Regulatory Alert: Ensuring Ship Seaworthiness: Navigating the Fulfilment and Supervision of the Certificate of Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks 

Ensuring Ship Seaworthiness: Navigating the Fulfilment and Supervision of the Certificate of Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks 

Setyawati Fitrianggraeni,[1]

BACKGROUND

The Indonesian maritime regulatory authority, The Directorate General of Sea Transportation (“DGST”), has issued  Circular Letter Number SE-DJPL 3 of 2023 concerning Fulfilment and Supervision of the Certificate of Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks as a Requirement and  Obligation of Ship Seaworthiness  (“CL 3/2023”). CL 3/2023 mandates  the shipowner’s obligation  to insure  ships with wreck removal insurance for certain Indonesia flagged vessels. This was  first introduced in Regulation of The Minister of Transportation Number PM 27 of 2022 concerning The Third Amendment to Regulation of The Minister of Transportation Number PM 71 of 2013 concerning Salvage and/or Underwater Works (“MoT 27/2022”). CL 3/2023 features important changes concerning the certificate which  replaces the Letter of Attestation for Compliance of Insurance or Other Financial Security in Respect of the Nairobi International Convention on the Removal of Wrecks, 2007, issued by the Directorate of Shipping and Maritime Affairs and concerning the certificate issuance mechanism (“Letter of Attestation”).

KEY REQUIREMENTS

1. All Indonesian flag ship owners and operators are now required  to:
   1. Immediately process Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks;^[2]
   2. Submit application for certificate issuance to the Director General of Sea Transportation c.q. Director of Shipping and Maritime Affairs in accordance with the provisions of statutory regulations;^[3] and
   3. Pay a levy for the issuance of the certificate pursuant to Government Regulation Number 15 of 2016 concerning Types and Tariffs for Types of Non-Tax State Revenue Applicable to the Ministry of Transportation;^[4]
   4. The owner and operator of the ship must submit a copy of the certificate as mentioned in letter b to the Director General of Sea Transportation c.q. Director of the Sea and Coast Guard Unit in accordance with the provisions of the law.[5]
2. The types of certificates that are required for seaworthiness and operation of the ship and must be on board are as follows:^[6]
   1. Certificate of Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks; or
   2. National Certificate of Insurance or Other Financial Security in Respect of Liability for the Removal of Wrecks.

The certificate(s) will replace the Letter of Attestation.

3. The classification of ships and their respective required certificate are as follows:
   1. Ship owners with a size of GT 300 (three hundred gross tonnage) or more are required to insurance coverage guarantee documents for their responsibility for the removal of wrecks;[7]
   2. Ship owners with a size of GT 35 (thirty-five gross tonnage) are required to have insurance coverage guarantee documents for their responsibility for the removal of wrecks and evidenced by a certificate of insurance, coverage documents or insurance policies, or guarantees of other financial institutions.[8] Indonesian-flagged commercial vessels with a gross tonnage of at least 35 (thirty-five) that already have a Letter of Attestation, must replace it with a certificate at the first opportunity.[9]

This mandate has been introduced in the interest of affirming and ensuring ship seaworthiness. It also provides more details on the role DGST in issuing certificates of insurance or other financial security in respect to liability for the removal of wrecks.

 

IMPLICATIONS

1. Operational Impact

Ships without the stipulated certificates may face operational restrictions potentially impacting trade and shipping activities. According to CL 3/2023, the harbormaster is authorized to delay the departure of ships for failure to obtain certificates.^[10]

2. Financial Impact

In addition to any potential compensation costs from removal of wreck incidents, ship operators might need to consider additional financial provisions to obtain and maintain these certificates.

3. Legal Impact

Non-compliance may lead to Port Clearance refusal or Port Clearance revocation.^[11]

 

CONSIDER

1. Immediate Compliance

If you own and/or operate an Indonesian-flagged ship, we recommend procuring the required certificates at the earliest to ensure uninterrupted operations.

2. Legal Consultation

Consider consulting with maritime legal experts to understand the nuances of the new requirements and the broader implications for your operations.

3. Engage with Authorities

It might be beneficial to engage directly with the maritime regulatory authority or relevant bodies to seek clarifications, if any.

CONCLUSION

This is a significant development for all stakeholders involved in the Indonesian maritime sector. We advise all our clients with operations or interests in the region to take cognizance of this change and act accordingly to ensure compliance and smooth operations.

 

[1] Setyawati Fitrianggraeni holds the position of Managing Partner at Anggraeni and Partners in Indonesia. She also serves as an Assistant Professor at the Faculty of Law, University of Indonesia, and is currently pursuing a PhD at the World Maritime University in Malmo, Sweden. This article is co-authored by Nazaruddin Insyiroh, Trainee Associate at Anggraeni and Partners.

[2] Number 5(a) CL 3/2023.

[3] Ibid.

[4] Ibid, Number 5(e).

[5] Ibid, Number 5(f).

[6] Ibid, Number 5(b).

[7] Article 18B(1) MoT 27/2022.

[8] Article 18B(3) Mot 27/2022.

[9] Number 5(d) CL 3/2023

[10] Number 5(b) CL 3/2023

[11] Article 134 and Article 242 of Law Number 17 of 2008 concerning Shipping.

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