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Friday, 3 April 2015

New expensive ship wreck removal convention comes into force this month.

A potentially massive cost impost on ship owners and their insurers is now in force with the Nairobi Convention. There will be an impact down the line on shippers rates and risks.

In operation this convention places strict liability on ship owners to remove the wrecks of their vessels if they are deemed to be hazardous.

Once upon a time the salvage technology and equipment simply didn't exist to remove some ship wrecks so they had to be left to mother nature to be broken up. Alternatively, in some situations, human intervention would cut them down only enough to allow the safe passage of the deepest draft vessels using that route. This has changed and in the last twenty years it seems removing any wreck is possible if enough money is thrown at it and therein lies potentially huge liability for the shipping industry. 

Although a cruise ship, take the "Costa Concordia" salvage for example. This cost approximately US$1.2bn and was a remarkable high tech operation. Here is a link to the time lapse of her being re-floated. 

So what does the Nairobi Convention potentially mean to shippers?

As I have mentioned in my blog in the past international maritime law places shared liability on all parties who have cargo on a vessel that gets into distress regardless of who is at fault. In simple terms essentially the law is that all parties are deemed to be joint venture-rs in the voyage and precedents tend to side with the ship owners who can successfully argue their vessel would not have been in that place, and therefore in distress, had it not been on it's way to deliver the shippers cargo it was carrying. This means that shippers share in the costs that flow from any incident. That's why my team and I constantly remind Depth Logistics clients to always always ALWAYS be insured!

The Nairobi Convention will inevitably lead to higher insurance premiums, charter rates and freight costs for shippers. 

Nonetheless the environment will be all the better for it with less wrecks dotting the worlds coastlines. 

All for now,
+Brad Skelton 

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