Posts

HULL INSURANCE AND GENERAL AVERAGE

General Scheme of The Marine Insurance

Marine hull insurance covers the damages that happen to an insured ship or other insurable parts of it, during the voyage, carrying cargo, during dispatch, anchorage, or repair. This coverage comprises all physical losses or perils, liabilities, and expenses of third parties, which arise from perils of the sea. They are known as “Marine Hull” among the Lloyd’s London market.

This insurance type has a small capacity, and they constitute %2 of the global non-life insurance. Nevertheless, it is a well-specialised field that provides exclusive coverages for different perils.

The main marine insurance market is in London which has the 18% of the global maritime premium. London market is represented by unions organised under Lloyd’s Underwriters Association and, on the other side also represented by International Underwriting Association. The second biggest market is in Japan which has the 16% of the global premium, and they are followed by the USA with %13 and Germany – Norway with 9%.

Marine insurance, especially Ocean Hull, has similarities with non-life reinsurance than other direct insurance types. It starts with the construction of the ship in foreign countries, and it does not have to be in a certain place. When the ship is launched, it can be open to traffic with cargo owners, insurers, and directors worldwide. In addition to this, in general, the crew is a combination of different nationalities. The flag of the ship is usually the flag of the owner’s country or any other country, where is not a part of the ship’s traffic.

Second, the type, which is named Ocean Hulls, has high insurance values. Therefore, in general, more than one insurer from different countries share the risk. These works proceed through brokers.

The third resemblance between marine insurance and non-life reinsurance is, those policies are usually issued for the one-year period except for one-time coverages.

As the fourth, mostly the result of the above explanation, the premium circulation is not stable (volatility) and therefore the demands are changeable. Apart from natural variations, that affect the occurrence of the damage, volatility may also be the result of changes in the deductible amounts, increased risks, variations of international regulations, or exposure of risk.

Hull and Machinery Insurances

The word “marine” is a comprehensive concept which embodies notions “hull”, “cargo”, “marine liability” and “offshore”.

In order to define “a ship”,; a ship is a sea vessel, which is not very small, that can move on the sea and the usage of the ship depends on its movability. Hull is a wider concept than a ship and it means a thing which is hallowed and voluminous. It is a general concept for ships and sea vessels. An insurance type HULL AND MACHINERY (H&M) provides a coverage for ship and its machinery. Although, in theory, H&M is not a compulsory insurance, it has become compulsory in practice to avoid problems that may happen on the controls of the international ports.

In the H&M Coverage, the insurable interests are, integral parts of the ship (when those parts are missing the ship is an incomplete ship; the hull, the mast, the deck, the tank, etc.) and additions of the ship that belong to the owner (maps, signal tools, etc.). In addition to this, subject to the insurer’s approval, sea vessels, which cannot be defined as a ship; houseboats, floating crane, barge, floating restaurants, sea motorcycles, etc. can be a subject of the policy.

From a different perspective, what real dangers in the marine industry are? They can be classified like in the below:

  • (A) Damage to the insured or loss of the insured, whether the insured is a ship or an oil rig, cargo, or another concept which is in the marine concept (partial or total loss).
  • (B) Every kind of liabilities. (Collision, environment, port, crew etc.)
  • (C) Loss of profit that arises from a temporary malfunction due to an accident (loss of profits insurance).
  • (D) Expenses arising from an accident, which can be compensated under Marine Insurance Policy. (Towage, salvage, etc.)

Hull Policy is a united assurance for risks under the scope of A, B, and D. Such that, for the united risks, an insurer can only be responsible for threefold of the insured amount. However, if the liability covered under the policy is exceeded, the exceeded amount is usually covered by P&I Clubs. Rules may show differences for every P&I Club since there are limited clubs that work under these conditions.

For the corporate objective, vessels are divided as Coasting Vessel and Ocean Vessel (Ocean Hull). Ocean Hull is also named “Bluewater Boat”. While ocean vessels have an international character, which refers to any ship that is part of international maritime trade, coasting vessels are generally used in inland waters.

