CHEAP, BUT COMPLICATED

It is well-known to all participants in maritime industry market that Russian fleet is not always capable of satisfying needs of Russian charterers when in comes to carriage of non-standard or dangerous cargoes. In practice this means that Russian charterer is in need of a vessel to hire, but no vessel is available. Specialized vessels under Russian flag are rare and almost always on-hire. This situation makes Russian market turn to foreign shipowners in Europe and Asia for chartering of their fleet.

At the same time, the ground rule, as outlined in Article 4 of Merchant Shipping Code of Russia (“MSC”), states that carriage of goods between 2 Russian ports, dredging and ice breaking works, search and towage operations, construction works in Russian territorial waters can only be performed by vessel under Russian flag.

In order to bring a foreign vessel into Russian waters, the shipowner and his Russian charterer must cooperate in order to obtain a permit for “cabotage”, coastal trade (“the Permit”). The issuance of such Permit is absolutely free and requires no payment of any tax or stamp duty; however the procedure of obtaining a permit is complicated due to large amount of documents and information which should be presented by the foreign shipowner to Russian authorities.

The national body to apply to is Federal Agency of Maritime and River Transport (“FAMRT”) which has the authority to accept and review applications for Permits from all interested shipowners, charterers and their representatives. Application procedure is outlined in “Administrative provision of FAMRT for provision of services for issuance of permits for carriage of goods and towage in cabotage, and also for other types of merchant shipping activities by vessels under foreign flag” (enacted by Order of Russian Ministry of Transport, dated 19.11.2012, N 403).

Application consists of two stages, mainly preparation of documents and drafting of written plea. After relevant documents are delivered to FAMRT, they are normally considered for a period of up to 20 calendar days, after which the applicant either receives the Permit or is faced with letter of refusal. The practice shows that preparation stages can easily take up to 30-40 extra days before the actual plea can be filed. The reason for such long preparation period derives from formalistic approach which shipowners and charterers are advised to take before entering into the procedure.

Firstly, it is very important to identify the correct party to apply for the Permit. In the eyes of FAMRT, the company to receive the Permit is a company which will actually and physically operate the vessel under foreign flag. So, in case time-charter contract is concluded between foreign shipowner and Russian charterer, it is the former who should apply to FAMRT, despite the fact that vessel shall operate under instructions of the later.

Secondly, the charter party contract should clearly be entered into for performance of works and / or carriage of goods, as outlined in Article 4 of MSC, otherwise FAMRT will refuse to issue the Permit for reasons of absence of authority on state body’s side.

Thirdly, a written plea must strictly comply with rules of Article 4 of “Order of issuance of permits for carriage of goods and towage in cabotage, and also for other types of merchant shipping activities by vessels under foreign flag” (enacted by Order of Russian Ministry of Transport, dated 26.07.2012, N 274). The named Article provides for 10 compulsory types of information to be provided by the applicant, including justification of necessity for performance of carriage of goods and towage in cabotage, and also for other types of merchant shipping activities by vessels under foreign flag, and not by vessels under Russian flag. The rule derives from protective policy of Russian state which favors Russian vessels over foreign vessels.

In order to fully and properly justify the named necessity, shipowners and charterers are advised to apply for professional expert justifications which will be based of statistics, study of availability of vessel’s in Russia and economics. Development of such justification can take up to 14 calendar days, with additional fee, depending of facts of the case in study.

Finally, there is a whole list of documents which should be presented to FAMRT in addition to written plea, which includes power of attorney, certificates of flag and ownership, vessel’s classification certificate and international tonnage certificate, insurance certificates for environmental pollution damage. Often, the flag state of foreign vessel does not issue flag certificates or issue documents with similar function, but different name. In order to avoid being refused the Permit by reason of non-presentation of necessary documents, the applicant must also take time and provide for a rule in national law of vessel’s flag state which confirms that issued documents are enough to testify vessel’s ownership and characteristics.

Shipowners of vessels with international convention certificates have more chances to receive the Permit than those which are classed by domestic, non-convention classification societies. The charterers are advices to hire only former vessels, otherwise the parties will be faced with necessity to arrange for additional vessel’s class, which is Russian Maritime Register class.

Finally, despite the fact that there is no written rule as to translation of documents, in order to speed up the process of issuance of the Permit, the shipowner is advised to translate all documents to Russian language. The written plea should also be in Russian, and should include full data on period of carriage / works, ports to be entered, etc.

It is evident that despite its supposed straightforwardness, the process of obtaining the Permit is complicated and depends a lot on facts of each case. It makes total sense to address professional maritime lawyers for legal assistance, such as drafting of the plea and performing preliminary check of documents before actual application to FAMRT.

If you would like to receive any additional information about how the Permit for performance of works and carriage in Russian territorial waters by vessels under foreign flag is obtained, please send us a message on sos@inmarin.ru, or give us a call on +7 (812) 363-13-64, and we shall assist you with this procedure.

Inmarine St. Petersburg Law Offices, 2016