SECURITY GUARDS

Some states have recently introduced their own 
      NATIONAL REGULATIONS ON THE USE OF ARMED GUARDS.

We have received many enquiries from members who are considering or are already using armed security guards. The following information is provided to provide some general guidance on a difficult subject. However, the position has improved considerably following the publication of the BIMCO contract GUARDCON on 28 March 2012 - for details see International Group Circular.  The GUARDCON contract addresses many of the issues discussed below.  

Since this information was provided, the IMO Maritime Security Sub-Committee has published MSC.1/Circ.1405 dated 23 May 2011 containing Interim Guidance To Shipowners, Ship Operators, And Shipmasters On The Use Of Privately Contracted Armed Security Personnel On Board Ships In The High Risk Area. The latest version of this Circular MSC.1/Circ.1405/Rev.1 was published on 16 September 2011. Members considering the use of armed guards should read this Circular.

Members will also find useful guidance in this article by Ince & Co: “Issues arising from the use of armed guards" together with a follow up article published in January 2012 Piracy - armed guards revisited and general overview.

Introduction to Private Maritime Security Companies (PMSCs) published by Oceans beyond Piracy also provides a useful overview of key documents and the stance of flag states.

ICS (International Chamber of Shipping) and ECSA (European Community Shipowners’ Association) have prepared a useful summary of the policy and rules of flag states on the carriage of arms and the use of private armed guards. ICS & ECSA point out that this information is for general guidance only and is not a substitute for proper verification with the flag state.

Should I enter into a contract with a security company?

• It is an operational decision for the owners whether they want to enter into an agreement with a security company which will provide armed guards.

Should I provide the contract to the Association?

• Please find below some general comments for members' consideration. Should members have more specific inquires, they should provide us with the agreement at least two weeks prior to its execution.
   
  Our comments are made with an eye on insurance and P&I cover. We therefore recommend that members satisfy themselves fully on their commercial considerations and operational requirements as well and that they employ an independent lawyer to review the contract for them with this in mind.

Does my P&I policy cover agreements with security companies?

• The presence of armed guards on board the vessel will not, as such, prejudice cover but certain risks may fall outside the scope of cover due to the terms of the contract entered into.

What about knock for knock-clauses?

• Most contracts with a security company include knock for knock-clauses. In these clauses the parties to the contract agree to hold harmless, indemnify and defend each other (and each other's employees) from and against certain claims, demands, liabilities or causes of action, which are connected with the performance of the security services and relate to the consequences to each party. Essentially, the loss would lie where it falls.

What about knock for knock-clauses which contain wide indemnities and waivers of rights of subrogation?

• It is common, for what may at first glance seem like a knock for knock-clause, to actually contain very wide indemnities and waivers of rights to recourse and subrogation. Such clauses may not be acceptable to the Association and may even prejudice P&I cover. Owners should be aware that they will not be covered for liabilities arising under contractual indemnities, unless approved in advance.

What happens, if we are forced to agree such clauses?

• In such circumstances, the Association may be able to provide additional cover to plug any gaps. Members should contact our underwriting department if they require such assistance.

Should I get any other insurance providers to review and approve the contract?

• Many contracts will contain provisions which will oblige owners to waive their right of recourse against the security company, should they have caused damage or loss of the vessel. Owners should therefore ensure that their hull and war risks underwriters have reviewed and approved the contract.

What about requirements under SOLAS and other Regulations?

• It is up to the owners to ensure that they meet all applicable requirements of the flag state including SOLAS . For example, members would need to check that the number of men or the equipment on board does not breach the SOLAS regulations. Infringement of SOLAS and flag state regulations could adversely affect P&I cover.

Is there an exclusion for claims caused by certain weapons?

• It should be noted that if a casualty or loss is incurred due to "weapons of war" being used (for example, the pirates launch a rocket propelled grenade (RPG), if that is now (or later) construed as a weapon of war, which is likely), P&I cover could be prejudiced. Please note, however, that claims caused by a weapon of war would normally be covered under the war risks policy, i.e. members would still be insured, but under a different policy (which is why they should also check the contract with their war risks underwriters).