Although coasting vessels can describe other small vessels such as fishing boats, coastal ferries, barges, etc., there is not a certain line to separate these notions. While damages to fishing boats and damages they have caused may be covered under the marine policy, the lives of fishers and loss of their profits may not be covered even if they are under the scope the marine insurance.

When we evaluate the other headline of our topic, General Average, it can be described as “voluntary sacrifices and extraordinary expenses in a voyage to protect the ship or cargo from a danger.”. At Article 1272 / III of the Turkish Commercial Code, it is stated that damages will be appropriated between ship, cargo, and carriage. This article is in accordance with Article A of York- Antwerp Rules. Because freight of a charterer, fuel for the time charter, or container of a commercial manager can also be subject to a general average.

For the existence of the general average, the ship and cargo should be together. Therefore, there will be no general average if the ship sails without cargo. However, a ship that sails without cargo and without charter-party, can be protected against extraordinary expenses and voluntary sacrifices with additional clauses to policy.

Being exposed to a sea danger is not a compulsory matter for declaring a general average. To illustrate it; the extension of the fire in the dock to the ship or cutting the anchor in order to prevent the spread of flames can also be a reason for the general average. In addition to this; even if the ship and cargo do are not damaged on the same level, declaration of the general average would be proper.

There is a condition for a proper general average declaration, real danger. Estimated danger or proximate danger (causa Proxima) is not sufficient for the general average. A precedent Supreme Court of Turkey decision states that the general average cannot be declared when the ship is grounded by its master’s own negligence. Therefore, the faulty party cannot claim any compensation and also is responsible to related parties for damage that arose by his own negligence (Turkish Court of Appeal 11th Circuit D: 25.11.1985, 1985/6087 and 1985/6406). Further, in the case “Watson v Fireman’s Fund Insurance”; the court held that; even if the master has a margin of error, spilling water because of the estimation that there is a fire and this fire will cause damage to goods in holds is not proper for declaring a general average and the master is responsible from the damages arose from the water.

Does the master have to wait until the appearance of real danger? An answer for this question is stated by Roche J. in “THE MAKIS” case. Roche J. held that; the danger does not have to be immediate or occur right away, the danger must not be imaginary.

In general average situation, actions and expenses should also be extraordinary. Although it is open for an opposite interpretation, there is an important case that can set an example. “Wilson v Bank of Victoria”; The ROYAL STANDARD was a large sailing ship with an auxiliary steam screw. She sailed on a voyage from Australia to England carrying a cargo of gold and about 500 tons of bunker coal. Eleven days into the voyage she hit an iceberg and suffered so much damage to her masts and sails that, in practical terms, she lost all power of sailing. She reached Rio de Janeiro under steam alone and nearly exhausted her stock of coal. The expense that made, in that case, was not held as extraordinary and the general average was not accepted.

After the above explanations about the “Hull Insurance” and “General Average”; it should be explained in such a circumstance which insurer bears which damage? This will be determined after the apportionment of damages (dispatch). In principle, H&M Insurer bears the “damages to the ship” and Cargo Insurer bears the “damages to the cargo”. “Gaps” that were left behind from the dispatch period, are filled by the liability insurer.

Due to article 66/4 of Marine Insurance Act 1906; if the assured has incurred a general average expenditure, without claiming from other relevant parties of the general average he may claim expenses directly from the insurer. If hull insurance does not cover the full expenses, the remaining amount will be covered by P&I (Protection and Indemnity) Club.

If some expenses are not under the coverage of the hull insurance, marine vessels liability insurance will bear those expenses. As an example, to this situation, if the real value of the ship is higher than the insured value, or rejection of the compensation claim by the cargo insurer because of breach of the carriage contract by the carrier.

The general average Absorption Clause is regulated with IHC 2002’s article 43 (additional Clauses), a part of the English Hull Clauses. Subject to insurer’s written approval, insured has right of choice. If the insured will not claim any demand from other relevant parties to the general average, the insurer will waive his right to subrogate. However, this situation is against article 1472 of the Turkish Commercial Code and therefore otherwise cannot be agreed upon since the code is compulsory.

