1. Unlawful Acts against Ships

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1 PRIVATE MARITIME SECURITY SERVICES ON BOARD CYRPUS SHIPS PROTECTING SHIPS AGAINST PIRACY Cyprus has enforced legislation which allows for the provision of private security services on board Cyprus ships for the purpose of protecting them and their crew and cargo from unlawful acts in sea, particularly acts of piracy in high risk seas. The House of Representatives, the Parliament of the Republic of Cyprus, has on the 31st of May, 2012, passed a new statute titled The Protection of Cyprus Flag Ships from Acts of Piracy and other Unlawful Acts Law 77(I) 2012 ( the Law ). The Law has been enforced towards regulating the use of security services and armed guards on board a Cyprus flag vessel ( Cyprus Ship or the Ship ) for the purpose of effectively addressing the threat of piracy and other unlawful acts. The Law contains provisions dealing with security measures to be adopted by masters and operators of Cyprus Ships and the delegation of such measures to licensed private maritime security companies. Under the following headlines, the present Memorandum affords a comprehensive summary of the essential provisions of the Law in a non-exhaustive manner under the terms of our engagement. 1. Unlawful Acts against Ships An Unlawful Act is defined pursuant to section 2 of the Law as meaning the act or suspected act or occurrence which inherently or contextually threatens the safety of the Ship or which can harm the Ship or the persons on board or its cargo and includes the commitment or attempt to commit acts listed under section 2 of the Law which, inter alia, entail acts of violence, acts relating to the seizing of control of a Ship, its abduction and/or pillaging, acts of piracy and acts which cause the material destruction and/or malfunction of the Ship. With respect to the unlawful possession of the Ship by any perpetrator, this shall not: Amount to a loss of the ship; Amount to a loss of Cypriot nationality and/or the Cyprus flag in accordance with Article 104 of UNCLOS; Render the ship unfit for voyages; Constitute grounds for challenging the validity of contracts concluded with the crew; Constitute grounds for challenging the validity of a bareboat charter entered in the Special Book of Parallel Registration; Constitute grounds for challenging the permission given by the Minister or the DMS for a ship registered in the Cyprus Ships Register and flying the flag of another State; or Constitute grounds for challenging the validity of any other contracts entered into by the owner, the registered bareboat charterer or the operator of the ship.

2 2. Safety, Security and Reporting Obligations for Cyprus Ships Pursuant to the provisions of the Law, obligations are imposed upon the master and the operator of a Cyprus Ship to: (i) take the necessary measures for the safety of the Ship, the safe-keeping of the Ship safe keeping and the prevention of any unlawful act against the Cyprus Ship, and (ii) take additional precautions (as shall be defined by a relevant circular to be issued pursuant to the provisions of the Law and shall include the use of fire arms) as shall be necessary for the safety, the safe-keeping and the prevention of any unlawful act when the Ship is in high-risk areas. Moreover, the master and operator of the Ship may take such other additional measures for the security of a Cyprus Ship as required provided that these do not contravene the provisions of the Law, or any other law of Cyprus or of the State within the territorial waters or contiguous zone of which the Ship is situated. The master and operator are further under an obligation to report to the competent authorities any situation relating to unlawful acts and specifically: (a) The master and operator of the Ship must report immediately to the Department of Merchant Shipping ( DMS ) any commission or attempted commission of an unlawful act to their ship, and to provide information on that incident; (b) The operator of the ship must inform the relatives of any persons on board that have been abducted, arrested or taken as hostage, or who have suffered personal injury or death due to the commission or attempted commission of an unlawful act, and keep any such relatives updated on any relevant developments. (c) The master of the ship must immediately forward to the DMS any information coming to his knowledge in relation to the commission or attempted commission of an unlawful act against a Cyprus Ship or other flag ship or those on board or the cargo transported by it and provide any other information as may be requested. With respect to the prevention of unlawful acts from taking place against the Ship and its personnel, the master and the personnel themselves are under an obligation to implement all reasonable measures necessary for the safety of the Ship and to make every possible effort to prevent any unlawful act. We should particularly note that under the Law the master and personnel may, when the Ship is in high-risk areas, use all means at their disposal to prevent unlawful acts which may endanger their safety, physical integrity or life or which may lead to the abduction of any person on board the Ship. Upon an unlawful act taking place and throughout its duration, the Ship s owner shall not cancel any crew members employment contracts nor refuse to pay wages

3 or expenses in case of illness or personal injury of any crew member. A crew member may request for his repatriation prior to the Ship sailing in high-risk areas. 3. Powers of Arrest When a Ship is in international waters the master and each crew member of the ship may: (i) make an arrest and search any person found on board the ship who has committed or is committing or attempts to commit an unlawful act against the Ship, or on those on board, or the cargo; (ii) confiscate any weapon, device, equipment, instrument or object used to commit the unlawful act or intended to be used for this purpose; (iii) detain persons referred to under (i) above and retain and keep as evidence those items referred to under (ii) above, until the delivery thereof to the DMS, or the competent authorities of another State under the instructions of the DMS. The master of the ship is required to report immediately to the DMS any arrest, investigation, detention, seizure, impoundment or storage made, and to provide all relevant information relating to such situations. The master and each crew member of the Ship may, when the Ship is within the territorial waters of a State: (i) make an arrest and search any person found on board the ship who has committed or is committing or attempts to commit an unlawful act against the Ship, or on those on board, or the cargo; (ii) confiscate any weapon, device, equipment, instrument or object used to commit the unlawful act or intended to be used for this purpose The master of the Ship is required to report promptly to the competent authorities of the State in whose territorial waters the Ship was at any such time. 4. Delegating Security and Safety to Private Maritime Security Companies The operator of a Cyprus Ship may delegate some or all of the above described measures to a duly licensed private maritime security company. Such delegation would not have the effect of releasing the operator or master of the Ship from their respective obligations towards maintaining the Ship s safety pursuant to the provisions of the Law. (a) Applying for the Engagement of a Private Maritime Security Company

