surveys to verify that ships remain in compliance with the class rules. However, EU Law sharply differentiates between statutory certificates as defined in Article 2(g) of the Regulation (see above) and class certificates as defined in Article 2(i) of the Regulation as documents “issued by a recognised organisation certifying the fitness of a ship for a particular use or service in accordance with the rules and procedures laid down and made public by that recognised organisation”. The legal predecessor regime to Regulation EC/391/2009, i.e. Directive 94/57/EC, had not been as explicit in this differentiation as it simply referred to “certificates” and “class certificates” while omitting the term “statutory”. 28 In particular, marine underwriters and Protection & Indemnity Clubs (P & I Clubs) require the ship to be “in class” during the insurance coverage period. Hull underwriters will only insure vessels not holding a valid class certificate under disadvantageous conditions (if at all).56 The class of a ship has another important relevance in relation to Port State Control (PSC). Since 2011, under the “new inspection regime” (NIR) certain flags and shipping companies known to have a history of frequent (minor or major) deficiencies or to utilize (nonIACS) “convenient ROs” will be inspected more often and in more detail as they are treated as potential threats to marine safety and environmental protection. 29 When classification societies offer classification services to a ship (including ship new-buildings) by examining the condition of the hull, machinery and certain parts of the equipment in form of a class inspection they determine whether the ship meets the minimum requirements laid down in their own class rules.57 Hence, class inspections serve a technical purpose, i.e., to certify that the ship is safe and eligible for seagoing services. However, the organisations insist that the classification certificate does not certify the general seaworthiness of the ship. The result of the class inspection will be that the ship is either “in” or “out” of class.58 Once the classification society verifies that the ship complies with its own rules the class certificate is issued to be valid for a certain period. Furthermore, the name of the ship is recorded in the register of ships which is maintained by the classification societies.59 30 Each of the classification societies uses a unique class symbol which is assigned to the ship indicating that the ship is in current compliance with the class rules.60 Several technical surveys are conducted to retain the ship “in class” on the basis of a periodical class survey regime that includes class renewal, inter55 Stopford, Maritime Economics (3rd ed., 2009), p. 660. 56 Lagoni, The Liability of Classification Societies (2007), p. 14; Basedow/Wurmnest, Third Party Liability of Classification Societies (2005), p. 7. 57 IACS, Classification Societies – What, Why and How? (2011), p. 4; Basedow/Wurmnest, Third Party Liability of Classification Societies (2005), pp. 6. 58 Lagoni, The Liability of Classification Societies (2007), pp. 6. 59 Basedow/Wurmnest, Third Party Liability of Classification Societies (2005), pp. 6. 60 Lagoni, The Liability of Classification Societies (2007), pp. 6.

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mediate and annual surveys61 and nowadays (at least regularly) works in parallel to the IMO’s HSSC.62 If a class inspection results in a non-compliance of the ship with the class rules, the class society may withdraw or suspend the class. Ultimately, this would also have an immediate impact on the ship’s “public status” under the IMO regime (as enforced by flag and coastal states) as the class surveyor would – most likely – have to recommend to the flag State to temporarily withdraw the statutory certificates from the vessel.63 To sum it up, class rules and class certificates are materially different from statutory certifications under the IMO legal regime but, in global shipping practice, they are frequently interlinked as they both serve the same objectives of maritime safety and protection of the marine environment. Article 2 For the purpose of this Regulation the following definitions shall apply: (a) (b)

(c) (d)

(e) (f) (g) (h) (i)

(j)

‘ship’ means a ship falling within the scope of the international conventions; ‘international conventions’ means the International Convention for the Safety of Life at Sea of 1 November 1974 (SOLAS 74) with the exception of chapter XI-2 of the Annex thereto, the International Convention on Load Lines of 5 April 1966 and the International Convention for the Prevention of Pollution from Ships of 2 November 1973 (MARPOL), together with the protocols and amendments thereto, and the related codes of mandatory status in all Member States, with the exception of paragraphs 16.1, 18.1 and 19 of part 2 of the IMO Instruments Implementation Code, and of sections 1.1, 1.3, 3.9.3.1, 3.9.3.2 and 3.9.3.3 of part 2 of the IMO Code for Recognized Organizations, in their up-to-date version; ‘organisation’ means a legal entity, its subsidiaries and any other entities under its control, which jointly or separately carry out tasks falling under the scope of this Regulation; ‘control’ means, for the purpose of point (c), rights, contracts or any other means, in law or in fact, which, either separately or in combination confer the possibility of exercising decisive influence on a legal entity or enable that entity to carry out tasks falling under the scope of this Regulation; ‘recognised organisation’ means an organisation recognised in accordance with this Regulation; ‘authorisation’ means an act whereby a Member State grants an authorisation or delegates powers to a recognised organisation; ‘statutory certificate’ means a certificate issued by or on behalf of a flag State in accordance with the international conventions; ‘rules and procedures’ means a recognised organisation’s requirements for the design, construction, equipment, maintenance and survey of ships; ‘class certificate’ means a document issued by a recognised organisation certifying the fitness of a ship for a particular use or service in accordance with the rules and procedures laid down and made public by that recognised organisation; ‘location’ means the place of the registered office, central administration or principal place of business of an organisation.

61 IACS, Classification Societies – What, Why and How? (2011), p. 7. 62 See above, note 23. 63 See, e.g., Chapter I, Part B, Rule 6 c) SOLAS. In shipping practice, the certificate is often not physically taken from the vessel but sealed in envelope which bears a national emblem or another official mark.

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2. Article 2 Regulation EC/391/2009 – Legal Definitions 31

The most important of the legal definitions of Article 2 – namely letters (a) – (c), (e), (g) – (i) – were already referred to in the introduction and in the commentary section relating to Article 1 of the Regulation.64 The list of legal definitions in Article 2 largely draws from the predecessor regime of Directive 94/57/EC, however, some definitions have been updated, for example, letters (c), (f), (g) and (h) of Article 2 of the Regulation. a) Updates to the Legal Definition “International Conventions” in Article 2(b)

32

33

34

35

36

It is important to highlight that Article 2(b) of Regulation EC/391/2009 and also (the identical provision of) Article 2(d) of Directive 2009/15/EC was updated at the end of 2014. Since 1 January 2015, the RO Code provides a consolidated IMO instrument containing criteria against which ROs (i.e. classification societies) are assessed and authorized on the global level. The RO Code also gives global guidance for subsequent monitoring of ROs by flag State administrations. Ultimately, the IMO’s success in drafting and passing the RO Code mandated a legal update in Article 2(b) of Regulation EC/391/2009 and in Article 2(d) of Directive 2009/15/EC. Via Commission Implementing Regulation EU/1355/2014 the Commission has identified that the IMO provisions explicitly excluded now by Article 2(b) of Regulation EC/391/2009 would otherwise create “discrepancies” under EU Law, four of those relating especially to the different treatment and understanding of ROs under EU Law and within the IMO.65 First, section 1.1 of part 2 of the RO Code defines a ‘Recognized Organization’ as an organisation assessed by a flag State, and found to comply with part 2 of the RO Code. In conjunction with Recitals (21) to (23) of Regulation EC/ 391/2009 this would contrast the definition of Article 2(e) of the Regulation – i.e., in the widest sense, the exclusive competency of the Commission to grant recognition to ROs within the EU legal order. The Commission has thus concluded that it “appears that several provisions in part 2 of the RO Code are incompatible with Regulation EC/391/2009. Consequently, a recognised organisation as defined in the RO Code would not fulfil all the requirements of Regulation EC/391/2009 and could therefore not meet the definition of a recognised organisation as set out in Union law.” Second, section 1.3 of part 2 of the RO Code defines “statutory certification and services” as a single category of activities that a recognised organisation is entitled to perform on behalf of the flag State, including the issuance of certifi64 See section B.1. on Article 1 of the Regulation. 65 Three other provisions – relating to the IMO “Instruments Implementation Code” / “III Code” – were also declared to be inapplicable with EU Law. As these provisions refer to the obligations of flag States, the relevant provisions and “discrepancies” between EU Law and the IMO regime are discussed in commentary section C.3.a) on Article 3(1) of Directive 2009/15/EC.

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cates pertaining to both statutory and class requirements. The definitions in Article 2(g) and (i) of the Regulation are crucial to understand the different legal dimension of the “twin functions” of classification societies when they simultaneously perform as ROs for flag States in the sense of Article 2(e) of the Regulation. They draw a clear distinction between statutory certificates and class certificates (see the commentary on Article 1 above).66 Not only under EU Law, but explicitly clarified and defined by the Regu- 37 lation, statutory certificates and class certificates are materially distinct and have different legal natures. Statutory certificates have a public nature, while class certificates have a private nature, being issued by the classification society in accordance with its own rules, procedures and conditions. In the view of the Commission, it follows that classification certificates issued by a RO for a ship in order to attest compliance with classification rules and procedures,67 are documents of a strictly private nature which are neither acts of a flag State nor carried out on any flag State's behalf. However, in the RO Code, statutory certification and services would be sys- 38 tematically referred to as being performed by the RO ‘on behalf of the flag State’, thus contradicting the explicit legal distinction established under EU Law. If this would be accepted as a norm under EU Law, it would entail a manifest risk that the recognition requirements contained in Regulation EC/391/2009 – pertaining to the entire activity of the organisation, irrespective of flag – could no longer be enforced within the EU. Third, section 3.9.3.1 of part 2 of the RO Code provides for a mechanism of 39 cooperation between ROs under the sole framework established by the flag State with a view to standardising processes concerning statutory certification and services for the flag State, as appropriate. Additionally, section 3.9.3.2 of part 2 of the RO Code establishes a framework by a flag State or ‘a group of flag States’ to regulate cooperation among their recognised organisations on technical and safety-related aspects of ‘statutory certification and services of ships […] on behalf of the said flag State(s)’. In contrast, cooperation between ROs under EU Law would be governed (exclusively) by Article 10(1) of Regulation EC/ 391/2009. This provision requires ROs to consult with each other with a view to maintaining equivalence and aiming for harmonisation of their rules and procedures and the implementation thereof.68 “In appropriate cases”, Article 10(1) of the Regulation also sets out a framework for the mutual recognition of (private) class certificates for materials, equipment and components. Thus, the two cooperation processes pertain to the private activities of the ROs, in their capacity as classification societies, and therefore apply without any distinction based on the flag. 66 Supra section B.1. 67 Including when verified by a flag State as proof of compliance with SOLAS Chapter II-I, Part A-1, Regulation 3-1. 68 See commentary section B.10. on Article 10 of Regulation EC/391/2009.

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The Commission concludes that the cooperation mechanisms provided for in the RO Code would limit the scope of the cooperation framework established by Regulation EC/391/2009 to the ROs’ activities with regard only to ships flying the flag of Member States. This would be in contradiction with the legal requirements of Article 10(1) of the Regulation. 41 Finally, section 3.9.3.3 of part 2 of the RO Code introduces a prohibition for a flag State to mandate its ROs to apply to ships, other than those entitled to fly its flag, any requirements pertaining to, inter alia, their classification rules, requirements or procedures. Pursuant to Directive 2009/15/EC, Member States can only authorise an organisation to act on their behalf for the statutory certification of their respective fleet if that organisation has been recognised and is being monitored for this purpose in accordance with Regulation EC/391/2009. 42 The ROs as such have to comply with the legal requirements of the Regulation in their relevant activities across their classed fleet, irrespective of the flag. This relates to most of the minimum criteria for “organisations” to obtain or to continue to enjoy Community recognition as set out in Annex I of Regulation EC/391/2009,69 as well as to other obligations, in particular Article 10(4) of the Regulation. The Commission concludes that in case section 3.9.3.3 of part 2 of the RO Code would be incorporated into EU Law, it would restrict the application of the existing recognition requirements in Regulation EC/391/2009, inter alia, if they qualify as rules, requirements and procedures to the RO’s performance with regard only to ships flying the flag of Member States. 43 In sum, the Commission has declared the named provisions of the RO Code to be inapplicable under EU Law. In order to preserve the integrity of the internal recognition methodology as introduced and applied since 2009 by the Regulation they are excluded from the scope of the Regulation. 40

b) Remaining Legal Definitions (Letters (d), (f) and (j)) 44

The remaining legal definitions which have not been addressed so far are letters (d), (f) and (j) of the provision. Letters (d) (“control”) and (j) (“location”) relate to a general understanding of corporate law. “Control” had not been defined before under the predecessor regime of Directive 94/57/EC. As a result, this is one of the few new legal definitions introduced in 2009. The exercise of control as regulated by Article 2(d) of the Regulation has already been relevant once (in 2013) when the two major IACS organisations “DNV” (Det Norske Veritas Group AS) and “GL” (Germanischer Lloyd SE) merged. Commission Implementing Decision 2013/765/EU70 clarified that – before and after the merger – “DNV” is financially controlled by the non-profit foundation Stiftelsen 69 See the reproduction of Annex I in commentary section B.3.a) on Article 3 of the Regulation. 70 See Commission Implementing Decision 2013/765/EU of 13 December 2013 amending the recognition of Det Norske Veritas pursuant to Regulation (EC) No 391/2009 of the European Parliament and of the Council on common rules and standards for ship inspection and survey organisations (notified under document C(2013) 8876)), OJ L 338/107 of 17 December 2013.

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Det Norske Veritas (“SDNV”), established in Norway. As part of the merger, SDNV acquired sole control of the GL and combined it with its subsidiary DNV. The new organisation was renamed as “DNV GL Group AS” (“DNV GL”). The new entity DNV GL, with all of its subsidiaries, is now responsible for all classification and certification activities falling within the scope of Regulation EC/ 391/2009. DNV GL is therefore now the relevant parent entity of all legal entities that constitute this RO and to which the recognition should be granted. DNV GL controls all of its subsidiaries, however, SDNV controls the new parent entity as a whole. The term “location” in Article 2(j) of the Regulation simply refers to the 45 headquarters of the RO, i.e., to the place where the parent entity is permanently situated. It is the same definition as already applied under Directive 94/57/EC. Finally, the “authorisation” as referred to in Article 2(f) of the Regulation is 46 the individual and sovereign decision of EU flag States to enter into a “working relationship” (see Article 5 of Directive 2009/15/EC) with a RO as defined by Article 2(e) of the Regulation. It is the same definition as already applied under Directive 94/57/EC. However, in contrast to the predecessor regime recognition under EU Law by the Commission is a legal precondition for a following authorisation decision by EU Member States. Consequently, the legal term “authorisation” is mostly relevant for Directive 2009/15/EC as being addressed to the Member States. But Regulation EC/391/2009 also relates to the ongoing developments after EU flag States have authorised ROs, thus it is necessary to use the term in some of the substance of the Regulation (see Articles 3, 5 and 10). Article 2 of Commission Regulation EU/788/2014 has added yet another le- 47 gal definition which is relevant for the term “authorisation”: ‘Member State concerned’ means any Member State that has entrusted (i.e. authorised) a RO with the inspection, survey and certification of ships flying its flag for compliance with the international conventions, in accordance with Directive 2009/15/EC, including the Member State that has submitted the request for recognition of that organisation to the Commission, in accordance with Article 3 of Regulation EC/ 391/2009. Article 3 1.

