By Ayoola Babatunde Fadola

Introduction

Given the complexities of global shipping, maritime security contracts help protect ships, cargo, and human life in hostile seas. These standardized contracts, which cover risks such as piracy, armed robbery, and terrorism, often pose significant challenges for risk sharing and dispute resolution. This essay considers the roles of arbitration in resolving the complexities of maritime security contracts in conflict areas.

Understanding Maritime Security Contracts 

Maritime security contracts are special agreements between owners, charterers, operators, and security companies. The drafters design these contracts to enhance the safety of vessels and their occupants by protecting a range of potential threats encountered in open waters. Bodies like the Baltic and International Maritime Council (BIMCO) have made standardized contracts, such as the GUARDCON contract, with a recognized standard for employing private maritime security companies (PMSCs) to deploy armed or unarmed officers aboard vessels.

These contracts are not geographically bound. The parties can agree on any pre-selected territory. However, they must also comply with international treaties and regulations, international law such as the United Nations Convention on Laws of the Sea (UNCLOS) and other International Maritime Organization (IMO) regulations, as well as the laws of relevant coastal states.

Standard Clauses in Maritime Security Contracts

Fundamental principles in maritime security contracts include “Knock for Knock” indemnity, a description of the ship Master’s authority and the security team’s responsibilities, adequate insurance for security contractors, and provisions governing the use of force.

Another necessary clause in maritime security contracts is the piracy risk clause. Pacific Basin IHX Limited v Bulkhandling Handymax AS (2011) demonstrated the importance of defining risk positions. In this case, charterers sought to halt a voyage charter party because the vessel failed to arrive at the port of loading on time. The Master’s decision to avoid the Gulf of Aden due to piracy threats caused the delay. The court ultimately ruled in favor of the ship owners, finding that the Master’s choice to sail an alternate course out of the Gulf of Aden on the grounds of risk of piracy was reasonable and justified. Well-crafted risk clauses in maritime security contracts allow providers to make essential decisions in dangerous situations. Tribunals recognize substantial threats as valid reasons to invoke these clauses, leading to increased adoption of risk provisions to protect against piracy while ensuring legal compliance.

The use of force provision is the most valuable and delicate of these contracts. It establishes guidelines for when and how security agents may deploy force, usually aligning with the industry’s 100 Series Rules. For example, various rules in the US regulate maritime security companies’ use of force, such as the US Port Security Advisory (3-09). This directive permits using deadly force in self-defense but emphasizes that the final decision rests with the ship’s Master.

Another essential provision is the rules of engagement (ROE) clause. A security contract’s rules of engagement will specify the conditions under which security agents have authorization to use force, the permissible extent of force, and the protocols for ensuring compliance with legal and ethical standards. In the Enrica Lexie case (Italy v. India), two Italian marines on an Italian-registered oil tanker shot at an Indian fishing boat off the coast of Kerala, killing two Indian fishermen. The Permanent Court of Arbitration (2020) found that the Marines breached the rules of engagement by firing without assessing danger. Although India was entitled to compensation, the tribunal ruled that the marines were immune from prosecution in India. Italy was directed to compensate India, while charges against the marines could proceed in Italy. This case has influenced the development of layered response strategies in maritime security, starting with minimal measures before escalating.

Arbitration in Maritime Security Disputes 

Arbitration is a critical mechanism for resolving disputes arising from maritime security agreements. It allows parties to tailor procedural arrangements and choose applicable frameworks. This flexibility is particularly valuable given the inherently international nature of these disputes.

Prominent institutions in this field include the London Maritime Arbitrators Association (LMAA) and the Singapore Chamber of Maritime Arbitration (SCMA). These institutions offer various rules and procedures for maritime incidents, including emergency arbitrators and expedited legal proceedings. Moreover, arbitration’s enforceability across borders enhances its appeal for parties engaged in international maritime contracts. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows numerous jurisdictions worldwide to recognize and enforce arbitral awards worldwide.

 Maritime Security Contracts Risk Assignment

Maritime security contracts like the GUARDCON aim to identify and mitigate risks related to piracy, terrorism, state interference, and regulatory compliance. These agreements outline specific strategies and procedures to safeguard maritime operations, manage vulnerabilities, and maintain compliance with relevant laws and regulations. Some contractual mechanisms manage risks such as knock-for-knock agreements, limitation of liability, force majeure provisions, and compliance warranties.

The MV Alondra Rainbow case (2004) brought attention to the legal status of private armed security guards. This case, involving pirates seizing a Japanese vessel, raised critical questions about shipowners’ obligations and the legal implications of employing private maritime security services. It underscored the need for transparent risk allocation in security contracts, principally regarding security providers’ responsibilities and duties.

High-risk situations often blur distinctions between threats like piracy and terrorism, causing variability in security services and costs. Contracts must balance robust, adaptable security measures with simplicity to foster trust. Achieving this balance complicates negotiations.

“Given the complexities of global shipping, maritime security contracts help protect ships, cargo, and human life in hostile seas.”

Ayoola Babatunde Fadola

Enforcement Challenges in High-Risk Zones 

Enforcing Arbitral decisions in maritime security is particularly challenging in high-risk areas. While the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides the legal framework for cross-border enforcement, it is often difficult to enforce in fragile countries. Jurisdictional complexities further complicate enforcement. Security measures for maritime vessels typically involve extending security across flag, coastal, and port states governed by distinct legal frameworks. Disparities in these laws can impede the enforcement of arbitral judgments. For example, in the Maersk Alabama case (2009), lawsuits over liability involved multiple defendants, including private security guards and the shipping firm, with differing jurisdictional laws complicating both liability determination and judgment enforcement.

The Bunga Melati Dua case (2008) illustrates similar problems. When pirates struck a Malaysian-registered tanker, disputes arose over whether the shipowner had maintained the proper security levels required by industry standards. The varying interpretations of “adequate security” across jurisdictions highlighted the challenges of ensuring compliance and enforcement.

Similarly, as mentioned earlier, the Enrica Lexie case (India v Italy, PCA 2012) highlights the jurisdictional complexities of maritime security incidents. The incident illustrates how flag state and coastal state authorities could collide in maritime security matters which is symptomatic of the requirement for explicit jurisdictional language in security contracts and the potential impossibility of enforcing arbitral decisions across jurisdictions.

Recommendation and Conclusion 

As the maritime sector evolves, several key improvements are recommended to enhance arbitration’s effectiveness in maritime security contracts. Firstly, greater contract clarity through clear jurisdictional terms and well-specified roles and obligations for all parties will help prevent conflicts, particularly in high-risk areas where jurisdictional inconsistencies may exist.

Second, the industry should standardize security requirements in maritime security contracts by adopting uniform risk management and use-of-force procedures to ensure adherence and facilitate enforcement. Enhanced arbitration systems are also critical. 

Third, stakeholders should promote diplomatic efforts to encourage local courts to accept and enforce international arbitration awards, especially in politically volatile areas. Further training and education programs for ship owners, charterers, and security service providers on their rights and responsibilities under maritime security agreements can improve contract performance and reduce the likelihood of disputes.

Finally, while contracts should incorporate flexibility to address shifting security issues in high-risk areas. Maritime security contracts and arbitration are also constantly adapting to changing risks and legal frameworks. The effectiveness of maritime security depends on the strength of well-crafted contracts and the expertise of arbitrators who resolve disputes.