The Merchant Shipping Bill, 2020: A step forward
The Merchant Shipping Bill, 2020: A step forward “We can’t control the wind, but we can direct the sail.”
India has a strategic location on the world’s shipping routes, being the sixth largest maritime country in the world, with a coastline of approximately 7,517 km. According to the Ministry of Ports, Shipping and Waterways (the Ministry), India’s 95 % trade by volume and around 70 % trade by value is done through maritime transport. This indicates how the Shipping Industry plays a predominant and valuable role in sustaining growth in the country’s trade and commerce. Relying on the Indian Government’s vital support for the ports sector, it has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbour construction and maintenance projects. It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports1 .
Indian laws that govern the Shipping Industry are centrally regulated and exclusively controlled by the government keeping in mind International Maritime Conventions that India is a party to. Mainly, the Merchant Shipping Act, 1958 and the Coasting Vessels Act, 1838 were drafted to foster development and ensure the maintenance of an Indian mercantile marine in a manner best suited to serve the national interest2 . With the changes that the world is going through, it is important that legislation is in sync with the changing times.
The Need for a New Shipping Bill
The Ministry issued a draft of the Merchant Shipping Bill, 2020 (The Bill) for public consultation on 26th November 2020. The Bill seeks to repeal and replace the Merchant Shipping Act, 1958 (Act No. 44 of 1958) and the Coasting Vessels Act, 1838 (Act No. 19 of 1838).
The Bill has been drafted with an intent to promote the growth of the Shipping Industry by incorporating some of the best practices adopted by developed countries such as the U.S., Japan, U.K., Singapore and Australia. The previous Act contained provisions that restricted the growth of the Shipping Industry in many ways. The new Bill shall not only revolutionize the Shipping Industry but also accelerate development and FDI in vessels flagged in India, promoting international trade as well. Previously, a ship that was flagged in India had to be 100% Indian owned, restricting foreign companies/ individuals from having any stake in the vessels flagged in the country. It was also compulsory for Indian ships to hold a license granted by the Director-General under Section 406 of the Merchant Act of 1958. The Registration method was very extensive and time-consuming. The Act of 1958 lacked in many regards, especially the dearth of provisions regarding pollution, safety of the seafarers and the vague/ non-existent definition of repatriation highlights its inadequacy in the legislation.
Therefore, it was the need of the hour to introduce the Bill to move forward in the Shipping Industry progressively. Adequate provisions are incorporated to ensure the safety and security of vessels, safety of life at sea, prevent marine pollution, provide for maritime liabilities and compensation, and ensure comprehensive adoption of India’s obligations under international conventions3 .
The Merchant Shipping Bill, 2020: Distinct Features
- Definition Clause: The Act of 1958 had a very confining definition section that did not cover all important key elements of the Act. The new Bill has many new definitions, refining the quality of the legislation. Words such as ‘abandoned vessel’, ‘abandoned seafarer’ were added and certain key conventions also found a place in the definition clause, such as, ‘Anti-Fouling Systems Convention4‘ and ‘Ballast Water Management Convention5. ‘
- Enhanced Definition of Coasting Trade in India: The earlier definition only described it as ‘the carriage by sea of passengers or goods from any port or place in India to any other port or place on the continent of India.’ The new Bill has included a clause (b) to the definition, widening its scope to ‘performing any service within waters in the jurisdiction of India, including the zones defined under the Territorial Water, Continental Shelf, Exclusive Economic Zones and other Maritime Zones of India Act, 1976 (80 of 1976), or any other law for the time being in force or any port or place, including inland ports that the Central Government may, notify through notification in the official Gazette, for this purpose6.
- Ease of doing business: The Bill does away with the mandatory requirement of a general trading licence for Indian vessels.
- Increase India’s tonnage: The Bill seeks to increase India’s tonnage by widening the eligibility criteria for ownership of vessels. The Bill proposes that a vessel needs to have a ‘substantial’ stake of around 51 % by an Indian while the remaining can be held by a foreign party.
- Registration of Bareboat Charter cum Demise: Bareboat Charter is a contract for the lease of the ship, for a stipulated period of time, by virtue of which the lessee has complete possession and control of the ship. The lessee also has the right to appoint the master and crew of the ship for the duration of the lease. Bareboat Charter cum Demise on the other hand is where the ownership of the ship is intended to be transferred after a specified period of the company to whom it has been chartered. The new Bill provides for Bareboat Charter cum Demise registration that allows international trade to increase significantly.
