The Shipping Law Review: Chile
Commercial overview of the shipping industry
According to information provided by the Chilean Maritime Authority,2 as at December 2020, there were 116 shipowners with approximately 266 Chile-flagged merchant ships.
The top five shipping companies in terms of tonnage are Naviera Ultranav Ltda, Compañía Marítima Chilena SA, CSAV Austral SA, Empresa Marítima SA (Empremar) and Transportes Marítimos Kochifas SA. To register a ship in Chile, the legal requirements are very demanding. Merchant vessels may be registered by Chilean nationals or citizens. If the owner is a corporation, it must meet the following requirements to be deemed Chilean:
- have its registered offices and true and effective headquarters in Chile;
- the president, manager and majority of directors or administrators, as the case may be, must be Chilean; and
- the majority of the equity capital must be owned by Chilean individuals or bodies corporate.
Special vessels may be registered in Chile by foreign natural persons as long as they are domiciled in the country and their main place of business is located locally (this rule does not apply to fishing vessels).
According to the Chilean Maritime Authority, the tonnage moved through Chilean ports in 2020 was 62,778,657 metric tonnes in export cargo and 53,023,445 metric tonnes in import cargo. Chile's seaports have connections with practically all the world's ports.
General overview of the legislative framework
The legislative framework is constructed from various regulations and laws, for which the main sources are as follows:
- Book III of the Chilean Code of Commerce, 'About Navigation and Maritime Trade' (Articles 823 to 1250), which includes general provisions and specific chapters on vessel ownership, liens, shipowners, masters, ship agents, navigation contracts, navigation risks, marine insurance and procedural issues;
- Navigation Law (Decree Law 2222/78);3
- Merchant Navy Law (Decree Law 3059/79);
- international conventions, such as the UN Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules), the International Convention for the Safety of Life at Sea 1974 (SOLAS), the Maritime Labour Convention 2006 (MLC) and the International Convention on Civil Liability for Oil Pollution Damage 1969, replaced by the 1992 Protocol (the CLC Convention); and
- regulations issued by the Chilean Maritime Authority.
Forum and jurisdiction
Article 1203 of the Chilean Code of Commerce establishes the general principle that the resolution of all maritime disputes, including those relating to marine insurance, is subject to mandatory arbitration. In short, all maritime disputes must be resolved by an arbitrator.
However, the ordinary civil courts may hear maritime disputes in certain cases, including:
- if the parties mutually agree to this (either by including it in the contract from which the dispute originates or by prior written agreement);
- if a criminal action could arise from the same facts (in this case the civil action can be filed before either the criminal court or an arbitrator);
- claims in respect of oil pollution as set out under Paragraph 4, Title IX of the Navigation Law;
- claims in which the state harbour or customs agencies are involved; and
- claims in which the amount at stake is less than 5,000 units of account (special drawing rights (SDRs), as defined by the International Monetary Fund), provided that the claimant submits its claim before the ordinary courts.
In addition, specific petitions for the appointment of an arbitrator and ship arrest are heard by ordinary civil courts.
As regards limitation periods, the general principle under Chilean law is that any action in respect of maritime disputes is time-barred after two years. However, actions concerning passage contracts, freight, general average and contributions are time-barred after six months. In addition, in collision actions, the two-year period is extended to three years if the responsible vessel was not arrested or detained while in Chilean jurisdictional waters, provided that the vessel leaves Chilean jurisdictional waters without calling at a Chilean port after the collision.
As regards time extensions, the progress of the appropriate limitation period can be interrupted by a declaration in writing to the claimant by the person who benefits from it. Time extensions can be granted several times but the limitation period will start again from the date of the most recent declaration.
ii Mandatory arbitration
The resolution of maritime disputes is subject to mandatory arbitration. The key principle is that the applicable rules are those to which the parties have agreed in writing. If the parties reach no agreement, the matter is subject to the rules set out by the Tribunal Code and the Civil Procedure Code.
Special powers of maritime arbitrators
The Code of Commerce establishes special powers for maritime arbitrators as follows:
- ample freedom to admit any evidence that the arbitrator may deem relevant;
- a proactive role for the avoidance of delays within the trial; and
- the ability to consider the evidence under the 'rule of the sane critic', which allows the arbitrator to assess the evidence according to his or her own criteria.
Pre-judicial measures and special liens
If pre-judicial measures (whether preparatory, precautionary or evidential) or special liens need to be enforced before the arbitration tribunal is established, the interested party can petition for these before the competent ordinary civil court under the rules of the Tribunal Code or the Code of Commerce.
iii Enforcement of foreign judgments and arbitral awards
Foreign judgments and arbitral awards are enforced through the exequatur process. This is considered in the Civil Procedure Code, under which judgments issued in a foreign country shall be given force in Chile by existing treaties. For a foreign judgment to be enforced, the procedures set out in Chilean law shall be followed unless they have been modified by existing treaties. If there are no treaties concerning the matter in question, Chile shall grant to the judgment the same force as granted to Chilean judgments by the jurisdiction in which the judgment was made. If the judgment comes from a jurisdiction that does not enforce Chilean judgments, it shall not be enforced in Chile. If none of the previous rules may be applied, foreign judgments shall be enforced in Chile provided that:
- they contain nothing contrary to the laws of the Republic, except that procedural rules to which the case would have been subject in Chile shall not be considered;
- they are not contrary to national jurisdiction;
- the party against whom enforcement is sought was duly served with process, except that the party may still be able to allege that, for other reasons, it was prevented from making a defence; and
- they are not subject to appeals or further review in the country of origin.
A duly legalised copy of the judgment – officially translated into Spanish, if necessary – must be presented to the Chilean Supreme Court to begin the exequatur process. In the case of an arbitral award, its authenticity must be certified by attestation of a high court of the originating jurisdiction.
Notice of the enforcement request must be served on the party against whom it is sought. That party must respond within 15 days (which may be extended depending on where the party is domiciled). An opinion from an independent court official is also requested by the Supreme Court.
The Supreme Court considers the matter in a hearing at which the parties may make oral statements.
After enforcement is allowed, the judgment must be presented to the competent civil court to commence an executive proceeding (under which the defendant's assets can be foreclosed, if applicable).
In respect of foreign arbitral awards, a law on international commercial arbitration – based entirely on the UNCITRAL Model Law – was passed in 2004.4 Article 35 of that Law regulates the recognition and enforcement of foreign arbitral awards and Article 36 lists the defences that can be asserted against enforcement and regulates orders of stay. Chile is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). In this respect, Chilean courts have enforced all foreign arbitral awards that comply with the rules set out in the Law for enforcement. In addition, Article 9 of the Law makes it possible to request from a local court any of the interim measures set forth under Chilean procedural regulations, such as attachments or goods retention, to protect the outcome of a foreign arbitration award. This criterion has already been tested in the context of international arbitration proceedings relating to a shipping dispute.
Chile does not undertake a significant amount of shipbuilding.
ii Contracts of carriage
In 1982, Chile ratified the Hamburg Rules, which entered into force internationally as of 1 November 1992. Additionally, the Chilean legislature included the provisions of the Hamburg Rules in the Chilean Code of Commerce in 1988,5 with minimal changes.
A cabotage reservation system is in force under the Merchant Navy Law (Decree Law 3059/79). The Law implies that only Chilean vessels are permitted to provide maritime or fluvial transport services (of cargo or passengers) within the national territory or the exclusive economic zone. On exceptional occasions, foreign vessels may participate in cargo cabotage when:
- cargo volumes exceed 900 tonnes, and when a previous public bid has been carried out by the user in advance; or
- cargo volumes are equal to or less than 900 tonnes when Chile-flagged vessels are not available (provided that authorisation has been obtained from the Maritime Authority).
In addition, passengers cabotage on foreign cruise vessels is allowed provided that the vessel:
- has transport capacity equal to or greater than 400 passengers;
- has facilities on board for overnight stays; and
- performs the transportation of passengers for tourism purposes.6
Chilean law recognises the concept of maritime privileges (see Section V.i, below).
How the duties and liabilities of the shipper are addressed
In accordance with the adoption of the Hamburg Rules by Chile, 'shipper' means 'any person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier, and any person by whom or in whose name or on whose behalf the goods are actually delivered to the carrier in relation to the contract of carriage by sea'. In line with Chilean practice, the scope of this definition includes both the person concluding the contract of carriage of goods by sea and the person actually delivering the cargo, provided they are not the same person.
The shipper is deemed to have guaranteed to the carrier the accuracy of particulars concerning the general nature of the goods, their marks, number, weight and quantity as furnished by him or her for inclusion in the bill of lading. The shipper must indemnify the carrier against any loss resulting from inaccuracies in these particulars. The shipper remains liable even if the bill of lading has been transferred by him or her. The right of the carrier to such indemnity in no way limits his or her liability under the contract of carriage by sea to any person other than the shipper.
Operation of multimodal bills of lading
The main rules regarding multimodal transport can be found in Article 1041 et seq. of the Chilean Code of Commerce, which are based on the United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980). Article 1041 defines the main applicable concepts: multimodal transport, contract of multimodal transport and operator of multimodal transport. Furthermore, Article 1043 sets out the regime of liability applicable in multimodal transport. The relevance of this Article is that, under Chilean law, the liability of all those involved in any part or parts of the multimodal transport is joint. Similarly, the Hamburg Rules must be taken into consideration when dealing with multimodal transport, especially in connection with the limitation of responsibility set out by the Rules, since Chile is a signatory.
iii Cargo claims
Carriage of goods by sea
Under the Chilean adoption of the Hamburg Rules, any party may be subject to the provisions of the Rules regarding carriage of goods by sea if:
- the port of loading or discharge as provided for in the contract of carriage by sea is located in Chile;
- the bill of lading or other document evidencing the contract of carriage by sea (such as the sea waybill, or through bills of lading or short-form bills of lading) stipulates that the contract will be governed by Chilean law (such as through a clause paramount); or
- one of the optional ports of discharge provided for in the contract of carriage by sea is the actual port of discharge and that port is located in Chile.
Chilean regulations are compulsorily applicable regardless of the nationality of the ship, carrier, actual carrier, shipper, consignee or any other interested person. In this respect, it is important to note that clauses paramount have been held as unwritten by the Supreme Court7 as they would be contrary to public policy.
The Chilean regulations are applicable to all contracts of carriage by sea and it is not a condition that they are necessarily evidenced in a bill of lading or other document of title, such as a sea waybill or short-sea note. In respect of combined transport bills or through bills of lading, the regulations are applicable only to the corresponding sea-leg carriage.
The Chilean adoption of the Hamburg Rules does not apply to charter parties. Nonetheless, a bill of lading issued in compliance with a charter party falls under the Rules if it governs the relation between the carrier and the holder of the bill of lading other than the charterer. In the case of contracts providing for future carriage of goods in a series of shipments during an agreed period (e.g., tonnage or volume contracts used for cargo projects), the Rules apply to each shipment. However, if a shipment is made under a charter party, the Rules do not operate, other than with the aforementioned exception.
Chilean law recognises a basic distinction between the carrier (also known as the contractual carrier) and the actual carrier. The former is defined as 'any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper' and the latter as 'any person to whom the performance of the carriage of the goods, or part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted'.8
The above distinction has very much simplified the problem of identifying the carrier as anyone who issues a bill of lading as a principal may be treated as a contractual carrier. This applies even to freight forwarders if they issue their own 'house' bill of lading and many cargo claims are based on these documents. In this regard it is important to note that, under Chilean practice, demise clauses have no effect.
If the performance of the carriage or part thereof has been entrusted to an actual carrier, the carrier nevertheless remains responsible for the entire carriage. In this respect, the carrier is jointly and severally responsible, in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his or her servants and agents acting within the scope of their employment. Additionally, all the provisions governing the responsibility of the carrier also apply to the responsibility of the actual carrier for the carriage performed by him or her.9
iv Limitation of liability
Chilean regulations that refer to tonnage limitation (i.e., Articles 889 to 904 of the Code of Commerce) are inspired by both the International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships, and Protocol of Signature 1957 and the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976). With respect to the tonnage limitation figures, the Code of Commerce follows the lines of the LLMC Convention 1976. In addition, note that the Code of Commerce establishes a specific set of procedural provisions in connection with the constitution and distribution of the corresponding limitation fund.