2.

3.

Member States which wish to grant an authorisation to any organisation which is not yet recognised shall submit a request for recognition to the Commission together with complete information on, and evidence of, the organisation’s compliance with the minimum criteria set out in Annex I and on the requirement and its undertaking that it shall comply with the provisions of Articles 8(4), 9, 10 and 11. The Commission, together with the respective Member States submitting the request, shall carry out assessments of the organisations for which the request for recognition was received in order to verify that the organisations meet and undertake to comply with the requirements referred to in paragraph 1. The Commission shall, in accordance with the regulatory procedure referred to in Article 12(3), refuse to recognise organisations which fail to meet the requirements referred to in paragraph 1 or whose performance is considered an unacceptable threat to safety or the environment on the basis of the criteria laid down in accordance with Article 14.

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3. Article 3 Regulation EC/391/2009 – Requests for Initial Recognition

Recital (6) of the Regulation specifically relates to Article 3 of the Regulation stressing that “in order to grant initial recognition to the organisations wishing to be authorised to work on behalf of the Member States, compliance with the minimum criteria laid down in this Regulation could be assessed more effectively in a harmonised and centralised manner by the Commission together with the Member States requesting the recognition.” Article 3 (and also Articles 8 and 14) of the Regulation provide more procedural details to further the objective as stated in Recital (6) of the Regulation. Specifically, Article 3 of the Regulation also refers to minimum criteria – laid down in Annex I of the Regulation – and to the ROs’ own rules which are crucial elements of external assessments. 49 This is also emphasized further by Recitals (15) and (16) of the Regulation: “The rules and procedures of [ROs] are a key factor for increasing safety and preventing accidents and pollution. The [ROs] have initiated a process that should lead to harmonisation of their rules and procedures. That process should be encouraged and supported by Community legislation, as it should have a positive impact on maritime safety as well as on the competitiveness of the European shipbuilding industry. The harmonisation of the rules of [ROs] for the design, construction and periodic survey of merchant ships is an ongoing process. Therefore, the obligation to have a set of own rules or the demonstrated ability to have own rules should be seen in the context of the process of harmonisation and should not constitute an obstacle to the activities of [ROs] or potential candidates for recognition.” 50 Finally, the catalogue of minimum criteria as referred to in Article 3(1) of the Regulation – more specifically in point B.5. of Annex I of the Regulation71 – implements a legal requirement which is already postulated by Recital (21) of the Regulation: This policy objective generally assures that “the protection of intellectual property rights of maritime stakeholders including shipyards, equipment suppliers and shipowners, should not prevent normal business transactions and contractually agreed services between these parties”. 48

a) Paragraphs (1) and (2): Requests for Recognition and Assessment by Minimum Criteria

Generally, Article 3 of the Regulation relates to a situations in which recognition (see Article 4) of an “organisation” (see the legal definition in Article 2(c) of the Regulation) does not yet exist – either because there had never been any prior EU recognition before or because recognition had been permanently withdrawn under EU Law (see Article 7 of the Regulation). 52 The best practical example for a newly granted recognition of a RO under EU relates to the successful initial recognition procedure of the Croatian Register of 51

71 See the reproduction of this requirement further below.

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Shipping (CRS, ‘Hrvatski registar brodova’) as part of the general accession of Croatia to the EU which was finalised by July 2013. Other practical examples of successful initial EU recognitions of organisations (i.e. classifications societies) do not exist yet. However, speculation about potential candidate organisations for future applications to be initially recognised by the EU Commission, could possibly entail – a general re-entry of the Portuguese Registro Internacional Naval (RINAVE),72 – an initial application of the Indian Register of Shipping (IRS), remarkably the only member organisation of the IACS so far which is not recognised under EU Law at the same time, and – an initial application of Türk Loydu (TL), depending on the progress in the long-lasting negotiations on a possible EU Membership of Turkey. Although nowhere mentioned specifically in EU Law, this would, however, 53 also entail a parallel enlargement of IACS membership (at least for the cases of RINAVE and Türk Loydu) because it is virtually impossible for an “organisation” to be recognised pursuant to Regulation EC/391/2009 without being a member of the IACS at the same time. In 2010, Croatia had submitted a request for recognition of CRS under 54 Regulation 391/2009 to the Commission. Thus, at the request of a (then) applicant state for further EU enlargement, the Commission had already started preparatory stages of the assessment of CRS before Croatia became finally a Member of the EU. This process of recognition was finalised by May 2014, via Implementing Decision 2014/281/EU.73 As part of the process, Croatia had provided early information on and evidence of CRS complying with the requirements of Regulation EC/391/2009. The data was updated in 2014 after Croatia’s accession to the EU. Between 2010 and 2014, the Commission had to verify whether CRS meets 55 all the minimum criteria set out in Annex I of Regulation EC/391/2009. In any such recognition procedure, the Commission is being assisted by the European Maritime Safety Agency (EMSA, see also Recital (22) of the Regulation). Annex I lists minimum criteria for “organisations” (see Article 2(c) of the Regulation) to obtain Community recognition (or, for ROs, to continue to enjoy Community recognition). Annex I is not only referred to in Article 3 but also in Article 5-8 and Article 13-14 of the Regulation. The minimum criteria of Annex I is fully reproduced here as part of the commentary to Article 3 of the Regulation 72 RINAVE had limited recognition pursuant to Article 4(3) of Directive 94/57/EC until 18 April 2008, see Commission Decision 2005/311/EC on the extension of the limited recognition of ‘RINAVE — Registro Internacional Naval, SA’ of 18 April 2005. 73 See OJ L 145/43 of 16 May 2014 (Commission Implementing Decision 2014/281/EU of 14 May 2014 granting EU recognition to the Croatian Register of Shipping pursuant to Regulation (EC) No 391/2009 of the European Parliament and of the Council on common rules and standards for ship inspection and survey organisations (notified under document C(2014) 3014).

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because the list illustrates what an applicant organisation has to submit (and keep) for initial recognition under EU Law: 56 A. GENERAL MINIMUM CRITERIA 1. A [RO] must have legal personality in the State of its location. Its accounts shall be certified by independent auditors. 2. The [RO] must be able to document extensive experience in assessing the design and construction of merchant ships. 3. The [RO] must be equipped at all times with significant managerial, technical, support and research staff commensurate with the size of the fleet in its class, its composition and the organisation’s involvement in the construction and conversion of ships. The [RO] must be capable of assigning to every place of work, when and as needed, means and staff commensurate with the tasks to be carried out in accordance with general minimum criteria under points 6 and 7 and with the specific minimum criteria under part B. 4. The [RO] must have and apply a set of own comprehensive rules and procedures, or the demonstrated ability thereto, for the design, construction and periodic survey of merchant ships, having the quality of internationally recognised standards. They must be published and continually upgraded and improved through research and development programmes. 5. The [RO] must have its register of ships published on an annual basis or maintained in an electronic database accessible to the public. 6. The [RO] must not be controlled by shipowners or shipbuilders, or by others engaged commercially in the manufacture, equipping, repair or operation of ships. The [RO] is not substantially dependent on a single commercial enterprise for its revenue. The [RO] does not carry out class or statutory work if it is identical to or has business, personal or family links to the shipowner or operator. This incompatibility shall also apply to surveyors employed by the [RO]. 7. The [RO] must operate in accordance with the provisions set out in the Annex to IMO Resolution A.789(19) on specifications on the survey and certification functions of [ROs] acting on behalf of the administration, in so far as they cover matters falling within the scope of this Regulation. 57 B. SPECIFIC MINIMUM CRITERIA 1. The [RO] must provide worldwide coverage by its exclusive surveyors or, in exceptional and duly justified cases, through exclusive surveyors of other [ROs]. 2. The [RO] must be governed by a code of ethics. 3. The [RO] must be managed and administered in such a way as to ensure the confidentiality of information required by the administration.

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4. 5.

6.

7.

The [RO] must provide relevant information to the administration, to the Commission and to interested parties. The [RO], its surveyors and its technical staff shall carry out their work without in any way harming the intellectual property rights of shipyards, equipment suppliers, and shipowners, including patents, licences, know-how, or any other kind of knowledge whose use is legally protected at international, Community or national level; under no circumstances, and without prejudice to the assessment powers of Member States and the Commission and in particular under Article 9, may either the [RO] or the surveyors and technical staff, whom it employs pass on or divulge commercially relevant data obtained in the course of their work of inspecting, checking, and monitoring ships under construction or repair. The [RO’s] management must define and document its policy and objectives for, and commitment to, quality and must ensure that this policy is understood, implemented and maintained at all levels in the [RO]. The [RO’s] policy must refer to safety and pollution prevention performance targets and indicators. The [RO] must ensure that: (a) its rules and procedures are established and maintained in a systematic manner; (b) its rules and procedures are complied with and an internal system to measure the quality of service in relation to these rules and procedures is put in place; (c) the requirements of the statutory work for which the [RO] is authorised are satisfied and an internal system to measure the quality of service in relation to compliance with the international conventions is put in place; (d) the responsibilities, powers and interrelation of personnel whose work affects the quality of the [RO’s] services are defined and documented; (e) all work is carried out under controlled conditions; (f) a supervisory system is in place which monitors the actions and work carried out by surveyors and technical and administrative staff employed by the [RO]; (g) surveyors have an extensive knowledge of the particular type of ship on which they carry out their work as relevant to the particular survey to be carried out and of the relevant applicable requirements; (h) a system for qualification of surveyors and continuous updating of their knowledge is implemented;

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(i)

records are maintained, demonstrating achievement of the required standards in the items covered by the services performed, as well as the effective operation of the quality system; (j) a comprehensive system of planned and documented internal audits of the quality related activities is maintained in all locations; (k) the statutory surveys and inspections required by the harmonised system of survey and certification for which the [RO] is authorised are carried out in accordance with the provision set out in the Annex and Appendix to IMO Resolution A.948(23) on survey guidelines under the harmonised system of survey and certification; (l) clear and direct lines of responsibility and control are established between the central and the regional offices of the [RO] and between the [ROs] and their surveyors. 8. The [RO] must have developed, implemented and must maintain an effective internal quality system based on appropriate parts of internationally recognised quality standards and in compliance with EN ISO/IEC 17020:2004 (inspection bodies) and with EN ISO 9001:2000 (quality management systems, requirements), as interpreted and certified by the quality assessment and certification entity referred to in Article 11(1). 9. The rules and procedures of the [RO] must be implemented in such a way that the organisation remains in a position to derive from its own direct knowledge and judgment a reliable and objective declaration on the safety of the ships concerned by means of class certificates on the basis of which statutory certificates can be issued. 10. The [RO] must have the necessary means of assessing, through the use of qualified professional staff and pursuant to the provisions set out in the Annex to IMO Resolution A.913(22) on guidelines on implementation of the International Safety Management (ISM) Code by administrations, the application and maintenance of the safety management system, both shore-based and on board ships, intended to be covered in the certification. 11. The [RO] must allow participation in the development of its rules and procedures by representatives of the administration and other parties concerned. 58 Proof of compliance with this comprehensive list of general and specific minimum criteria – mainly inspired by the relevant rules of the IMO Resolutions A.

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739(18)74 and A.789(19) 75 – has to be submitted first in writing by applicant organisations to the requesting EU Member State (or EU accession candidate states). In a second step, the EU member (or EU accession candidate state) will forward the documentation to the Commission. The Commission’s assessment will be based on two major elements: First, the 59 documentation submitted by the Member States’ authorities will be examined. Most prominently, and as also stipulated by Article 14 of the Regulation, this will include a statistical evaluation of the applicant organisations’ safety and pollution performance in comparison to the average performance of other EU ROs (using data of the Paris Memorandum of Understanding (MoU) on Port State Control and other regional MoUs, including the United States Coast Guard Port State Control regime. A rather easy task is, e.g., to assess and compare the average rates of vessel detentions classified and certified by the applicant organisation over certain periods of time. Second, there will definitely be several on-site inspections of the applicant organisation’s offices (frequently carried out by experts from EMSA) to verify the validity of the written documentation. Follow-up visits will serve the purpose of further verifying the implementa- 60 tion of possible remedial actions undertaken by the applicant organisation in response to the shortcomings identified by the Commission in the course of the assessment. In case of identified shortcomings, the applicant organisation has to implement appropriate and sufficient remedial actions in all cases. The Commission (assisted by EMSA) continuously monitors this implementation. Both the Commission and EMSA may also rate how effectively the applicant organisation cooperates during the assessment process, thus demonstrating its capacity to improve its organisation and procedures in a proactive fashion. The process may also include an appropriate increase in the applicant organisations’ technical and managerial capacities, including, if necessary, the expansion of its international network of offices and surveyors. The Commission will also verify whether the applicant organisation has undertaken to comply with the provisions of Article 8(4), 9, 10 and 11 of Regulation EC/391/2009 but Annex I (as reproduced above) contains more detailed “technical” requirements as compared to the provisions of the Regulation. At the end of the process – which may take some years – the Commission 61 may decide to recognise the applicant organisation pursuant to Article 4(1) of Regulation EC/391/2009 as it happened in the case of CRS in 2014. Pursuant to Article 12(1) of the Regulation the COSS (i.e. Committee on Safe Seas and the Prevention of Pollution from Ships) as established by Regulation EC/ 74 „Guidelines for the Authorization of Organisations Acting on Behalf of the Administration”, IMO Res. 733-779, 18th Session (25 October 1993 to 05 November 1993), pp. 18. 75 „Specifications on the Survey and Certification Functions of Recognized Organisations Acting on Behalf of the Administration”, IMO Res. 780-838, 19th Session (13 November 1995 to 23 November 1995), pp. 85.

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2099/2002 will assist the Commission in the final decision. The same requirement of COSS participation applies inter alia to the imposition of fines and periodic penalty payments as well as to possible withdrawals of recognition pursuant to Articles 6 and 7 of the Regulation (see Recital (14) of Commission Regulation EU/788/2014). b) Paragraph (3): Refusal of Recognition

In case of a negative assessment the Commission will refuse to recognise the applicant organisation. The refusal may be based on two grounds: First, the applicant organisation had a final negative assessment by the Commission and failed to meet the requirements as described above, i.e., the catalogue of Annex I of the Regulation and Article 8(4), 9, 10 and 11. Second, the performance of the applicant organisation is considered an “unacceptable threat to the safety or the environment” on the basis of the criteria laid down in accordance with Article 14 of the Regulation, i.e., a statistical evaluation of data exchanged by different port state authorities.76 63 Because of the interrelation between the Commission’s assessment and the criteria of Article 14 of the Regulation, it is virtually impossible for an applicant organisation to be positively assessed but to be qualified as an “unacceptable threat to the safety of the environment”at the same time. However – as evidenced by Article 5 of the Regulation – it could generally be that an applicant organisation satisfies the general “threat level” while still failing to be positively assessed for other reasons. However, generally both legal grounds for refusal of recognition will work together. Apparently, there has been – so far – no categorical refusal of recognition by the Commission relating to a completely new submission. 64 Finally, another situation has to be differentiated from a positive outcome of an initial recognition or the refusal of recognition pursuant to Article 3 of the Regulation: By 2010, pursuant to Article 15(2) of the Regulation, the Commission had to re-examine all prior limited recognitions (previously granted under the Regulation’s predecessor regime, i.e. Directive 94/57/EC). However, a continuation or replacement of a former limited recognition is completely different from a general refusal to be recognised under EU Law. 62

Article 4 1. 2. 3.

