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The Insurance Compensation Consortium and its Policyholders, with a Special Focus on Inland Road Freight Transport

In this article we will analyse how the Insurance Compensation Consortium (hereinafter “CCS”) is legally configured, as well as some of the most common cases in which the CCS is related to land transport of goods, delving into the characteristics of the relationship established between the CCS and its insured parties.

The CCS was created in 1954, and is currently defined as a public business entity, framed in articles 103 and following of Law 40/2015, of 1 October, on the Legal Regime of the Public Sector (LRJSP).

Public business entities are public law entities with separate legal personality, their own assets and autonomy in their management. As far as their financing is concerned, article 103 of the LRJSP states that “they are financed with market revenues, and that together with the exercise of administrative powers, they carry out service activities, management of services or production of goods of public interest, which are susceptible to payment”.

In addition, and as a peculiarity, it should be stressed that, although we are talking about public law entities, they are governed by private law. This is stated in Article 104 of the LRJSP, which specifies that “public business entities are governed by private law” and, specifically, it is also regulated in the CCS’s own regulations, in particular in Article 2 of Royal Legislative Decree 7/2004, of 29 October, which approves the revised text of the Legal Statute of the Insurance Compensation Consortium (hereinafter, “Legal Statute of the CCS”). Article 2 which, regarding the legal status of the entity, states: 1. The Consortium shall be governed by the provisions contained in these legal statutes (…). 2. It shall be subject, in the exercise of its insurance activity and, in the absence of special rules contained in these legal statutes, to the provisions of the revised text of the Law on the Regulation and Supervision of Private Insurance, approved by Royal Legislative Decree 6/2004, of 29 October, and in Law 50/1980, of 8 October, on Insurance Contracts. 3. The contracting of the Consortium is governed by private law, (…)”.

If we go to the Legal Statute of the CCS, we find the functions attributed to this public business entity in Chapter III, which is divided into a First Section covering its private functions in the insurance field, and a Second Section containing its public functions. Specifically, it is in the section relating to private functions where we find the different cases in which the CCS can be related to land transport of goods, which are as follows:

  • Compensate damage caused by extraordinary risks, understood as natural phenomena, or derived from events of political or social incidence, on the obvious condition of having subscribed an insurance policy for the persons or goods affected.
    This category would include, for example, all the damage suffered by the different tractor units and semi-trailers of hauliers as a result of the altercations and pickets during the strikes and stoppages of activity in the transport sector in March 2021, and which were about to be repeated in November 2022. These strikes or stoppages would fall under one of the extraordinary risks by being classified as “popular unrest”[1].
  • Assume the compulsory coverage of vehicles not accepted by insurance companies (e.g., those with foreign registration plates), as well as that of public bodies that request it. Also, compensate for damage caused by unknown, uninsured, or stolen vehicles. Think, for example, when there is a non-payment of premiums and the policy ceases to have effect after the legally established period of time[2], whether it is a private vehicle, a semi-trailer, a tractor unit or any other vehicle that causes damage.

Having analysed these two most common cases in which the CCS is related to land transport of goods, we consider it interesting to determine the characteristics of the relationship that the CCS establishes with its policyholders.

In this sense, our highest Court has been concluding since the 1990s that the relationship that exists between the insured and the CCS is contractual, provided that the insured has taken out an insurance policy with a Spanish insurance company under which the insured pays a surcharge on the premium in favour of the CCS. In such cases, the insured will be deemed to have two insurance contracts, one with the Spanish private insurer with which they took out the policy and the other with the CCS. However, both are instrumented in a single contract or policy, which is the one they sign with the Spanish private insurer.

The Supreme Court has also pointed out on several occasions that each of these two contracts has its own content and, as such, is subject to different legal regimes. Even so, the rules of the Insurance Contract Law will always be applicable to contracts entered into with the Insurance Compensation Consortium insofar as they are not provided for in its specific regulation, among others, the insured objects and their situation; the insured sum or the scope of the coverage; the amount of the premium, the surcharges and taxes; or the duration of the contract with expression of the day and time in which its effects begin and end.

