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A Commercial Vessel or a Vessel Carrying out a State (Government) Non-commercial Service?

Judgement of the 9th Commercial Court of Appeal dated January 18, 2021 No. 09АП-69250/2020 in case No. А40-40737/2020 (Federal state budgetary institution (FSBI) “Northern UGMS” v Rosmorrechflot)

We will consider an interesting case about the possibility of removing ships carrying out the state (non-commercial) service out of the scope of merchant shipping.

The use of ships for governmental non-commercial service can also be attributed to merchant shipping.

FSBI “Northern UGMS” applied to the Ministry of Transport with a request to instruct the employees of Rosmorrechflot to resolve the issue of excluding several scientific expeditionary and research vessels from the Register of categorized objects of transport infrastructure and vehicles. The Ministry of Transport refused and the Northern UGMS appealed this decision to the court.

The court denied the claim, stating that the claimant operates the disputed vessels for purposes falling under the concept of merchant shipping provided for in Art. 2 of the Russian Merchant Shipping Code. Namely, these vessels, fall under the para. 11(g) of Art. 1 of the Federal Law “On Transport Safety”, therefore Rosmorrechflot in this case has no grounds for excluding the disputed vessels from the Register. The court of appeal upheld the judgement.

The claimant made following submissions:

1. The disputed ships are not subject to the requirements established by the Law on Transport Safety due to the fact that the applicant uses the disputed ships for the state (government) non-commercial service. According to Art. 3(2) of the Russian Merchant Shipping Code, does not reply to this service.

This submission was rejected by the court, since the vessels are used to carry out research work in the field of hydrometeorology and related areas, monitoring of environmental pollution, which fall under the activities associated with merchant shipping in accordance with Art. 2 of the Russian Merchant Shipping Code.

In addition, according to the Charter of the claimant, they can carry out business activities under contracts, and one of such activities is the transportation and forwarding of goods, including dangerous ones, and passengers transport and inland waterway transport.

The claimant indicated, he operates ships to ensure the functioning of hard-to-reach polar meteorological stations, which involves delivery of goods, transportation of passengers.

2. Currently, the claimant does not carry out the transportation of passengers and high-risk goods.

As the court pointed out, the applicant is nevertheless entitled to carry out such activities, and the very fact of not carrying out this activity at the present time does not exclude the possibility of its implementation in the future.

Also, Art. 2 of the Russian Merchant Shipping Code does not exclude the possibility of using ships for other purposes to which the rules of merchant shipping may be applied, and therefore, the purposes of using ships are not limited by law.

3. Ships carry out state (government) non-commercial service and, therefore, are not used for merchant shipping.

The court indicated that the consolidation of the right to carry out business activities in the Charter of the organization contradicts the submission of using the vessel only for a governmental non-commercial service preventing the application of the Art. 3(2) of the Merchant Shipping Code of the Russian Federation.

The performance of work paid for from the federal budget and following the state assignment but falling under the legislation on merchant shipping should not be a basis for classifying ships as ships that are used in the interests of the government non-commercial service. Otherwise, all ships owned by the Russian Federation and assigned to the organizations that are entrusted with the obligation to fulfill the state assignment would be of non-commercial service.

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