Recognition shall be granted by the Commission in accordance with the regulatory procedure referred to in Article 12(3). Recognition shall only be granted to organisations which meet the requirements referred to in Article 3. Recognition shall be granted to the relevant legal entity, which is the parent entity of all legal entities that constitute the recognised organisation. The recognition shall encompass all legal

76 Supplemented by using the mathematical approach of Annex I of Commission Decision 2009/491/EC, see the commentary on Article 5 of the Regulation under B.5. in this section.

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4.

5.

entities that contribute to ensuring that that organisation provides cover for their services worldwide. The Commission, acting in accordance with the regulatory procedure referred to in Article 12(3), may limit the recognition as regards certain types of ships, ships of a certain size, certain trades, or a combination thereof, in accordance with the proven capacity and expertise of the organisation concerned. In such a case, the Commission shall state the reasons for the limitation and the conditions under which the limitation shall be removed or can be widened. The limitation may be reviewed at any time. The Commission shall draw up and regularly update a list of the organisations recognised in accordance with this Article. That list shall be published in the Official Journal of the European Union.

4. Article 4 Regulation EC/391/2009 – Granting Initial Recognition

Recital (7) of the Regulation stresses that “recognition should be granted only 65 on the basis of the quality and safety performance of the organisation. It should be ensured that the extent of that recognition be at all times in keeping with the actual capacity of the organisation concerned. Recognition should furthermore take into account the differences in legal status and corporate structure of [ROs] while continuing to ensure uniform application of the minimum criteria laid down in this Regulation and the effectiveness of the Community controls. Regardless of the corporate structure, the organisation to be recognised should provide services worldwide and its legal entities should be subject to global joint and several liability.” The concrete implementation of those objectives is governed more precisely by Article 4 of Regulation EC/391/2009 (in conjunction with Articles 5 to 8 of the Regulation). a) Paragraphs (1) and (4): Granting Initial Recognition and Possible Limitations

Regulation EC/391/2009 empowers the Commission to exercise exclusive 66 recognition competencies and enforcement instruments at the EU level. The EU members have transferred their rights to grant recognition to classification societies – and to possibly withdraw this recognition again in case of serious irregularities – exclusively to the Commission. Pursuant to Article 3(2), last sentence, of Directive 2009/15/EC the only exception to the exclusive recognition competencies of the Commission applies to the so-called cargo ship safety radio certificate (as defined by Article 2(l) of Directive 2009/15/EC).77 In accordance with Recital (23) of the Regulation the Commission has to re- 67 spect the principles of subsidiarity and proportionality in the practical application of the Regulation. Further details on the specific procedure for recognition are addressed in the commentary section relating to Article 12 of the Regulation.78 The same procedure also applies to limited recognitions which are pos77 See commentary sections C.2.c) on Article 2(l) of Directive 2009/15/EC and C.3.b) on Article 3(2) of Directive 2009/15/EC. 78 See commentary sections B.12.a) to d) on Article 12 of the Regulation.

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sible pursuant to Article 4(4) of the Regulation. In case of an initial recognition to be limited, the Commission states the reasons for the limitation and the conditions under which the limitation shall be removed or can be widened. The limitation of recognition may be reviewed at any time. 68 Factual limitation of recognition may be based on the proven capacity and expertise of the RO concerned. It may be applicable to certain types or sizes of ships, certain trades, or a combination thereof. There is yet no practical example of an initial limited recognition, however, pursuant to Article 15(2) of the Regulation, by 17 June 2010, the Commission also had to re-examine all limited recognitions granted previously under the Regulation’s predecessor regime (i.e. Directive 94/57/EC). 69 As part of this process the Commission had to decide whether prior limitations were to be replaced by others or could be removed. Prior limitations continued to apply until the Commission took its decision. In one of those cases, the Commission decided to extend the former limited recognition of the RO “Polish Register of Shipping” (PRS) without limitations.79 In another case, the former limitations of the “Hellenic Register of Shipping” (HRS) were extended for 17 months.80 In 2010, the Greek authorities withdrew their application in respect of the recognition of the HRS. Therefore, the ongoing procedures were discontinued. Both of these cases are addressed in some more detail in the commentary section of Article 15(2) of the Regulation.81 b) Paragraph (2): Recognition after Assessment 70

Effectively, Regulation EC/391/2009 ensures that only those classification societies which are members of the IACS can be recognised under EU Law.82 Article 4(2) of the Regulation refers back to its Article 3, i.e., the verification process whether an applicant RO meets all the minimum criteria set out in Annex I of Regulation EC/391/2009. This Annex lists minimum criteria to obtain Community recognition (and also to continue to enjoy Community recognition). The minimum criteria of Annex I is fully reproduced as part of the commentary to Article 3 of the Regulation.

79 Commission Decision 2009/728/EC of 30 September 2009 extending without limitations the Community recognition of the Polish Register of Shipping, OJ L 258/34 of 1 October 2009. 80 Commission Decision 2009/354/EC of 30 March 2009 extending the limited Community recognition of the Hellenic Register of Shipping (HRS), OJ L 109/42 of 30 April 2009. 81 See commentary section B.15.b) on Article 15(2) of the Regulation. 82 On the role of the IACS see, e. g., de Bruyne, Liability of Classification Societies: Cases, Challenges and Future Perspectives, 45 Journal of Maritime Law & Commerce (2014), pp. 181, at 183; Begines, The EU Law on Classification Societies, 36 Journal of Maritime Law and Commerce (2005), pp. 487, at 500; Lagoni, The Liability of Classification Societies (2007), pp. 24.

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c) Paragraph (3): Recognition of the Parent Entity

The Commission grants recognition to the parent entity of all legal entities 71 that constitute the RO although it might be financially controlled by another corporation or organization (see the definition of “control” in Article 2(d) of the Regulation). Recognition encompasses all legal entities that contribute to ensuring that the RO provides cover for their services worldwide. Consequently, all possible subsidiaries of a RO are also responsible for classification and certification activities falling within the scope of Regulation EC/391/2009. The Commission will also address all written correspondence and relate all procedural requirements to the location of the parent entity of the RO (see the definition of “location” in Article 2(j) of the Regulation), i.e. the permanent headquarters of the RO. Recognition of the parent entity is also of fundamental important for the pur- 72 poses of calculating fines and periodic penalty payments as being possibly imposed under Article 6 of the Regulation. The whole methodology is based on identifying the aggregate turnover of the parent entity holding the recognition. Fines under Regulation EC/391/2009 will be calculated pursuant to Article 4 of Commission Regulation EU/788/2014. They relate to the “total average turnover” of a RO as determined by Article 9 of the Commission Regulation. This value shall be one third of the amount obtained by adding the aggregate turnover of the parent entity holding the recognition and all legal entities which are encompassed in that recognition at the end of each business year of 2011 to 2013 (Article 9(1) of the Commission Regulation). In the case of a group with certified consolidated accounts, the total average turnover shall be the consolidated revenue of those entities, as regards the parent entity and all legal entities included in that group which are encompassed in the recognition at the end of each business year of 2011 to 2013 (see Article 9(2) of the Commission Regulation). d) Paragraph (5): Publication of the List of Recognitions within the EU

Apparently, the last time the list of the EU’s ROs was published in the Offi- 73 cial Journal was in 2007, thus still relating to the predecessor regime of Directive 94/57/EC.83 However, the provision does not require adherence to a specific interval of publications and EMSA continuously informs about the current status of the EU-wide recognition of “organisations” on its internet website.84

83 OJ C 135/4 of 19 June 2007 (List of organisations recognised on the basis of Council Directive 94/57/EC on common rules and standards for ship inspection and survey organisations and for relevant activities of maritime administrations (2007/C 135/04)). 84 See: http://www.emsa.europa.eu/implementation-tasks/visits-and-inspections/assessment-ofclassification-societies.html [last access: April 2015].

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Article 5 Where the Commission considers that a recognised organisation has failed to fulfil the minimum criteria set out in Annex I or its obligations under this Regulation, or that the safety and pollution prevention performance of a recognised organisation has worsened significantly, without, however, it constituting an unacceptable threat to safety or the environment, it shall require the recognised organisation concerned to undertake the necessary preventive and remedial action within specified deadlines to ensure full compliance with those minimum criteria and obligations and, in particular, remove any potential threat to safety or the environment, or to otherwise address the causes of the worsening performance. The preventive and remedial action may include interim protective measures when the potential threat to safety or the environment is immediate. However, and without prejudice to their immediate implementation, the Commission shall give to all Member States which have granted an authorisation to the recognised organisation concerned, advance notice of the measures that it intends to take.

5. Article 5 Regulation EC/391/2009 – Failure to Comply with the Regulation

Article 5 of the Regulation relates to situations where minor problems with the performance of ROs have been identified by the Commission, however, below the level of “infringements” (i.e. violations of the Regulation) as described further in Articles 6 and 7 of the Regulation. Specifically, the RO’s failure has not yet amounted to an “unacceptable threat to safety or the environment” (see already Article 3(3) of the Regulation). Nevertheless, interim protective measure imposed by the Commission might be necessary. 75 Generally, Article 5 of the Regulation will apply in cases where it can be proven that the failure of the RO is not yet “serious or repeated” as referred to in Articles 6 and 7. When it comes to “seriousness” as a legal term applied to a RO’s performance, the specific list of Article 5 of Commission Regulation EU/ 788/2014 provides the best practical guidance. This list of criteria is discussed further below, as part of the commentary on Article 6(1) of the Regulation. In any case, the Commission will take into account all relevant aggravating and mitigating circumstances. 76 Pursuant to Article 2 of Commission Decision 2009/491/EC,85 the criteria to be followed in order to decide when the performance of a RO acting on behalf of a flag State can be considered an “unacceptable threat to safety and the environment” are set out in Annex I of Decision 2009/491/EC. This Decision still relates to predecessor of Regulation EC/391/2009 (i.e. Directive 94/57/EC) but it also applies to the Regulation.86 The criteria and formula as established by the Commission Decision of 2009 has been evaluated by the Commission three 74

85 Commission Decision 2009/491/EC of 16 June 2009 on criteria to be followed in order to decide when the performance of an organisation acting on behalf of a flag State can be considered an unacceptable threat to safety and the environment, (notified under document number C(2009) 4398), OJ L 162/6 of 25 June 2009. 86 See also infra, commentary section B.14. on Article 14 of the Regulation.

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years after its entry into force (Article 4(1) of Commission Decision 2009/491/ EC). In sum, it is possible to calculate a mathematical expectation of possible threats to the marine environment by evaluating the number of ROs-related detentions in relation to total inspections over a three-year period and by combining data of regional Port State Control mechanisms87 and reports of the EU Member States (see Annex I and II of Commission Decision 2009/491/EC). Additionally, under Article 3(1)(a) and (b) of Commission Decision 77 2009/491/EC the Commission must consider a RO to be an “unacceptable threat to safety or the environment” in cases that come to its knowledge where it has been proven in a court of law or in an arbitration procedure that a marine casualty involving a ship in the class of a RO has been caused by a wilful act or omission or gross negligence of such RO, its bodies, employees, agents or others who act on its behalf; and it can be considered (based on the information available to the Commission) that such wilful act, omission or gross negligence has been due to shortcomings in the organisation’s structure, procedures and/or internal control. Pursuant to Article 3(2) of Commission Decision 2009/491/EC it shall take into account the gravity of the case, and shall seek to determine whether recurrence or any other circumstances reveal the RO’s failure to remedy the shortcomings and improve its performance. Article 6 1.

2.

3.

In addition to the measures taken under Article 5, the Commission may, in accordance with the advisory procedure referred to in Article 12(2), impose fines on a recognised organisation: (a) whose serious or repeated failure to fulfil the minimum criteria set out in Annex I or its obligations under Articles 8(4), 9, 10 and 11, or whose worsening performance reveals serious shortcomings in its structure, systems, procedures or internal controls; or (b) which has deliberately provided incorrect, incomplete or misleading information to the Commission in the course of its assessment pursuant to Article 8(1) or otherwise obstructed that assessment. Without prejudice to paragraph 1, where a recognised organisation fails to undertake the preventive and remedial action required by the Commission, or incurs unjustified delays, the Commission may impose periodic penalty payments on that organisation until the required action is fully carried out. The fines and periodic penalty payments referred to in paragraphs 1 and 2 shall be dissuasive and proportionate to both the gravity of the case and the economic capacity of the recognised organisation concerned, taking into account, in particular, the extent to which safety or the protection of the environment has been compromised. They shall be imposed only after the recognised organisation and the Member States concerned have been given the opportunity to submit their observations. The aggregate amount of the fines and periodic penalty payments imposed shall not exceed 5 % of the total average turnover of the recognised organisation in the preceding three business years for the activities falling under the scope of this Regulation.

87 Combined Port State Control data is collected from the ‘Paris Memorandum of Understanding’ on Port State Control (signed in Paris on 26 January 1982), the ‘Tokyo Memorandum of Understanding’ on Port State Control in the Asia Pacific Region (signed in Tokyo on 1 December 1993) and from the United States Coast Guard.

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The Court of Justice of the European Communities shall have unlimited jurisdiction to review decisions whereby the Commission has fixed a fine or periodic penalty payment. It may cancel, reduce or increase the fine or periodic penalty payment imposed.

