Indonesia encourages shipping investment

INDONESIA - Indonesia encourages shipping investment

Dyah Soewito and Michael D Twomey, of Indonesia-based Soewito, Suhardiman, Eddymurthy & Kardono, look at the conduct of shipping business by foreign shipping companies in Indonesia

AS Indonesia consist of over 13,000 islands, water transportation plays a vital role in not only the running of its economy, but also in the strengthening of ties among the islands that make up the Indonesian archipelago, and the promoting of the nation's unity and integrity. The Indonesian government, therefore, has made a continuing effort to encourage both foreign and domestic investors to be active in the shipping business.

In this regard, Indonesia enacted Law No 21 of 1992 regarding navigation (law 21) which, in respect of shipping matters, is chiefly implemented by government regulation no 82 of 1999 regarding water transportation (GR 82). GR 82 provides more opportunities for foreign shipping companies (FSCs) to participate in Indonesian shipping and sea transportation businesses, such as conducting international shipping transportation either using Indonesian or foreign-flag vessels.

To promote shipping, Indonesia has exempted from fees the transfer of title of foreign-flag vessels to Indonesian-flag vessels. Indonesia has also ratified several international conventions on shipping and navigation, certain provisions of which have been incorporated in its national regulations.

FSCs can engage in the Indonesian shipping business only by establishing an Indonesian joint venture shipping company (JVSC) licensed to engage in this business. The JVSC will have to be formed and, among other things, its capitalisation, manpower needs and business purposes approved by Indonesia's Capital Investment Board (BPM), in accordance with the provisions of Indonesia's Foreign Investment Law (Law No 1 of 1967). FSCs may initially own up to 95 per cent of the JVSC.

As the shipping business is classified as a strategic industry, there must be a minimum five per cent Indonesian equity participation under Government Regulation No 20 of 1994 regarding Share Ownership in Companies Established within the Framework of Foreign Capital Investment (May 15, 1995). While the applicable regulations do not expressly state that only a duly licensed Indonesian shipping company can be the local partner in a JVSC, in practice it appears as if a policy decision has been reached to that effect.

GR 82 provides that the JVSC, in addition to satisfying the stipulations set forth in the BPM approval, must own (not merely control through lease) at least one seaworthy Indonesian-flagged vessel of a minimum 5,000 gt.

Indonesia also allows FSCs to conduct international sea transportation business in Indonesian waters with foreign-flag vessels, so long as their vessels' routes are directly to and from Indonesian harbours that Indonesia has opened for international trading.

Each FSC must appoint a national shipping company as its agent, who shall take care of all matters relating to the vessels that it represents, for as long as the vessels are in Indonesian waters. In addition, FSCs are entitled, but not obligated, to appoint a representative in Indonesia, but the representative is authorised only to handle administrative matters on behalf of the FSC.

THAILAND - Four new arrivals in Thailand

During 2000, Thailand has introduced four new maritime bills. Paiboon Sutuntivorakoon, of Thailand-based PBS Law Ltd, explains the objectives of each bill and what they mean for the Thai maritime community

SINCE the beginning of the last decade, developments in maritime law in Thailand have been moving towards international standards and practices. Three major acts were passed laying down the foundations for the modernisation of maritime law. These were the Carriage of Goods by Sea Act, the Arrest of Vessels Act, and the Mortgage of Vessels and Maritime Liens Act.

The Carriage of Goods by Sea Act BE 2534 was enacted in 1991and provides a specific law governing the carriage of goods by sea instead of relying on the general provision on carriage of goods in the Civil and Commercial Code of Thailand. The Arrest of Vessels Act BE 2534, enacted in the same year, provides a Thai claimant with the right to arrest vessels owned or possessed by its debtor as security for a subsequent court action against the debtor. Finally, the Mortgage of Vessels and Maritime Liens Act B.E. 2537, enacted in 1994 and the last act in the series, has to a great extent addressed the concerns of creditors in ship financing, as previously there had been no specific law governing ship mortgages.

These laws did not gain momentum until 1996, with the establishment of the Intellectual Property and International Trade Court. This special court, which has jurisdiction for maritime disputes, has quickly gained the confidence of the shipping community inside and outside Thailand for its speed, neutrality and expertise in the disputes brought to the court.