Ultimately, a compulsory supplementary insurance contract is established between the insured and the CCS when the various surcharges on the premiums paid for the insurance are credited. That is why, in most cases, the liability of the CCS will be contractual. In the case of road hauliers, when policies are taken out for each insured tractor unit and/or semi-trailer.

In view of the above, we believe that it is absolutely essential for professionals in the transport sector to be aware of the characteristics of insurance policies, taken out directly or via their insurance brokers, and to review them periodically. This is because they contain intrinsic contractual rights and duties, of vital importance, which directly affect them as insured parties.

All of which is recommended in order to ensure better protection of the risks inherent in its activity and of the services provided to third parties in the event that they are affected by claims or incidents.

———–

[1] Defined by art. 2.1 k). of Royal Decree 300/2004, of 20 February, approving the Regulation on extraordinary risk insurance.

[2] Art. 15 of Law 50/1980 of 8 October 1980 on Insurance Contracts.

Irantzu Sedano Speaker at the National Maritime Law Congress

Once again, this year on 17 and 18 November 2022, the National Maritime Law Congress organised by the Spanish Maritime Law Association was held in Madrid.

AIYON Abogados, in addition to sponsoring the event, has collaborated closely in it, as our colleague Irantzu Sedano had the opportunity to be a speaker at the event with her presentation on the guarantees to be provided in requests for places of refuge for ships that are carried out in Spain.

Irantzu and her other three fellow speakers, Neus León, Carmen Zulueta and María Fernández Llamazares, all members of the Young Lawyers Group of the Spanish Maritime Law Association, through their interesting presentations on the personal guarantees to be provided in maritime navigation, provided us with practical and useful information, and helped us to broaden our knowledge on the subject.

In particular, our colleague’s presentation highlighted the analysis of the real and practical application of the provisions of the regulations applicable in Spain, through the case study of the ship “Modern Express” managed in conjunction with the port of Bilbao.

If you want more information on the guarantees to be provided in refugee applications made in Spain, we recommend that you read our article “On Ports of Refuge”.

On Ports of Refuge

Vessels in an emergency or dangerous situation while underway, whether due to fire, capsize, explosion, collision, etc., require urgent assistance. This assistance may come from vessels close to the incident, as well as from the rescue teams and coastal state authorities in charge of the area of responsibility for maritime search and rescue (SAR area) in which the vessel is located.

However, once human lives have been saved (always in compliance with SOLAS convention) and the damage and risks have been assessed, the affected vessel will most likely initiate the appropriate procedure to request the ship’s refuge in an appropriate place.

Although historically it has been understood that a place of refuge should correspond to a port, the International Maritime Organisation (IMO) changed this interpretation and broadened the term place of refuge to cover all places where ships in need of assistance can take the necessary measures to stabilise their condition or situation, be they berths, anchorages, ports or any other place.

The procedure for requesting refuge in Spain is relatively simple, and special attention should be paid to the provisions of Royal Decree 210/2004 of 6 February, which establishes a system of monitoring and information on maritime traffic.

The Master of the ship, or alternatively, a representative of the operator or shipping company concerned must submit a request for refuge to the competent authority of the country, in our case the Director General of the Merchant Navy, explaining the reasons why the ship requires refuge.

Once the Directorate General of the Merchant Navy has received the request for refuge, it will convene a technical committee comprising at least of the Maritime Master, the Head of the maritime district, the maritime inspection and safety coordinators and any other persons whose opinion may be relevant to the case; an example would be the local Port Authority in the event that the assessed place of refuge is a Port.

This committee will deliberate and carry out all the investigative acts it deems appropriate and may even go as far as to physically inspect the ship. It should not be overlooked that, in the first instance, the provision of a place of refuge may pose a serious danger, either by causing pollution, port congestion, etc., so all requests for a place of refuge must be carefully considered. On the other hand, it is true that failure to provide the necessary refuge in a timely manner could also lead to the ship’s situation worsening to such an extent that the damage that could have been contained, or at least minimised by the assistance required, would be multiplied. This was the reality in the case of the Prestige in 2002.