6. Article 6 Regulation EC/391/2009 – Fines and Periodic Penalty Payments

At the outset, Recital (10) of the Regulation stresses that “it is of the utmost importance that failure by a [RO] to fulfil its obligations can be addressed in a prompt, effective and proportionate manner. The primary objective should be to correct any deficiencies with a view to removing any potential threat to safety or the environment at an early stage. The Commission should therefore be given the necessary powers to require that the [RO] undertake the necessary preventive and remedial action, and to impose fines and periodic penalty payments as coercive measures. When exercising these powers, the Commission should do so in a manner that complies with fundamental rights and should ensure that the organisation can make its views known throughout the procedure”. 79 Pursuant to Article 6(1)(a) and (b) of the Regulation the Commission may impose severe financial pressure on classification societies in cases of “serious or repeated failure to fulfil the minimum criteria […]” or if “worsening performance reveals serious shortcomings in its structure, systems, procedures or internal controls”.88 The general objective of those fines and periodic penalty payments is to ensure an efficient enforcement of the criteria and obligations as established under the whole Regulation in order to swiftly remove any potential threat to maritime safety or the marine environment. But there are also limits. Therefore, in the interests of transparency and legal certainty, Article 6(3) of Regulation EC/391/2009 applies a maximum aggregate amount ceiling to fines and periodic penalty payments imposed by the Commission. 80 The necessary measures to implement Article 6 of the Regulation with specific procedural details were adopted in accordance with the regulatory procedure with scrutiny, as set out in Articles 12(4) and 14(2) of the Regulation. On 2 July 2013, the Commission, in fulfilment of its obligations arising from Articles 12(4) and 14(2), forwarded to the European Parliament, by means of the comitology register, a Draft Regulation containing detailed rules for the implementation of Articles 6 and 7 of the Regulation. The relevant procedure for this was the regulatory procedure with scrutiny by the EU Parliament.89 81 In the interest of transparency and legal certainty, the resulting Commission Regulation (EU) No 788/2014 of 18 July 2014 now lays down detailed procedural rules and criteria for decision-making and the imposition of fines and periodic penalty payments. Those decisions – made in accordance with Regulation EC/ 391/2009 – will be enforceable in accordance with Article 299 TFEU and can be 78

88 Complemented by Commission Regulation EU/788/2014 of 18 July 2014 and Commission Implementing Regulation EU/1355/2014 of 19 December 2014. 89 See: Question for written answer E-014192/13 to the Council Luis de Grandes Pascual (PPE) (17 December 2013).

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subject to review by the CJEU. Additionally, for the purpose of ensuring procedural fairness and legal certainty, it was also necessary to lay down detailed procedural rules for the calculation of time limits set by the Commission and of the limitation periods that apply to the Commission for the imposition and enforcement of fines and periodic penalty payments. This also has to take into account the date of entry into force of Regulation EC/391/2009, i.e. 17 June 2009 (see Article 19 of the Regulation). The Commission Regulation entered into force on 8 August 2014. Its legal 82 substance relates especially to the methodology for the calculation of fines and periodic penalty payments by the Commission so that it is now (since 8 August 2014) known in advance by the EU ROs possibly concerned. It is impossible to understand Article 6 (and also Article 7) of Regulation EC/391/2009 without considering – at the same time – the far more detailed (and transparent but complicated) rules of Commission Regulation EU/788/2014. Thus, a legal commentary of Article 6 and 7 of Regulation EC/391/2009 ne- 83 cessitates explicit citations of the provisions of the Commission Regulation. At first sight, the richness of detail in Commission Regulation EU/788/2014 is quite overwhelming. But in fact, it is an intricate collection of procedural rules to be followed both by the Commission and the ROs. Above all, the Commission Regulation includes specific criteria for the Commission to appraise the gravity of violations and the extent to which safety or the protection of the marine environment has been compromised. Via the introduction of fines and periodic penalty payments the Commission has emphasized that it has a supplementary tool allowing it to give a nuanced, flexible and graduated response to any breach of the rules of Regulation EC/391/2009 by ROs as compared to the severity of a complete withdrawal of recognition (see Article 7 of the Regulation). a) Paragraph (1): Grounds for Imposing Fines

The first paragraph of Article 6 relates specifically to fines and has to be read 84 in conjunction with Article 3(1) of Commission Regulation (EU) No 788/2014. This provision lists three grounds for the imposition of fines as a result of identified infringements. According to Article 3(2) of the Commission Regulation the burden of proving an infringement rests on the Commission in any infringement procedure. First, the Commission will identify an infringement under Article 6(1) of 85 Regulation EC/391/2009 where the “serious or repeated failure” by a RO to fulfil one of the minimum criteria set out in Annex I of the Regulation or its obligations under Articles 8(4), 9, 10 and 11 of the Regulation reveals “serious shortcomings” in a RO’s structure, systems, procedures or internal controls. Second, it will also identify an infringement if a RO’s worsening performance reveals serious shortcomings in its structure, systems, procedures or internal controls. As already described under the commentary on Article 5 of the Regulation, this evaluation will apply the formula and the mathematical expectation Henning Jessen

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86

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as established by Commission Decision EC/2009/491, i.e., evaluating the number of ROs-related detentions in relation to total inspections over a three-year period and combining data of regional Port State Control mechanisms and reports of the Member States (see Annex I and II of Commission Decision 2009/491/EC). Third and finally, the Commission will identify an infringement under Article 6(1) of Regulation EC/391/2009 when a RO has deliberately provided incorrect, incomplete or misleading information to the Commission in the course of its assessment or otherwise obstructed that assessment. If the Commission affirms grounds of an infringement by a RO the fines will be calculated pursuant to Article 4 of Commission Regulation (EU) No 788/2014. Fines will always relate to the “total average turnover” of a RO as determined by Article 9 of the Commission Regulation. Thus, it shall be one third of the amount obtained by adding the aggregate turnover of the parent entity holding the recognition and all legal entities which are encompassed in that recognition at the end of each business year of 2011 to 2013 (Article 9(1) of the Commission Regulation). In the case of a group with certified consolidated accounts, the total average turnover shall be the consolidated revenue of those entities, as regards the parent entity and all legal entities included in that group which are encompassed in the recognition at the end of each business year of 2011 to 2013 (Article 9(2) of the Commission Regulation). Only the activities falling under the scope of Regulation EC/391/2009 shall be taken into account (Article 9(3) of the Commission Regulation). Potentially, this appropriate and necessary rule can result in a very complicated calculation of the “total average turnover”, for example, if the RO is not only active in the “traditional” business of surveying ships but also in certifying fixed offshore installations or undertakes a significant amount of (paid) training in various areas of safety and security, not only maritime-related. Once the “total average turnover” of the RO in question has been calculated, Article 4(1) of the Commission Regulation stipulates that a basic fine of 0.6 % of its total average turnover shall be initially assigned to each infringement established on the basis of Article 6(1) of Regulation EC/391/2009. For the calculation of the individual fine for each infringement the basic fine referred to in Article 4(1) of the Commission Regulation shall be increased or reduced, on the basis of the seriousness and of the effects of the infringement, in particular the extent to which safety or the protection of the environment have been compromised (Article 4(2) Commission Regulation). The maximum amount of each individual fine shall not exceed 1.8 % of the total average turnover of the RO (Article 4(3) Commission Regulation). In cases where (only) one action or omission of the RO forms the sole basis of two or more infringements under Article 6(1)(a) of Regulation EC/391/2009 (identified in accordance with Article 3(1)(a) of the Commission Regulation), the concurrent individual fine shall be the highest of the individual fines calculated for the underlying infringements (Article 4(4) Commission Regulation).

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The total fine imposed on a RO by one single Commission Decision shall generally be the sum of all individual fines resulting from the application of Article 4(1) to (4) of the Commission Regulation. However, there is a final limit. The maximum ceiling (5% of the RO’s total average turnover) for a sum of individual fines is established by Article 6(3) of Regulation EC/391/2009. Art. 8 of Commission Regulation EU/788/2014 further substantiates the determination of the maximum aggregate amount of a fine. The seriousness of each infringement is assessed by applying the criteria Arti- 90 cle 5 of the Commission Regulation. The Commission shall take into account all relevant aggravating and mitigating circumstances, in particular: (a) whether the RO has acted with negligence or intent; (b) the number of actions or omissions of the RO which gave rise to the infringement; (c) whether the infringement affects isolated offices, geographical areas or the entire RO; (d) the recurrence of the actions or omissions of the RO giving rise to the infringement; (e) the duration of the infringement; (f) a misrepresentation of the actual condition of ships in the certificates and documents of compliance delivered by the RO, or the inclusion of incorrect or misleading information therein; (g) prior sanctions, including fines, imposed on the same RO; (h) whether the infringement results from an agreement between ROs or a concerted practice, which have as their object or effect the breach of the criteria and obligations provided in Regulation EC/391/2009; (i) the degree of diligence and cooperation of the RO in the discovery of the relevant actions or omissions, as well as in the determination of the infringements by the Commission. The effects of each infringement are assessed by applying the criteria of Arti- 91 cle 6 of the Commission Regulation. In particular, the Commission will ponder the extent to which safety and the protection of the marine environment have been compromised. Again, it shall take into account all relevant aggravating and mitigating circumstances, in particular: (a) the nature and extent of the deficiencies actually or potentially affecting the fleet certified by the RO which it has failed to or may not be able to request the timely correction of. In addition, as a result of the infringement, the nature and extent of the deficiencies the said RO has failed to detect or may not be able to detect, taking into account in particular the criteria for the detention of a ship laid down in Annex X of Directive 2009/16/EC on Port State control;90

90 See the commentary section onDirective 2009/16/EC on Port State Control, Chapter 4, VIII.

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(b) the proportion of the fleet certified by the RO actually or potentially affected; (c) any other circumstances posing specific identifiable risks, such as the type of the ships actually or potentially affected. b) Paragraph (2): Grounds for Imposing Periodic Penalty Payments

The second paragraph of Article 6 relates specifically to periodic penalty payments. According to Recital (4) of Commission Regulation EU/788/2014 periodic penalty payments should be effective in ensuring that any breach of the obligations and requirements laid down in Regulation EC/391/2009 is promptly and appropriately remedied. Therefore, Regulation EC/391/2009 empowers the Commission to apply periodic penalty payments where a RO has failed to undertake the preventive and remedial actions required by the Commission, after a reasonable period and until such time as the required actions have been taken by the RO concerned. If necessary, in the light of the circumstances of the case, the daily amount of the periodic penalty payments may gradually increase to reflect the urgency of the requested actions. 93 Article 7 of Commission Regulation EU/788/2014 substantiates how periodic penalty payments may be imposed by the Commission on a RO. The first two paragraphs of the provision refer to Article 3 of the Commission Regulation but this seems to be an editorial mistake. Rather the reference should point to Article 4 as Article 7(1) clarifies that fines and periodic penalty payments may stand together (“without prejudice to the fines imposed”). The objective of possible combined fines and periodic penalty payments is to ensure that preventive and remedial action is taken by the RO as required by the Commission in the course of its assessment. 94 The Commission may also establish periodic penalty payments to be imposed on the RO if, and for as long as, it fails to undertake remedial action or incurs unjustified delays in bringing the infringement to an end (Article 7(2) and Article 15 Commission Regulation). In such cases of non-cooperation (i.e. failure by the RO to undertake or the RO incurring unjustified delays in undertaking preventive and remedial action as requested by the Commission), the Commission shall first notify the RO in writing. In terms of procedure, the written notification by the Commission (in accordance with Article 15(1) Commission Regulation) shall make reference to the specific preventive and remedial action that has not been undertaken by the RO and the supporting evidence. Additionally, the Commission has to inform the RO of the periodic penalty payments that are being considered by the Commission thereon. Finally, the Commission shall set a time limit in which the RO may submit written observations to the Commission. The Commission shall not be obliged to take into account written observations received after the expiry of the time limit (Article 15(2) and (3) Commission Regulation). 92

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According to Article 7(3) of the Commission Regulation the decision to impose the periodic penalty payments shall determine the time limit within which the RO has to comply with the required action. The periodic penalty payments shall apply as from the day following the expiry of the time limit until the day on which appropriate remedial action has been undertaken by the RO, provided that the remedial action is considered satisfactory by the Commission (Article 7(4) Commission Regulation). Just like in the case of fines, periodic penalty payments will also relate to the “total average turnover” of a RO as determined by Article 9 of the Commission Regulation (see the commentary on Article 6.1 of Regulation EC/391/2009). The basic amount per day of the periodic penalty payments for each infringement shall be 0.0033% of the total average turnover of the RO (Article 7(5) Commission Regulation). For the calculation of the individual amount of periodic penalty payments for each infringement, the basic amount shall be adjusted based on the seriousness of the infringement and taking into account the extent to which safety or the protection of the environment has been compromised. This represents another similarity to the imposition of fines as the seriousness of each infringement is assessed by applying the criteria Article 5 of the Commission Regulation. The Commission will thus take into account all relevant aggravating and mitigating circumstances as listed already under the commentary of Article 6(1) of Regulation 391/2009. As the rules of the Commission Regulation represent a system of graduation and escalation the Commission may decide, in the light of circumstances of each case, and in particular in view of the urgency of the remedial action to be undertaken by the RO concerned, to increase the daily amount for periodic penalty payments (Article 7(6) Commission Regulation). This increase will be subject to maximum limits: Above all, pursuant to Article 7(7) Commission Regulation, the total amount of periodic penalty payments imposed, individually or in addition to fines, shall not exceed the maximum ceiling of 5% of the RO’s total average turnover as established under Article 6(3) of Regulation EC/ 391/2009, as further detailed in Article 8 of Regulation EC/391/2009. Consequently, the same mechanism of limitation applies both to fines and periodic penalty payments. Pursuant to Article 7(6)(a) Commission Regulation, before reaching the maximum ceiling, it is possible for the Commission to increase the daily amount for periodic penalty payments from 0.0033% per day to 0.005% per day of the RO’s total average turnover (calculated in accordance with Article 9 of the Commission Regulation). This graduation applies when the RO exceeds the time limit set by the Commission by more than 120 days, i.e., from the 121st to the 300th day from the expiry of the time limit. In case even more than 300 days have expired, Article 7(6)(b) Commission Regulation authorises the Commission to increase the daily amount for periodic penalty payments finally to 0.01 % per day of the RO’s total average turnover, calculated in accordance with Article 9. Henning Jessen

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All in all, the mechanism of Article 6(2) Regulation EC/391/2009 in conjunction with Article 7 Commission Regulation EU/788/2014 represents a significant potential for the Commission to exert flexible “painful” financial pressure on ROs. It is highly questionable whether a situation between a RO and the Commission can really escalate to extreme ends in the way as envisioned by Article 7(6) Commission Regulation. From a practical point of view, a RO will always try to avoid the application of this mechanism by being as transparent as possible and by explaining to the Commission inter alia why deadlines had to be exceeded. In this context, Recital (9) of Commission Regulation EU/788/2014 stresses the importance of the RO’s right to be heard. A decision of the Commission to impose fines, periodic penalty payments (or even the withdrawal of recognition) in accordance with Regulation EC/391/2009 must be based exclusively on grounds on which the RO concerned has been able to comment. This legal necessity is further substantiated in Article 6(3) of the Regulation. c) Paragraph (3): Procedural Standards and Requirements

The third paragraph of Article 6 Regulation EC/391/2009 introduces “procedural” standards for imposing fines and period penalty payments on ROs. Recital (5) of Commission Regulation EU/788/2014 reiterates that the calculation of fines and periodic penalty payments as a fraction of the turnover of the RO is “a simple method to make the fines and periodic penalty payments dissuasive” on the one hand. This wording is taken partly from the first sentence of Article 6(3) of Regulation EC/391/2009. On the other hand, as the same sentence stresses as well, to be legal under general EU Law, fines and periodic penalty payments imposed on ROs must still remain “proportionate to both the gravity of the case and the economic capacity of the RO concerned, in the light of diverse commercial sizes of ROs”. 101 The second sentence of Article 6(3) (and also the final sentence of Article 7) of Regulation EC/391/2009 stresses the importance of due process and the existence of possibilities for judicial review as mandated by Article 6(4) of the Regulation. Fines and periodic penalty payments shall be imposed only after the RO (and the Member States concerned) have been given opportunity to be heard, especially by “submitting their observations”. However, pursuant to Article 18(6) Commission Regulation and without prejudice to Article 9 of Regulation EC/391/2009, ROs shall not be forced to incriminate themselves. Thus, they also have the right to remain silent in situations where it would otherwise be compelled to provide answers which might involve an admission on their part of the existence of a breach. 102 A whole chapter of Commission Regulation EU/788/2014 (Chapter IV, “Common Provisions”, Articles 12 to 25) further substantiates the details of the procedural requirements of Article 6(3), second sentence, of the Regulation. This is especially true for Articles 12 to 19 of the Commission Regulation: First, pursuant to Article 12(1) Commission Regulation, where the Commission con100

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siders that there are grounds to impose a fine and periodic penalty payments on a RO (Article 6 of Regulation EC/391/2009), or to withdraw an organisation's recognition (Article 7 of the Regulation), it shall address a statement of objections to the RO and notify the Member States concerned. This means that the Commission will have to notify all EU Member States which have authorised the RO in question pursuant to Articles 3 and 5 of Directive 2009/15/EC.91 According to Article 12(2) Commission Regulation, the statement of objections shall include: (a) a detailed account of the RO's actions and omissions, including the description of the relevant facts and the identification of the provisions of Regulation EC/391/2009, which the Commission considers to have been breached by the RO; (b) an identification of the evidence on which the relevant findings are based, including by reference to inspection reports, assessment reports, or any other relevant documents which have been previously communicated to the RO concerned by the Commission or by EMSA acting on the Commission's behalf; (c) a notice that fines and periodic penalty payments or the withdrawal of recognition may be imposed by the Commission in accordance with Articles 6 or 7 of Regulation EC/391/2009. When notifying the RO about the statement of objections, the Commission shall invite the RO and the Member States concerned to submit written observations within a designated time limit, which shall not be less than six weeks of the date of receipt of the statement of objections (“in any event”, Article 12(3) Commission Regulation). The Commission shall not be obliged to take into account submissions received after the expiry of that time limit. However, according to Article 24(4) Commission Regulation time limits may be extended by the Commission “where appropriate and upon reasoned request made before the expiry of the original time limit”. According to Article 12(4) Commission Regulation the notification of a statement of objections shall not suspend the assessment of the RO concerned. At any moment prior to the adoption of a decision to impose a fine and periodic penalty payments, or the withdrawal of recognition in accordance with this Regulation, the Commission may decide to carry out additional inspections of a RO’s offices and facilities, to visit ships certified by the RO or to request the RO in writing to provide additional information relating to its compliance with the criteria and obligations under Regulation EC/391/2009. Article 12(5) Commission Regulation mandates the Commission to update its evaluation of the RO whenever necessary. At any moment prior to the adoption of a decision to impose a fine and periodic penalty payments, or the withdrawal of recognition, the Commission may amend its assessment of the RO concerned. 91 See further infra, commentary sections C.3. and 5.

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If the new assessment is different to the assessment which gave rise to the statement of objections, because new facts have been discovered, or because new infringements or new circumstances concerning the seriousness of an infringement or its effects on maritime safety and the marine environment have been identified, the Commission shall issue a new statement of objections. The wording of the first sentence of Article 12(5) Commission Regulation seems to postulate the issuance of a new statement of objections by the Commission only in cases where fines and periodic penalty payment are combined (“a fine and periodic penalty payments, or the withdrawal of recognition”). Under a strict rule of law approach, however, the obligation to update the statement of objections should apply as well separately to fines or periodic penalty payments. Pursuant to Article 13 Commission Regulation the Commission may request the RO in writing to provide written or oral explanations, or particulars or documents, within a designated time limit, which shall not, in any event, be less than four weeks. This provision serves to clarify the facts for the purposes of Article 12 Commission Regulation. If clarifications are necessary the Commission shall inform the RO of the periodic penalty payments and fines that may be imposed for failing to comply with the request or when incurring unjustified delays in the provision of information or providing deliberately incorrect, incomplete or misleading information to the Commission. In case a RO is subject of a statement of objections issued by the Commission, the RO has a right to be heard orally by its own request but not in public (Article 14 Commission Regulation). The Commission shall offer the RO the opportunity to present its arguments at an oral hearing. The Commission shall invite the competent authorities of Member States concerned to this oral hearing. Member States shall be represented by officials of that Member State. The Commission may choose to be assisted by EMSA (Article 14(2) and (3) Commission Regulation). The Commission, on its own initiative or at the request of Member States concerned, may also invite any other persons with a legitimate interest in the infringements to take part in the oral hearing. Natural or private legal persons invited to attend shall either appear in person or be represented by legal or authorised representatives. According to Article 17 Commission Regulation the RO shall have the right to legal representation at all stages of the proceedings. Each person invited to attend may be heard separately or in the presence of other persons invited to attend, having regard to the legitimate interest of RO and other parties in the protection of their business secrets and other confidential information (Article 14(4) Commission Regulation). The statements made by each person heard shall be recorded. Upon request, the recording of the hearing shall be made available to the persons who attended the hearing and to Member States concerned (Article 14(5) Commission Regulation). At the request of the RO to which a statement of objections has been addressed, the Commission shall grant access to the file containing documents and

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other evidence compiled by the Commission on the alleged infringement (Article 16(1) Commission Regulation). The Commission shall set the date and make the relevant practical arrangements for the RO's access to the file, which may be granted in electronic form only (Article 16(2) Commission Regulation). It shall also make available to the RO concerned, upon request, a list of all the documents contained in the file (Article 16(3) Commission Regulation). The RO concerned shall have the right to access the documents and informa- 113 tion contained in the file. When granting such access, the Commission shall have due regard to business secrets, confidential information or the internal character of documents issued by the Commission or EMSA (Article 16(4) Commission Regulation).92 In this context, Article 18(1) Commission Regulation generally mandates that all relevant proceedings shall be carried out subject to the principles of confidentiality and of professional secrecy. According to Article 18(2) Commission Regulation, the Commission, EMSA, and the authorities of the Member States concerned, as well as their officials, servants and other persons working under their supervision shall not disclose information acquired or exchanged by them and of the kind covered by the obligation of professional secrecy and confidentiality. In order to be able to adhere to Article 18 Commission Regulation any RO or 114 other person who submits information or observations to the Commission shall clearly identify any material considered to be confidential, giving the reasons for it, and provide a separate non-confidential version by a date set by the Commission (Article 18(3) Commission Regulation). The Commission may also require ROs and other interested parties to identify any part of a report, of the statement of objections or of a decision by the Commission, which in their view contains business secrets (Article 18(4) Commission Regulation). In the absence of proper identifications, the Commission may assume that the documents or observations concerned do not contain confidential information. When the proceedings are finalized the Commission will have to take a deci- 115 sion. An inculpatory decision for the RO, i.e., a decision by the Commission to impose fines, periodic penalty payments, or the withdrawal of recognition shall be based exclusively on the grounds on which the RO concerned had been able to submit its observations (Article 19(1) Commission Regulation). The decision to impose a fine or a periodic penalty payment and the determination of the appropriate amount shall take into account the principles of effectiveness, proportionality and dissuasiveness (Article 19(2) Commission Regulation). Additionally, when taking measures and deciding on the seriousness and effect of the relevant actions or omissions on safety and the environment the Commission 92 Such internal documents may include documents or parts of documents pertaining to the internal deliberations of the Commission and its services and of EMSA, including the opinions and recommendations of EMSA addressed to the Commission as well as documents or parts of documents forming part of the correspondence between the Commission and EMSA or between the Commission and Member States (Article 16(5)(a) and (b) Commission Regulation.

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shall take into account national measures already taken on the basis of the same facts against the RO concerned, in particular where that RO has already been subject to judicial or enforcement proceedings (Article 19(3) Commission Regulation). 116 Actions or omissions of a RO on the basis of which measures have been taken in accordance with Commission Regulation EU/788/2014 shall not be subject to further measures. However, these actions or omissions may be taken into account in subsequent decisions adopted in accordance with it in order to assess recurrence (Article 19(4) Commission Regulation). A decision to impose periodic penalty payments or a decision imposing fines and periodic penalty payments shall be adopted by the Commission in accordance with the procedure applicable pursuant to Article 12(2) of Regulation EC/391/2009 (Article 19(5) Commission Regulation). 117 The third sentence of Article 6(3) implements the element of proportionality by fixing a maximum ceiling for fines and periodic penalty payments. The provision mandates that the aggregate amount of the fines and periodic penalty payments imposed shall not exceed 5 % of the total average turnover of the RO in the preceding three business years for the activities falling under the scope of the Regulation. Article 8 of Commission Regulation provides more details on how to determine this maximum aggregate amount. It applies in the three following situations, i.e., the sole imposition of fines, the combination of fines and periodic penalty payments and the sole imposition of periodic penalty payments: (a) The aggregate amount of the fines imposed on a RO93 within one business year for that RO, taking into account the date of the decision to impose the fines and, in case of more than one decision imposing fines to that RO, the date of the first decision imposing a fine on that RO, shall not exceed 5% of the total average turnover of that RO.94 (b) The aggregate amount of the fines imposed on a RO95 within one business year for that RO, determined as stated under (a), and the periodic penalty payments imposed in the same decisions96 and accrued for as long as appropriate remedial action is not undertaken by the RO shall not exceed 5% of the total average turnover of that RO.97 Without prejudice to Article 21 Commission Regulation, recovery by the Commission of the periodic penalty payments shall not exceed the 5% ceiling. (c) The aggregate amount of the periodic penalty payments imposed on a RO98 and accrued for as long as appropriate preventive or remedial action is not undertaken by the RO shall not exceed 5% of the total average turnover of

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that RO.99 Without prejudice to Article 21, recovery by the Commission of the periodic penalty payments shall not exceed the 5% ceiling. d) Paragraph (4): Rule of Law and Effective Legal Remedies for ROs

Finally, Article 6(4) addresses adherence to the rule of law and effective legal remedies for ROs in proceedings instituted against them by the Commission. When applying the Regulation (and its implementation act as well) the Commission must respect fundamental rights and observe the principles recognised by the Charter of Fundamental Rights of the EU, in particular the right of defence and the principles of confidentiality and ne bis in idem, in accordance with the general principles of law and the case law of the CJEU (see Recital (10) of Commission Regulation EU/788/2014). Quite fundamentally but also self-evident is the fact that events which occurred before 17 June 2009 (i.e. the date of entry into force of Regulation EC/391/2009) shall not give rise to any measures in accordance with the Commission Regulation (see its Article 26). Other necessary procedural rules can be more intricate. Pursuant to Article 20 Commission Regulation the Commission shall inform the RO concerned of the judicial remedies available (paragraph 1). It shall also notify its decision to EMSA and to the Member States for information (paragraph 2). When justified, in particular on grounds of safety or protection of the environment, the Commission may make its decision public. When publishing details of its decision or informing the Member States, the Commission shall have regard to the legitimate interests of the RO concerned and other interested persons (paragraph 3). Article 21 of the Commission Regulation addresses the recovery of fines and penalty payments. The Commission shall proceed with the recovery of the fines and the penalty payments by establishing a recovery order and issuing a debit note addressed to the RO concerned in accordance with Articles 78 to 80 and 83 of Regulation (EU, Euratom) 966/2012100 and Articles 80 to 92 of Commission Delegated Regulation (EU) 1268/2012.101 The right of the Commission to impose fines and periodic penalty payments on a RO is limited in time. Generally, it shall expire after five years from the date when the action or omission of the RO giving rise to an infringement identified in accordance with Article 3 Commission Regulation was committed. However, in case of continuing or repeated actions or omissions giving rise to an infringement, time shall begin to run on the day on which the action or omission 99 Calculated in accordance with Article 9 Commission Regulation. 100 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002, OJ L298/1 of 26 October 2012. 101 Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union, OJ L362/1 of 31 December 2012.

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ceases. In case a periodic penalty payment relates to a form of non-cooperation of the RO (Article 15 Commission Regulation) the Commission’s right shall expire after three years from the date when the action or omission of the RO, for which the Commission requested appropriate preventive and remedial action, was committed (Article 22(1) Commission Regulation). Any action taken by the Commission or EMSA for the purpose of the assessment or the infringement procedure in relation to an action or omission of the RO shall interrupt the relevant limitation period. The limitation period shall be interrupted with effect from the date on which the action of the Commission or EMSA is notified to the RO (Article 22(2) Commission Regulation). Each interruption starts time running afresh. The limitation period, however, will not exceed a period equal to twice the initial limitation period, except where limitation is suspended (Article 22(3) Commission Regulation). Suspension of a limitation period shall be for as long as the decision of the Commission is the subject of proceedings pending before the CJEU (Article 22(4) Commission Regulation). Limitation periods for the collection of fines and periodic penalty payments are addressed in Article 23 Commission Regulation. The right to start a recovery procedure for fines and/or periodic penalty payments shall expire one year after the Commission has finally decided on this measure (Article 23(1) Commission Regulation). This limitation period can be interrupted by any action of the Commission or of a Member State acting at the request of the Commission, aimed at enforcing payment of the fines and/or periodic penalty payments (Article 23(2) Commission Regulation). Each interruption starts time running afresh (Article 23(3) Commission Regulation). In this context, limitation periods might be suspended for as long as (a) time to pay is allowed or (b) enforcement of payment is suspended pursuant to a decision of the CJEU (Article 23(4) Commission Regulation). According to Article 24(1) Commission Regulation the applicable time limits shall run from the day following receipt of the Commission's communication or delivery thereof by hand. In the case of a communication addressed to the Commission, the relevant time limits shall be deemed to have been met when that communication has been dispatched by registered post before the relevant time limit expires (Article 24(2) Commission Regulation). In setting the time limits, the Commission shall have regard both to due process rights and the specific circumstances of each decision-making procedure (Article 24(3) Commission Regulation). Where appropriate and upon reasoned request made before the expiry of the original time limit, time limits may be extended (Article 24(4) Commission Regulation). Information provided when national competent authorities cooperate in response to a request from the Commission shall be used by the Commission only for purposes as stated under Article 25 Commission Regulation: (a) to carry out the tasks entrusted to it for the recognition and supervision of ROs under Regulation EC/391/2009; and (b) as evidence for the purposes of decision-making

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under Commission Regulation EU/788/2014, without prejudice to Articles 16 and 18 of the Commission Regulation (i.e. access to files, confidentiality, professional secrecy and the right to remain silent). Article 7 1.