Another point about Hull Insurances that should be mentioned; the question of whether there is a direct right to claim from the insurer. Although there is a chance to claim directly from the insurer in most countries and in Turkey, this right is not accepted under English Law. However, the direct claim right is provided, if the right of compensation of third parties are covered in the policy, in Denmark under Insurance Policies Code, Article 95.

As an example, “The Yusuf Cepnioglu” is an important case for this subject. The injured party brought an action in Turkey, directly to the P&I Club. High Court evaluated the case whether there is a need for an anti-suit injunction or not. The foreign law (Turkish Commercial Code) was discussed that gives a chance of a right of direct claim. Court of Appeal decided that, although the right of a direct claim is a contractual right, it is not an independent right and, the court allowed the anti-suit injunction. This decision of the Court of Appeal is important because it is about the right of a direct claim against and current.

In conclusion, Marine Insurance has an important role to ease maritime commerce and international trade. Since “Marine Insurance” is proceeded as a legal contract, “marine Insurance Law” plays a significant role in the field. English Law is the dominant law about maritime law.

Employers’ Rights During the Coronavirus/COVID-19 Outbreak

In accordance with the Law on Occupational Health and Safety and the Code of Obligations, employers must ensure the occupational health and safety of their employees at the workplace. The employer must provide the necessary resources to ensure occupational health and safety at the workplace. It is necessary to take measures such as providing a sufficient amount of soap, cologne and hand disinfectant in the workplace and take measures such as ventilation of the workplace by employers. Employers should avoid risks that could lead to a dangerous situation for their employees, they have to eliminate existing risks, or replace existing risks with non-hazardous or less hazardous factors. If necessary, stopping workplace activities may be considered. In this process, international travel and meetings should also be restricted. Employers should also be informed about the COVID-19 epidemic and the measures taken in the workplace in this context and appropriate instructions should be given to the employees regarding health and safety measures. In this case, employees must also comply with all the measures taken regarding occupational health and safety.

If employees have an infection or suspicious symptoms, they should report these to their employers per their loyalty obligations. This is also important for ensuring occupational health and safety in the workplace. However, the definition of what poses risks should be clearly defined by employers and employees should be informed about this. Employers may recommend that their employees explain their findings, such as infection and suspicion, to their employers and authorised persons such as the workplace’s occupational health and safety board. The employer can’t give instructions to the employers to inform their employers about the symptoms of the disease due to data confidentiality, but this can be recommended to ensure health and safety in the workplace, employees should nevertheless express such concerns in secret. Because of the protection of their health and the health of their colleagues, they need to be careful. Although the employer is not obliged to notify the employees having the infection detected in the workplace to the health institutions, it would be appropriate for the employers to inform the health officials about this situation in case of such danger or suspicion. However, the employer can’t force his employee to be examined if he finds a suspect of infection. This situation can only be recommended. If the employee does not listen to these recommendations, if the employer deems it necessary, the employee can be gone on leave, provided that one is paid.

