Bearing The Law of the Arctic
Marcel Vaarzon-Morel and Bora Dukuz
Scientists and the petroleum industry no longer are the sole explorers of the Arctic. With the melting polar ice caps new routes are opening up to places only a privileged few could have had passage to in the past. Icebreakers were almost a necessity for the few scientific and cargo vessels that dared to gaze upon the ivory hills. Therefore, while unfortunate, arguably one of the few benefits brought on by climate change has been the opening of passages and is positive effect on trade and tourism. Regardless of purpose, whether it is for money, glory or furtherance of our understanding of human existence, this part of our world is a sight to behold.
Currently, in the most convenient sense summer is the time to visit this virgin land. However, time is a factor, as according to research by Prof Dirk Notz from the Max Plack Institute for Meteorology, Arctic summers will soon no longer involve the fluffy white stuff. The new research gives about 20 years before there is no ice left for the Arctic summer months. All this brings up the question of: how do I see this land of wonder before there is no land left to visit? Which brings up even more questions, such as: how do I gain safe passage? Which countries allow for access? Who owns the arctic? Which laws govern the arctic? Which country should I start my journey in? Can I enter through international waters? Could I enter the Arctic with a private vessel?
Beyond the requirements of Safety-of-Life-at-Sea (SOLAS) and the environmental marine convention (MARPOL), that are recommendations on standards of maritime safety and pollution prevention, the safe navigation of the Arctic depends on the time of the year a passage is attempted. Different times require different classes of ships. International association of Classification Societies (IACS) identifies the requirements for a ship to be classified as Polar Class. However, there have been some difficulties with definitions of the classes. Beyond the hull strength and navigational requirements, there is quite a bit to consider: International Maritime Organization (IMO) guidelines could really help with creating a checklist.
Currently, private ships are following voluntary international guidelines. However, the IMO Polar Code has extensive recommendations that are not limited to charts: From performance standards to survival craft, the Polar Code has painstakingly specific recommendations. It also includes a chapter on voyage planning. The Polar Code does make presumptions on who would be entering the water, in the sense that the smallest vessel referred to in the code is a passenger ship. Therefore, a catamaran with a crew of four would not have a manual on board. So, technically, it was not written with a smaller private vessel in mind, but it is a great insight into what it takes to sail the icy sea.
In the past there has been some criticism of the IMO: The fact that it is only recommendations and not legally binding and hence unenforceable; the confusing classifications of polar ships does make things harder especially for non-commercial ships; and it does clash with international law. The clash does create some problems not just for large commercial vessels, but also for small private vessels: Canada had two very published events that involved large international cargo ships that one would assume to have captains with a greater understanding of and experience with The Law of the Sea than a captain of a private vessel.
ONE TO RULE THEM ALL
To confuse matters further, the Arctic does not have a single treaty or code or any legislation that governs all of it, instead there are many treaties involving two or more countries. The Arctic Council, created in 1996, is intergovernmental forum: Arctic Council was a step in the right direction to simplify things, but, for our concerns, it mostly deals with Protection of the Arctic Marine Environment (PAME).
Additionally, there are five countries that claim ownership of waters in the Arctic. These are: Canada, Norway, United States, Denmark and Russia. Their claims end at the end of the Exclusive Economic Zone (EEZ)(370km) of each country. From there starts the international waters and rule of international law, unless there are no international waters, but another EEZ. We all know there isn’t an actual line in the water, so the fishermen and even the government vessels have mishaps when walking the line. There has been quite a bit of debate on which passageways to the Arctic are considered international waters. Although, the United Nations Convention on the Law of the Sea (UNCLOS) needs to be kept in mind, both Canada and Russian Federation have pretty strict rules for navigation in their waters. In addition, United States never joined the UNCLOS. With so many countries involved, there will be some disputes: While countries like Russia and Canada claim parts of Arctic as national waters, European union and United States see them as international waters. Hence, when one wonders if there is any single code of law in the arctic, just remind yourself that each country in the arctic has its own regulations for governing marine pollution let alone all the other numerous areas.
Innocent Passage as defined by UNCLOS means that as long as the vessel does not affect the peace, order or security of the coastal state, it should not need permission to enter another state’s waters. This means that you should have some idea of the laws governing those coastal states seas and should not assume anything. This is a problem: Northwest Passage to Arctic is considered national waters by Canada, but considered international waters by United States and EU; Northeast Passage to the Arctic is Russian waters, available to icebreakers for four months of the year; Beaufort Sea is passed the Chukchi Sea, it is partially disputed between Canada and United states and the waters around Hans Island are disputed between Canada and Denmark.
Ever since the border expansion of United States at the end of World War 2 – which was adopted by every country that has a claim in the Arctic – there have been way more than a handful of international tête-à-têtes, mostly concerning large vessels: One thing leads to another and coast guard gets involved, then its an international stand-of.
With all this in mind there are alternative routes: with the Transpolar Sea Route the simplest legal option as it solely relies on the international waters to access the Arctic. However, currently, the only vessels that can take this route are icebreakers. It is theorised that thanks to climate change by 2030 there will be no need for an icebreaker-strength hull to take this route. There is a similar problem involving the Arctic Bridge as it is only accessible only four months a year, but as the ice melts, it will allow for greater access.
If you plan a passage into these icy waters it is a harsh place with unique dangers that will test your will and skill. An endeavour, only a few of the brave should be taking. The dread of knowing exactly where you are in the world, but not knowing which country you are in is a rare experience. However, someone who set their minds on going to the Arctic, isn’t going to be deterred by this possible experience, but just might be delighted by the idea. With all this said, for a non-commercial private vessel, access through a single country to the Arctic, even avoiding the international waters, just might be the safest bet. In addition to all the planning once a route is considered, it would be helpful and recommended to discuss your voyage plans with a solicitor that has experience with Maritime Law and International Law.
