SECURITY AND INSURANCE OF MARITIME CREDITORS
I. Insurance of maritime claims
1. Insurance as a secondary means of securing maritime claims
Securing claims originating from the operation of merchant ship i.e. maritime claims is not of course less important than the availability of the claim itself. The right granted must be accompanied by a certain degree of protection; otherwise it remains a right in theory only and its eventual judicial recognition is a Mere Pyrrhic victory. Security offered to usual civil claims under the law is not a satisfactory basis for pursuing maritime claims. This is mainly because the only asset from which maritime creditors may be satisfied, namely the ship, may not be sufficient to satisfy a particular claim in case of total loss, change of owner, or existence of a higher ranked claim from another creditor, for substantive or legal reasons. Another danger is that the ship’s value may prove insufficient for the satisfaction of all creditors. This last danger has of course been mitigated by the limitation of civil liability under the 1976 International Convention on the Limitation of Liability for Maritime Claims.
The possibility of lifting the veil of the one-vessel shipowner company and thereby gaining access to the shareholders’ personal assets is very limited under Greek law. At any rate, it is not specially dealt with in the case of maritime creditors, but confined to the realm of corporate law. Therefore, even if some maritime creditors may be satisfied from the ship, there often remains other claim, which can only be protected and secured through a third party, who may be the insurer.
Law and practice acknowledge the particular status of the maritime creditor as compared to non-maritime creditors, reflected in the special provisions on mortgages, liens, ship arrests, and other conservative measures aiming at a rapid judicial safeguard of claims, when these are maritime claims and the asset involved is a ship. Security is also granted through the extensive unification of the law, i.e. through the formal standardization of agreements and general terms on a universal scale for matters related to the claims of maritime creditors; whether a claim is therefore regarded as privileged is independent of the actual location of the ship and of the law applicable in each port.
Claims arising from court expenses, referring to arrest and auction or arising from fiscal charges and taxes, from marine employment or salvage contracts, or claims arising from ship collision are usually internationally regarded as privileged. Such claims enjoy priority against mortgages and their protection through satisfaction from the vessel itself is sufficient to a point. It is not, however, completely sufficient for two main reasons: on the one hand, the satisfaction of privileged claims belonging to a superior rank may leave no remainder for the satisfaction of inferior claims, as may occur, for instance, with large claims arising from fines and indemnity due to pollution. On the other hand, the ship may have been lost or its value may prove inadequate. Such latter cases have been restricted by the International Convention on the Limitation of Liability. There is also the possibility that the claim is not acknowledged as privileged under the law of the place of execution. Private insurance is the appropriate means of satisfaction, supplementary in the case of privileged claims and primary for non-privileged claims. In fact, the Convention offers the possibility of obtaining cheap coverage. More satisfactory protection is granted when a claim is secured by a mortgage on the ship, especially when the applicable law provides, as does Greek law, that only a small number of privileged claims shall be satisfied before a mortgage. However, this protection is also contingent on the state of the ship. This uncertainty as to the financial satisfaction of a claim secured by a real right is resolved by private insurance.
The securisation through insurance could even be absolutely safe here if, after compensation of the damage to the insured property, the legal status of the creditor on mortgage would not be affected.
Private liability insurance concluded by future debtors of a maritime claim or insurance concluded by future creditors in order to cover the potential insolvency of the contracting party or still life insurance coverage concluded in favour of the debtor with assignment of the insurance sum to the creditor and other forms of similar private insurance contracts are a mean for each individual party in the maritime sphere of relationship to protect its own interests. The limited possibilities for the insurer to recover against maritime debtors if such insurance contracts are entered into may have an influence on the level of premium but not on the possibility of obtaining the insurance benefit.
2. Insurance as a primary means of securing maritime claims
a. Private insurance presents a singularity as regards the new liability borne by the shipowner who pollutes the marine environment mainly through an oil spill. According to the opinion prevailing in both a national and an international context, which opinion is expressed moreover in the 1969 Brussels Convention on the shipowner’s civil liability for the oil pollution of the sea, and 1971 Brussels Convention on the creation of a fund for the compensation of such damages, compensation claims for environmental damages caused by the ship should not depend on the shipowner’s solvency or on the state of the ship, as in the case of privileged claims, nor should it depend on the proceeds of the auction. Protection must be greater. Under the current system, the all-important aim, namely that «the innocent victims of oil spills should not be uncompensated», is pursued through the shipowner’s assets, namely only the ship and perhaps the cargo, since only the shipowner (and possibly the person responsible for the cargo) can be held liable under civil law, and since other systems for compensating such claims are not developed. The Convention on the Limitation of Liability for Maritime Claims expressly except from limitation the liability rising from damages by oil pollution. The system of compensation through the shipowner’s assets, i.e., the vessel, is thus unsatisfactory. The problem is resolved by private insurance, which here plays a primary part as a means for securing these maritime claims to the extent that such insurance is compulsory, and provides for a direct lawsuit by the creditor who has a claim arising from pollution, as is the case under the Convention on Civil Liability due to Oil Pollution. In fact, the link between insurance and liability is so strong in the Convention that the liability and, therefore, the extent of the maritime claim from oil pollution is determined, to a degree, by the demands and abilities of the insurance capacity and its techniques. This is also the case under other international conventions introducing new kinds of civil liability (for instance, product liability) as under the International Convention on the limitation of liability of maritime claims.
The escalation of liability according to tonnage sets a ceiling of liability corresponding to the need for insurance coverage, while the compulsory nature of the insurance, together with the possibility of a direct action allows insurance to actually operate as a discharge of liability.
b. As mentioned already, private insurance, with the exception of claims from pollution, is an auxiliary means for the protection of privileged claims. On the contrary, social insurance for certain claims arising from maritime employment contracts, offers primary security. The primary protection for claims insured by a social insurer is not the maritime lien which grants a right to indemnity from the shipowner. Basically, this is because the claim is of such importance socially that the legislator wished to secure it under all circumstances instead of relying only on the security offered by the maritime lien. The economic consequences of such claims are in this way shifted onto the Social Security Institutions. The prominent social character of such claims is also the reason why the Greek Code of Private Maritime Law chooses to arm the social insurer’s claims against the shipowner for employer contributions with a high-priority lien. The latter is not the ease, however, regarding premiums owed under an insurance contract, even if the contract was concluded by the shipowner for covering his liability and thus dealt with maritime claims, including those secured by a lien, even if the insurance has not been concluded to cover risks to the hull of the asset, which is preempted to the benefit of maritime creditors. The insurance concluded by the shipowner is viewed by the legislator as his private affair, a good purchased under no legal obligation, within the scope of entrepreneurial activities, even if it functions occasionally as the only means of satisfying maritime claims secured by a lien.
II. The insurance factor in formulating maritime claims
1. Introductory observations
Private insurance fills in the gaps left by the security of real rights on maritime claims and extinguishes the economic consequences of the risks of destruction of the ship. In other words it constitutes the main means of securing non-privileged creditors and grants the greatest security for the satisfaction of claims for damages by oil pollution. The enhanced importance of private insurance in maritime credit as a means of security shaped to a certain extent, the shipowner’s civil liability for pollution, and will continue to do so as his civil liability expands to new areas of environmental protection. Private insurance has created no fault liability, has set a maximum limit and restricted such liability under the 1976 London Convention on the Limitation of Liability and the 1971 Athens Convention of the transport of passengers and luggage, and has influenced other matters as well. Thus, for instance, the introduction (by art. 9 of the 1967 Brussels International Convention on Liens) of an amendment, providing in particular that the claim remains privileged even after it has been assigned, protects persons subrogated in the position of the creditor having a privileged claim after payment. Such persons are primarily professional payers of indemnity, namely insurers.
