Neither the demand of the inspection to pay damages, nor the failure to comply with such demand, cannot serve as a ground for a prohibition on leaving the seaport by ship vessels. Review of the court practice.
Over the past few years foreign shipowners face rigorous inspective activity by the State Ecological Inspections in the seaports of Ukraine. Although such examinations tend to be largely unfounded, they often result in the detention of ship vessels in the seaports of Ukraine which incurs exorbitant losses for the shipowners (for more details see: Recovery of damages caused by illegal detention of ships in Ukrainian seaports: review of the court practice; Detention of Ships in Ports of Ukraine for Reasons of Polluting Ukrainian Internal Waters by the Release of Ballast Waters: a few remarks on the new direction of the State Ecological Inspection activity). The owners of the vessels aim to rescue ships from the detention at all costs, usually trying to avoid bringing the matter before the court. However, the court practice for 2020-2021 demonstrates that there are some chances to redress the damages in the court and claim the activity of the Inspection to be unlawful. In this article we will outline the three key points that shipowners need to follow in order to grant their claims.
1. The Inspection examinations are unlawful if the evidence of the pollution of waters from the ships had not been established beforehand
There is a mandatory rule for the State Ecological Inspection set in paragraph 5-1 of the Resolution of Cabinet of Ministers of Ukraine No.269 on Regulations of protection of inland waters and the territorial sea of Ukraine against pollution. It prescribes that the authorised representatives of Inspection conduct examination at places where liquid, waste and ballast water flows (except for isolated ballast), exclusively in case of detection of visible traces of oil, oil products or other waste products in the area of the alleged dumping, which resulted in actual deterioration of water quality. The State Ecological Inspection often fails to comply with this rule, yet the rulings in the cases below demonstrate that the courts have all solid reasons to prove such inspections unlawful.
2. The State Ecological Inspection doesn’t have the authority to sample the indicators of water quality in the seaport waters in the first place
With the new Regulations of the interaction between the authorized representatives of the port administration and the State Ecological Inspection, adopted in 2019 (for more details see: New Rules Of Ship Detention in Ukrainian Seaports), the way the courts address cases regarding such interaction has also altered. Before the regulation was established, sampling of background indicators of water quality in the seaport waters could be carried out by Inspectors of the State Ecological Inspection and such actions were claimed to be lawful by the court. However, now it is essential to keep in mind the provision of the Article 4 of the Resolution of Cabinet of Ministers of Ukraine No 828 stating that sampling of background indicators of water quality in the seaport waters is carried out by the authorized representatives of the port administration without any delay after detection of visible traces of oil, oil products or other pollutants within the seaport waters. Therefore, if such sampling is carried out by the State Ecological Inspection and not by the authorized representatives of the port administration, the court could claim the examination to be unlawful and redress damages inflicted upon the shipowner as a result of such examination.
3. Neither the decision of the Inspection to make the claimant pay damages, nor the failure to comply with such decision, cannot serve as a reasonable ground to issue a decision on a prohibition on leaving the seaport by the ship
The decision on prohibition of leaving the seaport by the ship is often preceded by the claim of the Inspection to make the shipowner pay damages to the state budget. The inability or unwillingess of the latter to pay these damages is often regarded by the Inspection as one more reason in favour of deciding on ship detention in the seaport. However, such logic of the Inspection is wrong ad ill-founded as there is a legally established list of grounds for the prohibition on leaving the seaport by the ship and failure to pay damages in response to the claim of the Inspection cannot be accepted as one of these grounds.
In the VIKA case, the Inspection has conducted the examination of waters, claimed them to be polluted and issued a decision on the prohibition of leaving the seaport of Odesa by the vessel “VIKA”. The Inspection has also issued a Claim to make the shipowner pay approximately 40 000 USD of damages. The maritime agent, acting on the behalf of the shipowner, has paid damages in accordance with the terms and conditions of the Claim issued by the Inspection. Notably, the payment was made without recognition of commitment of any wrongful actions, under the pressure of ship detention and was by no means voluntary.
The ship owner of the vessel brought the matter to the court, asking the court to prove the examination unlawful, to revoke the decision on prohibition of leaving the seaport of Odesa, and to pay damages. The Court ruled that since it is the administration of the seaport and not the Inspection that takes samples of background indicators of water quality in the seaport waters, the actions of the Inspection of the Crimean-Chornomorsky Region regarding the sampling of water in the Black Sea water area were ungrounded and unlawful. The court granted the claim stating that to confirm the presence of visible floating particles, which was the basis for the inspection, the respondent provided a video recording, which was viewed in the court session. However, the provided video recordings did not show visible floating particles to be dropped together with the ballast water. The video recordings also didn’t show any traces of oil or other substances to appear on the water surface. Therefore, the court claimed the examination to be unlawful, satisfied/granted the claim and ruled to redress damages in the amount of approximately 40 000 USD.