After this leap forward, developments in maritime law went into a comparative lull. But during the course of this year, fresh impetus was provided by the introduction of four entirely new maritime bills which are tabled for consideration by the Council of State to be further submitted to parliament for its deliberation.

The four bills are the Multimodal Transport Act, the Marine Salvage Act, the General Average Act, and the Civil Liability from Collision Act.

The Multimodal Transport Act

The objectives of the bill are twofold. Firstly, it provides a specific law governing the rights and liabilities of the multimodal operator who at present has to rely on the general law under the Civil and Commercial Code of Thailand. Secondly, it fulfils Thailand's commitment to enact a domestic multimodal law once the ASEAN Agreement on Multimodal Transport becomes effective. The bill provides for the setting up of a National Committee on Multimodal Transport to supervise the operation of multimodal transport in the country, and will require a multimodal transport operator to be registered before it can operate such a business. Registration is mandatory if one is qualified as provided in the bill. Furthermore, the bill follows the principles of liability adopted by the Multimodal Transport Convention 1980 - a multimodal operator is presumed liable unless it is proven to have taken all measures that can reasonably be required to avoid the liability and its consequences, with certain additional exceptions not available under the 1980 convention. The limitation amount follows the UNCTAD/ICC Rules of 666.67 SDR per unit, or 2 SDR per kilogram, whichever amount is greater (for loss or damage claims) and not exceeding the amount of freight (for claim in delay).

Maritime Salvage Act

The main objective of this bill is to recognise and adopt the well?established no-cure-no-pay custom of maritime salvage into Thai maritime law. Under the bill, the Intellectual Property and International Court will recognise and enforce a maritime salvage contract performed in any sea or inland waters provided that at least one of the vessels is a seagoing vessel.

General Average Act

This bill will empower the Intellectual Property and International Court to decide any dispute relating to general average in accordance with principles laid down in the bill which reflect the well?established general average rules in maritime law.

Civil Liability from Collision Act

At present, civil liability resulting from collision is based on the provisions regarding wrongful act under the Civil and Commercial Code and the provision relating to collision under the Navigation in Thai Water Act B.E. 2456.

These two laws are outdated and are inappropriate when applied to a collision involving a seagoing vessel, which frequently involves parties of different nationalities. This bill will apply to any collision between one seagoing vessel and another vessel, whether it is a seagoing vessel or not. Other types of collisions will still be governed by the old legal regime.

SINGAPORE - Clash of the conventions

Jude P Benny of Singapore-based Joseph Tan Jude Benny Anne Choo compares the 1957 and 1976 conventions on limitation of shipowners' liabilities

THE concept of limitation of liability is a creature of statute. It enables a shipowner to limit its total liability for losses which have occurred, under circumstances for which it must answer but without its fault or privity. One may well ask why shipowners should form a select breed when other tortfeasers are left to fend for themselves to the full extent of their purses. In the words of Lord Denning MR in The Bramley Moore [1964] 1 All ER 105, "I agree that there is not much room for justice in this rule; but limitation of liability is not a matter of justice. It is a rule of public policy which has its origin in history and its justification in convenience."

The 1957 and 1976 conventions are the distillation of many years of legislation, case law and commercial input. The 1957 convention still retains the concept of "actual fault or privity". The words were interpreted to mean not just affirmative or positive acts by way of fault by the shipowner, but that the shipowner was guilty of an act or omission to do something which it ought to have done. The owner was no less guilty of actual fault than if the act had been one of commission.

By the 1976 convention, the test of "actual fault or privity" was changed for a test of whether "the loss resulted from the shipowner's personal act or omission, committed with the intent to cause such loss or recklessly and with knowledge that such loss would probably result".

It will be readily appreciated that the words adopted in the 1976 convention make it far more difficult to "break" limitation, i.e., deprive the shipowner of the right to limit its liability. One has to show "intent" - a near-impossibility, evidentially speaking. The 1957 convention offers less resistance under "actual fault or privity".

Given the fact that some maritime nations, such as the UK, have adopted the 1976 convention, and others, such as Singapore, have remained with the 1957 convention, the possibility arises for lawyers to choose very carefully where to ground jurisdiction for any given claim. This is brought into sharper focus by virtue of the fact that the 1976 convention generally leads to higher levels of compensation as compared to the 1957 convention.

As a consequence of the above, forum shopping has become the order of the day for the modern shipping lawyer. Using the right jurisdiction can now lead to savings or gains running into millions.