In other cases the insurance factor may give rise to de lege ferenda considerations regarding the protection of maritime creditors. Thus, in order to promote the insurance coverage of privileged claims, the privilege should not be extinguished when the insurer, in cases where the ship has been lost, is subrogated against the hull insurer after paying the privileged creditor, as is the situation under the Greek Code of Private Maritime Law. Therefore, the above subrogated insurer, in cases where the shipowner has not constituted the fund according to the Convention of Limitation of Liability of Maritime Claims and where the law applicable provides the constitution of the fund as a prerequisite for limitation, or in cases where the insured’s claim was not subject to limitation under the Convention, can only recover from the hull insurer. Where the law does not recognize a privilege on the recovery claim, it is very doubtful whether there shall remain any sum to be recovered; thus, the burden of coverage of the privileged claimant will even is accompanied by the creditor’s direct action against the debtor’s insurer, which lends to become extended to optional civil liability insurances is accompanied by the creditor’s direct action against the debtor’s insurer, which lends to become extended to optional civil liability.
Further and as will be reviewed below, in the case of a statutory exclusion of the extension of the privilege to the hull insurance indemnity, as well as in the case of insurance by both the shipowner and the creditor on mortgage, the insurance can result in undue enrichment and undue opportunities.
Finally, if the principles of maritime and insurance law fail to be properly combined, the benefit of insurance maybe lost; together with the security it offers the maritime creditor. An example of such incorrect combination is over-insurance with large deviations.
We will consider below several aspects of hull insurance in connection with maritime liens and mortgages, as well as the coverage of environmental claims.
2. Hull insurance and maritime privileges
a. Hull insurance is useful not only for the shipowner, but for his creditors as well, since the ship’s value is usually the only asset belonging to the shipowner from which creditors may seek satisfaction. This has been restricted under the 1976 Convention on the Limitation of Liability, but only for maritime claims provided by the convention, and only if the shipowner has constituted the fund, which is not, expected if the ship has been lost. The indemnity replaces the value of the lost ship, but loss of the ship entails loss of the security by mortgage and of the privilege on the claims they secure. Therefore, the privileged satisfaction is also lost. The extension of the mortgage on insurance indemnity by law is discussed below. The vessel and the value which it represents are no longer within reach of the secured creditors as an asset separate from the claims of other non-privileged creditors. The indemnity paid by the hull insurer of a lost ship is not owed to creditors secured by a real right, but to the former shipowner. For this reason it is not paid to these creditors by way of priority, but equally to all creditors. The principles of insurance and civil law offer no grounds for the prior satisfaction of creditors secured by a maritime privilege through the indemnity. There is no element in ordinary hull insurance which betrays the insured’s desire for coverage to function in favour of creditors secured by a real right. Under Greek law, even if such elements did emerge, and there were grounds for direct action brought by the creditor secured by a real right against the hull insurer of a lost ship, the creditor’s claim would lose its privilege.
For the claim to retain its privilege, the creditor would have to be insured. An ordinary hull insurance cannot, however, just by way of interpretation, be considered as an insurance in favour of any creditors secured by a real right. Extension of the privilege to the indemnity may be effected either by assignment of a future and uncertain claim or under an express legal provision. Such a provision exists in the Greek Code of Private Maritime Law and provides that the mortgage is exercised on the indemnity. Security by a real right docs not aim at the total or partial exercise of real ownership rights, but is directed only to the financial value of the asset belonging to the debtor. In case of satisfaction of creditors of maritime claims through an auction of the vessel, the value of the vessel will be reduced accordingly; the creditors must then be satisfied on this reduced basis. On the other hand, hull insurance is also directed to the financial value of the hull and replaces any reduction in such value. The question is why there is no legal structure under which the shipowner’s assets, which are not reduced after loss of the ship since he received the indemnity, cannot, as before, be affected to the guarantee of the claim secured by a real right? Insurance law provides the answer. The relationship between the shipowner and the insurer is one of exchange; coverage is offered on payment of a premium, and after an entire series of rules of conduct has been observed by the insured. The purpose is to case the financial consequences facing the owner after the ship’s value as an object is reduced, or after it is lost. Reduction of the ship’s value as an object of entrepreneurial activity is here irrelevant. A mortgage constituted on a ship or the pursuit of an activity which may give rise to a claim having a maritime privilege docs not entail a legal obligation to insure the hull. If such an obligation were present, there would raise the question of extending the privilege to the indemnity, since such a regulation would be forced to acknowledge in the protection of claims secured by a real right, and especially of claims having a maritime privilege. The same question would arise if the shipowner appeared to wish that the insurance functions in favour of claims secured by a real right.