The types of claims subject to limitation are as follows:
- death or personal injury and damage to property on board;
- death or personal injury caused by any person for whom the owner is responsible, whether on board or on shore (in the latter case, his or her acts must be related to the operation of the ship or to the loading, discharging or carriage of the relevant goods);
- loss or damage to other goods, including the cargo, caused by the same person or people, grounds, places and circumstances as given in point (b); and
- resulting liability concerning the damage caused by a vessel to harbour works, dry docks, basins and waterways.
The people entitled to limit liability pursuant to this regime are as follows:
- the shipowner as defined by Chilean regulations;
- the shipowner's staff;
- liability insurers;
- the operator, carrier, charterer and the ship's proprietor, if a different person or entity from that specified in point (a); and
- individual employees of any person specified in point (d), including the master and members of the crew, if sued.
Limitation in connection with civil liability for damage derived from spillage of hydrocarbons and other hazardous substances
The spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is subject to the CLC Convention 1992. However, the spillage of hydrocarbons from vessels not carrying oil in bulk as cargo, or spillage of other hazardous substances, is subject to the terms of the CLC Convention 1969 and supplementary norms set forth by the Chilean Navigation Law (among other things, it extends the limitation benefit to the owner, proprietor and operator).
Carriage of goods by sea
Chilean law draws a distinction between lost or damaged goods and delayed goods. In the former case, the carrier's liability is limited to an amount equal to 835 SDRs per package or other shipping unit, or 2.5 SDRs per kilogram of gross weight, if the latter is higher. In the case of delayed goods, the carrier's liability is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed, but not exceeding the total sum of the freight payable under the contract of carriage by sea. The aforementioned rules do not include either the interest on the value of the damaged goods or judicial costs.
Under the Chilean regulations that refer to passage contracts,10 liability can be limited in the following cases:
- death or personal injury of a passenger: the maximum liability amount is obtained by multiplying 46,666 SDRs by the number of passengers that the vessel is authorised to carry, up to a maximum equal to 25 million SDRs; and
- damage to property on board: up to 1,200 SDRs unless higher limits have been agreed in writing.
i Ship arrest
Chile has not ratified any international conventions regarding the arrest of ships. However, the fundamental regulations applicable to ship arrest that are found in Book III, Title VIII, Paragraph 5 of the Code of Commerce (About the Procedure to Arrest Vessels and its Release)11 are loosely based on the principles set forth under the International Convention Relating to the Arrest of Sea-Going Ships 1952 (the Brussels Convention).
Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types:
- privileged credits as set forth by Articles 844, 845 and 846 of the Chilean Code of Commerce (listed below); and
- credits other than those mentioned in point (a).
Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest pursuant to the special rules set forth by Book III, Title VIII, Paragraph 5 of the Code of Commerce. Articles 844, 845 and 846 of the Code of Commerce establish and distinguish the following groups of privileged credits.
Article 844 credits
- Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
- the remuneration and other benefits arising from the contracts of embarkation of the vessel's crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injury of the servants who survive ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel;
- the charges and rates of ports, channels and navigable waters, as well as fiscal charges in respect of signalling and pilotage;
- the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damage or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the limitation fund has not been constituted as established in Title IX of the Chilean Law of Navigation; and
- the indemnities for damage or loss caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of a collision or other accident during navigation, when the resulting action is not susceptible to being founded upon a contract, and the damage in respect of bodily injury to the passengers and crew of these other vessels.
Article 845 credits
Mortgage credits on large vessels (i.e., those over 50 gross tonnage (GT)) and secured credits on minor vessels (i.e., vessels up to 50 GT).
Article 846 credits
- In respect of the sale price, construction, repair and equipping of the vessel;
- in respect of the supply of products or materials that are indispensable for the trading or conservation of the vessel;
- arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
- in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
- in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.
The privileged credits of Article 844 enjoy privilege over the vessel in the order enumerated in Article 844 credits, above, with preference over mortgage credits and the privileged credits of Article 846. Mortgage credits are preferred to those of Article 846, which in turn follow the rank indicated under Article 846 credits, above.
In this respect, the privileged credits established by the aforementioned provisions have preference over and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damage from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Code of Commerce (About Privileges and Naval Mortgage) in the specific matters to which they refer.
Procedure for ship arrest
An arrest order is usually granted quickly if the arrest petitioner supplies the court with sufficient supporting documents to justify the arrest petition, such as invoices, bills of lading, contracts and survey or loss reports.
Arrest or retention of a vessel is served by the Chilean Maritime Authority when the vessel lies or by official letter or notification to the Director General of the Maritime Territory and the Merchant Marine if the vessel is not in the jurisdiction of the court that decreed the measure. Prior notification to the person against whom the measure is requested is unnecessary.
In urgent cases, the court may communicate arrest via telegram, telex or other reliable means. In a preliminary proceeding, the person against whom the arrest is requested must also be notified within 10 days of the resolution that granted the measure. This may be extended by the court for good reason. If an arrest or retention is not served within 10 days, or any extension granted, this causes automatic forfeiture of the decreed arrest, which is communicated directly to the Chilean Maritime Authority by the court.
Arrests of sister and associated ships
A lien on a ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also on a ship in the same ownership or a ship in the same administration or operated by the same person.
Security and counter-security
If the court considers that the supporting documents provided by the arrest petitioner are not sufficient, or the petitioner states that they are not yet available to him or her, the court may require that counter security be provided for the potential damages that may be result if, subsequently, it is found that the petition lacked basis. As to the form and amount of damages, there are no specific rules, so it is up to the court.
As regards security for lifting an arrest, the amount of security is usually established by the court based on the petition of the arresting party. The amount cannot exceed the value of the arrested vessel and can be reviewed subsequently through incidental proceedings. Regarding the form of security, there are no specific rules and it will depend on the court's resolution, but the security most usually requested and granted is a bank guarantee issued by order of the court. As soon as the security is provided, the court shall lift the vessel arrest without delay.
For a long time, protection and indemnity (P&I) insurance club letters of undertaking were accepted only if agreed by the arrest petitioner, mainly because of the fact that the Chilean courts were not accustomed to them. However, in a case of an arrest following a pollution incident, the court hearing the arrest accepted a letter of undertaking with no prior approval from the arrest petitioner. This is a positive development, as Chilean courts seem finally to be aligned with international practice, whereby a letter of undertaking is accepted by the courts as sufficient security.
First, under Chilean regulations, an arrest based on privileged credits is subject to the following conditions:
- the arresting party must invoke one or more of the privileged credits enumerated above. In this respect, note that, except for the regulations concerning pollution or for avoiding damage from spills of hazardous substances, maritime privileges preclude any other general or special privilege regulated by other laws in connection with the same goods. Maritime privileges also confer on the creditor the right to pursue the vessel in whosoever's possession it may be;
- the arresting party must attach antecedents that constitute presumption of the right being claimed; and
- if the court considers that the supporting documents are not sufficient or the petitioner states they are not yet available to him or her, the court may require that counter security be provided for the potential damage that may be caused if, subsequently, it is found that the petition lacked basis.
Second, when an arrest has been decreed a pre-judicial precautionary measure (i.e., a measure to secure the outcome of a subsequent substantive action), the petitioner is obliged to file its complaint requesting that the decreed arrest remain in force within a period that, in principle, is 10 days but that may be extended for up to a total of 30 days, provided there is a sound basis for doing so. The non-fulfilment of this obligation will result in cancellation of the arrest and liability for the damage that may have been caused, on the irrefutable presumption that the grounds for the arrest were fraudulent. In addition, if the arrest was wrongful, fraudulent or lacked basis, the defendant may claim damages in separate ordinary proceedings subject to the general rules set forth by the Code of Civil Procedure.
Bunker arrest claims
An arrest can be made over a vessel provided the claimant has a credit that qualifies as a maritime privilege as per the rules explained above. This credit will be considered a privileged credit in accordance with Article 846(2) of the Code of Commerce.
As regards specific regulations for arresting bunkers, there are no such regulations in Chile. In theory, this could be achieved by means of the general rules set forth by the Code of Procedure regarding pre-judicial and precautionary measures, but it is not an easy exercise because of formalities and timing restrictions.
Pre-judicial precautionary measures
Chilean procedural regulations are silent on the matter of whether the arresting party is required to pursue the claim on its merits in the jurisdiction of arrest or whether it is possible to effect an arrest only to obtain security. However, when an arrest is decreed as a pre-judicial precautionary measure (i.e., a measure to secure the outcome of a subsequent substantive action), it would be possible to arrest to obtain security and then pursue proceedings on the merits elsewhere. The procedural obligations established must be met, namely filing the petitioner's complaint requesting that the decreed arrest remains in force for a period that, in principle, is 10 days but may be extended for up to a total of 30 days provided there is a sound basis for doing so. However, this is an option that has yet to be further tested in Chile's courts.
ii Court orders for sale of a vessel
In accordance with the Code of Commerce, the judicial sale of a vessel, whether voluntary or forced, must observe the rules and formalities set forth by the Code of Civil Procedure for the judicial sale of real estate. The procedure may take between a couple of months and one or two years depending on the debtor's behaviour towards the proceedings. Court costs are usually minor but other costs might be generated, such as those relating to the administration of the attached property (incumbent on a depositary who has to render account for his or her administration before the pertinent court).
Chile has ratified the following conventions:
- SOLAS and its Protocols of 1978 and 1988;
- the International Convention on Load Lines 1966 (the Load Lines Convention) and its Protocol of 1988;
- the International Regulations for Preventing Collisions at Sea 1972 (COLREGs);
- the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1995 (the STCW Convention);
- the Convention for the Suppression of Unlawful Acts of Violence Against the Safety of Maritime Navigation 1988 (SUA) and its Protocol 1988; and
- the MLC and its Amendments of 2014 and 2016.12
These Conventions are in force notwithstanding the domestic regulations issued by the Chilean Maritime Authority.
ii Port state control
The responsibility for port state control falls on the Chilean Maritime Authority in accordance with the Navigation Law and complementary regulations, and applicable international conventions.
iii Registration and classification
Any type of vessel, whether constructed or under construction, or naval device can be registered at the following registries kept by the General Administration of the Maritime Territory and Merchant Marine:
- Large Vessels Registry;
- Minor Vessels Registry;
- Vessels in Construction Registry;
- Naval Devices Registry; and
- Mortgage, Liens and Prohibitions Registry.
The rules relevant to the organisation and operation of registries, and the procedures, formalities and requirements of registration, are contained in the applicable regulations. The practice of registering vessels chartered on a bareboat basis does not occur in Chile.
In accordance with Article 15 of the Navigation Law, all large vessels13 must be registered in the Large Vessels Registry, which is kept by the General Administration of the Maritime Territory and Merchant Marine. Minor vessels (those of 50 GT or less) are registered in the minor vessels registries that are kept by harbour masters.
iv Environmental regulation
The key legislation, rules and conventions in force in Chile for regulating air and sea pollution are as follows:
- the CLC Convention 1992 on hydrocarbon spills from vessels carrying oil in bulk as cargo;
- the CLC Convention 1969 and supplementary norms set forth by the Chilean Navigation Law on hydrocarbon spills from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances;
- the International Convention for the Prevention of Pollution of the Sea by Oil 1954 (the OILPOL Convention) (with its amendments of 1962 and 1969);
- the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972 (the London Convention);
- the International Convention for the Prevention of Pollution from Ships 1973 (as modified by the Protocol of 1978) (MARPOL (73/78)); and
- Article 136 of the Fishing Law (Law No. 18,892), which refers to criminal liability for spills that cause damage to hydrobiological resources (it covers both malicious acts and negligence and extends to companies' criminal liability).14
v Collisions, salvage and wrecks
Article 1,116 et seq. of the Chilean Code of Commerce set out the main regulations applicable to collisions. The Chilean Navigation Law and the COLREGs also apply.
Chilean collision regulations apply to damage that arises, for example, from a collision between two or more vessels or from waves caused by the movement of a vessel resulting in damage to other vessels, cargo or people on board, even if an actual collision does not occur. A 'vessel' is a maritime device that can move either on its own or by external means.
These rules also apply to events occurring in fluvial waters, lakes and any other navigable waterway. In addition, Chilean collision regulations apply to collision damage that arises between vessels under the same ownership or administration.