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The Commission shall withdraw the recognition of an organisation: (a) whose repeated and serious failure to fulfil the minimum criteria set out in Annex I or its obligations under this Regulation is such that it constitutes an unacceptable threat to safety or the environment; (b) whose repeated and serious failure in its safety and pollution prevention performance is such that it constitutes an unacceptable threat to safety or the environment; (c) which prevents or repeatedly obstructs the assessment by the Commission; (d) which fails to pay the fines and/or periodic penalty payments referred to in Article 6(1) and (2); or (e) which seeks to obtain financial cover or reimbursement of any fines imposed on it pursuant to Article 6. For the purpose of points (a) and (b) of paragraph 1, the Commission shall decide on the basis of all the available information, including: (a) the results of its own assessment of the recognised organisation concerned pursuant to Article 8(1); (b) reports submitted by Member States pursuant to Article 10 of Directive 2009/15/EC; (c) analyses of casualties involving ships classed by the recognised organisations; (d) any recurrence of the shortcomings referred to in point (a) of Article 6(1); (e) the extent to which the fleet in the recognised organisation’s class is affected; and (f) the ineffectiveness of the measures referred to in Article 6(2). Withdrawal of recognition shall be decided by the Commission, upon its own initiative or at the request of a Member State, in accordance with the regulatory procedure referred to in Article 12(3) and after the recognised organisation concerned has been given the opportunity to submit its observations.

7. Article 7 Regulation EC/391/2009 – Withdrawal of Recognition

The possible imposition of fines and periodic penalty payments already repre- 126 sents a higher degree of escalation between the Commission and a RO. However, the ultimate sanction of the Commission is to withdraw a ROs recognition pursuant to Article 7 with an EU-wide effect. The EU Member States have transferred this right in case of serious irregularities exclusively to the Commission. Recital (11) of the Regulation recalls that “in accordance with the Community-wide approach, the decision to withdraw the recognition of an organisation which fails to fulfil the obligations set out in this Regulation if the above measures prove ineffective or the organisation otherwise presents an unacceptable threat to safety or the environment, has to be taken at Community level, and therefore by the Commission, on the basis of a committee procedure.” Consequently, and just like in the case of Article 6 of the Regulation, the necessary measures to implement Article 7 of the Regulation were adopted in accordance with the regulatory procedure with scrutiny, as set out in Article 14(2) of the Regulation. Since 8 August 2014, Commission Regulation EU/788/2014 (of 18

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July 2014) lays down detailed rules for the withdrawal of recognition of ship inspection and survey organisations.102 According to Recital (7) of the Commission Regulation it is “appropriate” that a decision to withdraw the recognition of a RO should consider all factors linked to the overarching objective of monitoring the ROs’ operations and overall performance, including the effectiveness of any fines and periodic penalty payments already imposed for repeated and serious breaches of Regulation EC/ 391/2009. Just like for the imposition of fines and periodic penalty payments (and also for the general assessment of ROs) Commission Regulation EU/ 788/2014 lays down a specific procedure in order to enable the Commission, be it at its own initiative or at the request of Member State(s), to withdraw the recognition of a RO pursuant to Regulation EC/391/2009. Chapter III of the Commission Act regulates the withdrawal of recognition specifically, referring to a lot of standards and procedures which were also commented on under Article 6 of Regulation EC/391/2009. Upon its own initiative or at the request of a Member State, the Commission may adopt a decision to withdraw the recognition of a RO, in the cases referred to in Article 7(1) (a) to (e) Regulation EC/391/2009. In order to determine whether a repeated and serious failure constitutes an “unacceptable threat to safety or the environment”, the Commission will take the following elements into account: (a) the information and circumstances referred to in Article 7(2) Regulation EC/391/2009, particularly in light of the circumstances referred to in Articles 5 and 6 Regulation EC/391/2009; (b) the criteria and, as the case may be, thresholds defined in Commission Decision 2009/491/EC. Commission Decision 2009/491/EC103 has been addressed in the commentary under Article 5 of Regulation EC/391/2009. It refers to a mathematical expectation of possible threats to the marine environment by evaluating the number of ROs-related detentions in relation to total inspections over a three-year period and by combining data of regional Port State Control mechanisms and reports of the Member States (Annex I and II of Commission Decision 2009/491/EC).104 Additionally, under Article 3(1)(a) and (b) of Commission Decision 2009/491/EC the Commission must consider a RO to be an “unacceptable threat 102 See the discussion of the “genesis” of the Commission Regulation in commentary section B. 6. on Article 6 of the Regulation. 103 Commission Decision 2009/491/EC of 16 June 2009 on criteria to be followed in order to decide when the performance of an organisation acting on behalf of a flag State can be considered an unacceptable threat to safety and the environment, (notified under document number C(2009) 4398), OJ L 162/6 of 25 June 2009. 104 Combined Port State Control data is collected from the ‘Paris Memorandum of Understanding’ on Port State Control (signed in Paris on 26 January 1982), the ‘Tokyo Memorandum of Understanding’ on Port State Control in the Asia Pacific Region (signed in Tokyo on 1 December 1993) and from the United States Coast Guard.

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to safety or the environment” in cases that come to its knowledge where it has been proven in a court of law or in an arbitration procedure that a marine casualty involving a ship in the class of a RO has been caused by a wilful act or omission or gross negligence of such RO, its bodies, employees, agents or others who act on its behalf; and it can be considered (based on the information available to the Commission) that such wilful act, omission or gross negligence has been due to shortcomings in the organisation’s structure, procedures and/or internal control. Pursuant to Article 3(2) of Commission Decision 2009/491/EC it shall take into account the gravity of the case, and shall seek to determine whether recurrence or any other circumstances reveal the RO’s failure to remedy the shortcomings and improve its performance. When fines and periodic penalty payments imposed on a RO reach the maxi- 131 mum ceiling established in accordance with Article 6(3) of Regulation EC/ 391/2009 and appropriate corrective action has not been taken by the RO, the Commission may consider that these measures have not attained their objective of removing any potential threat to safety or the environment (Article 10(3) Commission Regulation EU/788/2014). Article 11 Commission Regulation sets out the procedure to withdraw recog- 132 nition at the request of a Member State: Where a Member State requests the Commission to withdraw the recognition of a RO in accordance with Article 7(3) of Regulation EC/391/2009, it shall address that request in writing to the Commission (Article 11(1) Commission Regulation). As appropriate, the requesting Member State shall explain the reasons for its request in full detail and by reference to the criteria and circumstances listed in Article 7(1) and (2) Regulation EC/391/2009 as well as the circumstances listed in Article 10(2) and (3) Commission Regulation (Article 11(2) Commission Regulation). The requesting Member State shall provide the Commission with all necessary documentary evidence supporting its request, duly classified and numbered (Article 11(3) Commission Regulation). The Commission acknowledges receipt of the Member State's request in writing (Article 11(4) Commission Regulation). Where the Commission considers that additional information, clarification or 133 evidence is necessary in order to take a decision, it shall inform the requesting Member State and invite it to supplement its submission as appropriate within a designated time limit, which shall not be less than four weeks. The Member State's request will not be considered complete by the Commission until all necessary information has been provided (Article 11(5) Commission Regulation). If the Commission concludes that the Member State's request is justified it will – within one year of receipt of a complete request – address a statement of objections to the RO concerned (see Article 12 Commission Regulation), with a view to withdrawing its recognition. In this case, the requesting Member State shall be granted all necessary procedural rights of participation (as addressed in detail under the commentary of Art 6(4) Regulation EC/391/2009).

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If, within one year of receipt of a complete Member State's request, the Commission concludes that the request is unjustified, it shall inform the requesting Member State, stating the reasons thereof. The Commission will invite the requesting Member State to submit its observations within a designated time limit, which shall not be less than three months. Within six months of receipt of these observations, the Commission shall either confirm that the request is unjustified or issue a statement of objections to the RP concerned (Article 11(6) Commission Regulation). If the Commission concludes that the Member State's request is unjustified or that it remains incomplete after the expiry of the time limit set by the Commission, it may choose to incorporate all or part of that request and its accompanying evidence into the assessment of the RO undertaken in accordance with Article 8 of Regulation EC/391/2009 (Article 11(7) Commission Regulation). The Commission reports yearly to the COSS on requests for withdrawal submitted by Member States as well as the on-going withdrawal procedures initiated by the Commission (Article 11(8) Commission Regulation). Finally, pursuant to Article 19(6) Commission Regulation a decision to withdraw the recognition of a RO shall be adopted by the Commission in accordance with the procedure applicable pursuant to Article 12(3) of Regulation EC/391/2009. Article 8 1.

All the recognised organisations shall be assessed by the Commission, together with the Member State which submitted the relevant request for recognition, on a regular basis and at least every two years to verify that they meet the obligations under this Regulation and fulfil the minimum criteria set out in Annex I. The assessment shall be confined to those activities of the recognised organisations, which fall within the scope of this Regulation. In selecting the recognised organisations for assessment, the Commission shall pay particular attention to the safety and pollution prevention performance of the recognised organisation, to the casualty records and to the reports produced by Member States in accordance with Article 10 of Directive 2009/15/EC. The assessment may include a visit to regional branches of the recognised organisation as well as random inspection of ships, both in service and under construction, for the purpose of auditing the recognised organisation’s performance. In this case the Commission shall, where appropriate, inform the Member State in which the regional branch is located. The Commission shall provide the Member States with a report on the results of the assessment. Each recognised organisation shall make available the results of its quality system management review to the Committee referred to in Article 12(1), on an annual basis.

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entrusted with this task on behalf of the Community.” Recital (22) of the Regulation adds that EMSA should provide the necessary support to ensure the application of Regulation EC/391/2009. In this context, Commission Regulation EU/ 7882014 also serves as a subsequent clarification of the Commission’s and EMSA’s procedural rights and obligations, in order to ensure the effective conduct of the inquiry, decision-making and follow-up process pursuant to Articles 6 and 7 of Regulation EC/391/2009 (see also Recital (13) of Commission Regulation EU/788/2014). a) Paragraph (1): Intervals of Assessments

The first paragraph of Article 8 of the Regulation mandates the Commission to carry out an assessment of each RO at least every two years. Depending on particular events (such as severe marine casualties) or other “catalysts”, this does not rule out ad hoc assessments/audits or a higher frequency of assessments of certain ROs at all.105 Effectively, the task of assessment as postulated by Article 8 of the Regulation is physically performed by EMSA on behalf of the Commission since 2011. Thus, EMSA is carrying out the inspections and reports to the Commission on whether the EU’s (currently eleven)106 EU ROs (still) adhere to the requirements and criteria for recognition as established by Article 3 of Regulation EC/391/2009 in conjunction with the general and specific minimum criteria of Annex I of the Regulation. Pursuant to Article 16 of the Regulation the assessment also includes the verification whether the holder of the recognition is still the relevant legal entity within the organisation to which the provisions of the Regulation shall apply. The impact of assessments is also evidenced by two case studies on the Commission’s review of limited recognitions relating to Article 15(2) of the Regulation and discussed in more detail in the relevant section of the commentary.107 About 15-20 audits as mandated by Article 8 of the Regulation are carried out annually by EMSA on behalf of the European Commission.108 A continuously updated list of the audits is available for download from EMSA’s internet website.109 With regards to checking the requirements of the international conventions,110 the audits carried out by EMSA cover almost exactly the same issues as those which the EU Member States are required to assess pursuant to Article 9 105 An ad hoc audit is an “unscheduled audit carried out as a means of investigating and reporting on a matter of concern”, see Commission Staff Working Paper SEC(2003) 351 – Report on the Loss of the Tanker “Prestige”, Brussels, 17 March 2003. 106 See the list of the eleven EU ROs (which is almost identical to IACS membership, apart from the Indian Register of Shipping) in the introduction to this commentary section. 107 See commentary section B.15.a) and b)Article 15(2) of the Regulation. 108 See: European Maritime Safety Agency (2010), EMSA 5-Year Strategy, p. 23. 109 See “Inspections of Classification Societies (RO)”, http://www.emsa.europa.eu/implementation-tasks/visits-and-inspections/msro-inspections/items.html?cid=235&id=186 [last access: April 2015]. 110 See the legal definition in Article 2 (b) of the Regulation.

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of Directive 2009/15/EC. Thus, there is an imminent danger of duplications of audits. 140 The reports of all audits are sent to the Commission for evaluation and further action. Analysing a considerable amount of audit reports – and making decisions on the follow-up to be given – places a considerable burden on the Commission. In 2010, EMSA indicated in its 5-Year-Strategy paper that it would also provide assistance to the Commission in the assessment and processing of the various audit reports, if so requested.111 141 However, EMSA expressed some concern that this task would be in addition to the core task of performing the periodical audits of EU-recognised ROs in accordance with Article 3 and 8 of the Regulation, which serve to verify whether the ROs continue to comply with the requirements for obtaining EU recognition as laid down in Annex I to Regulation 391/2009.112 Consequently, EMSA urged the Commission and the Member States to further consider how to avoid audit duplications and to introduce economies of scale, taking advantage of the inspections performed by EMSA. In particular, EMSA pointed to the question whether it could assist the EU Member States by auditing organisations which carry out certification tasks on their behalf, within the limits of international and EU legislation (thus, excluding any additional national requirements included in the agreement between a Member State and a RO, see Article 5 of Directive 2009/15/EC). For this reason, EMSA proposed to combine its “core task audits” with additional verification work on behalf of requesting EU Member States, who will be recipients of the latter findings.113 b) Paragraph (2): Standards and Requirements for Assessments

The selection and frequency of a particular ROs assessment will depend on its verifiable performance indicators. Although not explicitly mentioned in Article 8(2) of the Regulation this evaluation will apply the standards of Commission Decision EC/2009/491, i.e., an external evaluation of the number of ROs-related detentions in relation to total inspections over a three-year period and combining data of regional Port State Control mechanisms and reports of the Member States (see Annex I of Commission Decision 2009/491/EC). 143 Another feature relates to the reports produced by the EU Member States in accordance with Article 10 of Directive 2009/15/EC (using the template of Annex II of Commission Decision 2009/491/EC). This provision takes advantage of information that the 23 EU Member Port States obtain exclusively in their capacities as port states. It mandates these EU members to report to the Commission (and to the other EU Member States), and inform the flag State concerned, 142

111 European Maritime Safety Agency (2010), EMSA 5-Year Strategy, p. 23. 112 See the reproduction of the Annex in commentary section III.1. on Article 3 of the Regulation. 113 European Maritime Safety Agency (2010), EMSA 5-Year Strategy, p. 23.