SUPERYACHT / ICEBREAKER
Compared to the number of ships at sea, there are only a few ships that can navigate the ice filled waters and even fewer of these are privately owned. There are several icebreakers from 60’s to the 90’s that have been privately purchased and upgraded to a level that they can be called a superyacht. James Packer’s Arctic P is one such example: Built in 1969, it was used for many purposes, including rescues and exploration missions. It has entered the Antarctic more than once: The last time being in 2014 when the ship and crew set a new record. Nevertheless, not everyone wants a ship that has been around since the 60’s: Since 2015, there have been quite a few superyachts that can be honoured with the classification of Polar Class: One such example is the SeaXplorer luxury yacht: Built in accordance with the Polar Code, state of the art, this superyacht was made to go anywhere, including the most rare sights in the Arctic and the Antarctic.
DOMAIN OF THE DARING
If you are serious about a passage to the polar regions it is suggested that a good starting place for research about the sea-worthiness of your vessel in reference to the polar conditions is the IMO, with enough resources online to allow for an educated decision as to whether you make this passage with your existing vessel or an alternate vessel. Although, the guidelines are recommendations, it would be foolish to ignore them. And once again, it would be helpful to discuss your voyage plans with a solicitor.
Solving Disputes with Insurance Companies
Marcel Vaarzon-Morel and Troy Martin
An insurance policy, is it an evil necessity of life? Along with life jackets, EPIRB’s, and flares these are there for your protection. When you enter an agreement with your insurer it is your belief that your insurance will protect you by reducing the financial losses and help to lessen your emotional stress in the event of your boat being damaged, or total loss; or alternatively indemnifying you from another claim if you are at fault.
Unfortunately, as a maritime lawyer I also have clients who, whilst appropriately insured, have their claims rejected by insurers who fail to honour the insurance policy, much to the exasperation of my clients.
In essence, your last shield of protection has failed. While insurers failing to payout are nothing new, it is important you know what to do if this occurs.
STEP 1 – IDENTIFY THE DISPUTE, READ THE PDS AND PREPARE
Firstly, identify the dispute. This may sound obvious. However, the devil is in the detail. You must be aware of what is actually happening with an insurance claim. Occasionally, a dispute may arise from a delay in processing, quality of workmanship of an approved claim, or the insurer not approving certain items in a claim. Sometimes, the insurer will deny or reject a claim in its entirety. In short, insurance companies have a wide range of reasons why they may refuse a claim.
Read the Product Disclosure Statement (PDS) cover to cover. When you buy insurance, you are literally buying into a contract and the PDS is the contract. Find out what the insurer’s obligations and your obligations are and pinpoint in the PDS the part that is causing the dispute.
It is common practice for insurance companies to organise for an assessor to inspect the damage and give an opinion on what they think the cause is and the cost of repair. If the insurer is refusing your claim based upon the findings of the assessor, you may wish to appoint your own independent assessor for their opinion.
You must remember that the insurer pays an assessor. The assessor is not truly independent – and is not writing an expert evidence report under Oath – they will often write things in the report just to keep the insurer happy. They will sometimes cover themselves by clever phrasing like “we are instructed to reject the insured claim”. It may therefore pay off to have your own expert to assess the vessel.
STEP 2 – COMMUNICATE
Every insurance company works slightly differently. However, typically, when a claim is made a claims manager will ‘look after’ your claim. For larger insurance companies, your claims manager may change daily. But you should have a point of contact with the insurance company – a person who actually knows about your claim and makes the decision. If your dispute is quite small (a small delay in processing for example there is a small issue with repair work that the insurer is unaware of) give the claims manager a call or an email. This may solve the dispute simply and quickly.
As difficult as it may be, try to be polite to the claims manager. He or she is the one who will likely make any decision at this stage. The proverb, don’t bite the hand that feeds you, is good advice here. Even though you feel they might never feed you.
But do not spend too much time dealing with the claims manager. If your dispute is not resolved quickly at this informal stage, then it is unlikely the dispute will resolve informally at all. If this is the case, move straight to the next step.
STEP 3 – INTERNAL FORMAL DISPUTE
Each insurer is different, but it is likely your insurer will have an internal dispute resolution department. If you have a dispute or your claim has been denied, lodge a formal dispute. It is free and despite the name, does not require a full technical knowledge of the dispute. It is preferable that this dispute is in writing and concisely states what the dispute is about.
If you have evidence (such as an expert report) use it, refer to it, make it easy for the disputes department to navigate the dispute. Typically it takes a few weeks for the internal dispute stage to finalise with 45 days being the norm.
It is possible a compromise may be offered. Consider it, but remember you have the right to reject any offer or to reject their final decision.
If they telephone you, take your time to think about what was said. If you need some time to think about an offer or how to respond, simply say that you need some time to think or talk about it and call them back. And keep notes of all conversations with the insurer. I can promise you they are.
Eventually, you will receive correspondence from the insurer with the final outcome of the internal dispute resolution.
STEP 4 – FINANCIAL OMBUDSMAN SERVICE
If you are still not satisfied with the insurer after the internal dispute resolution process is complete. You have the right to make a complaint to the Financial Ombudsman Service, or F.O.S for short.
If you are now at this stage, you may wish to seriously consider getting professional legal advice. While having a lawyer on-board at this stage may seem costly at first; it just may pay off in the long run. Solving the dispute at through the F.O.S has considerable advantages with little risk to you. Think of the F.O.S as your time to shine. This is your first chance to have somebody completely and truly independent to settle the dispute.