For every collision, the applicable law is that of the state in whose territorial waters the event has occurred. If the collision occurs in waters not subject to the jurisdiction of any state, the law of the country where the lawsuit is instituted will apply.
Salvage is regulated by Book 3, Title 6, Paragraph 5 of the Chilean Code of Commerce (Services rendered to a vessel or other property in damage).15 These rules are based on the Comité Maritime International's draft International Convention (Montreal 1981) and the International Convention on Salvage 1989 (the 1989 Salvage Convention).
Wreck removal is regulated under the Chilean Navigation Law. In general, the Chilean Maritime Authority can order the pertinent proprietor, owner or operator to adopt all necessary measures, at his or her own cost, to proceed with removal of the wreck within a specified term. In February 2018, the Navigation Law was subject to an important amendment to strengthen marine environment preservation and navigation safety. Additionally, new faculties were granted to the Maritime Authority in respect of ships or craft whose condition poses a risk or danger, representing a positive change. The main amendments introduced to the Navigation Law are as follows:16
- wreck removal now comprises the cargo on board a sunk or stranded vessel, aircraft or artefact;
- if a vessel or naval artefact is drifting in bad buoyancy conditions or taking on water, the Maritime Authority can require the owner, proprietor or operator to adopt corrective measures promptly. If the owner, proprietor or operator fails to take such measures, the vessel or naval artefact will be deemed abandoned and its ownership will pass to the state;
- once abandonment has been declared in favour of the state, the Maritime Authority may proceed with removal or disposal of the wreck through public or private tenders. In cases of extreme urgency (e.g., the imminent sinking of a vessel or naval artefact), the Maritime Authority can authorise the dumping of a vessel or naval artefact;
- vessels or naval artefacts that are still afloat but have no statutory crew on board will be deemed abandoned. Ownership will pass to the state where the Maritime Authority requires the owner, proprietor or operator to provide safe manning and the order is not complied with. The same applies for vessels or naval artefacts that lack crew and have been stranded by the Maritime Authority on account of their owners, proprietors or operators having been requested to remove them from the stranding location;
- if the Maritime Authority concludes that a sunken or stranded vessel, aircraft or naval artefact (including cargo) poses no threat or obstacle to navigation, fishing, the environment or other maritime or shore activities, the owner will have up to one year to commence wreck removal operations; and
- the cost of a removal or extraction operation will be borne by the owner or operator of the sunken vessel, aircraft or naval artefact on the date of the incident, provided that there are no bidders or the tender process is cancelled. The same applies in the case of the presence of hydrocarbons or other hazardous substances.
Chile has not signed the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships 2009 (the Hong Kong Convention); however, the IMO Guidelines on Ship Recycling are applicable.
vi Passengers' rights
The Athens Convention on the Carriage of Passengers and their Luggage by Sea 1974 (the Athens Convention) is not applicable in Chile. However, passengers' rights and the liability of the carrier are regulated by the Code of Commerce (Articles 1,044 to 1,078), which is based on the Athens Convention. In addition, if a travel agent is involved, the Chilean Consumer Protection Act may also apply.
vii Seafarers' rights
Chile has ratified the MLC. These matters are also regulated under a specific chapter in the Chilean Labour Code.
New bill introduced to promote competition in Chile's maritime cabotage market
On 17 August 2021, in a presidential message to the Chamber of Deputies a bill was submitted to amend the Merchant Navy Law and the Navigation Law in order to promote competition in the maritime cabotage market. If the bill is eventually passed, the following amendments to national legislation will then be introduced.
Merchant Navy Law (Decree-Law 3059/79)
The bill amends Article 3 of Decree Law 3059/79, stating that foreign merchant ships may freely offer cabotage services when moving cargo between two Chilean ports. As regards the passenger cabotage market, the bill proposes that the 400-passenger threshold should be removed, thus allowing foreign cruise ships with a smaller capacity to compete in this market.
In addition, the release of the flag reserve implies that the bill is seeking to eliminate provisions that have become unnecessary as a result of the opening of cabotage. Other provisions that may be removed are as follows:
- the current exceptions contemplated by the law through waiver, together with their respective requirements; and
- the existing regulation in the law that refers to the transport of empty containers in cabotage.