What about limitation of liability?

• Members should ensure that they preserve the right to limit liability, e.g. by inserting a clause along the following lines:
   
  "Notwithstanding anything to the contrary herein, nothing shall restrict or prevent owners, insurers, charterers, managers and operators of the vessel from limiting liability under any applicable law or international convention, including but not limited to the Convention on Limitation of Liability for Maritime Claims, 1976 (London)."

What about salvage?

• There should be a clause in the contract to the effect that the security company and its personnel are not entitled to claim salvage.

Does the security company need insurance?

• The security company should have insurance to cover its liability to its own employees and to cover third party liability and liability to the owners. We recommend that such insurance is also on the basis that rights of subrogation are waived. It would be prudent to have a clause in the contract to the effect that the security company will take out the relevant insurance and maintain the same for the duration of the contract.
   
  Most insurance policies will be for a limited amount. Members should expect cover for at least USD 5,000,000. The Association can review the security company’s insurance policy to determine that it does cover the relevant liabilities and is not subject to any unreasonable limitations, restrictions, conditions or warranties on their cover.

Why should I get independent legal advice?

• There are a number of factors involved here, which should make it extremely important for the members to get separate legal advice. Members will see from below why it is necessary to get separate legal advice, not just on the contract, but going forward in assisting them with their relationship with the security company.

Who is in charge?

• The Master must remain in charge at all times. Article 3-4-1 of SOLAS provides:
   
  “The Owner, Charterer, the Company, operating the ship defined in Regulation 14/1 or any other person shall not prevent or restrict the Master of the ship from taking or executing any decision which in the Master’s professional judgement is necessary for the safety of life at sea and protection of the marine environment.”
   
  The ISPS Code states:
   
  “At all times the Master of the ship has the ultimate responsibility for the safety and security of the ship.”
   
  Some contracts will seek to state that the security company is in charge or may take the lead when the threat of attack is imminent or if an attack is in progress. The Association can not approve of such clauses as they would be a breach of both SOLAS and ISPS. Members are reminded that any breach of SOLAS could prejudice their P&I cover.

Do the master and crew need training?

• It is important that there is proper and coordinated training between the master and crew and the armed guards. The hiring of guards should supplement not replace proper crew training and contingency planning.

Why is following Best Management Practices so important?

• The armed guards should not only be aware of Best Management Practices (BMP4 or any revision thereof), but also be trained in that. Owners should take this up with the security company, to ensure coordinated and effective training between master, crew and security company.
   
  Members should note that in the event a vessel is captured as a result of failure to follow BMP, this could mean that members' P&I cover could be prejudiced. Further, in some instances, cargo or other interests may allege that the vessel was unseaworthy, such that any contribution cargo interests and / or charterers had to make to ransom payments and / or general average may be defended by them on the basis of unseaworthiness due to breaches of BMP.

Should I contact the flag state?

• Owners will need to make enquiries with the flag state as to:
   
  i. Whether it would legally permit them to allow armed guards on their vessels; and
   
  ii. Whether the flag state requires any licences or permits for the carriage and or use of weapons on board.

What happens when the flag state gives its approval?

• Once approval from the flag state is obtained, there may still be other issues relevant to the flag state that need to be addressed, such as approval of the Rules of the Use of Force (RUF).

What are the Rules for Use of Force (RUF) or Rules of Engagement (ROE)?

• These are rules that will govern the circumstances in which weapons can be used. They need to comply with the national law of the flag state.
   
  In the UK, for example, lethal force is only allowed where there is serious and imminent threat to life. The decision to use lethal force must be reasonable and the force used must be proportionate. This may cause problems when there are legitimate small boats near the vessel such as fishermen who may be armed to protect themselves in much the same way as the vessel is armed. The armed personnel will need to distinguish between a pirate vessel and a legitimate vessel. This is why in the RUF one will normally see that they have scales of escalation and warnings issued to potential targets.

Do I need to ensure that weapons on my vessel are properly licensed?

