Emne: GNL - HNS 1996

Fra: Hernández Gutiérrez José Francisco

Dato: Fri, 20 Jul 2007






Dear Colleague,


Following your request for comments, and as participant in the IOPC Correspondence Group on non-collectable levies to the LNG separate account of the HNS Fund, we would like to share with the rest of participants some commets on the topic.


Creation of the LNG account of the HNS Fund


         We support that all Contracting States may have similar legislations so to facilitate competition and avoid commercial advantages of players in some States over the others.

         We are most willing to actively collaborate in the jointly definition of flexible and fully operative legislation and procedures to support the implementation of the HNS Convention and, in particular, the constitution of the LNG account of the HNS Fund (i.e. required documentation, authorities involved, timing, procedures, etc.)


Funding mechanisms of contributions resulting from DES sales of companies not subject to the jurisdiction of any Contracting State


         We support all initiatives that could be implemented as long as they do not interfere with normal business operations and do not represent any direct additional economic burden for LNG importers.

         In that sense, we think that the recommendation stated in Professor Erik Rosag’s document dated 20th of July, proposing to declare the physical receiver of LNG cargoes jointly and severally liable with the titleholder immediately before the discharge, is not in line with the spirit of the wording of the HNS Convention and could undermine the competitiveness of the LNG industry in the affected State.


Proposed ways to guarantee the collection of expected contributions from companies belonging to non-Contracting States


         Asking DES sellers from non-Contracting States to provide Bank Guarantees or contract special Insurances [92FUND/A/ES.12/9/1 5.7] has to be further analyzed in order to check its feasibility. In the current market the usage of DES is increasing in detriment of FOB, so there is more possibility of finding sellers from non-Contracting States

         In particular, it is necessary to remark that the spot trading operations (in 2005 accounted for more than 12% of the total LNG trade) could be specially damaged if potential measures require extensive administrative work or are costly for the seller.

         In principle, asking for Bank Guarantees will have to face certain difficulties given that Banks Guarantees have to comply with precise requirements that depend on local legislations. This situation could be avoided by letting the HNS Fund manage the reception and evaluation of all Bank Guarantees. In this case, a single legislation will apply and Bank Guarantees standards could be established.

         Should a Bank Guarantee be consider, we propose to study the pros and cons of the following alternatives, including but not limited to the associated costs, administrative times and processes simplicity:

o        Bank Guarantee issued by an agreed list of international banks.

o        Bank Guarantee issued by any bank with a certain rating

o        Bank Guarantee issued by an intermediate institution to be created ad-hoc. In this case, the HNS Fund and the Contracting States will deal with a single entity by outsourcing all activities related to guaranteeing third banks, standardizing bank guarantees, validating guarantees, etc. An example of this kind of solution are the Certificates of Financial Responsibility Guaranty issued by SIGCo to comply with the United States Oil Pollution Act of 1990 (www.cofr.com).

         Furthermore, we have carried out preliminary evaluations and issuing a special insurance seems to be a feasible alternative solution. However, once more, costs have to be carefully evaluated so not to undermine the competitiveness of the LNG industry.

         An insurance of this type will require special confidentiality arrangements because detailed information will have to be released by the HNS Fund to insurance companies.



Contingent measures in case of failure to collect contributions from companies of non-Contractual States


         The spirit of the HNS Convention should not be violated by establishing procedures that in practice eliminate exceptions included for LNG [Art. 19.1.b].

         In particular we think that charging non-collected contributions to all contributors through the Administrative Costs [92FUND/A/ES.12/9/1 5.5] will distort its original role.

         We believe that HNS Convention clauses for non-payment of contributions shall be put in place before the implementation of any other measure [Art. 22]. In that sense, we think that a draft procedure could be elaborated and discussed so to fully evaluate the potential of the attributions of the HNS Fund.



Best regards,


José Hernández Gutiérrez

Jefe del Área Jurídico-Marítimo

Dirección General de la Marina Mercante

Teléfono: 91 597 92 01

Fax: 91 597 92 07





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