Compensation to ships: Ukraine explained how the provision of guarantees will work

In Ukraine, they are ready to provide shipowners, charterers and operators with guarantees of compensation for damages. UAH 20 billion has been allocated for such measures in the 2023 state budget.

It became known how the provision of guarantees for compensation of damage caused to charterers, operators and/or ship owners will operate. We are talking about the damage that can be caused as a result of the armed aggression of the Russian Federation, the Ministry of Infrastructure of Ukraine reports.

The Cabinet of Ministers approved a document that allows providing guarantees of compensation for damage. This applies to ships under Ukrainian and foreign flags (except Russia and Belarus).

The Ministry of Infrastructure explained that the stable operation of civil shipping in the Black Sea, in particular within the limits of the Grain Agreement, is impossible without insurance coverage for carriers of all risks.

“We see that insurance companies are wary of covering such risks, and this poses a threat to non-military sea transportation from Ukrainian ports,” the agency emphasized.

The launch of the damage compensation mechanism will enable charterers and shipowners to continue to ensure access to the ports of Ukraine. In particular, regardless of whether the Grain Agreement works.

“Ukraine, as a state that has ratified international conventions, has the right to free commercial navigation. And we are doing everything we can to find solutions that will open traffic to and from our ports. This is necessary in order not to depend on the aggressor country, which has been blocking traffic for more than 7 months even within the framework of the Grain Agreement,” added the Minister of Infrastructure of Ukraine Oleksandr Kubrakov.

Compensation will be provided to the shipowner to whom the insurer refused in writing to indemnify the damage caused as a result of the armed aggression of the Russian Federation. Only those shipowners who have concluded an insurance contract or a P&I (Protection and Indemnity) policy in accordance with the procedure established by the legislation of Ukraine or another state will have the right to compensation.

Damage subject to compensation includes:

• damage caused to the ship due to death or destruction, which is not subject to restoration;

• expenses for the elimination of structural damage to the vessel, due to which the vessel lost its seaworthiness;

• losses due to the loss and/or damage of cargo;

• expenses related to damage to the health or life of a passenger or a member of the ship’s crew.

For this, the shipowner must submit a package of documents to the MIU. This should take place no later than 90 calendar days from the date of receipt of the insurer’s refusal to provide insurance compensation.

As a reminder, the government of Ukraine has earmarked UAH 20 billion in the state budget for 2023 for such compensation guarantees.

As previously reported by USM, compensation will be issued if the vessel is damaged in the territorial waters of Ukraine.

The photo is illustrative