b. The legislator’s choice has been to refrain from creating an obligation by law which is in practice achieved with merchant ships on a voluntary basis; for such ships there is actually a sum available through private insurance corresponding to the ship’s value and to liability from the ship. To turn this into a legal obligation would open the way for extending the claims on the ship secured by real rights to the indemnity. The choice not to do so is certainly a reflection of many, chiefly technical, considerations, but in any case contradicts the importance given by the law to certain maritime privileges. Fiscal fees, taxes and maintenance costs arc all public claims; such sums are owed to the State. Failure to pay gives rise to severe sanctions, issue of an executable title by an administrative act, no court proceedings being necessary, etc. On the other hand, Greek law expressly provides that, even though privileges enjoy priority over a mortgage, the mortgage extends to the indemnity while privileges do not. Thus, if in a specific case the claim secured by a mortgage is so large that it extends over the entire indemnity, in case of auction, the State shall be able to recover while the claimant secured by the mortgage shall receive only part of the proceeds, after deduction. In other words, the claimant shall receive the sums corresponding to the privileged claims which have priority. On the contrary, if the ship has been lost, the State and other privileged creditors having priority against the mortgage will not receive anything, while the sum of the mortgage shall be collected in its entirety. The incidental loss of the ship works to the creditor on mortgage’s advantage and to the disadvantage of privileged creditors, and this cannot be justified. This is especially unsatisfactory if one considers that the a creditor/creditor on mortgage may, and in fact does, insure the risk of limited satisfaction from the mortgage, due to the priority enjoyed by maritime privileges. If no such risk is covered, there shall be cases where the loss of the ship shall end up as an advantage for the creditor on mortgage, who will avoid restricting the receivable sum by the extent of the privileges, a situation which is generally unacceptable. Further, this may constitute a prohibited case of undue enrichment in the meaning of insurance law.
c. Both the provision that the mortgage extends and the provision that the privilege does not extend, to the indemnity are subject to criticism. The creditor on mortgage does not, of course, base his right to the indemnity only on statutory provisions. In the credit or mortgage agreement he will contractually provide for the assignment of the future and uncertain claim of the debtor/mortgagee to the indemnity, and he will furthermore, require that the hull insurer waive the right to invoke exclusions of liability available to him under the law or the insurance contract. In fact, the express statutory provision that the mortgage extends to the indemnity renders meaningless any agreement under which the assignment of the indemnity to the mortgagor/creditor is valid only if there is supplementary coverage against the risk of restriction of the claim secured by a mortgage to the extent of the privileges. Such an agreement would be useful, however, since the creditor on mortgage’s position would be the same when his claim is satisfied from the proceeds as when it is satisfied by the hull insurer. This would avoid a situation whereby, as mentioned already, the ship’s loss would present an advantage for the creditor on mortgage.
On the other hand, if applicable law does not expressly exclude the extension of privileges over the insurance indemnity, then it should be possible to agree contractually that performance of the contract by the privileged creditor depends upon the existence of hull insurance. This contractual arrangement would be the basis of the privileged creditor’s claim to the indemnity, provided of course the privilege exists.