Navigation Law (Decree-Law 2.222/78)
Erasing barriers for companies that participate in a Chilean shipping company
In order to register a ship in Chile, the current law obliges the legal entity that owns the ship to comply with a series of requirements, namely:
- its address as well as real and effective headquarters in Chile;
- its president, manager and the majority of directors or administrators, as the case may be, are Chilean; and
- the majority of its share capital belongs to Chilean natural or legal persons.
The requirements for a Chilean shipping company to register ships in Chile and have Chilean managers or administrators and directors will be removed.
The percentage of officers and crew of a vessel who are Chilean nationals must meet the standards of the Labour Code
The bill proposes to reform this requirement, which was established in Article 14 of the Navigation Law and modify the maximum percentage of foreigners that any employer in an industry in Chile may employ.
Safeguard of naval reserve
With the aim of protecting national interests in the event of war, international conflicts that threaten Chile's security, internal commotion, public calamity or other emergencies, the bill establishes that ships or naval artefacts that have a national flag will be considered part of Chile's naval reserve, as referred to in Article 98 of the Navigation Law.
The release of the Chilean flag reserve does not imply differential treatment for foreign vessels for labour or tax matters; foreign ships that carry out activities permanently in Chile must compete on equal terms with national shipping companies.
Chilean labour law governs employment contracts concluded and effected in Chile, regardless of the nationality of the workers or the employer. Therefore, the opening of cabotage will not allow foreign ships that operate permanently in Chile to be governed by international labour regulations; they must submit to the labour regulations of the Chilean Labour Code.
In tax matters, these vessels will continue to be taxed with the additional tax of Articles 59 or 60 of the Law on Income Tax, depending on whether the type of contract concluded concerns a charter party or carriage of goods by sea, respectively. Additionally, if they operate permanently, and in the event that a permanent establishment is constituted, they will be taxed in the same way as Chilean companies.
According to the presidential message, the main objective of the bill is as follows:
to optimise the logistics chain and multimodal transport, generating improvements in competitiveness in the industry and eradicating inefficient cargo movements that take place on Chile's coasts and in the ports. The opening of cabotage for foreign ships would optimise the use of the capacity of its ships, increasing the available supply at competitive prices and take advantage of the natural route – the extensive Chilean coast.
It is not known yet whether this bill will pass because other similar bills have been submitted to Congress without success.
1 Ricardo Rozas is a partner at Jorquiera & Rozas Abogados (JJR Law Firm).
3 Published in the Official Gazette, dated 31 May 1978.
4 Law No. 19,971, published in the Official Gazette dated 29 September 2004.
5 Paragraph 3 of Title V of Book III.
6 Law No. 21,138, published in the Official Gazette dated 26 February 2019, which modified the Merchant Navy Law (Decree Law 3059/79) to allow passengers cabotage on foreign cruise vessels. The passengers cabotage restriction does not apply for calls at either the Archipelago of Juan Fernandez or Easter Island.
7 AJ Broom v. Exportadora, Supreme Court of Chile, Case No. 683-98.
8 Chilean Code of Commerce, Article 975 Nos. 1 and 2 (based on Hamburg Rules, Article 1.1).
9 ibid., Articles 1006 to 1008 (based on Hamburg Rules, Articles 10.1 and 10.2).
10 ibid., Articles 1,044 to 1,077.
11 ibid., Article 1,231 et seq.
12 Maritime Labour Convention enacted by Decree No. 11 of the Chilean Ministry of Foreign Affairs, published in the Official Gazette, dated 22 February 2019.
13 Law No. 21,408, published in the Official Chilean Gazette on 15 January 2022, introduced modifications in the definitions of large and minor vessels. According to this Law, 'Large vessels are those whose gross tonnage is 100 or more and minor vessels all those whose gross tonnage is less than 100'. This modification will enter into force six months after its publication.
14 Liability for negligence introduced by Law No. 21,132, which modernises and strengthens the exercise of the public function of the National Fisheries Service, published in the Official Gazette, dated 31 January 2019.
15 Code of Commerce, Article 1,128 et seq.
16 Amended by Law No. 21,066, which introduced new wreck removal provisions, published in the Official Gazette, dated 16 February 2018.