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P&I Clubs take position on IMO 2020 compliance coverage

25 Jun 2019

Maritime P&I clubs under the International Group of Protection and Indemnity Clubs (IGP&I), which provides liability cover for 90% of the world's ocean going tonnage, on Monday (24 June) jointly issued a notice informing that infringement of IMO 2020 Regulations will not necessarily be characterised as unseaworthiness. The following is an extract of the notice:

P&I Club Cover

The International Group Clubs recognise that the 2020 Global Sulphur Cap presents important challenges to the shipping industry and are closely monitoring discussions at the IMO.

Penalties for non-compliance are likely to include fines, detentions and possibly, in extreme cases, PSC banning orders. The 2020 Global Sulphur Cap does not require any amendments to be made to existing club rules. As has always been the case, clubs do not condone breaches of MARPOL. However, liabilities, including fines for purely accidental discharge of non-compliant emissions, are capable of P&I cover subject always to the rules and any terms and conditions of cover. This would also include the obligation to reimburse liabilities for fines incurred by another party.

Cover in respect of other fines, for example, for breach of documentary or other MARPOL requirements, including inaccurate or inadequate record keeping or carriage or use of non-compliant bunker fuel, is only available at the discretion of a club’s board of directors at the conclusion of a case. Until a decision has been made by the board on cover of such discretionary cases, clubs may be unable to provide security and, even if they do, this will only be in exchange for acceptable counter-security, which would usually be in the form of cash or a bank guarantee. The position in this respect is the same as set out in previous International Group circulars issued on the subject of MARPOL breaches.

It is recognised that the 2020 Global Sulphur Cap could result in P&I liabilities not previously seen which may arise in limited circumstances, for example where there is a technical failure of an otherwise approved scrubber undetectable by the exercise of due diligence that causes the accidental discharge of non-compliant emissions or the discharge of polluting wash-water. There have been suggestions that non-compliance with the Sulphur Cap provisions in MARPOL may have the effect of rendering a vessel unseaworthy which in turn would prejudice the availability of cover. Whilst every case will depend on its individual circumstances, the International Group Clubs wish to make clear both that an infringement of the Regulations will not necessarily be characterised as unseaworthiness and, to the extent it were to be, it is not a necessary consequence that it would deprive a member of cover.

Source: Gard
Published: 26 June, 2019


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