If employees prefer not to come to work due to the epidemic, the option of shortening their working time or part-time work may be considered. However, according to the Labour Law, changes in working hours must be notified to employees in advance and approved by employees in writing. If the employees do not approve of this change in writing within 6 working days, the employer cannot accept this change. It is also an option to send the employee unilaterally on leave, provided that the employee continues to be paid by the employer and the employee is ready to work. Employer’s encouragement or coercion of employees to work remotely is also one of the measures that can be taken in this epidemic environment. If a decision is taken to work from home in the workplace, employees will continue to receive full salary without any interruption and the employer will provide their employees with the technical equipment necessary to work from home. Employees also have the right to participate in short-term working and receive an allowance. For the employees to benefit from the short-time working allowance, the working hours of the workplace should be temporarily reduced by at least a third or the activities in the workplace should be stopped completely or partially for at least four weeks. If the employer justified the demand for the short-time working of the employee, he can contact the Employment Agency to provide a short-time working allowance for employees up to three months. In the short-time working, half of the wages of the first week are paid by the employer then a certain amount of wages will be paid from the unemployment fund to be deducted from the unemployment allowance. If verified coronavirus cases are detected in the workplace, employees can refrain from working. In this case, employers should continue to pay salaries even if the employees do not perform their duties. In the case of a force majeure such as the spread of the outbreak in Turkey and to threaten the general population, unpaid leave, as long as the mutual agreement of the employer and employee, is another option available to employees. The employer or employee can offer unpaid leave. If the proposal comes from the employee, the request for leave must be reasonable and the time off must be temporary. In the case that an employee does not have a request for unpaid leave with his consent, employers should use this option as a last resort and should never force their employees for unpaid leave. The employer must inform the employee in writing regarding unpaid leave in advance, and the employee must accept this request in writing within 6 business days. If the workplace activities are temporarily suspended and no employee contracts are terminated during this period, the employer is not obliged to inform the Social Security Institution. If the employee cannot participate in workplace activities due to force majeure, the employer is allowed to pay half of his salary for each day to the employee who cannot work for a week, according to the labour law. However, if the force majeure continues for more than a week, the employee or employer may terminate the employment contract for just cause. In this case, the employee will have all legal rights such as severance pay, overtime, unused vacation, but he will not be able to receive notice pay. On the other hand, if the workplace activities are stopped by the authorised institutions, the employer cannot terminate the employment contracts of his employees. However, in this case, the employee may have all legal rights, including severance pay, excluding notice pay, by terminating the employment contract for just cause.

Baker McKenzie announces record global revenues of $2.92B

Baker McKenzie has announced record revenues for the fiscal year ended 30 June 2019 (FY19) of $2.92 billion. In terms of constant currency, Baker McKenzie’s revenues were up 4.4% compared to the previous year. In US dollar terms, the Firm’s reporting currency, this translates into growth of 1.2%, after the effect of adverse currency exchange.

Baker McKenzie remains the most geographically diverse global law firm and all of our regions recorded growth as follows: EMEA +5.2%, AP +2.1%, LA +9.0% and NA +4.0%

All of our key financial metrics improved over last year: revenue growth, net income, profit margin, Profits per Partner (PPP), Revenue per Partner and Profits per Lawyer. We are especially pleased to accomplish this amid a market with flat demand. PPP was up by 3% to $1.48 million in US dollars. Overall net income or profit rose by 2% to $1 billion. Over the last decade the Firm has grown by 40% in terms of revenue and 50% in terms of PPP, outperforming most of our competitors.

Among our standout markets, all with significant double-digit growth, include Bogota, Buenos Aires, London, Prague, Turkey and Warsaw.

Baker McKenzie Acting Chair Jaime Trujillo says, “Recording 4.4 percent growth in a market as challenging as this while maintaining our commitment to all of our offices and our full service offering is a good result. The investments the Firm continues to make in legal services, the centres of excellence we have opened in lower-cost locations, and more effective partnering with clients, supported by long-term investments in industry, practice and client programs have enabled us to show profitable growth.

“This is despite the distinct geopolitical head winds throughout the second half of the year, which prompted our clients to cancel or postpone projects. We are also one of the most geographically diverse professional services firms in the world, both one of our key strengths, and at times a challenge in markets impacted when the US dollar is so strong, as it was this past year.”

Our Future

Jaime concludes, “There have been moments in the past year when the Firm was tested as much as it has been in our 70-year history, but I am extremely proud of how we have come together and dealt with the issues that we have faced. Neither has it been an easy 12 months for the profession as a whole, with softening client demand as a result of geo-political uncertainty, an increasingly competitive market with new entrants and a declining overall market. It takes a Firm like ours with an enormous amount of resilience, experience and strong leadership from all our partners to be confident to face the challenges ahead.”