The decision authorising access or refusal of refuge may be taken orally without undue formality; however, it must always be communicated to the persons concerned in writing and duly reasoned within a period of less than 96 hours.

Furthermore, practice has shown that authorisation to give refuge to a ship in need of assistance is to a greater or lesser extent subject to the provision of a guarantee. The characteristics of this guarantee are mainly set out in the aforementioned Royal Decree 210/2004 and in the revised text of the Law on State Ports and the Merchant Navy, and as a summary we can highlight the following peculiarities:

  1. When the guarantee is required: The Second Transitional Provision of Royal Decree 210/2004 establishes that the provision of the financial guarantee will be an essential element to be taken into account when authorising the refuge. Furthermore, practice shows that the guarantee is always requested before the ship has been admitted.
  2. Perceptiveness of the guarantee: In this aspect, we can affirm that the provisions of the regulations and the practical reality of refugee applications are contradictory. Although article 22 of RD 210/2004 and article 299 of the revised text of the Law on State Ports and the Merchant Navy suggest that the provision of the guarantee does not seem to be mandatory, the reality is different, as practice shows that refuges are not authorised without the provision of the necessary guarantee.
  3. Purpose of the guarantee: The purpose of the guarantee is clear; it is required to cover possible damage which may be caused to persons, public entities or property of any nature by the ship, its fuel or cargo, as well as to cover expenses incurred in the application of preventive measures.
    The guarantee shall cover all damage caused during the ship’s voyage to or from the place of refuge, as well as during its stay in the place of refuge.
  1. Maximum amount of the guarantee: This limitation cannot be confused with the limits of liability, which will have to be determined in accordance with the regulations applicable to each case.
    Depending on the goods transported, the limits will be one or the other:
    • Goods with the characteristics outlined in Regulation EC/1726/2003 of the European Parliament and of the Council of 22 July 2003. 7,000,000.00 euros for vessels not exceeding 2,000 GT and 10,000.00 euros for each tonnage unit exceeding 2,000 GT.
    • The rest of the goods. 2,5000,000.00 euros up to 2,000 GT and 600.00 euros for each tonnage unit exceeding 2,000 GT.
    Given the urgency of these processes, establishing the amount of the guarantee is very complicated; therefore, the maritime authority concerned usually seeks to be on the safe side by establishing the maximum permitted limit.
    In the event that no damage or costs are incurred in the course of the ship’s refuge, as was the case, for example, of “Modern Express” in the port of Bilbao, the guarantee will not be invoked.
  1. Types of guarantees allowed: Article 22 of RD 210/2004 establishes that a financial guarantee must be provided in favour of the Directorate General of the Merchant Navy at a bank domiciled in Spain, i.e. the General Deposit Fund.

In addition to this, in certain cases, there is a possibility of providing other types of guarantees, such as Letter of Undertaking (LOU) from Protection and Indemnity Clubs (P&I Clubs). Generally, in order to be accepted, the Letter of Undertaking is required to be provided by a P&I Club with an “A” rating, i.e. the highest credit rating.

The acceptance or rejection of this guarantee shall be taken on a case-by-case basis by the relevant authority.

Despite the fact that requests for places of refuge are not very common in the course of maritime navigation or in the day-to-day life of the sector, given their importance and the extremely serious and urgent situations that arise at such times, it is important that maritime lawyers and other experts involved in these operations are properly prepared to deal with this type of procedure. This is in order to guarantee an adequate resolution of these incidents, as well as to provide the best protection to the parties that may be affected.

AIYON Abogados collaborates with ISDE

The ISDE Law Business School has been collaborating this year with AIYON Abogados in teaching the classes on Land Transport and Maritime Transport included in its postgraduate course offered under the title “Master in Business Law, Arbitration and ADR”.

Our partner in Madrid, Verónica Meana, was in charge of the asynchronous classes on Land and Maritime Transport and will soon be giving the in-person class on Maritime Transport, while our partners Enrique Ortiz (Cadiz) and José Domínguez (Algeciras) gave a lesson on Land Transport and Payment Methods, respectively.

This collaboration has given AIYON a new opportunity to take part in the learning process of new generations of professionals who will surely enrich the sector.