ANANGEL HAPPINESS case
In the similar ANANGEL HAPPINESS case, the Court of Appeal ruled that no signs of pollution of the Pivdennyi seaport area and dropping of harmful substances from the vessel "ANANGEL HAPPINESS" during the stay of the ship in the Pivdennyi seaport were established. The court also pointed out that Inspection of the Crimean-Chornomorsky region didn't inform the administration about the fact of pollution of waters by the ship "ANANGEL HAPPINESS" during its stay in the seaport. Thus, the court of appeal endorsed the ruling of the court of first instance stating that there was no reasonable ground to conduct inspection at the place of water flow near the "ANANGEL HAPPINESS" at the time of the legal dispute between the claimant and the State Ecological Inspection.
PORT ESTRELA case
In the PORT ESTRELA case, the court pointed out that the respondent never provided any photos or video materials about the fixation of the presence of pollutants at the mooring place of the ship which once again proved no lawful basis for the conduction of the examination by the Inspection.
MARINO SHIPPING case
In this case, the claimant MARINO SHIPPING CO PTE LTD filed a lawsuit against the State Ecological Inspection and asked the Court to claim the decision of the Inspection to refuse granting permission for the leaving of the ship from the seaport to be unlawful. On filing such claim, the claimant referred to the previous ruling of Commercial Court of Odesa Region in the case 916/1287/20 which showed that the shipowner had no intention to avoid complying with the court's ruling and intended to pay in good faith the damages caused by the spillage of the cargo from his ship STAVANGER. Thus, the claimant considered that from 15.05. 2020, when the Commercial Court of Odesa Region has issued a decision in the case 916/1287/20, the State Ecological Inspection of Ukraine had to cancel or revoke its decision on refusal to grant the permission on leaving of the ship from the seaport. However, the Court refused to grant the claim stating that the decision of the Commercial Court of the Odessa region of 15.05.2020 on the mentioned case did not contain any provisions which would require the State Ecological Inspection to revoke the abovementioned decision. The Court also came to the conclusion that the decision of the Inspection about refusal to grant permission for the leaving of the ship from the seaport on 05.05.2020, referring to the fact of causing damages to the state as a result of the Ukrainian internal sea waters pollution, which the claimant MARINO SHIPPING CO PTE LTD has not denied, was made in the manner prescribed by law, in accordance with the norms of Ukrainian legislation, and therefore is legitimate and lawful.
The ruling in this case illustrates that if the fact of grave pollution was established and was not denied by the mere shipowner, the single intention to comply with the act of paying damages still cannot be regarded as a solid ground on revoking or terminating the decision on the prohibition of leaving the seaport by the ship.
BW DRY CARGO SHIPS case
BW DRY CARGO SHIPS LIMITED filed a claim to the Administrative Court of Odesa Region against the State Ecological Inspection, asking the court to declare the actions of the Inspection on getting the claimant to pay 17,305.68 USD of damages to be unlawful. The decision of Administrative Court of Odesa Region dated 23.10.2019, which was left unchanged by the ruling of the Fifth Administrative Court of Appeal of 29.01.2020, was to refuse to grant the claim. However, the Supreme Court of Ukraine addressed the case to the court of first instance for new hearing, stating that neither the decision of the Inspection to make the claimant pay damages, nor the failure to comply with such decision, cannot serve as a reasonable ground to issue a decision on a prohibition on leaving the seaport by the ship. Thus, during the new hearing of the case, the court will have to examine the grounds of State Ecological Inspection for issuing the abovementioned decision.
Taking a thorough look upon the recent court practice, one can see that there is some favourable precedent which has lately appeared in the court’s ruling with regards to the paying damages to the shipowners and recognizing the unlawful actions of the State Ecological Inspection by the Ukrainian courts. However, the shipowners shall bear in mind that their chances of granting the claim rely heavily on solid evidence of the ungrounded examination. Arguing in the court that no signs of pollutants could be traced before the examination, that the State Ecological Inspection failed to comply with the right procedure of conducting the examination, could be a strong reason for granting the claim. Thus, the shipowners should thoroughly prepare their modus probandi – namely the effective way of proving the unlawfulness of the actions of the Inspection in the court.
Authors: Oleg Kachmar, Anna Shevtsova