GOKSU SAFI ISIK Attorney Partnership Articletter 2019

Arrival of both hard and soft copies of the GSI Articletter 2019 Summer issue, which is the issue of great efford, coordination and excitement and sharing it with you dear readers and friends have always been the most exciting moment of all the stages.

Best wishes,

Göksu Safi Işık Attorney Partnership

https://www.goksusafiisik.av.tr/Articletter/2019_Summer/articletter.pdf

Acquisition of Turkish Citizenship by Foreign Investment

The Regulation of Implementation of the Turkish Citizenship Law (“Regulation”) has been amended by Presidential Decree No:106 effective from the date of publishing which is 19.09.2018. In accordance with the Turkish Citizenship Law No:5901 (“Law”), Regulation enables foreign investors to acquire Turkish Citizenship exceptionally by investment ways as below:

  1. to make fixed capital investment worth minimum 500.000 USD, equivalent foreign currency or equivalent amount of TL, to undertake not to transfer the company for following three years and to have the investment determined by the Ministry of Industry and Technology,
  2. to purchase real estate worth minimum 250.000 USD, equivalent foreign currency or equivalent amount of TL, to put an annotation onto the title deed stating that property shall not be sold in the following three years and to have the investment determined by the Ministry of Environment and Urbanism,
  3. to sign preliminary sales contract intended for the real estate, which has construction servitude or condominium registration, worth minimum 250.000 USD, equivalent foreign currency or equivalent amount of TL and to make the such payment in advance, to put an annotation states that preliminary sales contract shall not be transferred or abandoned for following three years onto the title deed and to have the investment determined by the Ministry of Environment and Urbanism,
  4. to employ minimum fifty employees and have such employment determined by the Ministry of Family, Labor and Social Services,
  5. to deposit minimum USD 500.000 USD, equivalent foreign currency or the equivalent amount of TL in banks operating in Turkey and to undertake not to withdraw the deposit for the following three years and to have such barred deposit determined by the Banking Regulation and Supervision Agency,
  6. to purchase public borrowing instruments worth minimum USD 500.000 USD, equivalent foreign currency or the equivalent amount of TL and to undertake keeping the instruments for following three years and to have the investment determined by the Ministry of Treasury and Finance,
  7. to purchase real estate investment trust or venture capital fund shares worth minimum 500.000 USD, equivalent foreign currency or the equivalent amount of TL and to undertake keeping the instruments for following three years and to have the investment determined by the Ministry of Treasury and Finance.

Ministry of Interior, General Directorate of Civil Registration and Citizenship has published Instruction of Procedures and Principles Regarding Acquisition of Turkish Citizenship by Foreign Investors (“Instruction”) which regulates the process of the application. The Instruction foresees that exclusive/joint offices shall be established in Ankara and Istanbul. Officers of General Directorate of Civil Registration and Citizenship, General Directorate of Migration Management and Determination Institutions shall provide the services in conjunction.

  • Applicants completed the investment according the Regulation, shall apply for Certificate of Conformity to the Determination Institutions. Obtaining the Certificate of Conformity allows the applicants apply for citizenship and residency permit referred to in article 31/j of the Law on Foreigners and International Protection No:6458 with joint documents. Application for citizenship shall be made to the Exclusive/Joint Offices with granted residency permit and required documents for citizenship. Required documents are as follows:
  • Applicant’s passport as translated and notarized. (should cover ID information, photograph and all the pages of entrances and leaves)
  • In case of statelessness, documents which certifies statelessness (As translated, notarized and authorized by the Turkish Consulate or by Apostille)
  • Birth Certificate or any official document covers applicant’s birth date/birth place/parents’ name information such as identity register copy. (As translated, notarized and authorized by the Turkish Consulate or by Apostille)
  • In the event of lack of birth date information; signed declaration to recognize Turkish Civil Registry Services Act’s authorization)
  • Certificate states applicant’s civil status such as married, divorced or widowed: Marriage Certificate, Divorce Certificate, Death Certificate. (As translated, notarized and authorized by the Turkish Consulate or by Apostille)
  • If applicant is married; identity register copy or similar document proves the family bond of spouse and children (As translated, notarized and authorized by the Turkish Consulate or Apostille)
  • If the child is in the guardianship of one parent; document states consent of the other parent as translated and notarized/certified by the authorized officer in Turkey, or document states consent of the other parent admitted from foreign representative offices/authorized institutions as translated, notarized and authorized by the Turkish Consulate/Apostille
  • Criminal record (in case of request)
  • 6 biometric photos (must be taken within last 6 months, regulated by ICAO, 50×60 mm size, white background, without pattern)
  • Receipt of Application Fee
  • Health Insurance
  • The Certificate of Conformity

