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Ukraine Unveils Safety Net Insurance Compensation Program for Shipowners

Date of publication: 8 June 2023

Sergey Nedelko, Attorney at Law, Counsel, Head of Odesa Office

Source: NorthStandard

The Ukrainian Government has approved a compensation procedure for shipowners who suffer damage by the war in Ukraine.

The procedure will apply to Ukrainian and foreign flagged vessels, with the exception of vessels flagged with Russia or Belarus.

The Ukrainian authorities expect this new program to facilitate shipping within the framework of the Black Sea Grain Initiative (BGSI) as well as ensuring ships will continue to call at Ukrainian ports in the event of Russia withdrawing its participation in the BSGI.

According to the government’s official announcement, compensation will be provided to those shipowners denied payment  by their insurer for damage caused by the war.

Only shipowners who have concluded an insurance contract or P&I (Protection and Indemnity) policy in accordance with the procedure established by the legislation of Ukraine or another state are entitled to compensation.

The damage to be compensated includes:

  • losses incurred by the vessel due to irreparable loss or destruction
  • the cost of repairing structural damage to the vessel which has rendered it unseaworthy
  • losses due to loss of or damage to cargo
  • expenses relating to damage to the health or life of a passenger or crew member

Ilyashev & Partners Law Firm advise that the key conditions for entitlement to compensation are:

  • damage sustained in the territorial waters of Ukraine
  • vessel was engaged in non-military cargo transportation
  • the voyage to/from the open seaports of Ukraine or call occurred after the ‘Procedure’ became effective [NB: today the open ports are Odesa, Chornomorsk, Pivdennyi, Mykolaiv, Olvia, Izmail, Ust-Dunaisk and Reni]
  • The vessel has a valid insurance and P&I policy at the time of damage
  • The vessel’s insurer has refused to settle compensation.

To receive compensation, the shipowner must submit a relevant application along with a set of supporting documents listed in the ‘Procedure’ (including the independent appraisal report) to the Ministry of Infrastructure of Ukraine. The documents must be submitted within 90 days from the date when the insurer refused to settle the insurance compensation, but not later than 1 December 2023.

The final decision shall be made by the Ukrainian Government [Cabinet of Ministers of Ukraine].

The maximum amount of compensation is limited to the amount of insurance indemnity under each policy. However, the total amount of insurance recoveries shall not exceed UAH 20 billion (approximately USD 547 million).

The official publication of the ‘Procedure’ and its entry into force are expected in the near future.