Maritime law in Ukraine
17 May, 2017
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Ukraine is a maritime state on Black Sea and Azov Sea coasts, which has its own fleet, shipbuilding and ship repair facilities, number of sea ports and river ports on two rivers, the Dnieper and the Danube, open for navigation. There are established short sea links with Turkey, Russia, Georgia, Bulgaria, Romania and Greece along with direct rail links to Central Europe, the Baltic States, the Russian Far East and Central Asia thus making Ukraine the trans-shipment hub as well.
The list of sea ports opened now for foreign vessels calls is provided by the Order of the Cabinet of Ministers of Ukraine dd. 26.06.2013 No. 466-p “On the list of seaports of Ukraine opened for entry of foreign vessels” and includes 13 sea ports (Reni, Izmail, Ust-Dunaisk, Belgorod-Dnestrovskiy, Chernomorsk, Odessa, Yuzhniy, Nikolaev, Olvia, Kherson, Skadovsk, Berdyansk, Mariupol). The waterfront and port territories are equipped with about 600 gantry cranes, thousands of lift trucks of different types and other units of port machinery. These ports have over 330,000 sq. m of sheltered warehouses and over 2.5 million sq. m open storage yards.
Ukraine is one of the world’s leading grain and sunflower oil exporters and is an important gate for import and export of commodities and goods. Ukraine exported 21.22 million tons of grain in 2016 (by Dec. 22, 2016), including 10.88 million tons of wheat, 4.25 million tons of barley and about 5.99 tons of corn. According to information of the Agrarian Policy Ministry of Ukraine announced on Dec. 30, 2016, the grain export forecast for the season July 2016 – June 2017 is in total 41.6 million tons.
Although the deadweight of the fleet under the Ukrainian flag shrank by 6 times since the last decade, a great number of shipping companies do business in Ukraine as operators, shipbrokers and charterers. Among major ship owners are Ukrrichflot and Ukrainian Danube Shipping company. Ukraine is also ranked as the 5th supplier of seafarers to the world fleet market providing some 75000 officers and ratings.
Main features of maritime law
“The importance of shipping in supporting and sustaining today’s global society makes it indispensable,” commented Ban Ki-moon, UN Secretary-General, in his message for World Maritime Day on 29 September 2016. The role of sea transport for economic development can hardly be overestimated as 90% of the world’s trade is carried by sea and it is the most cost-effective way to transfer goods and commodities around the globe.
Shipping has been at the forefront of international trade for over 5,000 years – no other industry has ever played such a fundamental part in economic voyages. Over the past fifty years, shipping has become progressively safer, more efficient and environmentally friendly. Sea transport is the ideal way to move large volumes of cargo. In comparison with air or road transportation, vessels are capable of carrying huge amounts of goods or commodities and are suitable for transporting gas and liquids as well as various types of hazardous freight.
Commercial vessels, operated by companies incorporated in different jurisdictions daily cross the oceans and seas, under charter parties and bills of lading imposing duties and liabilities on all parties concerned. The purpose of the world’s commercial fleet, the main reason why vessels are built, registered, chartered and insured is not maritime at all. Vessels sail to carry goods bought on the market to be sold on another. The real purpose of the entire commercial shipping industry and its regulatory and contractual framework is to make international trade possible, safe and efficient.
Reflecting the purposes of the commercial shipping industry, internationally Maritime Law has several basic features which are fixed in everyday practice within this area.
Generally, Maritime Law describes all law related to ships and shipping, including the building, navigation, crewing, operation and other activities and incidents related to ships.
One feature is its international nature which pleads for international uniformity in maritime law. This necessity has been satisfied internationally by implementing a number of international conventions or agreed rules like the Hague-Visby Rules which unifies certain rules of law relating to Bills of Lading or the York-Antwerp Rules fixing the grounds for general average assessment. In some jurisdictions and in Ukraine in particular the provisions of such conventions are implemented in the local laws such as Merchant Shipping Code or similar. The widespread use of standard form documents as the basis of most contracts of carriage (like GENCON, SIINACOMEX, NYPE or BPTIME3) also has the effect of unification.