• Yes. Owners have an obligation to ensure that the weapons carried on board their vessel meet and comply with all regulations and laws relevant to the port of embarkation, transit, mooring, disembarkation and that they comply with flag state regulations. Indeed, owners may also have an obligation to ensure that weapons carried on board meet and comply with the national laws of the country where the security company is based, and possibly the countries where the security company has offices in, plus the national laws of the employees working on board your vessel and employed by the security company.
   
  The licensing regime in respect of controlled weapons can be very complicated and strict dependent on where the security company is based. We understand that UK law for example is very strict.

Shall security companies take the lead in obtaining the right permits and licenses?

• Members should ensure that the security company does take the lead in getting all required licences and proving to the owners' lawyers' satisfaction that such licences and or permits have been obtained not just for use on the vessel pursuant to the flag state, but also for carriage at any relevant ports, including and not limited to ports of transit, embarkation, disembarkation and mooring.

What can happen if the right permits and licences for the weapons are not obtained?

• There are many "grey" areas in the licensing law, which would be extremely difficult for owners on their own to try to work through. However, in the end, it is still owners' obligation to ensure that arms on their vessel and coming to their vessel are properly licensed. Failure to ensure proper arms licensing could lead to action being taken against the master, crew, vessel and / or owners. Please see here for further information.
   
  Members are advised that if a claim arises, for example a fine, as a result of the failure to ensure that correct permits / licenses have been obtained from the relevant ports, authorities and flag state, P&I cover could be prejudiced.

Do I need to contact charterers and cargo interests about the presence of armed guards?

• Dependent on the charterparty, bill of lading and other contracts of carriage and the vessel and cargo in question, both charterers and cargo interests may have concerns about the presence of armed guards on board the vessel. We therefore believe that they should be alerted prior to entering into the contract. We suggest that owners' appointed lawyer advises on this after review of the relevant contracts.

What should I check when choosing a security company?

• Owners should exercise due diligence on the security company they chose to provide security services. Indeed, this is an express requirement by some flag. The exercise of due diligence on the company is something that could be done with the assistance of a law firm so as to establish for owners’ independent evidence. Owners may also engage a specialist company to assist with vetting - see for example the International Association of Maritime Security Professionals.

What factors should be checked before choosing a security company?

• i. Request and check references;
   
  ii. See if owners can check out the company informally with people or organisations they know;
   
  iii. The place of registration & business can be an indication of how serious the company is;
   
  iv. Check the :
  a. background;
  b. experience; and
  c. qualifications of the management and personnel;
   
  v. Look for specific marine experience – for example a background in Iraq may not be so useful on a ship;
   
  vi. Check how long the company has been in business;
   
  vii. Evaluate the size of the organisation;
   
  viii. Check whether sub-contractors are permitted;
   
  ix. Check whether the Company is a member of any industry organisations such as
  a. BAPSC (British Association of Private Security Companies); and
  b. SAMI (Security Association for the Maritime Industry);
   
  x. Has the company siged or is it willing to follow the IOCC (International Code of Conduct for Private Security Companies);
   
  xi. Are the rules of engagement included in the contract;
   
  xii. Is the law and jurisdiction provided for in the contract acceptable to owners;
   
  xiii. Do they have an ability to provide unarmed guards, crew training and other assistance – if so this may suggest an awareness of broader aspects of security rather than just providing "hired guns"; and
   
  xiv. Do they have a "no drug, smoking and alcohol" policy?

Note: this is not an exclusive list!

In sum, what will I need to do prior to executing the agreement with the security company?

• i. Provide us with the contract and seek approval prior to its execution.
   
  ii. Get hull underwriters and war risk underwriters to review and approve the contract.
   
  iii. We recommend that owners get independent legal advice on the contract, and we would like to review that advice when owners get it.
   
  iv. Advise charterers and cargo interest about the presence of armed guards. This is something owners' appointed lawyer may assist them with.
   
  v. Check whether some of the clauses of the contract can be improved. We would suggest that owners' appointed lawyer does this for them, and we can assist in so far as any clause relates to P&I insurance cover.
   
  vi. Owners need to ask for a copy of the insurance contract the security company has, as there may be limitations there that could affect owners' P&I cover.