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if they find that valid statutory certificates114 have been issued by ROs acting on behalf of a flag State to a ship which does not fulfil the relevant requirements of the international conventions115 or in the event of any failure of a ship carrying a valid class certificate116 and relating to items covered by that certificate. Only cases of ships representing a serious threat to safety and the environment or showing evidence of particularly negligent behaviour of the RO shall be reported by the EU Port States. The RO concerned shall be advised of the case at the time of the initial inspection so that it can take appropriate follow-up action immediately. c) Paragraphs (3) and (4): Visits to ROs / Review of Quality Management Systems

Visits organised by EMSA pursuant to Article 8(3) of the Regulation cover 144 both the head offices of ROs as well as selected regional, field and site offices. Moreover, even visits to particular ships are possible to verify the performance of the ROs.117 However, ship visits will be a rather random exception. In 2011 and 2012, EMSA’s visits to ROs focused on assessing their Quality 145 Management Systems (QMS) and on verifying the proper implementation of statutory and technical requirements. In 2013, EMSA carried out 21 such visits.118 With regard to the internal and external QMS audits, the ROs are required by Article 8(4) of the Regulation to “make available” the results and findings of those audits to the COSS (i.e. the Committee on Safe Seas and the Prevention of Pollution from Ships as established by Regulation EC/2099/2002). Since 2014, EMSA is prioritising inspections, subjecting some ROs to more 146 detailed scrutiny in case their past performance or other factors point to a higher risk profile.119 A designated unit within EMSA assesses these inspections horizontally. A recent study by the European Parliamentary Research Services has revealed that EMSA’s support is appreciated by most EU Member States acknowledging that its activities relieved them of some of the administrative burdens previously carried by them.120 Furthermore, EMSA’s reports provide a general overview of the situation of the ROs within the EU discussing the relevant common issues. On the other hand, some EU Member States would like to see

114 115 116 117

See the legal definition in Article 2(g) of the Regulation. See the legal definition in Article 2(b) of the Regulation. See the legal definition in Article 2(i) of the Regulation. Third Maritime Safety Package: Ex-Post Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study by EPRS (European Parliamentary Research Services), Ex-Post Impact Assessment Unit, PE 536.331 – December 2014, p. 71. 118 EMSA Work programme 2014, p. 16, see: http://www.emsa.europa.eu/emsa-documents/ latest/77-publications/2009-work-programme-2014.html [last access: April 2015]. 119 Ibid. 120 Third Maritime Safety Package: Ex-Post Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study by EPRS (European Parliamentary Research Services), Ex-Post Impact Assessment Unit, PE 536.331 – December 2014, p. 71.

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an increase in the information provided by EMSA, especially with regards to their findings on the functioning of the ROs.121 Article 9 1.

Recognised organisations shall ensure that the Commission has access to the information necessary for the purposes of the assessment referred to in Article 8(1). No contractual clauses may be invoked to restrict this access. Recognised organisations shall ensure in their contracts with shipowners or operators for the issue of statutory certificates or class certificates to a ship that such issue shall be made conditional on the parties not opposing the access of the Commission inspectors on board that ship for the purposes of Article 8(1).

2.

9. Article 9 Regulation EC/391/2009 – Access to Information from ROs

Article 9 of the Regulation serves to exclude any possible obstacles or objections submitted by ROs when EMSA (acting mostly for the Commission) carries out its (at least) bi-annual assessment of a RO. In this context, Recital (13) of the Regulation emphasizes that “as part of the monitoring of the operations of [ROs], it is crucial that Commission inspectors have access to ships and ship files regardless of the ship’s flag in order to ascertain whether the [ROs] are complying with the minimum criteria laid down in this Regulation in respect of all ships in their respective classes.” 148 Recital (19) of the Regulation adds that “transparency and exchange of information between interested parties, as well as public right of access to information, are fundamental tools for preventing accidents at sea.” Consequently, “[ROs] should provide all relevant statutory information concerning the conditions of the ships in their class to the port State control authorities and make it available to the general public.” 149 Consequently, a RO’s contractual confidentiality clauses with shipowners or other clients or a RO’s general principles of business secrecy may not be invoked against EMSA and/or the Commission in the course of an assessment under EU Law. Specifically, pursuant to Articles 8(1) and (3) of Regulation EC/ 391/2009, the commercial clients of the ROs, i.e. shipowners and/or operators, are bound to contractually agree to the possibility of Commission inspectors (i.e. mostly EMSA inspectors) boarding the vessel and inspecting it while it is moored in any port of the world. 150 In return, Commission Regulation EU/788/2014 grants procedural rights to the ROs in order to safeguard their business secrets. These rights are discussed in more detail in the commentary section relating to Article 6(3) and (4) of the Regulation because the danger of a possible disclosure of sensitive information is generally rising when the Commission institutes possible proceedings against a certain RO with the possible outcome to impose fines or periodic penalty pay147

121 Ibid.

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ments as a result of the assessment carried out in accordance with Articles 3, 8 and 9 of the Regulation.122 In infringement proceedings, Article 14(4) of the Commission Regulation 151 mandates the Commission to protect a RO’s business secrets and other confidential information. The same must apply to assessments pursuant to Article 3, 8 and 9 of the Regulation as a necessary pre-stage of possible infringement proceedings. When the proceedings reach this stage, a RO concerned shall have the right to access the documents and information contained in its file. When granting such access, the Commission shall have due regard to business secrets, confidential information or the internal character of documents issued by the Commission or EMSA (Article 16(4) Commission Regulation).123 Generally, Article 18(1) Commission Regulation mandates that all relevant proceedings shall be carried out subject to the principles of confidentiality and of professional secrecy. According to Article 18(2) Commission Regulation, the Commission, EMSA, and the authorities of the Member States concerned, as well as their officials, servants and other persons working under their supervision shall not disclose information acquired or exchanged by them and of the kind covered by the obligation of professional secrecy and confidentiality. However, the RO has to clearly identify any material considered to be confidential, giving the reasons for it, and provide a separate non-confidential version by a date set by the Commission (Article 18(3) Commission Regulation). Article 10 1.

Recognised organisations shall consult with each other periodically with a view to maintaining equivalence and aiming for harmonisation of their rules and procedures and the implementation thereof. They shall cooperate with each other with a view to achieving consistent interpretation of the international conventions, without prejudice to the powers of the flag States. Recognised organisations shall, in appropriate cases, agree on the technical and procedural conditions under which they will mutually recognise the class certificates for materials, equipment and components based on equivalent standards, taking the most demanding and rigorous standards as the reference. Where mutual recognition cannot be agreed upon for serious safety reasons, recognised organisations shall clearly state the reasons therefor. Where a recognised organisation ascertains by inspection or otherwise that material, a piece of equipment or a component is not in compliance with its certificate, that organisation may refuse to authorise the placing on board of that material, piece of equipment or component. The recognised organisation shall immediately inform the other recognised organisations, stating the reasons for its refusal. Recognised organisations shall recognise, for classification purposes, certificates of marine equipment bearing the wheel mark in accordance with Council Directive 96/98/EC of 20 December 1996 on marine equipment.

122 See commentary sections B.6.c) and d)on Articles 6(3) and (4) of the Regulation. 123 Such internal documents may include documents or parts of documents pertaining to the internal deliberations of the Commission and its services and of EMSA, including the opinions and recommendations of EMSA addressed to the Commission as well as documents or parts of documents forming part of the correspondence between the Commission and EMSA or between the Commission and Member States (Article 16(5)(a) and (b) Commission Regulation.

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2.

3.

4.

5.

6.

They shall provide the Commission and the Member States with periodic reports on fundamental progress in standards and mutual recognition of certificates for materials, equipment and components. The Commission shall submit a report to the European Parliament and the Council by 17 June 2014, based on an independent study, on the level reached in the process of harmonising the rules and procedures and on mutual recognition of certificates for materials, equipment and components. The recognised organisations shall cooperate with port State control administrations where a ship of their class is concerned, in particular in order to facilitate the rectification of reported deficiencies or other discrepancies. The recognised organisations shall provide to all Member States’ administrations which have granted any of the authorisations provided for in Article 3 of Directive 2009/15/EC and to the Commission all relevant information about their classed fleet, transfers, changes, suspensions and withdrawals of class, irrespective of the flag the ships fly. Information on transfers, changes, suspensions, and withdrawals of class, including information on all overdue surveys, overdue recommendations, conditions of class, operating conditions or operating restrictions issued against their classed ships, irrespective of the flag the ships fly, shall also be communicated electronically to the common inspection database used by the Member States for the implementation of Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port State control at the same time as it is recorded within the recognised organisation’s own systems and in any case no later than 72 hours after the event that gave rise to the obligation to communicate the information. That information, with the exception of recommendations and conditions of class which are not overdue, shall be published on the website of these recognised organisations. The recognised organisations shall not issue statutory certificates to a ship, irrespective of its flag, which has been declassed or is changing class for safety reasons, before giving the opportunity to the competent administration of the flag State to give its opinion within a reasonable time as to whether a full inspection is necessary. In cases of transfer of class from one recognised organisation to another, the losing organisation shall, without undue delay, provide the gaining organisation with the complete history file of the ship and, in particular, inform it of: (a) any overdue surveys; (b) any overdue recommendations and conditions of class; (c) operating conditions issued against the ship; and (d) operating restrictions issued against the ship. New certificates for the ship can be issued by the gaining organisation only after all overdue surveys have been satisfactorily completed and all overdue recommendations or conditions of class previously issued in respect of the ship have been completed as specified by the losing organisation. Prior to the issue of the certificates, the gaining organisation must advise the losing organisation of the date of issue of the certificates and confirm the date, place and action taken to satisfy each overdue survey, overdue recommendation and overdue condition of class. Recognised organisations shall establish and implement appropriate common requirements concerning cases of transfer of class where special precautions are necessary. Those cases shall, as a minimum, include the transfer of class of ships of 15 years of age or over and the transfer from a non-recognised organisation to a recognised organisation. Recognised organisations shall cooperate with each other in properly implementing the provisions of this paragraph.

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10. Article 10 Regulation EC/391/2009 – Mutual Recognition Within Ship Classification

The imposition of fines and periodic penalty payments (see Article 6 of the 152 Regulation) or the threat of a possible withdrawal of recognition (see Article 7 of the Regulation) could be perceived to have generated the biggest potential for controversy between the EU ROs and the European Commission since 2009. However, this is not the case. Instead, Art. 10 of Regulation EC/391/2009 – especially the first paragraph of the provision – has proven to be the most problematic and controversial provision of the Regulationin practice.124 A more thorough analysis of Article 10 of the Regulation requires both 153 knowledge of purely private classification and an understanding of the intricate and ever-increasing technological challenges related to private classification. The ROs have stressed that a modern ship is “a complex engineered unit that comprises significant structural elements, sophisticated power producing machines that provide propulsion and electrical power to the ship, a wide range of auxiliary mechanical and electrical systems, and a large number of items of equipment that are integrated into these systems.”125 Article 10 of the Regulation directly impacts the legal treatment of the various materials, equipment and components of this “complex engineered unit”. As such, Article 10 of Regulation EC/391/2009 entails legal consequences which are – so far – at least partly unknown. Although the provision is rather descriptive in nature, Article 10 of Regulation EC/391/2009 is thus most difficult to comment on, also for purposes of legal theory. Via Article 10 of the Regulation, the Commission has pushed forward a rather 154 “delicate” agenda of mutual recognition of class certificates (as legally defined in Article 2(i) of the Regulation), i.e., documents issued by a RO certifying the fitness of a ship for a particular use or service in accordance with the rules and procedures laid down and made public by that RO.126 Generally, Recitals (17) and (18) of the Regulation summarise the political and legal objectives pursued by the Commission: “[ROs] should be obliged to update their technical standards and enforce them consistently in order to harmonise safety rules and ensure uniform implementation of international rules within the Community. Where the technical standards of [ROs] are identical or very similar, mutual recognition of certificates for materials, equipment and components should be considered in appropriate cases, taking the most demanding and rigorous standards as the reference. While each [RO], in principle, should be held responsible solely and exclusively in relation to the parts it certifies, the liability of

124 See Fairplay Magazine of 4 November 2010, pp. 22 (“ROs must learn to share in class”); Tradewinds of 27 April 2012, p. 2 (“Brussels smells a class ‘conspirary’”). 125 Mutual Recognition within ship classification in accordance with Article 10.1 of Regulation (EC) No 391/2009, p. 20. 126 See commentary section B.1.b) relating to Article 1, second sentence, of the Regulation.

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[ROs] and manufacturers will follow the agreed conditions or, as the case may be, the applicable law in each individual case.” 155 Before the Regulation was passed, the Commission estimated that a higher degree of mutual recognition could reduce industry costs (i.e. those of the marine equipment and shipbuilding industries) by up to one billion EUR.127 On the other hand, implementing the requirements for mutual recognition is costly as well because additional processes are required to ensure that system safety is not compromised through inappropriate certification and the additional costs associated with the development work.128 Thus, it is hardly surprising that Article 10 of Regulation EC/391/2009 was (and still is) heavily criticized both by ROs, shipowners, insurers and even also by some EU Member States, basically for the following main reasons: – Quite obviously, ROs would lose a lucrative business, i.e., re-certification of marine equipment on multiple vessels which has been described as being “highly profitable” for ROs in the past.129 However, in the regulatory view of the European Commission the traditional system was “prone to abuse”, “placing a heavy and unjustified burden on the industry and raising unnecessary barriers to trade”.130 – Second, there were fears (of both ROs and shipowners) that a “forced” imposition of mutual recognition at the EU level (resulting inter alia in a fragmentation of the survey, certification and storage of technical records) would negatively affect ship safety on the global level. Shipowners stressed that their appointment of a particular RO is often a decision based on trust and traditional business relations which could be undermined by mutual recognition. The same line of argumentation applies to marine insurers as well because important bases for underwriting and risk evaluation are trust and business experience with certain classification societies and shipowners. – Third, the EU plans for mutual recognition were perceived to prepare potential extra-territorial effects of the Regulation131 because its legal substance reaches deeply into the “traditional” private sector as served by classification societies for centuries,132 governed so far exclusively by internal self-regulation of the “classes” – especially within the forum of the IACS – 127 Lloyd’s List of 12 July 2010, front page (“Brussels moves to silence transport law opponents”). 128 Joint Report, SEA Europe and the EU ROs Joint Workshop on Mutual Recognition of Certification under Article 10 of EC Regulation 391/2009 p. 6 (para. 4). 129 Tradewinds of 27 April 2012, p. 2 (“Brussels smells a class ‘conspirary’”). 130 Lloyd’s List of 12 July 2010, front page (“Brussels moves to silence transport law opponents”). 131 See also Third Maritime Safety Package: Ex-Post Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study by EPRS (European Parliamentary Research Services), Ex-Post Impact Assessment Unit, PE 536.331 – December 2014, p. 76. 132 See the preliminary remarks to the Regulation and the Directive (under section A.) and commentary section B.1.b) relating to Article 1, second sentence, of the Regulation.

