J.M William Turner – The Shipwreck, 1805, London - Tate Britain

Shipwrecks and other disasters at sea were frequently painted during the Romance period.

Costa Concordia Salvage Operation

It is expected to be the biggest salvage operation ever attempted. As of September 2013 the salvage has cost over $800 million.

The Bulk Carrier Double Fortune

The Panama flagged bulk carrier Double Fortune was built in 2010. Gross tonnage and deadweight are 50617 t and 95790 t respectively.

Manoeuvring Container Operations

Containerisation and multimodal transport: the development of door-to-door transport.

Fire Onboard Vessel

Fire on board ship is one of the most dangerous risks for vessels and cargos. Electrical equipments, flammable liquid on board, engines and boilers often cause it.

Friday, 22 September 2017

European Shipowners Discuss Different Measures To Reduce CO2 Emissions

September 22, 2017

In the European Shipowners’ seminar on CO2 reductions in the shipping industry one message was clear: in order to achieve CO2 reductions across the world merchant fleet, a combination of different measures is needed.

“In our seminar this week, we discussed with our stakeholders and European decision-makers different measures that enable to minimise the environmental impact of the shipping sector. In one analysis, the measures were divided in categories including the Technical and operational measures, Alternative fuels and Logistics related to the speed management of a vessel”, explained Tor Christian Sletner, the Chairman of ECSA’s Air Emissions Working Group and Director, Head of Environment of the Norwegian Shipowners’ Association.

Following the International Maritime Organisation’s (IMO) latest meeting of the Marine Environment Protection Committee (MEPC71) and in view of the second meeting of the intersessional working group on reduction of GHG from ships in October 2017, European Shipowners this week organised the seminar on CO2 reduction in the shipping industry. In the event, shipowners presented their initiatives followed by a debate with stakeholders, including the Commission, maritime attachees, European Parliament’s representatives and NGOs such as Transport and Environment.
“We certainly aim to promote ambitious short, mid and long term global measures in line with IMO MEPC71 roadmap for the CO2 reductions from international shipping, and the Paris COP21 Agreement on climate change. We feel that the shipping industry is fully engaged in advancing the emission reduction agenda. We call for the EU Member States to proactively engage IMO’s global members that IMO continues to seriously address CO2 reduction for ships and adopts an IMO CO2 strategy as soon as possible, as a global solution is what our industry indeed needs”, concluded Sletner.

Source: http://www.marineinsight.com

Wärtsilä: World’s First Wireless Charging For Hybrid Coastal Ferry Successfully Tested

September 22, 2017.

The technology group Wärtsilä has successfully tested its automatic wireless induction charging system on a hybrid powered coastal ferry. This is the first commercial ferry in the world operating with high power wireless charging capability for its batteries, and the successful project represents a notable breakthrough in the evolution of plug-in electrically operated vessels. The tests were carried out on the 85 metre long ‘MF Folgefonn’ in Norwegian waters during the end of August / early September of this year. The ferry is owned by Norled, one of Norway’s largest ferry operators.

Wireless charging eliminates the cable connection between the vessel and shore, thereby securing and facilitating safe connections and disconnections. It also reduces maintenance since wear and tear to physical connection lines is eliminated. The integrated Wärtsilä system is based on inductive power transfer and is capable of transferring more than a MW of electrical energy.

The Wärtsilä system is designed to maintain efficient power transfer at distances of 50 centimetres between the two charging plates built into the side of the vessel and the quay. No other wireless charging system is as powerful, or capable of maintaining the transfer of energy at such a distance.

“During recent years, wireless charging has been introduced for cars, busses and trains. We have now made this possible for marine vessels. The main benefits for customers are up to 20 percent more utilisation of the available charging time, increased operational safety, and greater system reliability. There is an ongoing trend to equip coastal ferries with battery powered and hybrid propulsion since they are particularly affected by environmental regulatory demands. Wireless charging will, therefore, create considerable value for operators of hybrid ferries,” says Ingve Sørfonn, Senior Technical Officer E&A, Wärtsilä Marine Solutions.