It is free for you to make a complaint and best of all; the decision of the F.O.S is binding on the insurer but not you! Like the first ball in a game of backyard cricket, you can smash one over the fence without any risk.
Typically, from your first referral of the matter to the F.O.S, the final decision will be around four months. However, both parties are given the chance to settle during the course of the proceedings.
It is important to use the F.O.S proceedings wisely. You only get one chance and if it does not solve here you have little option but to proceed to the costly exercise of court action.
If you are not satisfied with the F.O.S decision you must within 28 days. If you fail to do so, you are bound by the decision of FOS.
STEP 5 – COURT ACTION
In the unfortunate event that you’re unhappy with the decision of the F.O.S you may wish to initiate court action. The particular court you will need to go to will depend on the size of your claim. Costs will depend largely on the size of the claim or complexity of the dispute.
If your dispute is at this stage, it is highly advisable that you get yourself a qualified and experienced lawyer before commencing down this path. Preparing court action is just as important (if not more!) than the actual hearing itself.
You must be aware of the costs and risks associated with it and therefore must make a sensible commercial decision whether or not to proceed. Expert reports, are more than likely essential to proving your case against the insurer and expert reports must be prepared in accordance with the rules of evidence. Failure to do this may prove to be a very costly mistake.
The road to settling a dispute with an insurer is a long and exigent one. However, if done wisely it can eventually have you back on the water enjoying the sybaritic pleasures of boat ownership just like you should be.
Playing Friendly: The Boat-Syndicate Agreement
Let’s face facts – owning a boat is an exercise in expense. There’s the ever-rising cost of fuel, the marina, storage or transportation fees, registration, insurance, and the seemingly endless upkeep and maintenance costs. As a solicitor, I often come across clients who’ve fallen into the trap of buying into the boating dream without fully appreciating the true costs associated with long-term ownership. They’ve overextended their finances, ignored the effects of interest and depreciation, or underestimated the amount of repairs needed; in all cases ending up severely out of pocket. Yachtsmen frequently joke that their vessels are merely holes in the ocean in which to pour their money, and many a mariner will swear to the old saying that BOAT actually stands for ‘Break Out Another Thousand’.
As economic uncertainty continues to loom and cost of living expenses keep rising, it’s becoming harder and harder for some recreational mariners to allocate the necessary funds to keep sailing. When we consider that on average a boat in Australia is taken out just 14 days per year, trying to justify these ongoing expenses (especially to your significant other) can be quite a challenge. It therefore comes as no surprise that private boat syndicate schemes and commercial syndicates are increasing in popularity. And while these certainly reduce the annual spend by splitting costs between several parties, joint-ownership can be a risky venture. It is therefore essential, like any contractual relationship, that you know exactly what you’re signing up for from the outset while also recognising above all else owning a boat should be fun.
BASICS OF THE BOAT-SYNDICATE - PERSONAL ARRANGEMENTS
A boat-syndicate is where two or more individuals decide to purchase a boat between them in the understanding that each will be entitled to a period of exclusive recreational use of the vessel. While these agreements are contractual in nature, they are by no means inflexible, nor do they require formal legal drafting to be effectual. A group of friends who simply pool their resources and buy a boat together would be bound to any verbal agreement made between them as to the terms and conditions of use. However this approach, while surprisingly common among mariners, offers little (if any) protection to the parties if there is a disagreement later down the track. This is especially applicable when not all owners have an equal share in the property. It is highly recommended that any verbal agreement, even between friends, be formalised in writing, signed and dated by all part-owners. This document should expressly state for how long each person gets the boat, over what dates, and under what conditions. It should address issues such as who is responsible for ongoing maintenance, berthing and upkeep. Also its advisable to stipulate what is to happen should someone damage the vessel, default on payment, wants to vary the agreement or sell his or her interest in the vessel.
I have acted in disputes that have involved boat-syndicate agreements between unknown parties. Despite taking precautionary measures, such as signing written agreements the parties involved ended up having a dispute, in one case over the position of the mooring and pre-delivery mooring costs, prior to the boat being delivered. This raises a number of concerns and highlights the importance of having a contract in place that is easily understood between the parties and covers all the relevant areas providing you with appropriate protection of your legal interests as well as the legal avenues you may have if a dispute arises.
The scenario above occurred during such an early stage of the agreement that the dispute was an early warning sign for continuing disputes. And it is more than likely a dispute that occurs at this early stage will lead to a continuing legal relationship between the parties that will fester and eat away at any enjoyment you might get from having ownership in a boat. Therefore if you are looking to enter into a boat-syndicate arrangement it would be wise to enter into a private agreement with people you know and trust, it is also important to be cautious and seek advice when entering into these agreements. If nothing else a cautious, diligent approach will allow you to minimise risk and focus on the positives and enjoyment that one receives from owning a boat.
In some instances, it may be easier to head down the pathway of the commercially managed boat-syndicate.
COMMERICAL MANAGED BOAT-SYNDICATE
A popular alternative to the private agreement is to purchase a share in a vessel directly through a management organisation that do most of the heavy lifting for you. These companies advertising and bringing together owners, providing ongoing maintenance and upkeep of the vessel and performing all the necessary legal and administrative work. They usually charge a yearly flat fee for this service, which, depending on the nature of the scheme, grants members a certain period of time each year in which to enjoy use of the vessel. However behind the outward simplicity of these schemes there often lies some hidden complexity, particularly in relation to questions of ownership. A second option is employing a marine industry solicitor to draft the relevant documents and form a company/trust to manage the boat and its owners.