Certificate of Conformity granted by the pertinent Authority is required to complete the application file as a determination of the investment. In acquisition of Turkish Citizenship through real estate purchase procedure, an application to authorized Directorate of Land Registry which is related to Ministry of Environment and Urbanization, shall be made to obtain a Certificate of Conformity. This document purports to indicate that the monetary value of the real estate purchase has exceeded the threshold figure of 250.000USD, and a record has been entered into land registry record stating that the ownership status shall not change for a period of three years.

In acquisition of Turkish Citizenship through bank deposit, an application to Department of Financial Consumer Relations of the Banking Regulatory Authority, shall be made to obtain a Certificate of Conformity purports to indicate that, 500.000 USD or equivalent amount of other currencies have already been deposited at a bank operating in Turkey and a record has been entered into the bank account inhibiting the withdrawal of the money for a period of three years.

Foreign investors who had been granted with the Turkish Citizenship should meet abovementioned requirements for the duration which has stated in the Regulation. In case the investor fails to maintain such requirements, determination institutions would notify General Directorate of Civil Registration and Citizenship and General Directorate of Migration Management. Subsequently, citizenship status shall be revoked in accordance with article 31 of the Law.

Staying in the technology race, avoiding protectionist pitfalls

It is vital for law firms and in house counsel that they are at the forefront when advising on the specifics and legalities of the technology supply chain, which increasingly relies on mining raw materials for use within the manufacturing process of ‘smart’ products. However, an acute awareness of the barriers is also essential.

As such, Gowling WLG’s Protectionism 2.0 Report highlights how protectionist domestic policies from country to country can stifle the commercial overseas collaboration opportunities that technology offers.

Given the increase in protectionist policies, and the inherent link that exists between these and mining essential raw materials, it has never been more important that in house teams work closely with their advisers to anticipate market changes and implement strategies to manoeuvre through what can be difficult events and circumstances.

What is becoming evident, as set out in the report, is that there is a startling correlation between countries that pursue digitally protectionist policies (laws that prevent the overseas collaboration that is needed for technology to properly develop) as well those that are protectionist in relation to their natural resources – in particular China, Russia, India, Vietnam, Argentina and Turkey – six key global players in both areas of the economy. Given that countries like these are the very same which house the essential raw materials that need to be mined to fuel the development of technology, it is crucial to understand how to anticipate the impact of such behaviour on the technology supply chain.

General Counsel could be forgiven for focusing more on the operational and trading aspects relating to the existing uncertainty surrounding Brexit and global trade – and simply seeing digital protectionism as a side-line issue to focus on at a later date. This would be a mistake, given that these measures pose as much a threat to international trade and development as the more traditional tools of trade protectionism that seem to be most in focus at present.

Not only do the identified countries above have a strong track record in imposing trade barriers and tariffs on imports, they also have a high number of restrictive data laws and large deposits of the vital raw materials needed to make smartphones, connected devices and batteries for electric vehicles.

While this is happening in real time, many technology focused brands – focused on the manufacturing side of the industry – may not yet have anticipated how this will affect their sourcing and subsequent supply chain partners and processes. This makes it even more important that General Counsel communicate the effect of this on the output of their businesses in order to assist internal relationships or indeed, using the foresight of their selected legal advisers.