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March 21, 2023.

Update on regulations governing ship agency activities in Montenegro

The ship agency activities refer to group of various services of ship agents and brokers which are related to the maritime navigation, ships and their exploitation, assisting and clearance of ships in the ports, care about passengers and crew, intermediary activities in concluding contracts pertinent to shipping sector etc.

Even though originally present in Montenegrin practice, the activities of ship agents and brokers have not been regulated by any legal instrument in Montenegro so far, except for the part regulating rights and obligations of agent and principal under the ship agency services agreement.

However, it is expected that the ship agency activities will soon fall into a group of regulated professional activities, given that the Government of Montenegro adopted the Proposal of the Law on Ship Agency Activities on 20th March 2023 (the „Proposal“) which was then sent to Parliament procedure.

The Proposal aims to comprehend all relevant aspects of ship agency activities in one place of referrence, therefore it prescribes conditions for carrying out ship agency activities, rights and duties of ship agents and ship brokers, the way of keeping registers of ship agents and brokers, supervision over the performance of ship agency activities and other issues of importance for the work of ship agents and brokers. Also, for all questions not regulated thereby, the Proposal refers directly to the maritime customs.

In this way, the proposed law aims to put out of use and replace the provisions of MINA regulating the ship agency services agreement, but to keep the legal solutions prescribed therein almost in their entirety.

Article 719 of MINA stipulates that, under the agreement on ship agency services, the ship agent undertakes to perform ship agency services for and on behalf of the principal on the basis of a general or special authorization and the principal undertakes to reimburse the ship agent for the expenses and pay remuneration. A contract for ship agency services based on a general authorization shall be drawn up in writing and in case of doubt as to the limits of a general authorization it shall be deemed that the said authorization covers the services of assisting and clearance of ships.

The ship agent shall be obliged and is authorized to, by exercising the due diligence of a good businessman and within the limits of the given authorization, perform services which are necessary or customary for fulfilling the orders received from the principal.

Furthermore, if the exclusive service of a ship agent is conducting intermediary activities or representation in concluding agreements for the use and hire of ships, in case of doubt as to the limits of a general authorization it shall be deemed that the said authorization covers the intermediary activities in concluding the said contracts, excepting charter by demise and time charters for a whole ship, however always within the scope of the principal’s services. If expressly instructed so by both parties, the ship agent may sign agreements of use and hire of ship for and on behalf of both contracting parties.

If the ship agent does not expressly declare that he is acting in the capacity of a ship agent, it shall be deemed in respect to a person in good faith that the ship agent is acting in his own name.

Finally, Article 727 of MINA grants the right of the ship agent to reimbursement of the expenses and to remuneration for the intermediary activities and conclusion of agreement by the mere fact that the agreement has been concluded.

The improvement made by the proposed law is that, in comparison with the said articles of MINA, it clearly differentiates the two types of ship agency activities: activities of ship agent and activities of ship broker. Also, the proposed law more sistematically enumerates the rights and obligations of the parties under the ship agency agreements. It also emphasizes the duty of ship agents and brokers to expressly assert their capacity of ship agent or broker against the third parties. 

Apart from regulating their private law aspects, the proposed law sets the regulatory framework for ship agency activities as well. Only persons registered with the respective registries of ship agents and ship brokers (the „Registries“) can perform ship agency activities. The Proposal sets cumulatevly the conditions for entering the Registries, including the relevant documentation to be presented, minimum technical requirements and employment conditions. The important novelty introduced by the Proposal is a licensing requirement for the ship agents and brokers, which license can be obtained only upon succesfully passed professional exam under the auspicies of the competent Ministry.

Furthermore, the Proposal sets a requirement of professional liability insurance for ship agents and brokers which shall be valid throughout all the period of ship agency activities. The minimal insured sum is EUR 50,000.00 per one harmful event and EUR 100,000.00 for all harmful events during the one year of insurance. If the ship agents and brokers fail to mantain the valid insurance policy, they can be fined with a pecuniary fine in a range of EUR 500 to EUR 20,000.00 for the legal entities and EUR 30 to EUR 2,000.00 for the responsible person in the legal entity.

Since there were no significant objections to the proposed Law on Ship Agency Activities during the respective public debate, it can be expected that the Proposal will be adopted by the Parliament and form part of the Montenegrin positive legislation. With this new level of regulation, the market competition and quality of ship agency services in Montenegro will improve, whilst both ship agents/brokers and their principals will enjoy maximum legal protection. Last but not least, with operative Registries in place, the State of Montenegro will be able to monitor and benefit from the ship agency activities, which has not been the case by now.

Abaco Ltd. took part in preparation of the Proposal of the Law on Ship Agency Activities as a leading consultant of the Ministry of Capital Investments.