Unlike chartering a vessel or buying into a timeshare, when entering into a boat-syndicate scheme, you become one of the owners of the vessel. This has two main advantages; owners have a saleable interest at the end of boat-syndicate agreement (usually a period of three years) and the vessel itself is likely to have been well maintained by all participants due to a sense of owners’ pride. However, unlike informal private agreements, you have very little bargaining power in a commercial boat-syndicate and are subject to the conditions as stipulated by the managers of the scheme.
This lack of bargaining power can become an issue when the relationship between the parties is based on the commercial agreement and no prior personal relationship. While any contract made as part of the commercial boat-syndicate will provide you with legal rights sometimes conflicts can arise on a personal level between the parties to the syndicate. Therefore when entering into an agreement it is important to ensure that dispute clauses are included in the contract, and that if there are multiple contracts that the dispute clauses are consistent and easy to follow and understand.
Commercial agreements should also be carefully considered so that issues such as asset ownership and exit clauses are fully understood. Above all owning a boat, regardless of contractual agreements is designed to be fun for everyone within the boat-syndicate. With this in mind a courteous relationship between members who might not know one another is vital as legal rights can sometimes be manipulated if the personal relationships between the parties become bitter. Despite the initial set up difficulties, a carefully thought through boat-syndicate agreement gives you peace of mind, and means all parties can spend more time enjoying the vessel rather than spending time in their solicitor’s office.
Insurance for Cats
Marcel Vaarzon-Morel and David Behne-Smith
You would think that marine insurance policies would be drafted to adequately protect the boat owner generally, given the accepted fact that boats live in a hostile marine environment. And that the insurer’s risk analysis policy would not make the customer the scapegoat, by interpreting their policies so broadly. However, it appears that some insurers are becoming more inclined to reject claims, even when you believe you have adequately maintained your vessel. So given that the rules on the insurance playing field are often not fare, protect yourself.
The starting point is to consider what you will use the vessel for, where and possibly when. This will provide a road map when reading the insurance policy to ensure it meets the special requirements that owning a multihull requires such as salvage; property damage and includes towing to name a few examples. It is important that you are fully informed about the insurance contract you decide on and what happens to your salvaged vessel when it is recovered. The leaflet that you are provided with when you insure your vessel is more important than the cover may suggest. One positive for multihull owners is that traditional differences between multihull and monohull insurance options seem to have faded with advances in design and construction materials.
MULTIHULL INSURANCE PREMIUMS HISTORICALLY
These days the premiums that insurance companies charge are approximately the same amount for equally priced monohull and multihull marine vessels. However, this was not always the case, historically there has been a difference in insurance premiums for multihull users compared to monohull. This was likely because multihulls were either poorly made or the construction materials were limited in the 60’s and 70’s, and thus more prone to sinking in some cases.
Nowadays multihulls are much safer in their design and due to advances in materials. Additionally, it could be argued that multihull designs have become more acceptable within mainstream boating circles. But for whatever the reason it appears that insurance companies charge approximately the same prices for multihulls as they do for monohulls.
CAPSIZED CAT VS MONO
However, any owner of a multihull needs to be more aware than a monohull owner, about whether their insurance policy covers salvage operations. This is because when a monohull capsizes the keel will cause the vessel to self-right. However, this proposition is not possible in a multihulled vessel.
You may not think this is a problem because you believe that your comprehensive insurance will cover you and all you will need is a simple tow to either right your cat or bring it back to safety.
While this might be practically true there are a few important terms to be familiar with when choosing an insurance policy especially, salvage costs, towing costs and various non-salvage costs. And, it is worth going into a little more depth regarding your salvage costs and distinguishing them from towing costs.
WHAT IS SALVAGE?
One of the main areas of dispute when it comes to insurance law is definitions and interpretation of specific words. It is a whole area of law in itself, so it should not come as any surprise that ‘salvage’ does have a specific definition.
If your marine vessel becomes ‘capsized or damaged while you are at sea and there is danger to your boat or yourself’ then you will likely need assistance. This is particularly true for a multihull, which does not self-right itself. Anyone who provides this assistance can be considered a salvor and are conducting a ‘salvage operation’.
There is a historical legal expectation that the salvors be paid a fee for assisting in the recovery of the vessel or its content, or protecting the environment from damage and this continues today on a more commercial basis. Historically this fee was to protect the damaged vessel’s contents from piracy, to encourage salvors to help for reward, as well as to provide monetary compensation for salvors who risk their own vessels and lives to assist in recovering people, vessels and property.
THE DEFINITION OF SALVAGE AND INSURANCE
For the purposes of insurance, it is important to distinguish insurance cover for salvage operations, as opposed to insurance covering damage to property or non-salvage operations. This is because boat insurance typically provides a maximum amount of coverage for different type of claims; for example, damage to the hull is set to a set amount, and damage to the motor is set independently. The same is said for salvage. Plus, what you may think is a salvage operation may not be a salvage operation and you may not even be covered!
Insurance for salvage operations relates to the money that needs to be paid as salvage costs to the salvors, but it may not cover towing costs in a non-salvage situation, such as involving simple towing or minor groundings where there is virtually no danger to the vessel or crew.
Such non-salvage operations may be covered separately in an insurance contract.
PRICE OF SALVAGE OPERATIONS
The price to be paid to the salvors for salvage operations can vary depending on:
• The value of the salvaged vessel (as salvaged) and the value of the other property salvaged,
• The skill used and the efforts made by the salvors in protecting the environment, in salvaging the vessel, its contents and the people,
• How successful the salvor was overall,
• How dangerous it was for the salvor,
• How quickly the salvage operation was done,
• How available other vessels and equipment were for the operation, and
• How prepared, efficient and valuable was the salvors’ equipment.