3. Hull insurance by both the shipowner and the creditor on mortgage
a) In spite of the fact that his claim ranks after maritime privileges, the creditor on mortgage has greater possibilities to secure it. The creditor on mortgage will usually be a credit institution. The entire world of financial services has contractually shaped credit security by relying on the preferred maritime mortgage, on the contractual assignment of the hull insurer’s indemnity, and possibly on the indemnity of the life insurer of the shipowner who gives a personal guarantee, as well as through his own credit insurance. Thus, the law which provides the possibility of hull insurance, not only to the benefit of both the shipowner and the creditor on mortgage, is of limited importance for the latter’s protection. The general principles of insurance law are of great importance, however, in particular the indemnity principle in insurance for damages. An expression of the above principle, which of course applies to hull insurance as well, is the so-called prohibition of enrichment. To violate this principle in the contractual formulation of the creditor on mortgage’s coverage may lead to limited function of the insurance or even to total denial of the indemnity because the courts would invalidate any provision in breach of the principle. According to Greek case law, great deviations between the insured sum and the real value of the subject matter insured constitutes, even in the presence of prior contractual evaluation, a presumption of willful over-insurance which will release the insurer of its contractual obligations. The insurer may have agreed to refrain from invoking objections the bank would have had against the insured, which would lead to his release. This is known in Anglo-Saxonic law as breach of warranty cover. Such agreement, however, documents not violate the prohibition on enrichment which is a prohibition provided for reasons of public order. As is well-known, Areopag, in a plenary session, considered that a ruling of the House of Lords violated mandatory rules of Greek public policy because it found the over-insurance of a ship by twice its actual value to be valid. Said ruling was ultimately not held to be executable in Greece. Nothing changes in this respect if the entire indemnity is assigned to a credit institution or if the shipowner has been forced to conclude over insurance by the bank. Furthermore, non-executability does not, in the Areopag decision, depend on whether over-insurance was so great so as to give rise to a presumption of willful over-insurance.
b) In effect the Greek Commercial Code expressly acknowledges the indemnity character of non-life insurance. Statutory provisions relating to over-insurance, subrogation and double insurance confirm this character. It is however also clear that the main underlying reason behind this principal is in fact to avoid that insurance business in general becomes a gambling business and the insurance accident a lottery. A further illustration of this is that under Greek commercial law, not any person may insure an object. In order to be able to insure an object the person must be connected to this object through a real right, or have a lawful interest in its preservation. In accordance with this rule, legal doctrine uniformly holds both the creditor on mortgage and the owner of the object capable of concluding insurance against damages to the object. The creditor on mortgage may, in any case, only insure for his own account up to the value for which the mortgage has been registered. He can insure the remaining value only for the owner’s account. Cumulative hull insurance concluded by both the owner and the mortgagor cannot, in my opinion, and if we agree on the indemnity principle, result in a total amount of insurance indemnity exceeding the ship’s value. Otherwise, the accident would release the shipowner from the obligation to return the loan, and perhaps also from his personal guarantees, while at the same time he would be compensated for the ship’s value. The indemnity cannot be cumulatively greater than the ship’s value because the risk to the vessel is the subject matter of both insurances, which is the risk to the ship. While it is true that hull insurance does not attach to thing insured, i.e. it does not «follow» the ship irrespective of its owner, but only the insured owner, With reference to the indemnity principle, however, hull insurance, does from the point of view of the indemnity principle, in the end, attach to the thing insured, since the existence of several hull insurances for the same risks, even if they refer to different insurers violates this indemnity principle. A relationship between property insurance and the thing insured is also present, from the point of view of security for the seizer, in art. 992 par.3 of the Greek Code of Civil Procedure, which provides that the seizure applies also to the indemnity owed by the insurer. If the hull insurer pays the insured/creditor on mortgage with which he has concluded the insurance against the risk of loss of the mortgaged ship, the insurer cannot bring an action for recovery against the shipowner’s hull insurer who has insured the same vessel. No grounds for such action can be found in Greek law, and it is, therefore, only possible by contractual agreement. The fact that the creditor on mortgage’s hull insurer may bring action against the person responsible for the loss is another matter. The insurer, because of the indemnity principle, may not indemnify the creditor on mortgage if the latter has already been paid by the shipowner’s hull insurer. If, however, due to the fact that the mortgagor’s loss has been restored, the shipowner keeps his indemnity, we must again admit that the prohibition on undue enrichment is violated but this time in favour of the shipowner. The shipowner must not, therefore, receive that share of the indemnity which corresponds to his release from debt through the ship’s loss. Consequently, in terms of application of the indemnity principle, the hull insurance concluded by the shipowner and the hull insurance concluded by the mortgagor form a unit. If there is no contractual arrangement concerning of the way the two insurances complements each other to avoid accumulation, the rules on multiple or double ship insurance shall apply by analogy. These rules shall also solve the problem of the relation between the two insurers.
c) The picture is different when we have accumulation of hull insurance by the shipowner and credit insurance by the mortgagor. Although the insurance of a mortgaged interest functions in the end as credit insurance, the credit insurance receiving the indemnity shall not result in the simultaneous release of the shipowner/debtor, as should occur under insurance of a mortgaged interest. Credit insurance shall function as a supplement to the extent that the insured creditor was not satisfied by the hull insurance indemnity. Thus, if the credit insurer has paid indemnity first, he has a right of recourse against the shipowner/debtor. Therefore the recourse against the shipowner/debtor can be immediately executed to the benefit of the credit insurer against the hull insurer, provided the loan agreement has been notarized and expressly provides that it is self-executor.