“For Wärtsilä, this wireless charging revolution focuses on coastal ferries, a segment of the transportation industry that is well-suited to the technology because of short stop-and-go schedules. The wireless charger is an innovative and value adding new part of our hybrid solutions offering, which we shall continue to develop further in line with the needs of our customers,” says Cato Esperø, Sales Director, Wärtsilä Norway.

The project has been partly funded by Innovation Norway, a Norwegian funding institution.

Source: http://www.marineinsight.com

Customs Asking Shippers To Pay More Guarantees

September 22, 2017. 

ESC together with the other associations, such as CLECAT and IRU, has asked the European Commission’s Directorate-General for Taxation and Customs Union to reduce the administrative and financial burden related to the guarantees against customs debts.

According to the Union Customs Code, an economic operator (a shipper) should provide a guarantee if there is a risk of a customs debt for the goods that this operator is transporting or processing; or if the shipper does not have a secured warehouse. A “customs debt” means the obligation of a person to pay the amount of import or export duty which applies to specific goods under the customs legislation in force. Thus, if the goods get stolen from a warehouse or during transportation, and a debt occurs, customs authorities can recover the debt from the guarantee. This can be done even if the company is not solvent anymore.
This rule also applies to the companies that have a status of the Authorised Economic Operator (AEO). In this case, customs authorities have already a good view on the risks insolvency and compliance of these company. By asking for an additional guarantee from the reliable companies, customs are getting a double safety net which is a comfortable situation for customs but is a difficult situation for the operator (shipper).
Under the previous customs legislation, the guarantee was already applied and considered disproportionate. But under the present legislation (Union Customs Code) this is even more the case. The mitigation of a guarantee is accepted less frequently and more cases are subject to the guarantee deposit. The companies providing the guarantee deposit or a guarantee from a bank, cannot use this money for internal investments, and the guarantee becomes “dead money.”

For this reason, ESC has co-signed a letter with other Associations such as CLECAT and IRU, to reduce the number of cases and the amount of the guarantee. Hopefully DG TAXUD will respond positively to this request.

Source: http://www.marineinsight.com/

Wednesday, 13 September 2017

When an owner can sell its charterers’ cargo: an application to the English Court

September 13, 2017.

Dainford Navigation Inc. v. PDVSA Petroleo S.A. (Moscow Stars) [2017] EWHC 2150 (Comm)

In this case, the Owners had exercised a contractual lien over their Charterers’ cargo on board the vessel due to failure to pay hire. The hire dispute was being resolved in arbitration proceedings but, during this time, the Owners’ vessel was effectively being used as a floating warehouse as the cargo could not be discharged into storage. The decision provides an illustration of when an owner can obtain an order for sale of cargo on board before the conclusion of arbitration proceedings, thereby releasing the vessel for other employment.

The background facts

The vessel was time-chartered to PDVSA, the Venezuelan state owned oil and gas company. The Owners stated that there had been repeated failures to pay hire since January 2016. On 14 October 2016, a cargo of crude oil, owned by the Charterers, was loaded in Venezuela and the vessel was ordered to proceed to the Bahamas for discharge. On 18 October, while the vessel was off the discharge port, the Owners exercised a contractual lien over the cargo due to the Charterers’ failure to pay hire. The Charterers subsequently ordered the vessel to Curacao, where she had remained ever since with the cargo on board. The Owners commenced arbitration against the Charterers for the unpaid hire and now brought an application to the English Court for an interim remedy, requesting an order for the sale of the cargo on-board the vessel, with the proceeds to be held as security pending the outcome of the arbitration.

The Commercial Court proceedings

“Goods the subject of the proceedings”

Under s. 44(2) of the Arbitration Act 1996, a party to an arbitration can apply to the English Court for sale of goods if those goods are “the subject of the proceedings” (meaning the arbitration proceedings). This gave rise to the question whether the cargo in this case was “the subject of the proceedings”. The Charterers argued that the cargo was not the “subject”– the alleged unpaid hire was the subject of the proceedings – and so this requirement was not satisfied. The Court rejected this argument. It stated that, because of the lien, neither party could deal with the cargo until the arbitration dispute was resolved. Accordingly, even if the arbitration was not “about” the cargo, the arbitration would certainly determine what would happen to the cargo. The Court did not comment on what the position would be if the cargo had been owned by a third party that was not a party to the arbitration.

