In the realm of international politics, Western powers, notably the G7 and EU, often posture sanctions based on moral grounds, ignoring the ripple effects these actions have on the Global South. This selective moral compass not only threatens international harmony but also imposes the unintended burdens on nations least equipped to handle them.
John Rawls, in his theory of justice, emphasises the principle of fairness. He argues that societies should be organised in a manner that the least advantaged are not disproportionately burdened. Sanctioning one country may be perceived as an act of justice against an aggressor or violator of international norms, but the resulting consequences often spill over, deeply affecting those not originally targeted. This philosophy, applied internationally, underscores the unintended harm done to the Global South.
Case in point: Western sanctions on Russia. The intricate web of international trade and economy ensures that no sanction is an isolated act. Europe’s stance on purchasing crude oil from Russia exemplifies this. While Europe continues its transaction, problems arise when nations from the Global South attempt to purchase Russian crude. The Price Cap Coalition (Australia, Canada, the EU, France, Germany, Italy, Japan, the UK and the US) has imposed a price cap of $60/barrel on Russian crude exports. It has essentially banned companies from providing services like insurance to tankers carrying Russian cargo which is traded at a price higher than this cap.
Here is where the Protection & Indemnity (P&I) Clubs come in. P&I clubs are mutual insurance associations that provide risk pooling, information, and representation for their members, mainly shipowners. Their primary focus is on liabilities related to marine activities, including cargo damage, environmental damage, and personal injury. Most of these P&I clubs are affiliated to the International Group. The International Group, composed of 12 P&I clubs, provides marine liability cover for about 90 per cent of the world’s ocean-going tonnage. Each member club, though competitive, collaborates on large loss exposures, sharing knowledge on shipowners’ liabilities and their insurance.
Organised as an unincorporated association, the Group is coordinated by a secretariat in London. Its day-to-day tasks are conducted through several committees addressing various maritime issues. The Group’s main functions are claims pooling and reinsurance, serving as an information-sharing platform, and acting as a representative body for external engagement, especially concerning maritime regulations and policies. The pooling agreement, where liabilities exceeding $10 million are shared among clubs, is a pivotal function of the Group. This structure ensures that shipowners have adequate insurance and promotes balanced maritime policies and regulations.
Most P&I entities, predominantly based in the UK, often follow Western directives. For example, UK P&I’s Club Circular 17/22 on ‘Price Cap on Russian Oil’ mandates shipowners and charterers transporting Russian crude oil or petroleum products to provide attestations ensuring adherence to a specific price cap. This is corroborated by collecting attestations from their contracts and keeping a record of all maritime transportation related to Russian oil.
Non-compliance can jeopardise their P&I insurance or invalidate claims, irrespective of the shipowner’s domicile or the vessel’s flag. Due to mounting legal constraints, trading with Russia now has notable restrictions, emphasising that cover isn’t available for any trade violating these sanctions. This essentially means that shipowners, including those from India associated with these entities, risk losing insurance covers. An India-based P&I entity might have offered a more flexible approach in such scenarios.
Surprisingly, none of these P&I entities which are part of the International Group is based out of India. India’s extensive coastline and major maritime activities underscore the need for such an entity. As one of the world’s largest economies, a significant chunk of India’s trade happens via sea. The surge in maritime trade, commercial shipping, and fleet size necessitates an entity addressing the intricate liabilities these operations encounter.
Wide array of liabilities
Shipping operations can face a wide array of liabilities, ranging from cargo damage to crew negligence. P&I clubs cover these multifaceted risks, often overlooked by standard marine insurance. A domestic P&I entity facilitates risk pooling for Indian shipowners, offering cost benefits, especially to smaller operators. Furthermore, an in-country P&I club would provide valuable legal and compliance guidance, adhering to local laws and norms.
Such an entity could also champion the interests of Indian shipping globally, influencing maritime law and environmental policies. Cost efficiency is another advantage, as reliance on foreign insurers could diminish, strengthening the domestic economy. Additionally, P&I entities offer training and preventive programmes, which, when localised, can address the specific needs of Indian operators. And finally, as the Finance Minister recently stated, there is a need to have a full-fledged, India-owned, India-based P&I entity to reduce the country’s vulnerability to international sanctions and pressures to provide greater strategic flexibility in shipping operations.
As depicted in numerous films, characters often face external challenges that prompt them to take destiny into their own hands. Just as a protagonist creates his/her own path amidst adversity, India too needs to charter its own course in the global maritime landscape. The constraints imposed by Western-dominated P&I entities have made it clear: for India to protect its maritime interests and navigate the complex webs of international politics and trade, an Indian-owned, India-based P&I entity is imperative.
Such a move would not only symbolise India’s assertion in the global arena but also ensure that its maritime endeavours aren’t at the mercy of external geopolitical dynamics. Just as in cinema, where the hero finds a way out of predicaments, it’s time for India to script its own narrative in the maritime domain.
The writer is OSD, Research, Economic Advisory Council to the Prime Minister. Views are personal