George Naumof
Senior inspector
Romanian Naval Authority
Dear Professor Erik Rosaeg,
After reading your letter on 21 August 2007 I try to offer my answers to your questions.
Spirit of the convention.
As you know very well, the HNS Convention is a very complex one. Consequently, also its spirit is very complex and it has many aspects. Focusing only on the LNG account of the HNS Fund, in my understanding the spirit can be summarized as in the next sentence:
“The separate account for LNG must be fed by the titleholders (any person who in the preceding calendar year, or such other year as the Assembly may decide, immediately prior to its discharge, held title to an LNG cargo discharged in a port or terminal of that State) and must be used only for claims after an incident involving LNG cargoes. The role of the State Party is to provide to the HNS Fund the correct and complete information (name and address) about the titleholder and its LNG cargoes discharged in the ports and terminals on the territory of the State Party.”
If we would consider only the final goal of the convention (to cover claims, and for this reason we need to feed the separate account for LNG) as its spirit, then we would do a mistake, because the sources for the compensations fund are excluded and these sources (those companies which make huge profits using LNG in their activities and exposing the environment and properties belonging to the third part to serious risks during the carriage by sea of the LNG cargoes from the source to the user) are part of the spirit of the convention.
My three solutions, presented in the previous letter, respect the spirit of the HNS Convention and are based on the wording of that.
At your question with State A and State B I have a very simple answer: If the wording it is respected, then the spirit of the convention it is respected. If the practices in these two states are not similar and because of the difference in practice appears a commercial advantage in one of the states, fore sure this advantage will be speculated and the competition will be affected. In my understanding the correspondence group has to present solutions applicable in all States Parties with the recommendation to be generally implemented to avoid the distortion of the competition.
Security
As I mentioned in one of my previous letters a State Party is free to take measures considered appropriate to fulfill its tasks to meet the requirements of the HNS Convention.
If I understood correct, you suggest that a State Party to introduce a security (bank guarantee or recognized insurer) for a limited/certain amount (to the satisfaction of HNS Fund) and for a certain time in the case of a titleholder not subject to the jurisdiction of a State Party.
Against this solution I have the next 4 arguments:
1. It is introduced a discrimination on the local market, between titleholders under the jurisdiction of the States Parties and titleholders under the jurisdiction of a non States Parties, the later ones having additional costs with the security;
2. The certain/limited amount of the security could be less than the levy which will be established by the Assembly of the HNS Fund. If that is the case, then the State Party which established the amount of the security is responsible for the financial loss for the HNS Fund and, therefore that State Party is liable to compensate the HNS Fund for such loss;
3. The certain time span could be shorter than the time when the HNS Fund issues the invoice for the levy. If that is the case, then the State Party which established the time span of the security is responsible for the financial loss for the HNS Fund and, therefore that State Party is liable to compensate the HNS Fund for such loss;
4. It is introduced an element strange from the HNS Convention, therefore the spirit of the convention is not respected, because the person liable to pay contributions is replaced by another person which is not foreseen in the convention. The surety (bank or insurer) is not an actor foreseen in the HNS Convention, and the criteria to accept such a surety could be arbitrary, and anyhow these are not supported by the wording of the HNS Convention
Advanced payment of a fixed levy
As we know from the art.17 (1) of the HNS Convention, annual contributions to each separate account shall be levied only as required to make payments by the account in question. Also, from art.17 (3) we know that the Assembly shall decide the total amount of annual contributions to be levied to each separate account. Following that decision the Director shall, in respect of each State Party, calculate for each person liable to pay contributions in accordance with Article 18, Article 19(1) and Article 21(5), the amount of that person's annual contribution to each account, on the basis of a fixed sum for each unit of contributing cargo reported in respect of the person during the preceding calendar year or such other year as the Assembly may decide. For each separate account, the fixed sum per unit of contributing cargo referred to above shall be calculated by dividing the total annual contribution to be levied to that account by the total quantity of cargo contributing to that account.
When an annual budget must be approved, the Assembly establishes the total amount of annual contributions to be levied to LNG separate account. If the Assembly decides to collect levies for LNG separate account for the quantities of LNG discharged in the current year (year of the budget), the fixed sum per unit of contributing cargo could be calculated by dividing the total annual contribution to be levied to that account by the total quantity of cargo contributing to that account recorded for the preceding calendar year, considering that the total quantity of LNG cargoes will be maintained at the same level and in the current year. In this way, the titleholder will pay before each discharge of LNG cargo a portion of annual contribution. If, at the end of the year, will appear differences, these differences could be balanced at the next annual budget.
As you see, the total amount of annual contributions to be levied is known and nothing is against that the Assembly to decide to consider the current calendar year for calculating the contributions, if the Assembly could decide on the current year as being “such other calendar year”.
In the last your letter you say: “However, in these cases, there must be a levy per tonne fixed at a time when one does not know the losses attributable to the year in question or the total amount of cargo in respect of that year. (This applies whatever year one choses as the relevant years.)”
As I understand, the losses attributable to the year in question, means the compensations which must be paid by HNS Fund, corresponding to the year when the incident happened.
As I mentioned in a previous letter, in the budget for the current year could be included compensations for different incidents happened in different preceding years. In my understanding it is not possible to have a direct correspondence between the amount of each compensation and the year when the incident happened and to calculate the fixed sum per unit of contributing cargo for the respective year and respective titleholders who discharged LNG cargoes.
If the interpretation of the HNS Convention is to reconstitute the year of the incident and to ask to the titleholders reported in that year to contribute to the fund for the compensation of the claimants of the respective incidents, then, in my understanding, will be not possible to be put in practice such a system. Why? Because at the date when it is known the amount for compensations (which could be few or many years after the incident happened), part or all of the titleholders could be dissolved and will be impossible to collect the levies very accurate and fair calculated.
If the wording “the preceding calendar year or such other year as the Assembly may decide” shall be interpreted as “the year immediately previous to the current calendar year or such one of the others preceding calendar years”, then the second solution is not a real solution and it cannot be taken into consideration.
Best wishes,
George Naumof
Bucuresti, 22 August 2007