 “Good reason…to sell quickly”

The Court also needed to satisfy the requirements of Civil Procedure Rule 25.1, which states that an order for sale of goods could only be made where the goods are of a perishable nature (not applicable here) or which, for any other good reason, it is desirable to sell quickly.

The Owners argued that there was good reason to order sale of the cargo in this case. Although there had been efforts to arrange discharge of the cargo into storage, for various reasons this had not proved possible. The cargo had been on board the vessel for over nine months at this point and, even if the Owners were successful in the arbitration, it would likely remain on board for many more months. During this time, the Owners incurred the usual operating expenses but were not receiving hire. Additionally, the vessel needed to be cargo-free for drydocking in January 2018 as SOLAS and Class inspections were due.

The Court agreed with the Owners that there was good reason for an order for sale. It also noted that the day before the hearing, the Charterers had made an open offer to sell the cargo themselves and pay the sale proceeds into escrow. This made it clear that any order for sale would not be interfering with the Charterers’ proprietary rights in the cargo, as it was going to be sold anyway.

The Court concluded that the sale of the cargo should be ordered as the jurisdictional and discretionary factors were satisfied.


Where owners have exercised a lien over the cargo on board their vessel, the parties are often faced with an impasse. The Charterers cannot deal with the cargo because it is held under lien, but the Owners cannot deal with the cargo either, as often the Owners’ right to the lien must be established in arbitration – which might take many months. If no suitable storage can be found, then the Owners are faced with the unpleasant prospect of storing the cargo on the vessel, thereby removing her from employment.

This Court decision will provide the Owners with some degree of comfort that, in such a situation, it is possible to apply to the English Court for an order for sale of the cargo as an interim remedy, pending resolution of the dispute in arbitration.

Source: http://www.incelaw.com/

Tuesday, 12 September 2017

3D Printed Ship’s Propeller Prototype Produced

September 12, 2017.

A prototype of the world’s first class approved ship’s propeller manufactured using 3D printing techniques has been produced by a cooperative consortium of companies that includes Damen Shipyards Group, Rotterdam Additive Manufacturing LAB (RAMLAB), Promarin, Autodesk and Bureau Veritas.

The 1,350mm diameter propeller – named WAAMpeller – was fabricated from a Nickel Aluminium Bronze (NAB) alloy at RAMLAB in the Port of Rotterdam. The propeller was produced with the Wire Arc Additive Manufacturing (WAAM) method using a Valk welding system and Autodesk software. The triple-blade structure uses a Promarin design that is used on Damen’s Stan Tug 1606. With production complete, the WAAMpeller will be CNC milled at Autodesk’s Advanced Manufacturing Facility in Birmingham, U.K.

The 400kg prototype 3D printed propeller represents a steep learning curve of the understanding of material properties, according to Kees Custers, Project Engineer in Damen’s R&D department. “This is because 3D printed materials are built up layer by layer,” Custers explained. “As a consequence, they display different physical properties in different directions – a characteristic known as anisotropy. Steel or casted materials, on the other hand, are isotropic – they have the same properties in all directions.”

Because of this critical difference, one of the first steps was to carry out extensive testing of the material properties of the printed material to ensure compliance to Bureau Veritas standards. “This involved printing two straightforward walls of material – then using a milling machine to produce samples for lab testing of tensile and static strength,” Custers said.

“The challenge has been to translate a 3D CAD file on a computer into a physical product. This is made more complex because this propeller is a double-curved, geometric shape with some tricky overhanging sections,” Custers explained.

Yannick Eberhard from Promarin’s R&D department, added, “The transformation from a semiautomatic to robotic processing is the solid foundation for even more complex and reliable future propeller designs.”