In the Areopag decision mentioned above, it was heard, outside the court, that the creditors asked the shipowner to insure the hull to an extent large enough to cover the loan and the mortgage, which were more than twice the ship’s value. Greek law does not prevent one type of insurance from concealing another. In any case, the prohibition on undue enrichment only refers to relative enrichment. The person incurring the loss may not receive, according to the principle, a sum greater than the sum necessary to restore the damaged object or the current value of the lost object. It is irrelevant whether the owner’s inability to use the object caused any greater loss, even if such loss exceeds the amount of an eventual over-insurance. Furthermore, the assignment of the indemnity to the mortgagor in face of the risk on the debtor’s inability to pay the debt is not a way of circumventing the principle, as long as the insurance remains an insurance of objects. But even in the case where the excess conceals credit insurance, it could still lead to the conclusion that the prohibition on enrichment is, in the last analysis, violated.
Of course the prohibition of undue enrichment is not a strict principle and applies only if the insured value is substantially and unreasonably higher than the current value in such a way that the indemnity character is actually altered. A large difference is not reasonable, even if it is agreed value. The Code of Private Maritime Law provides that the creditor on mortgage can insure the vessel against maritime risks up to a maximum of 130% of the amount of the indebtedness. It is clear that reference is made here to the value of the vessel because what are involved is a hull insurance and not a credit insurance. Thus, if the value of the vessel is lower than the indebtedness, the creditor cannot insure for the total indebtedness but only for such part of the indebtedness corresponding to the value of the vessel (plus 30%). If, on the contrary, the vessel’s value is higher than the indebtedness, the creditor cannot insure for its own account the total value, but only such part of the value corresponding to the indebtedness (plus 30%). The same principles apply in cases where the creditor on mortgage enters into a hull insurance contract on account of the shipowner.
4. Security for claims from pollution through insurance
The situation is different with claims for compensation from pollution. Claims arising from sea pollution arc based on special national legislation or international conventions and among them, it is possible to distinguish between on the one hand, the claim of the creditor of a fine, namely the State, and on the other hand, claims of creditors of compensation claim. Greek case law accepts that liability for fine is an extension of the shipowner’s tort liability. The State could thus be considered as a privileged creditor through the interpretation of the Brussels International Convention of 1967. However, as Greece has not ratified the above convention, the State’s claim for a fine from liable parties is not reinforced by a maritime privilege. Civil liability insurance to cover fines is permissible, but civil liability insurers no longer accept unlimited coverage, nor are payment certain since it depends on the observance of contractual provisions and in spite of the fact that their social dimension requires their satisfaction to be secure. Further, ΡandI Clubs do not willingly cover civil liability from oil pollution which is not based on an international convention. Greek law does not provide for direct action against the civil liability insurer, and hence there can be no question of a clause whereby the insurer is prevented from making the same objections against the creditor which he had against the insured.