The second obvious feature of maritime law is that contracts for carriage of goods by sea fall to be performed in specific and often hazardous conditions in which it is practically impossible for one party to supervise over the other party’s work on a daily basis. This factor is the key instrument in development of the sea carrier’s general duties and legal grounds for them including the duty to provide a seaworthy ship and not to deviate from the route stipulated by the charter party as well as other carrier’s duties connected with the sea voyage. It also influences those parts of the maritime law dealing with the shipper’s duty to disclose the dangerous nature of goods shipped the master’s powers of jettison and other extraordinary powers conferred on the master of the vessel in the event of an emergency.
The third notable feature which is affecting the nature and the practice of maritime law is that shipping regulated by such maritime law is directly dependent on other commercial activities. Contracts for the carriage of goods by sea are not made in commercial isolation. They are typically entered onto in order to sell goods or to give effect to a previous sale. This means that contracts for sea carriage often reflect direct interest of both, sellers or buyers, under the sales contract. Third parties may become involved in the carriage of goods in other ways. Even when a cargo remains in the ownership of single shipper throughout an ocean voyage it is quite possible that the whole or part of the contract (loading or discharging the cargo, for example) may actually be performed by someone other than the party who originally contracted to carry and deliver. This leads to complex questions about who can sue and who can be sued. In the absence of a contract provision dealing with the particular problem, the main role in such cases plays the governing law of a carriage contract which is English law for majority of sea carriage contract forms or local law as the law of the place of incident.
The use of standard forms is a great point of maritime law practice. This use in itself constitutes an important feature of the overseas trade. Biggest part of the maritime law consists of settled interpretations of common clauses and agreements. Such interpretations are fixed in certain court decisions as it is usual for common law countries, or in particular law provisions together with different kinds of resolutions/recommendations/authorities’ orders in the countries with continental system of law like Ukraine.
The vast majority of standard contracts developed by international associations, in particular, BIMCO (Baltic and International Maritime Council), FOSFA (Federation of Oils, Seeds and Fats Associations) and GAFTA (Grain and Feed Trade Association), contain standard or default provisions on application of English law. So, under the circumstances, Ukrainian maritime law practitioners deal mainly with casualties and incidents, not with contracts. The Merchant Shipping Code of Ukraine of May 23, 1995 regulates all main questions in this respect such as collision, pollution or grounding. Ukraine signed and is a party to many international conventions, e.g. the International Convention for the Prevention of Pollution From Ships, 1973 as modified by the Protocol of 1978 (MARPOL 73/78), the International Convention on Maritime Search and Rescue (SAR 1979), the International Regulations for Preventing Collisions at Sea (COLREGs 1972), the International Convention on Maritime Liens and Mortgages (Geneva, of 6 May 1993), the International Convention Relating to the Arrest of Sea-Going Ships (Brussels, of 10 May 1952), etc.
A number of conventions are not ratified but implemented into the text of the Merchant Shipping Code of Ukraine, e.g. the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (“Hague Rules”, Brussels, of 25 August 1924), the International Convention for the Unification of Certain Rules of Law With Respect to Collision Between Vessels (Brussels, of 23 September 1910), the International Convention on Salvage, 1989 (SALVAGE, London, 28 April 1989) etc.
Role of Arbitration in shipping
Shipping industry is looking for detailed consideration of each case which can vary significantly in the carriages of goods by sea depending on the port of loading and discharging, type of the contract of carriage, the kind of cargo, etc.
In the consideration of maritime disputes, cases with a foreign element, the process of determining jurisdiction goes beyond the classic rules for determining jurisdiction regarding property, the persons and legal relations. The process is complemented by the influence of the European conventions such as the Brussels Regulation in the issue of the jurisdiction choice and The Rome Convention, concerning the applicable law and the international principles.