“Material characterization and mechanical testing have been an important part of this project,” said Wei Ya, Postdoctoral Researcher from the University of Twente at RAMLAB. “We have to make sure that the material properties meet the needs of the application. Material toughness, for example – ensuring that the propeller is able to absorb significant impact without damage.”

“But we have also been working towards optimizing the production strategy for 3D metal deposition. This includes bead shape and width, as well as how fast we can deposit the printed material.”

Highlighting RAMLAB’s capacity to print objects with maximum dimensions of 7x2x2 meters, Ya said, “For large scale 3D metal deposition, the WAAMpeller is really groundbreaking for the maritime industry.”

Ya continued, “This technology is a fundamental change in the concept of how we make things. With additive manufacturing, you can print most metallic components that are needed in principle. There is so much potential for the future – these techniques will have a big impact on the supply chain.”

This first prototype WAAMpeller will be used for display purposes, and planning for a second example is underway. “We start production of a second propeller with class approval later next month – using all the lessons we have learned over the past few months,” Custers noted. “We are aiming to install this second one onto one of our tugs later this year.”

Source: https://www.marinelink.com

“Blockchain” and the World of Marine Insurance

September 12, 2017.

If you’ve been working in the marine insurance industry lately, you will have heard about “blockchain” at some point; it is the electronic, distributed ledger, notoriously known for enabling the use of cryptocurrencies such as Bitcoin and Ether. But the blockchain technology’s utility goes beyond cryptocurrencies, potentially offering creative ways to solve other real-world problems.
Within blockchain ledgers, the use of ‘smart’ contracts essentially converts contractual obligations into lines of computer protocols, which facilitate, verify, or enforce its performance.
Much has already been written about how this technology could impact the financial services and transportation industries, including container shipping’s problems with non-delivered cargo. The emerging technology also has potential applications in marine insurance.
As its applications beyond cryptocurrencies are just emerging from the develop-mental phase, relatively few companies have implemented blockchain technology on a large scale. That will not be the case for long.

The Marine Insurance Use Case
Marine insurance is generally accepted as being the oldest form of commercial insurance; this has enabled the sector’s customs, practices and policy terms to standardize and codify. This standardization of policy language and customs potentially allows marine insurance to reap the benefits from automation, particularly from the use of a blockchain ledger and smart contracts.

In fields of insurance with well-established policy provisions, where underlying terms & conditions seldom change, a corporate risk manager typically purchases a standard policy from the insurer directly or through a broker. The risk manager can request specific policy provisions beyond the standard contract, either before inception or by endorsement later. These are standard practices.
However, performing and recording these tasks on a blockchain, and having the policy represented in a smart contract, could simplify the purchasing process and increase transparency among the parties.
Conceivably, the purchasing process would no longer require a financial intermediary; it could be performed by the purchaser and all activities related to quoting and binding coverage visible to all stakeholders. The payment of the premium would be immediate and direct to the insurer, and the policy would be available upon confirmation of the exchange of funds. Using a binder to hold coverage in place while an insurer builds and delivers the policy could become obsolete.
In this scenario, disputes would be more easily resolved, as there would be an immutable record of all transactions permanently recorded on the blockchain ledger. The public ledger can be made available to all participants, building transparency and trust among the parties.
Anonymity could be maintained by assigning non-descriptive keys to each party, or by making the blockchain private to those involved. The process would significantly reduce any perceptions of wrongdoing -- as well as errors and omissions -- because all parties could verify each transaction, in permanent perpetuity.
Other menial tasks typically performed by brokers and insurers also could be automated; since the policy specifications are already hosted on the database, a certificate of insurance summarizing coverage could be quickly produced through a simple query and made available to any party with permissions to view the policy on the ledger.