All this this can come to a substantial sum and it is therefore an important aspect of insurance contracts, whether present in the insurance policy or not.
It is important to briefly note: if the salvage operation gave no ‘useful result’, then there is no obligation to pay a reward to the salvors nor if you refuse expressly and reasonably salvage aid.
The concept of ‘buyer beware’ can cover many different things – also insurance. It is important to remember that you are buying an insurance policy. You are quite literally, buying into contract. If you open up your $4 carton of eggs to make sure non are cracked than it makes no sense not to open up your insurance policy worth thousands of dollars to check its contents.
Salvage fees may be covered by typical insurance contracts; though it is definitely worth checking with your insurer first to confirm this, either by reading the insurance policy (the PDS) or calling and asking, or both! But make sure you receive any confirmations in writing, by email or standard mail to cover you and prevent any questions down the track.
Additionally, salvage clauses in insurance contracts can involve the insurance company gaining ownership of your damaged/written off multi-hull as part of the terms of the contract (and you receiving monetary recompense). It is definitely worth confirming that this is a term you would like in your contract or not.
The importance of reading your insurance contract very carefully cannot be overstated. In any aspects you do not understand you should immediately contact your insurance provider or get legal advice, ideally before signing the contract. Remember, contact your insurance company and get them to send any clarifications or advice in writing – it may prove invaluable later down the track.
If you are still concerned whether or not you are properly covered, you should contact a solicitor ideally well versed in marine law such as Vaarzon-Morel Solicitors.
Marine Salvors Today
Even with all the modern technology yachts are susceptible to the elements of the sea and can become stranded by running aground or some other misadventure. In some circumstances you may able to do little more than don a lifejacket, transmit a mayday message and prepare your crew to abandon ship. Both you and your vessel are now completely reliant on the goodwill of others to come to your aid and salvage the vessel.
Salvage is a term that is widely misunderstood and while evoking colourful images of looting and plundering shipwrecks, in reality the modern day salvor is likely to be skippering a tugboat as they assist the stranger at sea. The salvage operation is an essential part of the seascape, saving lives, property and environmental habitats. Thankfully, with modern technologies, strict safety standards and fast coordinated responses, loss of life at sea is becoming increasingly rare. However, whether or not a vessel or its cargo can be saved is a different story. For a country with a large coastline it is a question of time, risks and available resources, with most salvage attempts requiring specialised assistance and specific equipment to keep a sinking vessel afloat. Given the costs associated with salvage are usually worn by the vessel’s owner it is important to have a basic understanding of the law of salvage.
THE LAW OF PREVENTATIVE SALVAGE
Salvage is an ancient maritime concept originating from the seafaring Rhodians some 3,000 years ago. In an attempt to discourage pirates and looters from interfering with commercial trade, Rhodian law held that those who rescued property lost at sea were entitled to a percentage of the goods as reward for their services. This percentage varied depending on the dangers involved in the recovery efforts, which encouraged individuals to sift through flotsam and jetsam in exchange for generous compensation. From these obscure beginnings the law of salvage evolved to become a cornerstone of our unique system of Admiralty law.
The modern definition of salvage, in the 1989 International Convention on Salvage, branches out significantly from its Rhodian roots. In a world of electric pumps, powered crafts and global positioning systems, salvage is now less about the recovery and more about the measures taken to prevent the loss. However, despite the modern definition one aspect of salvage remains unchanged, unlike land locked law that focuses on punitive actions, salvage laws continue to reward the good deeds of individuals. Where the man off the street voluntarily rescues property from a blazing house fire and does not receive any benefit for his selfless actions the same individual would be entitled to a significant financial reward for preventing loss to the owner’s property in territorial waters, even if the aid is given without the request or consent of the owner. This curious discrepancy can be justified on economic grounds as successful ‘user-pay’ salvage attempts minimise costly insurance claims, reduce potential litigation and encourage professional salvage operations, saving the state and taxpayers from providing similar infrastructure.
Despite salvages increasingly being carried out by experienced commercial entities, anyone who comes to the aid of distressed vessels and provides them with salvage services has the right to financial reward under well-established equitable principles. In order to succeed in such a claim the courts have identified three elements that must be satisfied.
First, a ship, its cargo or crew must be in some form of maritime peril. The danger does not need to be immediate, but must be real or at least based on a reasonably held belief. The courts have been fairly liberal in their interpretation of what constitutes danger, with examples ranging from the threat of piracy, to the loss of a propeller whilst being towed.
Once danger has been established, it must then be shown that aid was voluntarily provided by persons with no prior interest in the vessel or its cargo. The traditional interpretation is that there cannot be a contractual or legal relationship which compels the individual to act. This means the distressed vessel’s captain or crew cannot usually be regarded as salvors as they already have a duty to maintain the boat.
Finally, the salvor must succeed or at least partially in their salvage efforts. This is based on the well-established Roman concept of ‘No cure, No pay’. As is made clear in the Convention, where a salvage attempt fails to produce a ‘useful result’, the salvor will typically not be entitled to any reward for their efforts, unless they are attempting to prevent further environmental damage, such as an oil spill.
Overall, anyone who voluntarily provides successful preventative salvage services should be able to tick all the above boxes to be entitled to a financial payment by the salvee. This amount may be agreed upon privately, however the courts are best suited to make this determination, taking a number of factors into consideration including the time used, promptness of services rendered and the salved value of the vessel. However, in practice most salvage attempts are initiated through formal contractual agreements.