- Welcoming Digital Technology with open arms: The Bill allows electronic means of registration and grants statutory recognition to electronic agreements, records7 , database8, and logbooks in addition to electronic licenses, certificates and payments. Digitalization of such forms and documents will only result in better management and accountability under little or less maintenance.
- Speedy response to emergencies: The Bill contains the pioneer statutory framework for regulating maritime emergency response against marine incidents. Time effective mechanisms shall be installed that can enhance the response time, ensuring the emergencies does not take the shape of a wreck or a catastrophic event. This provision gives weightage to the seafarers in need and ensures that the ones in crisis aren’t left at bay.
- Welfare of abandoned vessels and seafarers: The provision with respect to repatriation of seafarers have been improved to be in line with the Maritime Labour Convention, 2006 regulations. This convention contains seafarer’s rights to decent condition of work and is globally applicable9. Additionally, the new Bill has a dedicated section10 to repatriation that was absent in the Act of 1958.
- Strengthen adjudication and predictability of claims: In order to strengthen the investigation and adjudication of claims arising out of the collision of vessels, assessors may be tasked by the High Courts to present their findings on the degrees of the fault of each vessel. This provision can be found in Section 155 of the new Bill titled, Apportionment of liability, it clearly lays down that for any maritime claim arising out of a collision between vessels, the High Court may, in the course of proceedings under this Act, assign all or any of the following duties to any assessors, appointed by the Central Government under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017:
(a) determination of fault, including the degree of fault attributable to each vessel;
(b) attend the proceedings before the High Court;
(c) present their written findings to the High Court; and
(d) any other duties that may be assigned by the High Court11
- India as an Active Enforcement Jurisdiction: The Bill also empowers the Director-General, appointed under Section 6 of the new Bill, to take action against vessels that are unsafe and pose a threat to the safety of life at the sea and the environment. It also gives power to the Director-General to entertain appeals from detention orders and lays out the procedure for the same as well.
The Bill also seeks to encourage active enforcement of pollution prevention standards, as the Central Government has been granted the power to mandate compulsory insurance or other financial security for pollution damage. The above elements of the new Bill portray how the concerned industry has grown and how these provisions can not only accelerate opportunities for investment but also act as an impetus to a self-reliant domestic investment climate in the maritime industry.
The Merchant Shipping Bill, 2020 shall definitively change the way the regulatory framework was functioning. Having said that, it is without doubt, a step forward towards better business and growth. Among many useful changes that the new Bill introduced, provisions regarding maritime education, training, certification and recruitment of seafarers have been included. The Bill all-in-all covers every aspect in the Shipping Industry and provides for realistic and effective solutions to key issues. If implemented, it will bring about vital changes along with FDI in India, expanding the scope of business to the Shipping Industry.
- 1Shipping Industry & Ports in India, India Brand equity Foundation (Jan 02, 2021, 10:00 AM) https://www.ibef.org/pages/ports-india-shipping.aspx
- 2Preamble, The Merchant Shipping Act, 1958, ACT NO. 44 OF 1958
- 3Govt issues draft ‘Merchant Shipping Bill’ for public consultation, The Economic Times, Industry (Jan. 03, 2021, 11:00 PM) https://economictimes.indiatimes.com/industry/transportation/shipping-/-transport/govt-issues-draft-merchant-shipping-bill-2020-for-public-consultation/articleshow/79429006.cms
- 4Means, ‘International Convention on control of harmful antifouling systems on ships, 2001’, Section 3 (4), The Merchant Shipping Bill, 2020
- 5Means, ‘the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, 2004′, Section 3 (7), The Merchant Shipping Bill, 2020
- 6Section 3 (16), The Merchant Shipping Bill, 2020
- 7Section 321, The Merchant Shipping Bill, 2020
- 8Section 75, The Merchant Shipping Bill, 2020
- 9ILO MLC Frequently Asked Questions, International Chamber of Shipping (Dec. 29, 2020, 2:00 PM) https://www.ics-shipping.org/shipping-fact/ilo-mlc-frequently-asked-questions/#:~:text=The%20MLC%20is%20a%20comprehensive,of%20fair%20competition%20for%20shipowners.
- 10Section 65, The Merchant Shipping Bill, 2020
- 11Section 155, The Merchant Shipping Bill, 2020