Marine Claims Adjusting
Perhaps the most significant impact blockchain could have on insurance practices relates to claims adjusting and payment.
In the complex field of marine insurance, goods travel around the world with insurance attached to them for the entire voyage, or only a small portion of it. While in transit, they are exposed to any number of perils, and title to those goods often transfers several times during the voyage.
Tracking the source of loss or damage and following the chain of insurable interest entails the difficult process of chasing the associated paperwork around the globe. Hosting this information on a publicly shared blockchain ledger would empower adjusters to make informed decisions sooner, reducing the amount of time required to indemnify the client.
Smart contracts could be designed to pay immediately upon notification and verification of a loss, especially in cases of a total loss of goods. Where there is a total loss that is easily verifiable, funds could be transferred based on pre-set criteria that trigger payment.
For example, when a ship sinks it is an easily proven and well-documented event. Payment of the vessel’s agreed value could be performed based solely on a few lines of code, responding only when specific criteria are entered into the blockchain.
In the case of cargo losses, smart contracts can also be designed to pay losses immediately based on predetermined triggers.
Pharmaceutical goods or food-grade products contaminated or thawed prema-turely may constitute a total loss, depending on the underlying policy. If the temperature of a refrigerated container exceeds a specific threshold, a total loss can easily be declared and verified by a surveyor report or other trade document showing the violation. Funds would be transferred immediately for the loss through a smart contract.
Similar trans¬actions can be equally shared by all parties with a financial interest in the voyage, in line with the legal principle in maritime law known as ‘general average’. Informing the blockchain database of an instance of general average could allow immediate posting of an average bond, reducing the time it takes to release cargo.
Admittedly, there are intricacies of the claims process that would need to be further developed, and agreed upon by the insured and insurer prior to entering into a contract.
For example, the salvage value of goods -- and the responsibility of the insured to mitigate losses even in cases of total loss -- must be clearly understood and enforceable. Smart contracts could be designed to immediately transfer the title and rights of recovery to the insurer, though the insurer typically refuses aband-onment of goods: this maintains an incentive for the insured to mitigate the loss when they still retain title to the damaged goods.
These intricacies of the insurance contract may not be easily captured by a smart contract, but the terms and conditions of the policy would provide guidance.

Marine Mutual Insurance: Protection & Indemnity (P&I) Clubs and beyond
In personal lines of insurance, there has been a proliferation of companies adopting the blockchain technology beyond when compared to commercial lines. Blockchain-based insurance companies using the peer-to-peer (P2P) model have emerged globally over the past few years, while commercial insurers are cautiously testing the waters.
One group that is structurally ripe for adopting the blockchain and smart contract technologies using a P2P model is P&I Clubs, or mutual insurance associations of vessel owners, typically based offshore, which insure liabilities of their members.
Many of the advantages of this technology are closely aligned with the practice of P&I clubs. Automatic collection of advance, supplementary, or release calls could be captured by ‘coded’ smart contract. Loss reserves could be established based on user input as soon as claims are reported.
Most other aspects of the club rules, or insuring agreements and conditions of insurance, could be captured in smart contract programming language, and automatically performed.
The process of managing the club could be reduced to a decentralized autonomous organization (DAO) of vessel owners, with the decentralized and public nature of the blockchain removing the need for trust among potential business partners.
Consultants can be hired as part-time trustees -- appointed to update club rules and the underlying code -- and claims payment could be based on a system of “voting” based on survey reports (when not completely captured by smart contracts).
This hybrid method of automatic payment in qualified circumstances -- and voting in instances of partial loss -- may enable a more just and adaptable method of adjusting and paying claims.
There are few barriers to implementing this type of DAO: the code is open source, and with the technical knowledge to update the code and a broker to bring them together to get the system in place, the concept is not far fetched.
An intermediary could be used to place risks into the P&I club; alternatively, new risks could be voted in by every other member, and pre-established underwriting guidelines could prevent any “bad risk” from entering the club, or increase the premium. A final vote among the current club members could be used for any risks acceptable by the underwriting guidance.
Vessel owners aren’t the only group that could benefit from application of blockchain technology in mutual associations; similar agreements, or DAOs, could be established among cargo owners, with each mutually insuring the others’ cargo losses. These types of organizations -- consisting of potential business rivals -- can benefit from pooling risk while simultaneously using a system that does not rely on trust among parties to resolve claims.

