TT Club: Non-security-compliant ports “are not insured”
TT Club: Non-security-compliant ports “are not insured”
Ports that do not comply with the International Ship and Port Facility Security (ISPS) code by July 1 risk increases in liability and the invalidation of their insurance cover, a senior executive of the Through Transport Club insurance mutual has warned.
Nick Sansom, principal officer of the club in Southeast Asia, said non-ISPS-compliant port operators could be left exposed without insurance protection. He cited potential claims by ship operators or third parties like the general public after a terrorist attack at a terminal.
“An operator who is not ISPS compliant runs risks under mandatory law as well as under contractual liability and from third party claims,” Sansom told a conference in Singapore.
The TT Club said there are growing concerns at the number of ports lagging in their preparations, with Indonesia reported that only five of 141 ports will be certified as ISPS compliant within the deadline.
In this context, the TT Club, a major insurer of ports and terminals, said it is hoping its warning “will awaken operators to the very real legal and commercial dangers they face.”
“The general risk of terrorism has increased and therefore the traditional defenses for port operators against liability based on a third-party’s act will not always be available,” Sansom cautioned. “The known risk of terrorism increases the duty of the operator to take security precautions. Moreover there is a greater risk of negligence, as the ISPS code specifically requires a security assessment and security plan to be in place and for the plan to be applied.”
A port operator’s liability is often subject to private contract. But in some countries, there is a mandatory domestic law, the insurer said. The TT Club said a ship operator is subject to international maritime conventions and “will seek a recourse against a port operator that causes the ship operator to incur a liability under the relevant convention.”
The club pointed out that, under international maritime conventions and typical domestic mandatory law, a defense against liability may be permitted where loss is caused by an “act of war” or by “intentional” damage by a third party. Both of these defenses, the club argued, are applicable to an act of terrorism. However an operator who has not complied with the ISPS code could find that it is guilty of contributory negligence, “which may well remove this defense,” the club added.
By contrast, the existence of, and full compliance with, the ISPS code gives the port operator “a very strong defense” against any allegation of negligence in the case of a terrorist attack, the TT Club said.
Sansom also stressed the issue of contractual liability, which includes damage to cargo, damage to ship and containers, injury to crew, delays to ships and possible fines at discharge ports.
“The traditional basis of liability is that the port operator is only liable if found to be negligent and, sometimes, there may be an express exclusion of liability for terrorism,” he said.
“However, the existence of both a known terrorist threat and the ISPS code designed to combat such a threat mean that these defenses may be invalidated if reasonable security measures have not been taken,” he added. This would occur if the port operator fails to become certified under ISPS, to undertake all that is necessary for certification, or to apply the measures outlined in its agreed ISPS security plan.
The TT Club is also warning of “the very strong likelihood” of third party claims following an act of terrorism. These claims, such as by a visitor to the port or the general public injured by the explosion of a bomb in a container, are governed by so-called tortious law, the club said.
Generally unlimited liability applies in these cases and financial compensation awards “can be very large,” it noted.
Again, failure to comply with ISPS will provide significant proof of negligence, while full compliance will assist in a strong defense against such claims, according to the TT Club.
“There can be little doubt that ships and ports that are unable to demonstrate compliance — on a continuing basis — are likely to be at a commercial disadvantage,” Sansom said. “Vessels that use non-compliant port facilities may incur delays and subsequently be denied access to discharge ports that demand the ISPS code be upheld.”