Although the law of salvage historically operated outside the realm of contract law, almost all modern-day salvages are now carried out by professional salvors with vast resources and large commercial fleets around the world. Out of commercial necessity, these organisations use standardised salvaging contracts, the most popular of which is Lloyd’s Open Form (LOF) developed by insurers, salvors and shipping agents in the late 19th Century, these ‘open’ agreements acknowledge the highly-stressful, time-sensitive nature of the operation and the vulnerability of the signing party. To overcome the potential issues relating to mistake, duress or manipulation, the LOF allows parties to defer discussions of cost and makes provisions to agree to be bound to an amount of compensation calculated by a neutral arbiter after the event. The benefit of such a system is that emergency services can be immediately delivered without being bogged down by legal issues or complications.
It should be noted that these operations do not fall within the traditional laws of salvage as commercial salvors are not volunteers and often get paid regardless of the outcome. Further, one major downside to using the LOF in Australia is that all arbitrations must be heard in London under English law. Nevertheless, these uniform and virtually universal agreements have been adopted by nearly all professional salvors.
SCAVENGING OR SALVAGING?
In some situations vessels and their cargo cannot be saved however, contrary to popular belief the sinking of property is not enough in itself to rob the owner of his or her legal title. Goods are only subject to the well-loved principle of ‘finders keepers’ if they have clearly been jettisoned or otherwise abandoned. In all other cases the established principles of salvage still apply. When the British container ship MSC Napoli ran aground in 2007 spilling its cargo across a beach in South Devon, the hundreds of looters who took off with thousands of pounds worth of goods seized possession but not ownership as there had been no clear abandonment. Under salvage law the shipping company was forced to pay the looters a reward for their services, in exchange for the return of the goods. However, in cases where goods would have significantly depreciated in value it is worth considering whether salvage is economically feasible.
Salvors play an invaluable humanitarian, commercial and environmental role in the 21st Century, making sea voyages safer and reducing the impact of maritime disasters. However, their services come at a cost such as saving a sinking yacht in the middle of the sea could be as high as 50% of the yacht’s salvaged value, especially if lives are saved in the process. While it is possible to question the continued appropriateness of what is effectively an antiquated user-pay system, this generous economic compensation is essential to ensure the growth of the salvor industry and to ensure private mariners will continue the long-held tradition of aiding others mariners in distress.
Yacht Racing and the Law
The New Zealand Millennium Cup is back on the agenda with a fleet of yachts showing off on the emerald waters of the Bay of Islands. In these circumstances it seems very fitting to discuss the rules of yacht racing and how it actually applies to the law of sea.
While I would love to talk about when yachting goes smoothly, the sad truth of my profession is the law tends to only get involved when things go wrong. Maritime accidents happen and when they do legal ramifications are likely to arise. Whether it be a fight with insurance companies, seeking compensation or even criminal action, there must be certainty as to law the skipper follows. If this accident occurred during a yacht race, the actual law to be followed is not as simple as one would imagine.
THE INTERNATIONAL REGULATIONS FOR PREVENTING COLLISIONS AT SEA
When on the water you should be familiar with The International Regulations for Preventing Collisions at Sea 1972 (‘COLREGS’). These regulations are known as the ‘rules of the road’ for vessels at sea to prevent collisions.
It is the international standard, widely adopted across the globe and applies to many different types of vessels in different types of waters on different types of voyages.
In Australia, it is adopted as law on the waters of New South Wales. It is hidden away in section 5 of Marine Safety (General) Regulation 2009 (NSW) and needs to be read in conjunction with section 10 of the Marine Safety Act 1998 (NSW). In New Zealand it is found in Part 22 of the Maritime Rules.
THE RULES OF RACING
This all may sound simple so far. But, yachts in a yacht race can be treated differently under the law. It can cause a headache to the poor souls whose yacht race goes from a dream to a nightmare.
The simple fact is that the COLREGS were never intended to govern a fleet of yachts sailing in close proximity to each other. The COLREGS intended purpose is to provide a broad set of rules covering all vessels at sea. Yet, bulk carriers and alike share as much similarity to a yacht as an Airbus A838 to a kite.
The Racing Rules of Sailing (RRS) are based on the COLREGS but with slight variances that take into account the unique circumstances that racing yachts find themselves in. Like the COLREGS, they are adopted worldwide for the sport of sailing.
Importantly, the law can give effect to the RRS over the COLREGS, but only in very specific circumstances.
WHY ARE THE DIFFERENCES IMPORTANT?
You may be asking yourself “Why does it matter which one applies?” This is quite a valid question. Sure there are differences in the rules discussed above. But what does it actually mean for you?
For starters, every skipper of a racing yacht should be familiar with both sets of rules. Preventing a collision would avoid unnecessary and costly heartaches. Besides, it’s a race; avoiding a collision and being first to cross the line goes hand-in-hand with each other. Yacht racing is not a game of dodgem cars.
But, like I said, lawyers tend to only get involved when things are not smooth sailing. In the event of a collision and without even touching on the criminal aspect of breaching the rules, the importance lies in determining who is at fault in the event of a collision.
A key commercial factor between the two rules is how actual liability is worked out.
Under the RRS, if a yacht collides with another racing yacht then typically, one yacht will be found entirely at fault for the collision. Whereas, if you were to follow the COLREGS then you will find that both vessels are somewhat at fault and the question becomes who is more at fault.
The importance of this cannot be understated. In the event of a claim for compensation the payout figure would likely be a percentage under the COLREGS. And when is comes to yachts this can run into the many millions!
Under general maritime law, however, fault will be allocated between the parties on a percentage basis. And fault in a maritime collision is almost never allocated 100% to one party.
