UKDC Publications : SOUNDINGS - Issue 4 2004

The International Ship and Port Facility Security (ISPS) Code came into force on 1st July 2004. In the enhanced ‘security culture’ in which we now live, the ISPS Code is aimed at protecting ships, crews, ports and port facilities from terrorist activities or attacks. It affects all passenger carrying and other ships over 500gt trading internationally. It imposes stringent security measures on those ships and the ports to which they trade.

Much has already been written about the enormous practical challenge the ISPS Code presents to owners and ports alike. The costs of compliance with the ISPS Code have also been highlighted by the media and at key industry conferences. The ISPS Code, however, also has important legal implications for owners and charterers alike to consider.

This briefing is intended to serve as an aide memoire for Members on the key ISPS issues they should address when fixing ships.

Owners’ obligations

Ships will not be able to trade internationally without the necessary security certificates. A ship that fails to comply with the ISPS Code, for example, in respect of the security management, or competence of the crew, will likely be found unseaworthy. At the very least, lack of ISPS compliance will be evidence of a lack of due diligence to make the ship seaworthy. The owner will be liable for the consequences. A ship without IS certification will also be at the mercy of the governmental authority tasked with enforcement. This could lead to costly delays and ultimately termination of the charterparty.

Additional costs - Who will pay?

Owners of ships that fall within the ISPS Code will already have invested significant sums of money and time to ensure compliance with the ISPS Code. However, the day-to-day operation of these anti-terror safeguards also affects the cost of loading, carriage and discharge Not only will there be additional carriage requirements, but extra time will be needed in port, for example, for getting security checked personnel on board, and where security levels in operation differ on board and ashore.

It is therefore essential that Members provide for an allocation of these costs in their fixtures.

A logical way may be for owners to pay the expenses and delays directly related to the ship’s compliance with the ISPS Code. Charterers should pay those arising from employment of the ship i.e. additional port and cargo expenses.

Documentation and information

Owners must provide charterers with documentary evidence of their compliance with the ISPS Code, together with full contact details of their Company Security Officer. Owners are also required to maintain a Continuous Synopsis Record, which includes information regarding the ship’s employment.

This information can only be exchanged with co-operation of the parties. For avoidance of doubt, it should be written into the charterparty. In addition, owners must not only be clear on the identity of their direct contracting parties, but must be able to identify any sub-charterers. Where the charterparty contains a liberty to sub-let, that clause must provide for this to be on condition that the sub-charterers’ full details are obtained by charterers and passed up the contractual chain.

Pattern of trade- Calls at a non-ISPS port

Even when a ship is ISPS compliant, owners may still be penalised when she has visited a non-ISPS compliant port within her last ten port visits, or even has loaded cargo originating from a non-ISPS compliant port. Inspection, detention, removal or expulsion from the port, removal to another area, or denial of entry in the first place will inevitably give rise to delays, additional costs and losses for owners, even though the ship has remained ISPS compliant throughout.

Owners may wish to preserve the right to decline to comply with charterers’ instructions where the ship is being asked to call at a port that is non-ISPS compliant, as this may affect not only future calls but also the ship’s marketability. Alternatively, if appropriate, owners should agree adequate indemnities for calling at a non-ISPS compliant port, or in the event that a port becomes non-compliant while the ship is there.

Charterers should check the ship’s trading history prior to fixing. If she has recently called at a non-ISPS compliant port, they should be guided by that.

Security levels and port safety

The ISPS Code provides that owners must produce a Ship Security Plan which should indicate the operational and physical security measures the ship itself should take to ensure it always operates at security level 1 (low risk). The Plan should also indicate the additional, or intensified, security measures the ship itself can take to move to and operate at security level 2 (medium risk) when instructed to do so. Furthermore, the Plan should indicate the possible preparatory actions the ship could take to allow prompt response to instructions that may be issued to the ship at security level 3 (high risk).

How will these security levels affect the safety of the port? What happens if a vessel ship is ordered to a port which the owner or charter are aware, at the time of nomination, is operating at security level 2 (medium risk) or 3 (high risk)? Is there a specific or imminent threat to render the port unsafe? Can the owner exercise his right to reject the order and insist on fresh orders?

In most charterparties, there will be an express warranty on the part of the charterer as to the safety of the loading or discharging port. If not, it will be implied. The usual interpretation of warranty as to a safe port is that the charterer is warranting that, at the time of the nomination, the port or place is prospectively safe for the period of the ship’s likely visit, in the absence of abnormal or unexpected events.

There are usually two different types of obligations relating to unsafe ports: Some charterparties oblige the charterer to send the ship to a port that is safe in fact. Others merely oblige the charterer to show the exercise of due diligence to investigate the safety of the port before directing the ship there. Previous case law provides some guidance on political unsafety. In the SAGA COB, charterers ordered the ship to Assab and Massawa. Eritrean guerrillas subsequently attacked the ship. Was the port was prospectively unsafe in view of the knowledge that there was known guerrilla activity on land? The Court of Appeal stated:

'The port will not be regarded as unsafe unless the political risk is sufficient for a reasonable ship owner or master to decline to send or sail his vessel there.'

T he Court of Appeal did not regard that guerrilla activity was foreseeable as sufficient to turn the port into an unsafe port.

A port at security level 3, which is an exceptional risk of a security incident, is likely by definition to be an “unsafe” port, and perhaps also a port at security level 2. However, if adequate precautions are in place it may not necessarily render the port unsafe. Owners will have to examine all the circumstances known at the time of nomination, on a case by case basis, before deciding whether a port is unsafe or not.

In view of the above comments, Members should consider who should bear the extra costs of providing the ship on standby level 2 or 3 when required for any ports she visits.

Drafting ISPS Clauses.

The BIMCO Documentary Committee has produced an ISPS clause dealing with the basic obligations of owners and charterers in compliance with the ISPS Code. This may be used as a starting point but Members should also consider the cost and safety implications of providing the ship on standby level 2 or 3 and the need to balance the right to decline to call at non-ISPS compliant ports and the provision of adequate indemnities from charterers. Members in need of assistance can contact the Managers.

For further information on any matters covered by SOUNDINGS, please contact the Managers

The MTSA broadly mirrors the ISPS Code. All ships over 100gt trading to the US must comply with the new US security rules. ISPS compliant foreign flag ships will be accepted by the US Coastguard as having complied with MTSA. However ships to which the ISPS Code does not apply, for example, those between 100gt and 500gt, must submit security plans. US Coastguard approval is required for plans for US flag ships.

Whilst the application and approval process under the ISPS Code and MTSA differ, the observations above on charterparty terms apply equally to ships trading to the USA which fall within the MTSA regime.

For further information on any matters covered by SOUNDINGS, please contact the Managers