India – The Need For Automatic Identification System (AIS) Clause In Indian Maritime Contracts.

In March last year, Canada extended its contract for procuring AIS data from ORBCOMM Inc1. In April, Australia followed Canada2. In August, India and France agreed to set up an AIS based joint maritime surveillance system3. They agreed to use low-Earth orbiting satellites like Oceansat-3-Argos to identify and track ship movement globally and particularly in the Indian Ocean region4. Ever since 2004, when Regulation 19 of Chapter V of IMO’s International Convention for the Safety of Life at Sea (SOLAS) came into force requiring AIS aboard all ships of 300 gross tonnage and above and engaged on international voyages, cargo ships of 500 gross tonnage and above and not engaged on international voyages and all passenger ships regardless of size, governments have expedited the usage of AIS in maritime surveillance. The Indo-French agreement is merely a stage in a major process that India began in 2012 by implementation of the National AIS Network5,6.

 

To understand why governments are keen on AIS data, one must simply understand AIS. Automatic Identification System (AIS) is a nautical tracking system and a critical collision avoidance tool7. It helps vessels 'see' marine traffic in real-time. It enhances coastal surveillance and maritime security. It can also detect oil slicks and trace their origin8. AIS information comprises of the ship’s identification number, position, course, speed, type of cargo and other ship and voyage related specifics. This information is typically displayed on the Electronic Chart Display and Information System (ECDIS) screens along with the marine radar which remains the primary collision avoidance on board during a voyage9. AIS data manipulation includes altering vessel names, IMO numbers, Maritime Mobile Service Identities (MMSIs), or other unique identifying information10.

 

 This article explores the need of AIS clauses in Indian maritime contracts in light of the recent Indo-French agreement on space based ship tracking system and advisories against AIS manipulation by the UN and US Department of Treasury's Office of Foreign Assets Control (OFAC).

 

Ship-owners have tracked ships since long before satellite communications were invented. They used daily position message, radiotelegraphy, the local agent at a port or while traversing canals11. The IMO made daily reports mandatory only in 200212. Times have changed, we have come far. Today both US and UN reports on North Korean sanctions request banks to include AIS monitoring and screening clause in relevant contracts like ship-to-ship transfers and letters-of-credit13. Shipping companies must think on their feet to avoid sanctions risk. The USA's Sanctions Advisory lists contract provisions that it considers best practices14,15. A lot of Contracts of Affreightment, Voyage Charters, Time Charters, Seafarer’s Employment Contracts and even Marine Salvage Contracts are susceptible to the changes brought in by increased AIS activity. Indian maritime ecosystem must brace for new and revised clauses in shapes of representations regarding past trading history, AIS manipulation and compliance program16.

 

The OFAC Advisory is promoting AIS broadcast during the entire shipment. It encourages adoption of contractual language that incorporates AIS specific clauses and recommends investigation of signs and reports of AIS disabling or manipulation before entering into new contracts. For example, an attempt to avoid sanctions by manipulating AIS of a vessel could lead to a breach of contract17. Admiralty jurisdiction regulates maritime conduct concerning contracts, torts, injuries and offences, particularly those relating to shipping18. The 'Rotterdam Rules' based on the 2008 UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea addresses the requirement for door-to-door contracts, including the international sea leg under a single contract19. Older OFAC guidelines had recommended companies to monitor AIS only when vessels were in high-risk areas like the Red Sea, East China Sea or the Gulf of Tonkin20⁠.

 

Technological ripples are felt across the world. Since the beginning of 2019, dozens of non- US vessels, owners, and operators have been put on the Specially Designated Nationals List, troubling small European vessel owners to shipping giants like COSCO21–23. Maritime contracts can adapt by adding clauses like 'AIS-switch-off’ and allowing ship owners, charterers and operators to terminate work with an AIS manipulator client etc13. The evolving impact of US sanctions on non-US persons and companies on how to or not to use sanctions clauses in maritime agreements and contracts is for the future to decide24.

 

For now, the advisory recommends insurers and re-insurers, petroleum-product and coal-trading, refining and oil-producing companies and financial institutions to include clauses in relevant contracts, letters of credit, loans, and other financial instruments mandating continuous AIS transmissions and presentation of evidence of complete delivery to the stated destination or vessel20,25,26. It advises vessels to obtain and analyze AIS transmission history before contracting to identify patterns indicative of illicit activities or 'dark activity' in waters of concern. It also requests vessels to continuously gather and analyze AIS transmissions and investigate signs of AIS manipulation before providing services or engaging in other activities concerning transactions involving the truant vessel. Few examples of AIS-related clauses that can be put in contracts are –

 

• As per terms of the AIS License Agreement, the Company holds a worldwide exclusive license, free and clear of all liens, in the AIS-Intellectual Property Rights, including the exclusive right to transfer, sell, license or dispose of the exclusive license in the AIS-IP rights and to bring an action for infringement.

 

• As per provisions of Section X, the Seller shall assign, transfer, or sublet the AIS data contracts to Purchaser and Purchaser shall assign or license such AIS data contracts other than the Sales Representative Agreement and Contracts under the AIS License Agreement.

 

• Purchaser shall assume all liabilities concerning the AIS data contracts, provided that purchaser shall be automatically released from any assumed liabilities relating to the contracts upon assumption of the same by AIS under the AIS License Agreement

 

The AIS 140 Regulation (dated 01.04.2019) mandates that a vehicle-tracking device and one (or more) emergency button(s) must exist in all existing and new public-service and commercial vehicles27. Similarly, each AIS has a Maritime Mobile Service Identity (MMSI) number with country code. The Home Ministry has estimated a total of Rs 336 crore for installing two lakh transponders in small fishing boats at the cost at Rs 16,800 each28. The project is being implemented by the Department of Animal Husbandry, Dairying and Fisheries under the Agriculture Ministry with technical assistance from the Directorate General of Lighthouses and Lightships29.
 

The world shipping fleet grew by 3.5% in 2016. This tiny figure conceals the global overcapacity as reported in a 2016 UNCTAD report30. 90% global trade, by volume, is done by the sea. Traffic management in congested areas is essential in vessel navigation, critical situations like collisions, accidents like oil pollution, grounding or ships in distress, and for system-wide management in marine protected areas and other regions where conservation is a key factor31. Some see AIS as assistance, some see it as intrusion while a lot others are not so certain. None of them are to blame. AIS technology has grown rapidly in the last 15 years. Security is part of the freedom India aspires for. Modern supply chains demand transparency. AIS is a step forward. All Chinese vessels compulsorily monitor AIS. There are no good reasons as to why India must not defend itself in land, air and sea. India must make AIS mandatory for all vessels. If nothing else the Navy shall have better access to data, and data is the new oil.

 

For further information, please contact:

  

Ayush Anand, Partner, Atharva Legal

contact@atharvalegal.com
 

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