4 Specifically, the operator of the Ship may, when the ship sails in high risk areas, allow the use of firearms by the private maritime security company it has engaged or by the Ship s personnel for the purpose of protecting the Ship against any potential unlawful acts. A Ship operator must apply for the issuing of a relevant license under the provisions of the Law towards engaging the services of a private maritime security company. Such application should be submitted by the operator of a Ship (or its duly authorized representative in Cyprus) to the DMS and it should contain the following information and documentation: (a) The name and the particulars of the Ship; (b) The name and address of the registered office of the private maritime security company it so wishes to engage; (c) A risk assessment analysis and description of security measures whose implementation will be undertaken by the private maritime security company; (d) The description of weapons and/or special security equipment to be used in case of need; (e) The place, port or port facility or the sea region where, and dates of which, the embarking and disembarking of private security guards is expected to take place; (f) The place, port or port facility or the sea region where, and dates of which, the loading and unloading of firearms and/or special security equipment is expected to take place; (g) The description of voyages or routes of the Ship; and (h) A copy of the agreement that the operator has or intends to conclude with the private maritime security company. (b) The Agreement between the Private Maritime Security Company and the Operator of the Ship ( the Agreement ) The Agreement may take the form of the standard or amended Agreement for the Employment of security guards on ships published by the Baltic and International Maritime Council ( BIMCO ). With respect to such Agreement the operator of the Ship has an obligation, inter alia, to ensure that at the time of its conclusion the private maritime security company holds a valid certificate of approval, sufficient indemnity insurance, and that the private security guards to be used are able to communicate and interact with the master and crew of the ship. Furthermore, the Agreement must expressly include the following information:- (a) the name, nationality, identity card or passport details of each private security guard; (b) firearms and/or special equipment that might be used as necessary for the security of the Ship; (c) the conditions or circumstances which would permit the use of firearms and/or

5 using special equipment for safety of the Ship; and (d) the procedure to be followed in case of an amendment to the matters referred to in paragraph (c). 5. Licensing of Private Maritime Security Companies A private maritime security company intending to provide security services on board a Ship is required to submit to the DMS an application for licensing allowing it to provide such services through the employment of private guards. The DMS shall, upon being satisfied on the merits of the said application, issue a certificate of approval to the applicant company which shall enable the latter to provide its private security services. An application under section 21(2) of the Law for the purpose of the DMS issuing a certificate allowing an applicant company to provide private security services on board a Ship must include the information prescribed under Annex 6 to the Law and it is highly recommended that an Advocate submits such application to the DMS for the purpose of ensuring full compliance with the applicable statutory provisions. An approved private maritime security company and the private guards it employs are obliged to comply with and apply primary legislation of Cyprus as well as any subsidiary legislation in force and issued pursuant to the Law, including decisions and directives of the DMS, and is also under an obligation to abide by the lawful orders of the master and operator of a Cyprus Ship in connection to which its services have been engaged. The acts and omissions of a private maritime security company with respect to its obligations and/or the obligations of its employees under the Law and/or any applicable law of Cyprus shall be subject to the jurisdiction of the Courts of Cyprus. The private guards of a private maritime security company must be persons employed under relevant employment contracts between themselves and the company and must be persons approved and stated in the certificate issued by the DMS with respect to the licensing of the company. We must note however that the provision of a private maritime security company s services on board Cyprus Ships are solely governed by the Law and no other law of Cyprus shall be applicable towards regulating the provision of such services. Within this context, the possession or use of weapons, ammunition and/or special security equipment by a private maritime security company on board a Ship in connection to which its services have been engaged shall not subject to the provisions of the Firearms and Non-Firearms Laws of A private maritime security company may become liable for damages with respect to any loss or damage caused to the Ship and/or its crew by virtue of a negligent act of the company (including its employees), which liability may be set aside by the

6 operator of the Ship waiving any rights the Ship may have in that regard. It should be noted that the private maritime security company may limit its liability within the provisions of the Convention on Limitation of Liability for Maritime Claims and its Protocol. A private maritime security company is under extensive reporting obligations towards the DMS pursuant to s. 26 of the Law. 6. Use of Firearms and Equipment on Board a Ship The Law places upon the captain of a ship a duty observe, supervise, and control the loading, discharge, storage and use of firearms, and of other security equipment. Firearms and other security equipment must be stored in a safe and restricted area which must be accessible only by the private maritime security company and its staff when the ship is in high risk areas, or when required for use. The captain has a duty to inform the DMS when firearms and the other security equipment are used and the circumstances thereof. The Law categorizes (in Annex 2 thereto) firearms in different classes, and attaches to each class respective conditions for approval. Some types of firearms are prohibited from being used altogether. The new legislation establishes a new era for maritime security and Cyprus is a pioneering jurisdiction in this regard. Affording ship owners with the capability of engaging the services of private maritime security providers enables ships to sail securely and safely through seas entailing the highest risks for their crew and cargo. Our Firm assists both ship operators wishing to engage the services of approved security companies as well as any company wishing to obtain the relevant certificate from the DMS towards providing maritime security services on board Cyprus ships. Should you require any further information or clarifications regarding the above, please do not hesitate to contact us: APC Constantinou Ltd Audit Tax Consulting T: F: E: info@apccpa.eu W: