Liberalising Chilean law

Leslie Tomasello Weitz, of Chile-based Tomasello & Weitz Ltd, looks at recent developments in Chilean maritime law affecting oil pollution, port activity and coastal trade

SINCE February 2001, probably the single most important legal development in Chilean maritime law has been the ratification of the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage (CLC 1969). For maritime pollution incidents that have occurred on or after July 16, 2003, the 1992 Protocol (CLC 1992) applies. For any contamination other than “oil”, as defined in the CLC 1992, that is being “carried in bulk as cargo”, Chile applies the provisions contained in the Law of Navigation (Decree Law N° 2.222). These provisions are essentially comprised of the CLC 1969 with some amendments. Chile is not a state party to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND), 1971, or any of its Protocols.

Another development of note was the implementation of the ISPS Code in July last year. This was particularly successful with 100 per cent of the ports and vessels engaged in international trade officially certified by IMO.

On the regulatory front, Chile has gone through a marked liberalisation process, which has affected the maritime sector in many areas. This process started as a unilateral opening strategy and continued by way of bilateral agreements and Free Trade Agreements resulting in Chile signing six Free Trade Agreements and seven Economic Complementation Agreements. Chile has also entered into 18 Agreements on Double Taxation (with five signed but not in force yet), and 52 Foreign Investment Protection Agreements (38 in force and 14 signed but not in force yet). The inspiration behind these agreements has been to encourage foreign investors not only to invest in Chile but also to make use of the country’s well-developed financial and banking systems as a platform to investing in other Latin American markets. Chile is the Latin American country with the greatest access to leading world markets.

The liberalisation process in the maritime sector began with the Merchant Marine Development Law of 1979, known as the Decree Law (DL) N° 3.059. With the exception of coastal trade and the bilateral traffic with Brazil, DL N° 3.059 eliminated most cargo reservations as well as tax exemptions and national subsidies. To increase the efficiency of the sector, port activity, which until December 1997 was a public monopoly, was reformed.

On December 12, 1997, Law N° 19.542 was enacted creating, on one hand, ten state-owned companies with public terminals, and, on the other hand, establishing that the provision of port services be set up by concessions and bid. These ports are administrated by ten companies - Empresa Portuaria Arica (Arica’s Port), Empresa Portuaria Iquique (Iquique’s Port), Empresa Portuaria Antofagasta (Antofagasta’s Port), Empresa Portuaria Coquimbo (Coquimbo’s Port), Empresa Portuaria Valparaiso (Valparaíso’s Port), Empresa Portuaria San Antonio (San Antonio’s Port), Empresa Portuaria Talcahuano-San Vicente (Ports of Talcahuano-San Vicente), Empresa Portuaria Puerto Montt (Puerto Montt’s Port and its Ferry Terminal), Empresa Portuaria Chacabuco (Chacabuco’s Port and its Ferry Terminal), and Empresa Portuaria Austral (Ports of Punta Arenas and Puerto Natales).

As for the remaining barriers, DL N° 3.059 establishes that international carriage of goods by sea should be performed according to the principle of reciprocity. Therefore, 50 per cent of the cargo is reserved for Chilean ships on routes to or from Chile in those bilateral traffics where the other country has reserved all or part of its cargo for itself. In the case of coastal trade, the service must be performed by a Chilean shipowner or a Chilean shipping company as defined by DL N° 3.059. In addition, the service has to be rendered through vessels registered in Chile and flying the Chilean flag. Finally, the vessel has to be owned by a Chilean shipowner or be leased and/or chartered to his name.

Foreign ships may participate in coastal trade where cargo volumes exceed 900 tones prior to public bid. When cargo volumes are less than 900 tones, and there are no ships under the Chilean flag available, foreign vessel may also participate with due authorisation from the maritime authority. This illustrates the tendency for Chile to exclude foreign vessels from coastal trade, which is odd for a country that has been so prone to economic reform. The explanation probably lies in the fact that most Chilean neighbours have not liberalised their cabotage traffic.