In countries where fines are privileged and in Greece after the above Convention, fines, while their amount may not always be huge, arc, mainly as regards fines provided by L. 743/77, sufficient to override other privileged creditors of lower ranks and the creditor on mortgagor. A supplementary credit insurance concluded by the banker/creditor on mortgage is possible and is to be expected, in order to avoid the threat posed to its satisfaction by the claim from pollution. This document not holds, however, for other privileged creditors, who are displaced by the new liability rising from pollution. When maritime privileges were introduced, the new situation of liability from pollution did not exist, nor did the prospect of the rapid developments it brought to the field of shipowner civil liability. It is, therefore, unreasonable for the same rule to remain, as this would change the legislator’s choices and aims, as they are, reflected in the chosen hierarchy of privileged maritime claims. This unsatisfactory situation may be resolved by dislodging the payment of the fine from the ship and by introducing a system of compulsory liability insurance and the possibility of direct action against the insurer. This is the case as regards the compensation claims for oil spills based on the 1969 Brussels International Convention on Shipowner Civil Liability. The security of indemnity claims for oil pollution which are based on the CLC is achieved through the specific liability insurance which the shipowner must subscribe. The insurance replaces liability. The costs of insurance are borne by the vessel, while the costs for the operation and payments of the Fund are also borne by other which has an interest in the oil transportation. The question here is why the premium of the oil spill liability insurer of the shipowner should not be granted a privilege, given that the indemnity benefits the privileged creditors. In the USA the Oil Spill Liability Trust Fund, which has been constituted so that material and purely economic damages, etc., from oil spills do not remain uncovered, does not function as the shipowner’s civil liability insurer, but as a guarantee for the compensation owed by the shipowner. The Fund, therefore, has a right to recovery. Although under the International Convention on Maritime Privileges, the privilege is transferred along with the assignment of the claim, there may here raise a question as to the hierarchy of the Fund’s claims and as to the discarding of other privileged creditors.
It is questionable from an economic point of view whether it is reasonable to maintain several systems for the coverage of environmental claims against the vessel, together with a system of subrogation of the first indemnified to the other liable persons. Additional claims against the vessel could also be reflected in international treaties for liability in case of environmental catastrophes. The generalization of substituting liability for environmental damages by compulsory private insurance is useful, at least for certain types of liability in negligence, not only to improve the security of claims but also to save costs which would otherwise result from the maintenance of different systems of damage compensation.
III. Conclusion
An overview of compulsory and optional systems of coverage, whether introduced for the security of common and especially new maritime creditors, or for the security of debtors, reveals a general tendency to secure dangers related to maritime operations, not only through the classic system of real rights and privileges, but through private insurance as well. The penetration of private insurance is not due exclusively to an increase in foresight and to the improvement in the organization of shipping enterprises. It is also due to two further factors; in the first place, there is the general shift in the part of participation that should burden the shipping enterprise in satisfying claims arising from its operation, and in the second place, the fact that it is becoming less and less acceptable for accident to determine the extent of liability and of compensation for damages. This is especially prominent, as mentioned already when the claim arises from an oil spill. Such a claim is considered to deserve special protection, which is why the shipowner’s insurance functions obligatorily to the claim’s advantage. Privileged maritime claims based on tort could meet with similar protection by introducing compulsory hull insurance for their advantage as well. International conventions, such as the one on the Limitation of Shipowner Liability of 1976 and the one on Oil Spill Liability, succeed in reaching a compromise by weighing the interest of all parties. This compromise shapes the civil liability of shipowners within a number of limits. These limits are precisely the outcome of weighing the various interests against one another, and it is these limits which facilitate the penetration of private insurance. The old system may remain in cases of willful misconduct or gross negligence on the part of the shipowner. This, however, creates multiple systems of coverage for maritime claims (civil liability, private insurance concluded by the creditor and the debtor, etc.). This multiplicity gives rise to considerations of economic expediency as to their preservation. One alternative is to replace the system of satisfaction of claims from damages to goods in transport, when they are not due to intent or gross negligence, with transport insurance, and to perhaps develop a system of ship contribution in this insurance. This alternative is not contrary to private law principles, while at the same time it would abolish the time consuming and expensive process of establishing the existence of slight negligence.
By way of conclusion, there is one final observation. The ship has ceased to be the exclusive asset used for satisfying maritime creditors, without meanwhile circumventing the principle of limited shipowner liability. This is achieved through insurance, which in certain cases extends unilaterally in favour of certain maritime creditors the possibilities for satisfaction. In this way, the possibility is also offered for determining the shipowner’s civil liability according to the legislative recognition of the extent of satisfaction that a claim should reach, taking into account the possibility of insurance coverage. This system could extend to other cases of maritime claims, where the system of satisfaction through the ship is not sufficient, mainly because the ship has been lost.
Presented by Professor Ioannis Rokas
1st International Conference of Maritime Law
Piraeus 1992