Maritime cases are very specific and are very complex. Many of them are connected with casualties. The accidental factor is very strong. Which vessel is guilty when a collision arises? Why is the cargo found wet? Is it because of unfit hatches? To make a right conclusion, one needs to have specific knowledge and expertise. That is why many in shipping favour arbitration over litigation. Arbitrators are more knowledgeable in maritime matters rather than judges which have limited exposure to shipping. They can decide cases based upon the law, their practical knowledge and commercial reasoning. Furthermore, judges may be forced under the doctrine to decide modern-day disputes based on antiquated case law. Arbitrators, however, are not bound by this doctrine and have broad latitude to use their commercial sense of fairness. Neither are arbitrators bound by strict court rules of evidence and procedure.
Still the most popular choice for maritime arbitration is London. The majority of standard form charterparties, international sale contracts, salvage contracts, reinsurance and P&I Club Rules provide for London arbitration and in particular arbitration at the LMAA (London Maritime Arbitrators’ Association). Many bills of lading incorporate the arbitration clause in the charterparty under which the bill is issued.
In Ukraine there is Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry, an independent permanent arbitration institution operating under the Act of Ukraine On International Commercial Arbitration of 24 February 1994, the Statute on the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry (Annex No.2 to this Act) and the Rules, approved by the Decision of the Presidium of the Ukrainian Chamber of Commerce and Industry No.18(1) of 17 April 2007, as amended by the Decision of the Presidium of the Ukrainian Chamber of Commerce and Industry No.24(6) of 25 October 2012. This tribunal shall settle disputes arising out of contractual or other civil law relationships in the area of merchant shipping regardless of whether participants of such relationships are subjects of Ukrainian and foreign law or exclusively of Ukrainian or foreign. During the latest years the number of cases has significantly increased thus making this forum more and more popular for consideration of maritime disputes.
Ukraine is a maritime state
Ukraine’s position as a maritime power requires both following global trends in world sea trade and trends in Black Sea and Sea of Azov regions. The need for developing the domestic sea economic complex is dictated by the high profitability of the transport service market due to world-recognized competitive advantages of water transportation (ecological compatibility, low price, investment attractiveness, etc).
However the legal framework which regulates the marine industry remains imperfect. In particular, most of the items on its functioning in Ukraine are still regulated by subordinate acts. There is not a sufficiently high level of marine activity management by several central executive bodies without a sufficient level of coordination both with each other and with local executive bodies of maritime regions.
During 25 years of its independence Ukraine has faced constant changes in the status of the central executive bodies which regulate the marine industry. At present most sea economic enterprises belong to the system of the Ukrainian Ministry of Infrastructure. At the present moment several authorities and enterprises perform functions of the Maritime Administration (State Inspection of Ukraine in Transport Safety; the Ukrainian Sea Ports Authority; Inspection upon Training and Certification of Seafarers; Maritime Search and Rescue Service). Such situation does not facilitate to unification of the state policy in the relevant sphere based on the integrative and universal approach to the performance of the functions within the competence of the Maritime Administration according to the international practice.
The procedure of establishment of the Maritime Administration is at the stage of creation of regulatory basis for its activity. In particular, on 29.09.2016 the Ministry of Infrastructure of Ukraine submitted to the Cabinet of Ministers of Ukraine for consideration the Draft Order “On establishment of State sea/river transport service of Ukraine – the Maritime Administration”.
All above are the reasons while despite a long maritime tradition Ukrainian maritime arbitration and court practice are of minor importance for maritime business. The serious drawback of the Ukrainian legislation in the maritime sphere is lack of the unified approach in questions related to maritime activity. The legislation of Ukraine consists of the Merchant Shipping Code, laws and subordinate acts that regulate some specific maritime relations. The legal framework in this respect is imperfect. Ukraine should refuse from regulating shipping by subordinate acts and base mainly on international conventions and traditions. There is a strong necessity to systemize legal norms regulating maritime activity. If positioning itself as a maritime state Ukraine should follow global trends.
Ukrainian legal community has recently unified its efforts aiming to improve the legal framework regulating some of the main issues of maritime law, in particular, ship arrest under maritime claims, ballast waters regulations, and others. Such work will definitely result in necessary amendments to legislation giving for Ukraine the possibility to obtain strong system of maritime law and to become more attractive as the maritime jurisdiction.