DETERMINING WHICH ONE APPLIES?
Which set of rules applies? Competing laws are no friends of lawyers. Dealing with one set of law is hard enough let alone dealing with two and figuring out which different set of laws prevail. The answer here largely depends on where you are, if the event organisers did their job properly and the circumstances of the race.
The COLREGS were never intended to govern racing vessels. The COLREGS applying to a yacht-racing event seems bizarre. The simple logistics of following the COLREGS during a race will, at least in my opinion, dampen the excitement of a race.
But this has been the subject of many court decisions in both the UK and the USA. When millions of dollars are at stake there is very likely going to be some court decision on it. The issue is the law is not clear.
The default position here in New South Wales is the COLREGS apply unless the governing authority (here being Maritime Services) says otherwise. Racing events must be approved by Maritime Services as races are regarded as an ‘aquatic activity’ and rightly so. The law is framed so as to allow the COLREGS to be overruled by the RRS if the aquatic activity licence actually states that the RRS applies.
It is important to note that even if the RRS applies to a race, the racing vessels must follow the COLREGS to avoid collisions with non-racing vessels. This is built into the RRS itself.
However, the law in New South Wales seems to go further, that the COLREGS apply even if there is a risk of colliding with non-participating vessels. The Courts have not determined how broad this risk needs to be. By literal interpretation of the law, if you have a vessel on Sydney Harbour, there is always the risk of colliding with another non-participating vessel. It seems that in a busy area of water, the COLREGS will almost always apply, significantly narrowing the circumstances when the RRS can apply.
HOW DO YOU KNOW WHICH ONE APPLIES TO YOUR RACE?
Ask the event organiser!
In New South Wales the law is framed so that the COLREGS automatically apply. The only way to be certain of which one applies is to ask the organiser of the event if there is an aquatic licence (there should be!) and ask specifically if the aquatic licence states that the RRS applies. If it does then it is likely that the RRS applies when it comes to determining which rules to follow when encountering another racing vessel.
But the law in New South Wales goes further than this and states that COLREGS will apply even if there is risk of collision with another vessel not involved in the activity. How broad this risk has to be is a question for the courts and a question that causes a needless headache for yacht owners, skippers and lawyers alike.
The Boat Insurance Policy MADE FROM FIRE
• FROM PANTAENIUS - SAIL AND MOTOR YACHT INSURANCE
Often it takes a disaster to bring about real change and growth. Such was the case with Pantaenius’ water up, all-risk and agreed value insurance policy. The Phoenix metaphor gets used a lot, but in the case of Pantaenius, it is beyond true. It was the very genesis for the base policy that allows Pantaenius to cover everything from global cruisers to sports fishing, as well as yacht racing and super yachts.
A large fire in a winter storage shed in Hamburg, Germany, in the 50’s destroyed several delightful wooden yachts that were in perfect condition. The owners were friends of one, Harald Baum, who was in commercial marine insurance at the time. Their insurers acknowledged the accident, but were only prepared to offer Harald’s friends the cost of the yachts on the current market, which was nowhere near enough to replace these magnificent examples from another era.
“The owners could not afford to replace their craft with something similar. Their insurance company failed to protect their assets. Now it would be this very notion and the lack of a true, waterborne yacht insurance policy at the time that sparked the idea for my father to develop the product we have today. Forty years on it is the one standard for yacht insurance in Europe and beyond. We now have over 90,000 yachts insured around the globe,” said Harald’s son, Martin, who is now the group’s managing director.
“This has meant that we have become the only true, worldwide yacht insurance provider, all under the one policy document. So when it comes to cruising the world, Pantaenius supports you with local knowledge in the same time zone 24/7, courtesy of own employees here in Australia, as well as the USA and throughout Europe.”
Today, Pantaenius is still very much a family company, with Martin’s siblings also involved in the business and Harald still goes to work each day. This family ethos, coupled with a genuine and strong nautical affliction, means Pantaenius is ostensibly without equal the world over.
Now into its fourth year of operation in Australia, Pantaenius has its growth stemming from these very cornerstones and the fact that each staff member is a dedicated boaty in their own right. This makes Pantaenius a very unique player in the local, Australia-Pacific scene. The ever-increasing contingent of global cruisers, especially in multihulls, were some of the first to adopt Pantaenius here. Soon after it was ocean racing boats and inshore sailors. More recently, all manner of powerboats form long-range cruisers to sports fishermen.
“Our staff have sailed all over the world, been around various types of craft being built and moored in more marinas than we can count up. In addition to that, they have a network of contacts that surpasses enviable. Coupled with our global collection of surveyors, riggers, mechanics, yards and all services, you have a powerhouse of assistance waiting for you. It is all of these that will ensure your boat and mooring are fully sorted, so that you can get on with enjoying your favourite pastime,” said Baum.
Australia and the Pacific Rim are very important to Pantaenius collectively. In a way, the world has become smaller, with more people taking to the seas to complete life-long ambitions and dreams. They are covering great distances as they go from Europe to the Pacific or Australia to the Caribbean. It is no surprise that Pantaenius wanted to have a ‘local’ presence in an area that covers the Asian powerhouse, Australia and the vastness of the South Pacific.
“We saw that in our opinion, Australia was not getting the level of service it demanded, nor the best insurance offering. Back then the time was more than right and today we are fortunate to have so many clients confirm that theory by providing us with their business.”
The Pantaenius Team l-r: Jayah Simmons, Maike Muth, Michaela Backes,
Jamie MacPhail, Adam Brown, Danielle Blackmore, Vicky Millynn.