We would like to thank ISDE for this opportunity, which we hope will be the first of many.

The “Prestige” case twenty years on

On 13 November 2002, it was twenty years since the Prestige sent out its first distress call while sailing off the Galician coast, loaded with approximately 77,000 tonnes of crude oil on board. This first call led, six days later, to the ecological disaster that resulted in the sinking of the Prestige and the consequent spillage of part of its cargo into the sea (63,200 tonnes). 

The IOPC Fund (International Oil Pollution Compensation Fund), an intergovernmental body set up under the auspices of the International Maritime Organisation (IMO) to promote adequate compensation for those affected by oil spills and the economic damage they cause, takes part in these situations. Spain is a State Party and a member of the IOPC Fund.

Specifically, in the “PRESTIGE” case, the IOPC Fund had 147.9 million euros at its disposal to deal with the incident.

Since its inception, the team of lawyers of AIYON ABOGADOS S.L.P. has advised the IOPC Fund in the “PRESTIGE” case which was prosecuted in Spain, and our partners Mikel Garteiz-goxeaskoa and Verónica Meana are currently in charge of this advice.

Among other national and international publications, the national newspaper “La Razón” has echoed this news by publishing on 13 November a comprehensive article entitled “Prestige: caso abierto 20 años después” (Prestige: open case 20 years later). 

Read more…

AIYON Abogados Collaborates with ISEC

In collaboration with the ISEC (Institute for Cargo Security), our partner in Bilbao, Zuberoa Elorriaga, took part in the III National Congress on Land Transport which took place on the 20th of October at the Centre for Traffic Management and Emergency Coordination of the Basque Country in Bilbao.

The Congress was opened by Ms. Sonia Díaz de Corcuera, Director of Traffic of the Basque Government and was aimed at members of the Local Police, Autonomous Police, Civil Guard and transport inspection technicians from the different Autonomous Communities, in order to provide them with continuous training and learning in the area of land transport, adapting to new regulations.

Together with the great professionals of the sector such as Andoni Gortazar, Francisco Fernández Sasiain and Juan Cantón Revuelto, Zuberoa took part in the presentation on Lashing Techniques, which covered a wide range of content on regulation, methodology, equipment, obligations and responsibilities, providing her vision on the role of the parties to the transport contract, and the best way for the inspection authorities to deal with the imputation of responsibilities or penalties to those involved in the stowage and lashing of cargoes.

AIYON Abogados would like to thank ISEC for giving us this opportunity, as well as for the excellent welcome received at the Traffic Management and Emergency Coordination Centre. We hope this is the first of many collaborations.

On the Collision of the “OS35” and “ADAM LNG” in the Waters of the Strait of Gibraltar

On the night of Monday 29 August 2022, the vessels “OS 35” and “ADAM LNG” collided during the manoeuvre out of the Bay of the Port of Gibraltar.

What happened was a textbook collision, as there was physical contact between the two ships and certain damage was caused after the collision: ‘Collision is defined as a collision involving ships, vessels or naval craft, resulting in damage to any of them, persons or things’.

In this regard, the Brussels International Convention of 23 September 1910, for the Unification of Certain Rules Relating to Collision, states that its consequence extends: “to compensation for damage which, either by execution or omission of a manoeuvre, or by non-observance of the regulations, a vessel causes to another vessel or to persons or things on board the latter, even if there has not been collision”, demanding as an indispensable requirement to determine that a accident between two vessels is collision, that damage is caused. For its part, the Spanish Maritime Navigation Act of 2014 complements this legal concept, extending its regime to damages produced in navigation accidents in which there has been physical contact or not, such as those that may be suffered in the event of omission or execution of a manoeuvre.

Fortunately, and despite the seriousness of the events, it should be noted that there were no fatalities. The ship that suffered the most damage, the bulkcarrier “OS 35”, ran aground near the port in shallow waters, precisely to avoid putting the safety of its crew at risk, to avoid polluting spills, and to affect the situation of the cargo as little as possible.

