October: CIRCULAR 7A/2004


In our Circular 1A/2004 of January we advised that MAPFRE, the Spanish Insurance Company which had been providing insurance bonds on behalf of most of the International Group P&I Clubs when their entered vessels were detained by a Spanish Port Authority, would stop providing these guarantees to cover fines imposed by Spanish Maritime Authorities as from 2004.

We also advised that in the event of an incident or claim where a vessel is detained by a Spanish Maritime Authority as a preventive measure to guarantee possible fines, delays may be expected while the provision of the guarantee is being arranged, given that Club letters are not acceptable as a matter of law for claims which are contemplated as “infringements” by our Ports Law. The types of guarantee that are acceptable are basically cash money, cheques, bank guarantees and insurance bonds.

Since then not only have we been actively seeking an alternative to MAPFRE which would allow a quick departure of the vessel and at a low cost of maintenance, but we also held a meeting with the General Directorate of the Merchant Marine to see whether the new socialist government substituting the previous centre right Popular party were ready to accept LOUs issued by our principals (see our Circular 4A/2004 of May).

Following our liaisons with the five different facilities in Spain providing insurance bonds before the Spanish Authorities, and therefore duly registered as surety before the General Directorate of National Treasury, ACC SEGUROS DE CAUCION, CESCE, ASEFA, CREDITO Y CAUCION and HCC EUROPA, all of them advised us they were not ready to provide these bonds except one company, HCC EUROPE, who asked us to approach them again in the near future.

Meanwhile, whilst some Spanish Owners have found their individual solutions such as arranging specific contracts with certain Spanish insurers so that they provide insurance bonds if one of their vessels is detained by a Spanish Maritime Authority, we understand there is one P&I Club which have found their own arrangements with ACE INSURANCE through their office in London.

Whilst we were waiting to contact again HCC EUROPE, we recently had a meeting with a well known broker for most of the P&I Clubs / Insurances, INTERNATIONAL SURETIES LTD. from New Orleans, who advised us they have managed to obtain an agreement with HCC (Houston Casualty Company) in Houston, Texas, by which HCC EUROPE would be ready to provide insurance bonds in Spain in order to release vessels under arrest or detention. This option would be available to the Clubs and fixed premiums through International Sureties Ltd. However, whilst MAPFRE has offices in almost all Spanish ports, HCC EUROPE has offices in Madrid, Barcelona and Sevilla, which would mean that if a vessel is detained for instance in the port of Vigo by the Harbour Master, the insurance bond would be issued and signed in Madrid, the original of which would have to go to Vigo and its signature would have to be authenticated by the State Attorney of Vigo in order to be accepted by the Deposits Department of the General Treasury in Vigo. An easier procedure would apply to bonds before Spanish Courts.

The reason for this is that our domestic law governing insurance bonds to be presented before Spanish Authorities requests, not only that they have a specific wording, but also that in order to be accepted by the General Deposits Office the bonds have to be authorised by the attorney in fact  from the insurance company to sign bonds, and this power of attorney will need the stamp of “Sufficient” by the Legal Counsel of the General Deposits Office in Madrid if the bond is to be presented in Madrid or by the State Attorney of the Spanish province where the vessel has been detained if the bond is presented at the branch office of the General Deposit there.

Another possibility is to approach the various insurance companies which are registered in Spain by the General Directorate of Insurance in their Special Registry to provide Insurance Bonds and which are also registered as a surety before the General Directorate of National Treasury, and see whether they would be ready to provide the same service provided by MAFPRE to release vessels and cover the fine if finally imposed by the General Directorate of the Merchant Marine or the Spanish Port Authority concerned after the necessary proceeding.

Whilst looking for this possibility, it would seem that six P&I insurers are registered in the Special Registry of the General Directorate of Insurance to provide Insurance Bonds in Spain. This would mean that they would be initially ready to provide themselves insurance bonds in Spain to release the vessels under arrest they cover. It would also seem that three other P&I insurers which are authorised to provide marine insurance cover in Spain could possibly provide Insurance Bonds to release their vessels under arrest if they requested the necessary authorisation to also operate in the insurance bond Spanish market.

Together with Rubine e Hijos, P&I Correspondents in La Coruña, we also recently had a meeting with the new General Director of the Merchant Marine, Mr. Felipe Martínez, to see whether they would be ready to accept Club letters as opposed to a bank guarantee or other form of security, due to the slowness of the applicable procedure in Spain and the bureaucratic inconsistency between the various parties involved (Harbour Masters, Treasury Department, State Attorneys and Banks), as it was not thought for situations where a quick release is needed in order to avoid high costs which can follow vessel’s detention. From this meeting it seems that whilst the new socialist government would not be ready to generally accept Club letters as a matter of law, they would however be ready on a case by case basis to initially accept them to ease a quick release which would be then substituted by another form of security contemplated in our 1997 Law. Of course, this needs a prior written requirement from our side and their studying the matter before they take any decision.

We will continue to keep you informed. Meanwhile, should you have any queries or useful information, please do not hesitate to contact us.