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P&I club says it can decline cover to ships violating Qatar 'trade embargo'

08 Jun 2017 12:55 GMT

Gard refers to definitions of 'blockade running' and 'unlawful trade' in its rules guidance book.



Protection and indemnity (P&I) insurer Gard moved to explain on Thursday what the implications would be for members with insurance cover that have been affected by the restrictions on Qatari-flagged ships and vessels travelling to and from Qatar which have been implemented in recent days by ports in the UAE, Bahrain and Saudi Arabia.

Earlier this week, Fujairah's port authority confirmed that Qatari-flagged ships or vessels destined to or arriving from Qatari ports would not be allowed to call at Fujairah or Fujairah's offshore anchorage. The decision is set to have cost and logistical implications for many ships with links to Qatar that regularly call at the Middle East's leading bunker port for fuel.

Likewise, bans are in place in Abu Dhabi, Sharjah, Khor Fakkan and ports operated by DP World UAE - namely Jebel Ali, Mina Rashid, and Mina Al Hamriya.

Bahrain and Saudi Arabian port authorities have also stated that Qatari-flagged/owned ships will not be allowed to enter their waters. Bahrain has in addition banned ships moving from and to Qatar from calling at its ports.

Meanwhile, Egypt and Suez Canal port authorities have currently not indicated that ships calling from Qatar or proceeding to Qatar will face difficulties.

Explaining the cover implications, Gard said: "We are not faced with a sanctions regime against Qatar similar to those we have seen implemented against, for example, Iran or Syria. What we are seeing now is a trade embargo. It means in practice that ships flying Qatari flag will not be allowed to call at certain other ports in the region. Furthermore, ports in some countries in the region will also be closed to ships destined to or coming from Qatar regardless of the flag the ship is flying. No reference is made to insurance as far as we can see in the published port circulars. Thus, it is not in itself prohibited to insure a ship trading on Qatar."

In light of the above, Gard refers to Rule 74 as the relevant provision, which states: "The Association shall not cover liabilities, losses, costs or expenses arising out of or consequent upon the Ship carrying contraband, blockade running or being employed in or on an unlawful, unsafe or unduly hazardous trade or voyage."

Gard points to 'blockade running' and 'unlawful trade' as being the relevant criteria in this scenario. The two terms are described in the explanatory notes of Gard's 'Guidance to the Rules' as follows:

- Blockade running (Rule 74): "'Blockade running' occurs when an attempt is made, whether successfully or not, to call at ports or places to which access is denied by naval or other military forces, or which are declared to be blockaded by a country or an international organisation such as the United Nations."

- Unlawful...trade or voyage (Rule 74): "A trade or voyage may be unlawful if it contravenes the laws of one or more countries. The laws of the following countries may be relevant in this regard: the country where the member is domiciled or carries on business, the country of the ship's registration, the country or countries to or from which the vessel will trade, or the country the law of which applies to the contract of carriage. The association does not treat the legal requirements of any one country as being either conclusive or more important than the law of any other country in this respect. However, the fact that the voyage or trade is considered unlawful by a particular country may be considered by the membership to be particularly relevant when considering whether the particular member should have allowed the ship to be engaged in the particular voyage or trade. What is relevant for the purpose of Rule 74 is the objective assessment of the association acting on behalf of the membership as a whole rather than the subjective knowledge of the particular member."

In short, Gard says that it "will not include liabilities and losses arising out of breach of the trade embargo the alliance against Qatar has implemented". If a P&I liability should arise as a result of the entered ship having violated the 'trade embargo', the P&I club says it can decline cover.

Gard points out, however, that Rule 74 excludes merely liabilities that have 'arisen out of or consequent upon' the breach. In other words, cover is excluded under Rule 74 only if there is a causative link between the liabilities, losses, costs or expenses that the member incurs, and one or more of the specific events to which reference is made in the Rule, e.g. the carrying of contraband or blockade running.

Furthermore, under Rule 34. 1 (xi), Gard excludes liabilities arising out of a deviation or departure from the agreed voyage that deprives the member of the right to benefit from certain defences and rights to limit liability. On a general basis, the P&I club recommends members to check 'liberty clauses' in contracts of carriage to ensure that the carrier complies with the terms of the contract of carriage when it comes to delivery of the cargo.




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