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but not by an international public regulator. Additionally, not less than six EU ROs have their corporate headquarters outside of the EU,133 and especially some of those ROs fiercely opposed the proposed rules EU on mutual recognition. Already before Regulation EC/391/2009 was passed, the Commission’s loom- 156 ing new powers had thus been identified – at least partly – as problematic from the perspective of public international law.134 However, more than five years later, Recital (25) of Commission Implementing Regulation EU/1355/2014 (and also of Commission Implementing Directive 2014/111/EU) clearly stated in appeasement that: “The scheme for the mutual recognition of class certificates for materials, equipment and components laid down by Article 10(1) of Regulation (EC) No 391/2009 is only enforceable within the Union in respect of ships flying the flag of a Member State. As far as foreign vessels are concerned, the acceptance of relevant certificates remains at the discretion of relevant non-EU flag States in the exercise of their exclusive jurisdiction, notably under the United Nations Convention on the Law of the Sea (UNCLOS).” Some non-EU flag States might argue that this kind of official declaration has been uttered far too late since Regulation EC/391/2009 itself is lacking such an explicit statement of non-enforceability outside of the EU. But above all, by virtue of the EU Regulation, the EU ROs are still put into an unpleasant “hybrid” position between the EU and its flag States on the one hand and non-EU flag States on the other hand. This is also because EU ROs are obliged to report to the Commission and to the EU flag States’ administrations which have granted authorisations to them “all relevant information about their classed fleet, transfers, changes, suspensions and withdrawals of class, irrespective of the flag the ships fly” (see below, Articles 10(4) and (5) of the Regulation). a) Paragraph (1): Obligations of ROs under the EU Mutual Recognition Concept

As indicated above, Article 10(1) of the Regulation – a descriptive and 157 lengthy sub-paragraph – is probably the most challenging provision of the whole Regulation, both from the perspectives of classification practice and legal theory. Unlike other areas where the IMO regime and EU Law regularly follow the same methodological approaches and policy objectives (in fact, the EU often mirroring IMO rules and reinforcing them within the EU legal order), Article 10(1) of Regulation EC/391/2009 reflects a unique EU agenda which differs from the objectives of the IMO. Generally, it is a provision which seeks to instigate an improved harmonisation of differing business practices (in this case: 133 See the list in commentary section C.4.b), i.e., the commentary on Article 4(2) of Directive 2009/15/EC. 134 See also generally Reuß/Pichon, The European Union’s Exercise of Jurisdiction Over Classification Societies, 67 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (2007), pp. 119, at 130.

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classification services). As such, Article 10(1) of the Regulation intends to remove existing barriers to trade within the EU’s internal market. 158 In contrast to the EU, the IMO obviously does not address the harmonisation of markets but concentrates on its core objective of globally achieving “safe, secure and efficient shipping on clean oceans”. Moreover, the IMO would also lack the necessary legal instruments to enforce rules on mutual recognition of classification certificates directly on the ROs. Nevertheless, the IMO as well promotes an intensified standardization of ROs’ rules and procedures, as particularly evidenced by Rule 3.9.3 of Part II of the IMO’s new RO Code (entitled: Cooperation between ROs). This rule sets out a comparable policy agenda of the IMO albeit in a much more “soft” form and “under the framework established by the flag State”.135 Mutual recognition is not addressed by Rule 3.9.3 of the IMO RO Code but rather it is labelled as “mutual cooperation”, both between ROs and among flag States themselves. 159 For reasons commented on in more detail under Article 2 of Regulation EC/ 391/2009, the first three sub-provisions of Rule 3.9.3 of Part II of the IMO RO Code have been declared to be incompatible with EU Law in late 2014.136 In its decision of 2014, the Commission concluded that the cooperation mechanisms provided for in the RO Code would limit the scope of the cooperation framework established by Article 10 of Regulation EC/391/2009 to the ROs’ activities with regard only to ships flying the flag of EU Member States. This would be in contradiction with the legal requirements of Article 10(1) of the Regulation. In fact, Article 10(1), first sentence, of Regulation EC/391/2009 mandates EU ROs to consult with each other periodically with a view to maintaining equivalence and aiming for harmonisation of their rules and procedures and the implementation thereof. Thus, Regulation EC/391/2009 generally entrusts the EU ROs themselves with the task of conducting the overall process which shall lead, eventually, to greater harmonisation and finally to a mutual recognition of class certificates. This objective is also apparent from the following two sentences of Article 10(1) of the Regulation: The second sentence of the provision requires ROs to “cooperate with each other with a view to achieving consistent interpretation of the international conventions, without prejudice to the powers of the flag States”.

135 The first two sub-provisions of Rule 3.9.3 of the RO Code read: “Under the framework established by the flag State, the ROs shall cooperate and share relevant experience with other ROs with the view to standardizing processes concerning statutory certification and services for the flag State, as appropriate. (3.9.3.1) Under the framework established by a flag State or a group of flag States, the organizations recognized by this State or these States shall establish and maintain appropriate technical and safety-related cooperation processes regarding statutory survey and certification services of ships, which may affect the validity of certificates issued by other ROs either in whole or in part on behalf of the said flag State(s). Flag States shall seek to mutually cooperate in order to ensure, as far as practicable, the compatibility of their respective frameworks. (3.9.3.2)”. 136 See commentary section B.2.a) on Article 2 of Regulation EC/391/2009.

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The flesh and bones of the EU’s mutual recognition agenda follows in the 160 third sentence of Article 10(1) of the Regulation mandating ROs “in appropriate cases” to agree “on the technical and procedural conditions under which they will mutually recognise the class certificates for materials, equipment and components based on equivalent standards, taking the most demanding and rigorous standards as the reference”. In order to implement these new legal obligations for ROs of “consulting, cooperating, agreeing” on the way forward in mutual recognition in accordance with the first three sentences of Article 10(1) of Regulation EC/391/2009 the EU ROs first had to find a common institutional format and suitable coordination methods. In 2009, the EU ROs set up a new group establishing a modus operandi around an Advisory Board137 and a Technical Committee138 composed of representatives from all EU ROs.139 These bodies are now responsible for developing and maintaining technical requirements (TRs) in place. Initially, the members of this forum met more than 20 times between 2009 and 2012140 adopting a very cautious but at the same time constructive approach on how to implement the requirements of Article 10(1) of the Regulation. In particular, the EU ROs Mutual Recognition Advisory Board and Technical 161 Committee systematically developed a step-by-step approach resulting in a – now continuously evolving – “Type Approval” methodology for materials, equipment and components, based on safety considerations.141 From a practical point of view, this was probably the only approach which made sense in terms of implementation because both the EU as well as the IMO already recognize the application of type approval schemes for marine equipment.142 Even Article 10(1) of Regulation EC/391/2009 itself already incorporated 162 type approval “silently”, i.e., by a reference to the EU’s harmonised rules on specific items of marine equipment: The fourth sub-paragraph of Art. 10(1) mandates ROs “to recognize, for classification purposes, certificates of marine equipment bearing the wheel mark in accordance with Council Directive 137 The Advisory Board has the overall responsibility for the administration of the procedures and methods of work between the EU ROs, see: First Report to the European Commission and the Member States (October 2012): Mutual Recognition within ship classification in accordance with Article 10.1 of Regulation (EC) No 391/2009, p. 10 (hereinafter: First EU RO Report 2012). 138 See ibid., the Technical Committee is responsible for developing recommendations for the Advisory Board regarding the identification of appropriate materials, equipment and components for Mutual Recognition, adopting the agreed technical requirements and procedures to use for Mutual Recognition of classification certificates and for specifying documentation and design evaluation requirements and other relevant technical conditions. 139 First EU RO Report, p. 4. 140 First EU RO Report (Foreword). 141 For more details see, e.g.: First EU RO Report, p. 12; Third Maritime Safety Package: ExPost Impact Assessment on the Implementation and Effects of the Third Maritime Safety Package, Study by EPRS (European Parliamentary Research Services), Ex-Post Impact Assessment Unit, PE 536.331 – December 2014, p. 74. 142 For the IMO see IMO Doc. MSC.1/Circ.1221 of 11 December 2006 which clarifies the purpose and procedures of the type approval certification scheme used by the flag States, classification societies and other recognized bodies.

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96/98/EC of 20 December 1996 on marine equipment”. By virtue of Commission Directive on Marine Equipment (2013/52/EU) the EU has recently updated the related legal rules. The EU continues to apply the type approval approach (see Article 2 of Commission Directive 2013/52/EU).143 Thus, mutual recognition for certificates issued on the basis of the Marine Equipment Directive, i.e. certificates bearing the wheel mark shall be recognised not only for statutory certification, but also for class certification. For the European marine equipment industry this limited legal effect of Article 10(1) of Regulation EC/391/2009 constitutes an important benchmark for the introduction of mutual recognition for other (i.e. non-wheel mark) classification certificates. 163 The EU ROs individual process for mutual recognition-related type approval currently consists of three main stages:144 1. Design evaluation involving engineering evaluation and witnessing of manufacturing and testing processes;145 2. Production quality assurance (PQA) which aims to ensure the consistency of production with the approved design and manufacturing process; 3. The EU RO maintenance process which aims to ensure all changes to EU RO mutual recognition documentation go through the appropriate review and approval process; consulting with industry where necessary. 164 Via the concept of creating generally acceptable Mutual Recognition Type Approval Certificates (MR TACs) for particular pieces of materials, equipment or components intended for a ship to be recognised by the EU RO classing the ship, these certificates may – note: not must – also be recognised by other EU ROs. The methodology is supplemented by the EU ROs Technical Committee gradually defining common technical requirements (TRs) which adhere to Article 10(1), third sentence, of the Regulation, i.e., “taking the most demanding and rigorous standards as the reference” for the TRs. As a result, vessel-related materials, equipment and components have been now been categorized by EU ROs in a hierarchically-applied “safety pyramid” which incorporates six different safety levels:

143 Commission Directive 2013/52/EU of 30 October 2013 amending Council Directive 96/98/EC on marine equipment, OJ L304/1 of 14 November 2013. 144 See: Supplement No. 2 to the First EU RO Report (1 July 2014), p. 8; EU RO Mutual Recognition Group Newsletter, Issue No. 2 (July 2014), p. 6 (available online: http:// www.euromr.org [last access: April 2015]. 145 For example, the EU ROs have informed that, currently, eight mutual recognition technical requirements (MR TRs) require witness testing by the EU ROs surveyor in accordance with the “most demanding and rigorous” principle of Article 10(1) of Regulation EC/391/2009, see Statement from the EU RO MR Group on the Report from the Commission to the European Parliament and the Council (Pursuant to Article 10.2) (available online: http:// www.euromr.org/statement [last access: November 2015].

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Source: First Report to the European Commission and the Member States (October 2012): Mutual Recognition within ship classification

165

in

accordance

In terms of ship safety, the first two levels of that safety pyramid are not criti- 165

Incal terms of shipfor safety, the first two levels of safety pyramid are not critical enough for mutual enough mutual recognition ofthat classification certificates as they either do recognition of classification certificates as they either do not require any classification or not require any classification or certification at all (level 1) or manufacturers’ certification at all (Level 1) or manufacturers’ declarations of conformity are deemed to be declarations of(Level conformity areROs deemed be sufficient byentertainment ROs (level systems 2). Theas EU sufficient by ROs 2). The EU have to stated furniture and ROsexamples have stated furniture entertainment good examples for level good for Level 1 whileand examples for Level 2systems are, e.g., as distribution boards, semi141 conductor and e.g., condensers. 1 while converters, examples sounding for levelrods 2 are, distribution boards, semi-conductor con-

verters, sounding rods and condensers.146 Direct involvement of classification services via Type Approval – thus imple- 166 Direct involvement of classification services via Type Approval – thus implementing Article menting Article 10(1) of the Regulation – starts at level 3 of the safety pyramid. 10(1) of the Regulation – starts at Level 3 of the safety pyramid. The materials, equipment and The materials, and components falling under this vessel-related category aresafety still components falling equipment under this category are still considered to have a lower criticality, thus to enabling Typesafety Approval Certificates TACs) to be considered have aMutual lowerRecognition vessel-related criticality, thus(MR enabling Mutugenerally acceptableType for EUApproval ROs. As a result, vessel-related approval mass acal Recognition Certificates (MRtype TACs) to facilitates be generally production for marine equipment since no individual or product-specific certificates are required ceptable for EU ROs. As a result, vessel-related type approval facilitates mass for those products anymore.142 This is what the European Commission has envisioned to be the production marine no individual orfor product-specific certifikey advantagefor of Article 10 equipment of Regulationsince EC/391/2009 (however, a wider range of products 147 incates the long and somefor additional the EU ROs scheme below). arerunrequired those criticism productsonanymore. This is stated what further the European Commission has envisioned to be the key advantage of Article 10 of Regulation 167 EC/391/2009 (however, for a wider range of products in the long run and some The EU ROs criticism are currently on EU on-going a “tierbelow). system” which gradually additional oninthe ROsprocess schemeofisdeveloping stated further includes more and more specific products into the tiers of type approved materials, equipment The EU ROs are currently in on on-going process of developing a “tier sys- 167 tem” which gradually includes more and more specific products into the tiers of type approved materials, equipment and components. The adoption of a first tier 141 RO Report, p. 13. ofFirst TRsEU(Tier 1) for eleven initial products has been implemented since the begin166

142

The term “products” is used to include “materials, equipment and components” within the meaning of Article 10(1) of Regulation EC/391/2009.

146 First EU RO Report, p. 13. 58 147 The term “products” is used to include “materials, equipment and components” within the meaning of Article 10(1) of Regulation EC/391/2009.

Henning Jessen

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Chapter 4, VII.

ning of 2013.148 In mid-2013, another eleven products followed for Tier 2 of type approved products.149 Revised Tier 1 and 2 MR TRs were released in March 2014.150 By mid-2014, the EU ROs had introduced TRs for a total of 34 type approved products under the Mutual Recognition scheme, thus, Tier 3 of type approved products added another 12 products to the list.151 Effective from 1 July 2015, the EU ROs added another ten products to the list via Tier 4.152 As of mid-2015, the EU ROs were offering mutual recognition type approval certification for a total of 44 products. Work on the next tier of products (Tier 5) commenced soon after the release of the ten products relating to Tier 4 and is expected to be finalised in 2016. 168 Consequently, by mid-2015 about 60% of all of the 75 to 90 suitable type approved products (i.e., those products falling into level 3 of the Safety Pyramid) had been fully integrated into the EU ROs Mutual Recognition scheme. According to the EU ROs, already Tier 1 and Tier 2 products are widely used within ship’s systems and should impact a large number of equipment suppliers to the maritime industry.153 Thus, Tiers 3 and 4 (and future Tiers to be determined) will have a comparable positive economic effect for the marine equipment industry. On the other hand, it has already been criticized that the system which has been developed so far by the EU ROs is still closer to “mutual acceptance” as compared to a real “mutual recognition”.154 In particular, the above-mentioned Mutual Recognition Type Approval Certificates (MR TACs) do not replace all other traditionally established classification certificates but rather they are accepted by all EU ROs. Thus, they are practically acquired on top of existing cer148 First EU RO Report, p. 4, the eleven initial products for TR1 were: Circuit breakers, resin chocks, contactors, electrical motors