Exclusive Q&A on Shipping Law with Mohamed Idwan

What are the main regulators and legislations that apply to shipping & maritime in your jurisdiction?

Law No 17 of 2008 on Shipping ("Shipping Act"). The Shipping Act covers among others regulations on all kinds of water transport, licensing, ship mortgages, maritime liens, ports, safety and security, seaworthiness, navigation and aids to navigation, port administration, environmental aspects, accidents at sea, search and rescue, human resources and crewing, information systems, community participation, sea and coast guards, investigation,  criminal aspects,

Have there been any recent regulatory changes or interesting developments?

Continuing implementation of Indonesian President Jokowi's five pillars maritime-axis doctrine:

1. Rebuild Indonesia's maritime culture. As a country consisting of 17,000 islands, Indonesia should be aware of and see the oceans as part of the nation's identity, its prosperity and its future are determined by how we manage the oceans.

2. Maintain and manage marine resources, with a focus on building marine food sovereignty through the development of the fishing industry.

3. Provide priority to the development of maritime infrastructure and connectivity by constructing sea highways along the shore of Java, establish deep seaports and logistical networks as well as developing the shipping industry and maritime tourism.

4. Through maritime diplomacy, Indonesia invites other nations to cooperate in the marine field and eliminate the source of conflicts at sea, such as illegal fishing, violations of sovereignty, territorial disputes, piracy and marine pollution.

5. Indonesia has an obligation to develop its maritime defense forces. This is necessary not only to maintain maritime sovereignty and wealth, but also as a form of our responsibility to maintain the safety of shipping and maritime security.

What does the Paris Agreement (COP21) mean for the future of the shipping & maritime industry?

Indonesia is a signatory to the Paris Agreement. Indonesia's commitment to ensure the implementation of the Paris Climate Agreement is strong. Indonesia will do its utmost to ratify the Paris Agreement. This should include the commitment to address GHG emissions from ships engaged in trade.

Can you outline the other main safety and environmental concerns currently facing the industry?

Indonesia is aware that environmental protection is part of the national transportation system and therefore attempts to prevent and combat marine pollution originating from activities associated with shipping. Adjustments to address GHG emissions will undoubtedly affect cost and freight rates and the cost of building new vessels. If this will not apply on a uniform basis, it might also create a competitive disadvantage for vessels of countries with higher and costlier standards

What is being done to tackle the high number of attacks on ships by pirates?

Indonesia has a clear stance. Indonesia will not submit to the whims of pirates especially separatist/political groups, which have demanded ransoms for the release of hostages. A concerted effort by Indonesia, Malaysia and Singapore to tackle piracy and robberies in nearby waters saw the number of incidents decreasing.  The three countries also stepped up efforts to detect unregistered ships around ports, and intensified checks on ships entering and leaving ports Indonesia may get even stronger support for its fight against piracy by joining the Region Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP).

What are the key types of insurance and what aspects of insurance do firms frequently neglect?

We understand that identification of attackers as “pirates” or “terrorists” – insofar as they can be identified – is important for insurers and insureds because this may dictate the insurance(s) under which the risks and liabilities potentially arising out of the attack are covered. Under certain hull and machinery conditions “piracy” is treated as a marine peril, not a war risk, although it is understood that many owners insured on such terms now seek to exclude “piracy” from their hull and machinery policy and include it under their war risks policy. 

Can you assess the risk management perception and trends?

Risk assessment will depend on the specific circumstances, including operational parameters and financial considerations. One challenge is that risk analysis often suffers from a narrow perspective when it comes to identifying threat, hazards and consequences. We understand that results of a risk analysis must always be weighed against risk tolerability levels as well as other operational parameters, such as financial considerations, requested reliability and possible operational gain.

Several experts have suggested that in times of economic crisis the number of ship arrests tends to increase worldwide. Has this been the case given the current economic difficulties caused by the oversupply of ships and falling commodity and oil and gas prices?

Yes. Especially in Indonesia in times of economic crisis the number of ship arrests tends to increase. In our firm we have seen an increase of requests for ship arrests in Indonesian ports. In many cases of debt restructuring individual arrest warrants of vessels are not necessary if a general freezing order applies to all assets of the owner.

What are the laws and procedures for ship arrests in your jurisdiction?

Ship arrests of foreign and Indonesian flag ships for civil claims are regulated in Articles 222 and 223 of the Shipping Act. Indonesia is not a party to any international arrest conventions. The issue is to a lesser extent whether it is possible to arrest a ship, but in relation to foreign ships is more an issue whether the warrant can be obtained in time while the ship is in Indonesia. It is therefore advisable to initiate procedures far ahead of the ship's estimated arrival in Indonesia. The Shipping Act provides discretionary authority to the competent court to issue a ship's warrant of arrest without needing to first undergo regular civil court proceedings. However, in practice a regular complaint must still be filed, except that the warrant can be issued ahead of the summons to the defendant and ahead of the first hearing. However, the Shipping Law does not provide a detailed procedure for the issuance of the warrant of arrest. Based on such warrant, the arrest itself will be implemented through the local harbor master. Whilst ship arrests are possible in practice, implementing regulations mandated by Article 223 have not been issued.

How can you overcome conflict of laws and conflict of jurisdictions in shipping litigation?

Especially relating to ship arrests, creditors often choose to wait until the ship is in other jurisdictions where conflicts can be overcome and for campos ship arrests can be obtained swiftly. Conflicts of jurisdiction in shipping disputes against a foreign defendant is often solved by making their Indonesian agent an additional defendant. If one of the defendants is domiciled in Indonesia, Indonesian courts have jurisdiction. If the only defendant is not domiciled in Indonesia, then Indonesian courts would have no jurisdiction. Conflicts of law and jurisdiction can also be prevented through a choice of law clause and/or an arbitration clause specifying the seat of arbitration.

How are shifts in global demographics and population growth rates likely to affect the shipping & maritime industry?

Whilst especially for Indonesia shifts in demography and population historically only have had a limited effect on the shipping and maritime industry, the development of maritime infrastructure and connectivity by constructing sea highways along the shore of Java, establish deep seaports and logistical networks as well as developing the shipping industry and maritime tourism has a far bigger impact on the shipping and maritime industry.

What key trends do you expect to see over the coming year and in an ideal world what would you like to see implemented or changed?

Firstly, where possible and available for Indonesia to join international conventions, especially to overcome conflict of laws and conflict of jurisdictions in shipping litigation. Secondly, to provide priority to the development of maritime infrastructure and connectivity by constructing sea highways along the shore of Java. Thirdly, establish deep seaports and logistical networks as well as developing the shipping industry and maritime tourism, part of Indonesia’s five pillars maritime-axis doctrine.

Mohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS). He graduated from the Faculty of Law of the University of Indonesia and holds a PhD in Law from the University of Hamburg, Germany. Dr. Ganie has more than 30 years of legal experience, and specializes in commercial transactions and commercial litigation, including alternative dispute resolution and has acted as an expert in a number court and arbitration proceedings. His expertise covers general corporate/company law, banking law, finance, bankruptcy and restructuring, mining, investment, acquisitions, infrastructure projects/project finance, antitrust, and shipping/aviation, with a particular focus on corporate governance and compliance.

Mohamed can be contacted on (62-21) 831-5005, 831-5025 or by email at ganie@lgslaw.co.id