Nevertheless, from an environmental point of view, significant risks were caused because, contrary to the initial information given by the “OS 35”, the vessel was indeed suffering from small fuel oil leaks. These leaks, after intense work by experts, were identified and sealed after several days. This situation has undoubtedly also had an impact in Spain, and in particular in the Campo de Gibraltar area.

Although a priori, by analysing the trajectory of the ships involved, it might seem easy to identify who is responsible, it is not always easy to delimit. In those cases, in which the fault is shared by both ships, both the 1910 Convention and the Spanish Maritime Navigation Act provide for a system of graduation of liability; that is to say, a system of graduation in proportion to the degree of fault actually produced by each ship, the only exception being the case in which it is impossible to determine the degree of fault of each party. Only in that case would the presumption of liability of the shipowners in equal shares come into play.

Leaving aside the responsibilities yet to be delimited and possible administrative sanctions that the vessels or their owners may receive, more than a month after the accident we can affirm that one of the most controversial aspects of this incident has been precisely the determination of sovereignty over the waters in which it occurred, which is not clearly defined.

This collision has particularly affected the United Kingdom (Gibraltar) and the Kingdom of Spain, both signatories to the Treaty of Utrecht. The acceptance of this Treaty by both states determines the mutual acceptance that Gibraltar, together with its port (castle, city, inland waters and harbour), are under the sovereignty of the United Kingdom. However, what it does not determine, and what Spain therefore objects to, is that Gibraltar can generate maritime spaces outside its jurisdiction.

But we should not forget that, regardless of which state ultimately determines sovereignty over the waters in which the incident occurred, international law imposes an obligation on both states to cooperate, inter alia to protect and preserve the marine environment (United Nations Convention on the Law of the Sea).

The gas tanker “ADAM LNG” is currently sailing normally after having entrusted its emergency repairs to a Spanish shipyard. However, the vessel “OS 35”, which undoubtedly bore the brunt of the collision, and which has been the subject of full public attention due to its spectacular situation, is still being managed by the Gibraltarian authorities after being sunk and stabilised in a controlled manner so that it cannot move and turn with the waves, the tide and/or the wind. As of today, it remains in position after having discharged all its fuel, as well as the polluting substances it had on board, but there is still much to be done and decided on this collision.

This, however, has reminded us of the relevance and magnitude of merchant ships and their mission, carrying out complex and risky work daily as they sail the world’s waters.

Renewal of the Board of Directors of the Propeller Club of the Basque Country Port of Bilbao

On 27 January 2002, the Propeller Club of the Basque Country – Port of Bilbao, an association in which our firm participates, began the year 2022 with a change in its presidency.

Gerardo Tiedemann, who has led the association for years with great success and dedication, handed over his post to José Luis Grijalvo, to whom we wish the best in this new journey.

In the Board of Directors of the Propeller Club of the Basque Country-Bilbao, together with the rest of the relevant representatives of the maritime and logistics sector in Bilbao, our partner from Bilbao, Mikel Garteiz-goxeaskoa, remains as treasurer and member of the Board of Directors.

Broad representation of AIYON Abogados at the National Congress of the Spanish Association of Maritime Law (AEDM)

Verónica Meana, Zuberoa Elorriaga and José Antonio Dominguez, partners of the offices in Madrid, Bilbao and Algeciras, respectively, took part in the National Congress of the Spanish Association of Maritime Law (AEDM) on November 18thand 19th which was held in Madrid under the title “The Maritime Law of the Recovery. Challenges and Reforms”.

The congress, which provided information of great interest to the participants, began with an In Memoriam tribute to Javier Galiano, Ramón Fernández Guerra and Fernando Meana Green. In memory of the great personal and professional legacy of the latter, Verónica, his daughter and our colleague, made a brief speech.

The congress program was structured into six modules that were addressed with rigour and depth. The latest experiences on the implementation of the Paris Memorandum, with the presentation of the point of view of various sectors (insurance, shipowners, and Directorate-General for Merchant Shipping); the “Next Generation” Funds in the maritime sector, with the analysis of the requirements for their application; liability and insurance in accidents in ports; technological challenges in technical investigation of maritime accidents; and the ongoing reforms of the Law on State Ports and Merchant Marine and the Maritime Navigation Act were discussed.