News date: 19 April 2024
Sergey Nedelko, Attorney at Law, Counsel, Head of Ilyashev & Partners’ Odesa Office, delivered a speech at the seminar “Maritime Business During the War: New Challenges in 2024”, which was held on 15 April 2024 in Odesa. The event was organized by the Committee on Maritime Law of the Ukrainian Advocates’ Association.
In his report entitled “Implementation of the procedure for providing guarantees of compensation for damage caused to shipowners due to armed aggression of the Russian Federation”, Sergey noted that the issue of insurance against war risks and providing guarantees of compensation for potential damage is the most important for shipowners and charterers.
“The cost of a War Risk Insurance may be up to 3-5% of the insured value of the vessel for every 7 days of its stay in the war zone. These additional logistics costs increase the cost of freight from open Ukrainian ports, which directly affects the competitiveness of Ukrainian export products in foreign markets. Therefore, just before Russia’s withdrawal from the “grain initiative”, the Ukrainian government began to implement Plan “B”, an element of which was supposed to be precisely the procedure for providing compensation to shipowners”, – Sergey Nedelko said.
By Resolution No. 548 dated 26 May 2023, the Cabinet of Ministers of Ukraine approved the Procedure for providing guarantees of compensation for damage caused to shipowners due to military actions on the territory of Ukraine. The Procedure established a mechanism for compensation of damage only in 2023, therefore, on 29 March 2024, the Cabinet of Ministers of Ukraine approved Procedure No. 361 on the provision of compensation for damage caused as a result of military actions within the country to foreign and Ukrainian charterers, operators and/or owners of sea vessels and inland navigation vessels, except for vessels associated with Russia and Belarus. According to Procedure No. 361, compensation will be paid in the amount of up to UAH 2 billion from the state budget reserve fund if vessels move non-military cargo to/from open seaports of Ukraine or entered such ports after 1 January 2024.
According to Sergey Nedelko, some issues are still not regulated by law, which deprives sea carriers of the opportunity to receive compensation for damage.
“Cargo owners are not on the list of parties entitled to receive compensation – this is provided for neither by Procedure No. 548 nor No. 361. In addition, shipowners are deprived of the right to compensation if the damage was caused in December 2023, – Sergey Nedelko noted. – The Procedures for compensation of damage adopted by the Cabinet of Ministers also do not determine the period for consideration of documents for obtaining compensation for damage, which are submitted to the Ministry of Infrastructure, do not provide for the return of documents for their amendment or correction, as well as the reapplication. If the set of documents does not comply with the requirements of the Procedure, the Ministry of Infrastructure notifies the shipowner in writing that there are no grounds for compensation. In addition, issues arise at the stage of preparation of the independent evaluation report, which requires a technical damage assessment with the involvement of competent specialists and equipment.”
The speakers of the seminar “Maritime Business During the War: New Challenges in 2024” represented the leading law firms in the Maritime Law practice. The participants of the event also discussed problematic issues related to the arrest of vessels and the ownership of the operational waters of the berth, losses of cargo owners during the war and their compensation.