On marine insurance in Russia

Russian market of marine insurance features instability, few players and tricks that almost leave no possibility for judicial dispute resolution. 

The market of marine insurance is quite thin in Russia. As Maksim Shimchenko, founder and Director General of Max Marine, said at the First Seminar on Sea Law and Insurance held in Saint-Petersburg, this market is officially represented by 30 companies with just 20 real players including only 6 large and established players. In the nearest time the market expects the structures of large banks with public ownership, the signs are already visible.  In fact, the expert thinks the market of marine insurance is features instability with players unexpectedly appearing and disappearing from the market, often without paying their customers' loss. In this case, the only way out for the insured is to apply to court. Yet, different barriers and tricks will face him at this way.

Konstantin Krasnokutsky, founder of Lex NavicusConcordia, said at the Seminar that court jurisdiction clause in insurance agreement is very important. For example, if the agreement sets forth the exclusive jurisdiction of English court, this will actually deprive the ensured of the opportunity to be defended at court. That is because the proper procedure for service of summons will actually take several years which will result in expiry of the statute of limitations. Besides, there are certain difficulties in confession of English court’s judgement in Russia. 

An alternative to English court is a maritime law arbitration or a Russian court of arbitration. For example, application to Maritime Arbitration Commission has certain advantages like competent proceedings, an expert judge and knowledge of English language (hence no need for verified translation of documents, which is a time and money saver). However, maritime arbitration proceedings often take more time than ordinary arbitration.

Russian court of arbitration also has its advantages and disadvantages. The judges are inclined to settle the disputes in favor of the insured which is confirmed by the practice. Besides, the trials are quite speedy. Among the disadvantages, the need for verified translations and supply of original documents. As compared with the maritime arbitration their proceedings are more superficial and less competent which can be treated both as advantage and as disadvantage depending on the situation.

Konstantin Krasnokutsky says it is reasonable to foresee a ‘hybrid’ jurisdiction in insurance agreements, for example, a Maritime Arbitration Commission and a local court of arbitration.

Sometimes, representatives of insurance companies drag out the trial to escape the payments. Ekaterina Bykovskaya, representative of law bureau Flagman, said at the Seminar that courts have started fighting against this practice through introducing the concept of procedural unconscionability. If a judge acknowledges that any of the sides drags out the trial, covers up facts or provides them in portions, selects a court far from a defendant’s location the decision can be made in favour of the other side due to the opponent’s procedural unconscionability.

Experts say another problem in the Russian market of marine insurance is the specific national legislation providing difficulties for insurance companies to make advance payments to clients without obtaining all the necessary documents.

So, if experts and lawyers defending the interests of the insured are anything to go by, the level of marine insurance in Russia is quite low and requires improvements in terms of legislation, judicial system and insurance culture.

Vitaly Chernov