Details of Implementation
A current obstacle to implementation is accounting for the customs and practices that exist in the marine-insurance marketplace and distilling these into program¬ming language to guide smart contracts.
In those cases, when the static nature of computer logic can’t act independently, voting among disinterested members can substitute. Ambiguous situations become the responsibility of the other, disinterested parties to reconcile.
Insurance companies rely on their claim adjusters to make fair assessments of facts pertaining to loss; these facts can be ambiguous and less-than-forthcoming, and may instead be the opinions of a surveyor.
As with present practices, insurers and their adjusters must continue to vigilantly guard against moral hazard, which may seem difficult when the process is outsourced to computer code that pays a claim when criteria are entered into the database.
There needs to be a clear set of rules for payment in these cases, outlined in the underlying policy and understood by all parties. Also, surveyors may still be needed to act as independent third parties to serve as impartial judges of losses, placing automatic payment out of control of the insured.

Source: https://www.marinelink.com/

Construction of charterparty terms: choose your words carefully!

September 12, 2017.

Gard Shipping AS v. Clearlake Shipping Pte Ltd (MV Zaliv Baikal) [2017] EWHC 1091 (Comm)

The Commercial Court has recently considered the meaning of various demurrage regimes in a voyage charterparty in order to determine whether the Owners were entitled to earn demurrage at an escalated rate. The Court held that the charterparty contained different demurrage regimes, each with different triggering events. In the circumstances, the only triggering event was the tendering of a notice of readiness and, as such, the Owners were not allowed to recover demurrage at an escalated rate.

The background facts

The parties entered into a voyage charterparty based on BPVOY4 terms. A formal charterparty was not drawn up, but a fixture recap made a number of amendments to the terms of a previous fixture between the parties. The charterparty contained the standard laytime and demurrage provisions but also incorporated specifically agreed terms, pursuant to which the Charterers had the liberty to order the vessel to stop and wait for orders. If they did so, the time spent by the vessel waiting for the Charterers’ orders was to count as laytime and demurrage and was payable at an enhanced rate. In some of the instances contemplated in the charterparty, bunkers had to be paid in addition to demurrage. 

It was common ground between the parties that the vessel departed from the loading port on 31 December 2015, stopped at various ports en route (any delay arising being paid for pursuant to the charterparty), arrived at Rotterdam on 26 January 2016 and there tendered notice of readiness on the same day. The vessel then waited for instructions from the Charterers for 64.708 days. The parties agreed that demurrage should be paid during this period, but they disagreed as to the actual level of demurrage payable.

The Owners claimed that they were entitled to an escalated rate of demurrage pursuant to additional clause (AC) 11 of the Gard/Clearlake terms, which formed part of the charterparty. Specifically, they contended that the terms of the charterparty meant that the Charterers were not permitted to instruct the vessel to stop and wait for orders for longer than three days, were not entitled to use the vessel as a floating storage unit and that the vessel was to be considered as being used for floating storage if stopped for more than five days over the course of the voyage, whether before or after reaching the discharge port or giving notice of readiness. The Owners argued that the clear commercial purpose of the charterparty was to make the Charterers pay at the enhanced rate if the vessel was being used as a floating storage unit. In the Owners’ view, it did not matter that the Charterers did not give an order to the vessel after the notice of readiness was tendered, as opposed to giving a “stop and wait” order. From a commercial point of view, they were both the same thing and the Charterers’ failure to give orders should not absolve them from liability to pay demurrage at the enhanced rate.

In the alternative, the Owners argued that it was commercially necessary to imply into the charterparty a term that meant that if the vessel was waiting for longer than five days then she was considered to be used as a floating storage unit.

The Charterers argued instead that the charterparty provided for a series of different situations where payments in the form of demurrage and/or payment for bunkers used, or other costs, were imposed. Each constituted a separate regime and the question was which regime was the operative one for the situation at the discharge port. The Charterers submitted that the relevant regime was the one applying the standard rate of demurrage and nothing over and above that. As the contractual wording was clear, the Charterers argued that there was no need to imply a term into the charterparty.

Both parties relied on the well-known Supreme Court decisions (Rainy Sky SA v. Kookmin Bank [2011] 1 WLR 2900, Arnold v. Britton [2015] AC 619 and Wood v. Capita Insurance Services Ltd [2017] 2 WLR 1099), which are authorities for the proposition that, when faced with issues of construction, the Court’s task is to balance the language used by the parties with the commercial consequences of competing constructions.

The Commercial Court decision

The Court rejected the Owners’ arguments. It agreed with the Charterers that the charterparty provided for a series of different regimes, the existence of which meant that the key to working out what the contract provided in respect of any given situation or event was to identify under which regime the event or situation fell. That in turn required the identification of the trigger for each regime, as provided for by the terms of the charterparty.

The Court concluded that the charterparty wording required a “stop and wait” order to be given for the enhanced demurrage rates to be triggered. As no such order had been given by the Charterers, the enhanced rates were not triggered and the ordinary demurrage rate applied.

The Court also rejected the Owners’ alternative argument based on the existence of an implied term on the grounds that it lacked commercial necessity.


The decision illustrates that even where a party’s contentions as to what was intended are supported by commercial common sense, the Court will give more weight to the written words and will not imply terms to achieve the more “commercial” result. Those entering into charterparty and other shipping contracts should ensure that they use clear wording in their contracts. This is particularly important when departing from assumed standard positions, such as the number of different demurrage regimes provided for in the charterparty in this case.

Source: http://www.incelaw.com

Are you ready for the new Insurance Competition Regime?

September 12, 2017

On 30 March 2017, the EU Insurance Block Exemption Regulation 267/2010 (IBER) expired, removing the automatic exemption from EU antitrust rules for (a) joint compilations, tables and studies; and (b) insurance and co-insurance pools. Going forward, parties to such agreements will have to “self-assess” to ensure that their agreements comply with EU competition rules. 

What does self-assessment involve? 

Self-assessment requires the parties to an agreement subject to EU law to ensure their agreements satisfy the four exemption tests set out in Article 101(3) of the Treaty of the Functioning of the European Union (TFEU). All four exemptions must be satisfied to achieve compliance.  

This means the parties must demonstrate that their agreement:

(1)  contributes “to improving the production or distribution of goods or to promoting technical or economic progress” - i.e. whether it produces efficiency gains for the parties such as cost savings, better use of resources and increased productivity. 

(2)  allows “consumers a fair share of the resulting benefit” - i.e. whether consumers also derive benefits, such as additional coverage or lower premiums. 

(3)  does not impose on the parties “restrictions which are not indispensable to the attainment of these objectives” – i.e. the agreement does not contain unjustifiable restrictions on the parties, such as post-agreement non-compete clauses or penalties for early withdrawal.

(4)  does not lead to the elimination of “competition in respect of a substantial part of the products in question” - i.e. the parties’ market power does not lead to competitors being driven out or prevented from entering the market. 

The process of self-assessment is therefore a mix of economic and legal tests. A self-assessment report will make recommendations for any changes required to the examined agreement to ensure compliance with EU rules.

The Commission has issued high level “Guidelines” to assist parties to self-assess. These Guidelines do not confer exemptions but explain the Commission’s enforcement policy and give guidance to parties on how to approach compliance. The Commission is bound to follow its Guidelines unless it gives reasons for departing from them in a specific case. 

Recommended action

After the expiry of IBER, parties will be obliged to ensure future compliance through self-assessment.  Such routine compliance measures will become a feature of good commercial management and practice.  

Self-assessment of insurance agreements will pose a challenge to the industry. However, there exists sufficient past case law and other sources of EU guidance to enable parties to agreements to self-assess with confidence that they will be able to comply with the rules. 

The European Commission enforces EU competition rules on parties to any agreements impacting the EU market: for UK based insurers, there will therefore be a continued requirement to comply with EU rules following Brexit. It is also thought likely that UK competition law will continue to be harmonised with EU rules, to ensure convergence and the avoidance of double-jeopardy.

Source: http://www.incelaw.com