“Australia is not more price sensitive than other markets, but in addition to service, the local market required fairness and honesty. We feel our agreed value, optional new for old replacement and the due diligence performed before contract is signed sets up this classic Aussie handshake deal making.”
“Of course, legalities mean that there is paperwork to be completed, but here too our policy documentation is written in plain English and the exclusions take less than one page. The ever increasing complexity of compliance rules are making it harder to provide the client service that we are used to, so this is where we put our attention and effort to deliver best practice,” added Baum.
Now one of the things that many clients comment on is how they get to deal directly with the person who sold them the insurance. No matter whether it is changing your cruising locale or making a claim, you speak with a Pantaenius team member. Indeed it is this level of service that has many clients now as advocates, especially those who have suffered a total loss.
Why? Simple. Fast response and claim settlement times, but even more importantly, it is the lack of deductions form the final payout that has them so very pleased. The number on the front of the policy documentation is the one they receive. As one client said after his horrific accident, “You know there is always a silver lining and thank God mine came in the form of the team at Pantaenius. They were just bloody brilliant!”
Baum spends a lot of time in Australia each year. He said of the similarities and differences, “All the segments are similar, with all manner of sail and motor yachts. One difference would be that superyachts in Australia start from AU$1.5m, whereas in the USA and Europe they are bigger, say 24m plus and are above €5m sum insured. It might be smaller by volume here in Australia, but it is growing more rapidly than those other markets.”
“We do not have the sports fishermen segment in Europe and I have been not only captivated by it, but also impressed. The fishermen play an integral role in helping to analyse and maintain the fish stocks in the around this island continent. Depending on the species, up to 97% of the catch is tagged and released, which is just great. Until the recent NSW Game Fishing Association Interclub Championship I did not know that it was the oldest in the world!”
In closing, Baum said “I was asked to talk about Pantaenius as a brand during ASMEX. Specifically, this relates to our global expansion, by virtue of the experiences and problems we have faced along the way. The idea is that other companies in the yachting industry may benefit from our learnings and that maybe it will help them to make the right decision on their way to expanding their own businesses both here and overseas.”
AIMEX was thrilled to have Pantaenius guiding force Martin Baum speak at ASMEX 2016 conference at the Intercontinental Hotel Sanctuary Cove on May 17. Theirs is a story of a robust business that is an exemplar to the marine industry and ties in the ASMEX 2016 theme of ‘Building Better Business’ for our Australian marine industry.
Now no one could know your boat as well as you do.
Pantaenius will ensure you know it even better with a policy designed to reflect your needs and boating lifestyle.
Call +61 2 9936 1670 or go to www.pantaenius.com.au and find out why it is so.
Loan Advice for New Boat Finance
from Rapid Finance - gorapid.com.au
MAKE SURE YOU GET THE BOAT FINANCE THAT SUITS YOUR NEEDS
Whether you’re buying your first boat or looking to upgrade, getting the right kind of financing can be incredibly important. When it comes to any kind of large financial expense like car loans, home loans, and boats loans, making sure that the loan details are suitable for you could end up saving thousands of dollars over the life of the loan.
With that in mind, here is some general advice on how to find a boat loan that is suitable for you. Always get advice from a financial professional before taking out a boat loan.
SECURED OR UNSECURED FINANCE
Secured and unsecured loans each have their own advantages and disadvantages, so the one that you choose will likely come down to a matter of preference, and depend on which suits you better.
Secured boat loans – These use the boat as security for the loan. This means that the lender has the right to repossess the boat if you default on the loan. However, this also means that the loan is a lower risk for the lender which means that the interest rates are usually lower than unsecured loans. This also means that a secured boat loan will likely be less flexible than an unsecured loan since a secured loan can only be used to purchase the asset that secures it.
Unsecured boat loans – An unsecured boat loan will mostly likely be a personal loan that you use to buy a boat. Because it is unsecured, it may have a higher interest rate than a secured loan or you may get approved for a lower loan amount. However, you will also have the flexibility to use the loan for other things, for example, you could take out a loan to buy a boat with enough left over to pay for new fishing equipment.
FIXED OR VARIABLE INTEREST RATES
This is another option that will likely come down to a matter of preference. Both fixed rate and variable rate loans have their own advantages and disadvantages, so your choice depends on whether you prefer stability and predictability or the possibility of future savings.
Fixed rate loans – Because the interest rate doesn’t change during the loan term, you’ll always know what your repayment amounts are, as they won’t change. This makes it easier to budget for your loan repayments in the long term which some people find to be very helpful and important. However, if interest rates drop in the future, you might ‘miss out’ on potential saving s on your repayments.
Variable rate loans – A variable rate loan might end up being cheaper or more expensive than a fixed rate loan, depending on the direction of interest rates over the loan term. This makes it more difficult to budget for your repayments, but you might end up saving money as well.
TIPS FOR GETTING BOAT FINANCE WITH BAD CREDIT
Having bad credit isn’t the end of the world, you may still be able to get approved for a boat loan. There are several things you can do to demonstrate to lenders that your current financial situation is good, even if you have bad credit, and make your application more attractive to them. These include:
• Always be honest in your application
• Make sure your bank accounts don’t get overdrawn or dishonoured
• Save at least a little bit every time you get paid.
GET PROFESSIONAL FINANCE ADVICE
Getting help from a finance broker is always a good idea, whether you have bad credit or not. They will be able to give you tailored advice for your boat loan so that it matches your needs. And if you need to upgrade the car that’s going to tow your new boat, they will be able to help you with a car loan as well. And if you do have bad credit, a good finance broker will be able to advocate the strengths of your application to lenders on your behalf.