Particularly regarding the limitation of Pertamina’s liability in the Incident. It is time to modernize Indonesia’s Maritime Law.
Stefanny O. Simorangkir & Boni Facius Justin
On 23 September 2021, Indonesia has just celebrated National Maritime Day. As an archipelagic state with the goals of becoming global maritime axis, Indonesia still has several outstanding chores, one of which will be discussed in this article related to the collision incident that occurred in 2019 in Indonesian waters near Bintan Island.
The collision incident involved a Hong Kong flagged vessel: MT ANTEA/ANTEA and Vanuatu flagged vessel: MV STAR CENTURION/CENTURION which resulted in the sinking of the latter vessel (“Incident”). This incident was widely reported and involved Singapore’s assistance to rescue several crew members of CENTURION which sank after the incident.
As it is common in ship accident, dispute between the owners of the vessels involved in the Incident was taking place. What is interesting to note here, is that the settlement of the dispute was not adjudicated in Indonesian courts (which should be one of the authorized forums to handle disputes arising from Incident considering the location of the incident occurred in Indonesia).
In fact, the dispute arising from the Incident were brought and resolved in Hong Kong First Instance Court through the Decision in February 2021 (Hong Kong Decision). The selection of the forum was carried out by the owners and the manager of ANTEA, namely PT Pertamina (Persero)/Pertamina in an attempt to limit its liability for losses arising out of the Incident.
Pertamina’s attempt above does trigger a very principal question. What is the underlying reason that one of the largest State-owned Enterprises in Indonesia had to contest its right through foreign court and not choose domestic/Indonesian dispute resolution forums?
Hong Kong Legislation and Overview on Hong Kong Decision
In contrast with Indonesia, Convention of Limitation of Liability for Maritime Claims of 1976 (Convention) has become part of Hong Kong legislation through Cap. 434 Merchant Shipping (Limitation of Shipowners Liability) Ordinance (Hong Kong Ordinance) since 1993.
However, Hong Kong specifically suspends the entry into force of Article 2 paragraph 1 (d) of the Convention through Section 15 of the Hong Kong Ordinance. The postponement causes the limitation of liability for several maritime claims to become ineffective, such as claims related to the cost of wreck removal of the vessel (which is used as the basis by Pertamina in limiting its liability related to the Incident).
In the dispute related to the incident which was submitted to Hong Kong Court, Pertamina seeks to limit its liability in relation to the cost of wreck removal for CENTURION vessel. Pertamina attempted to interpret another paragraph in the Convention which allows limitation of liability in relation to the consequential loss due to the operation of a vessel (Article 2 Paragraph 1 (d) of the Convention). Pertamina was of the opinion that the limitation of the cost of wreck removal can also be interpreted as part of the consequential loss resulting from the Incident which is basically caused by the operation of the ANTEA vessel.
Pertamina’s effort was opposed by the owner of CENTURION, Trevaskis Ltd. As stated in the Hong Kong Decision, the Panel of Judges ruled in favor of CENTURION/Trevaskis Ltd and stated that the interpretation attempt by Pertamina was unacceptable because it would derail Hong Kong’s intention of not limiting liability in terms of wreck removal costs by suspending the application of Article 2 paragraph 1 (d) of the Convention.
Assessment under Indonesian Law Perspective
Despite the failure of Pertamina’s efforts to limit its liability in relation to the Incident, we noted that Pertamina has chosen a foreign court forum, particularly Hong Kong court to resolve the dispute.
Pertamina’s decision to choose a foreign court is suspected to be caused by the current conditions in Indonesia, namely: (i) Indonesia has yet to ratify the Convention which allows parties to limit their liabilities with regards to claims in maritime sector; and (ii) difficulties in applying the provision on limitation of liability of shipowners in maritime claims as stipulated in Indonesian laws and regulations.
To be more specific, the limitation of shipowners’ liabilities in maritime claims is regulated under Wetboek van Koophandel voor Indonesie (Indonesian Commercial Code/KUHD) which has not been amended since Indonesian independence and certainly is outdated. This is clearly seen by the provision on limiting the liability of ship owners based on the tonnage in Article 474 KUHD stating “…then the liability (of the carrier/shipowners) regarding the loss caused to the goods transported by the ship, is limited to an amount of fifty rupiahs per cubic meter of the net contents of the ship…”. As a result, there is still a legal vacuum in interpreting the amount of liability limits based on the provisions in KUHD.
Considering the above situation, the application of the said article will certainly pose a challenge given the lack of references (i.e. court decisions regarding the interpretation of the article), and will depend greatly on the discretion of the judge handling the case.
Therefore, Pertamina’s decision to opt for a foreign court forum is understandable by taking into account the state of the laws and regulations regarding the limitation of liabilities in terms of claims in maritime sector which are more advanced and certain in other countries, compared to our domestic provisions.
Urgency of Amendments/Modernization of KUHD
In conclusion, the above case has shown the urgency of amending/modernizing the KUHD for the sake of applicability and to adapt to the current needs of stakeholders in the shipping sector. We have seen the government’s serious efforts to revolutionize the existing laws and regulations, including the issuance of Law No. 11 of 2020 on Job Creation/Omnibus Law and its implementing regulations. However, the process cannot be separated from the lengthy preparation time and give raise to various issues in relation to harmonization.
As an alternative, the Indonesian government may consider ratifying the Convention (Convention of Limitation of Liability for Maritime Claims of 1976) which can provide a solution in the form of comprehensive regulations for limitation of liability in maritime claims and in line with international standards. The ratification of the Convention by Indonesia can also provide clarity for the implementation of the ratification of The Nairobi International Convention on the Removal of Wrecks or the Nairobi Convention on 20 July 2020, particularly with regard to the reference to the Convention on the obligation to carry out wreck removal by ship owners.
Another way that the government may consider to achieve the same purpose is to issue an implementing regulation to further clarify its implementation or provide an interpretation of the currency values stated in the articles of the KUHD. One example in a similar scenario is the enactment of Supreme Court Regulation No. 2 of 2012 Adjustment of Limitation for Misdemeanor and Fines Amount in Criminal Code (KUHPid). In this regulation the miniscule amount of fines under the undeveloped Criminal Code are being multiplied to 1000 times.
All in all, if we look at the current trend of the Indonesian government which continuously trying to update the existing laws and regulations, we are of the view that it is time for the government equally provides attention for modernization of provisions in the KUHD, particularly in regards to the limitation of liability in maritime claims. Modernizing the provisions of laws and regulations can certainly serve as a positive step to create legal certainty and supports Indonesia to become the axis of the maritime industry.