CAPÍTULO III: RESULTADOS, MODELO TEÓRICO Y DESARROLLO DE LA
3.3. Desarrollo de la propuesta
Nigeria155. Curiously, no deployment of foreign navies other than the Nigerian Navy is present
to secure the transit of merchant vessels. The situation is exacerbated by the dimension of the Gulf (2350.0000 Km2) and the presence of 13 states and islands. Every state has its own ideas on how to combat piracy, and its own regulations.156 Arguably, west Africa is not as
strategically crucial for ‘Western Powers’ as much as Aden in regard to energy flow and it is not considered to be an international problem for many countries.157
The Strait of Malacca is another high-risk area for piracy and presents other peculiar characteristics. The global operation of private security businesses is complicated as piracy take place in territorial waters and each territory will have differing restrictions. Sovereign states like Malaysia, Indonesia and Singapore deploy their own navies and are reluctant to allow private actor to operate. In addition, these states have good maritime security capabilities.158 Nevertheless, the risk of piracy is real and shipping companies have more
limited means to protect themselves, in a proactive fashion. Consequently, although sailing next to the coasts of a ‘failed state’ like Somalia expose a vessel to more risks, arguably it provides more ‘room for manoeuvre’ to shipping companies in terms of proactive defence. This is not to say that shipping companies should not appreciate having navies patrolling their shipping lanes. 159
This piece of work involved a relatively small sample size and whilst this has been sufficient to gain an overview of the current issues and draw general conclusions, the limited participants of shipping companies, the variety of shipping companies and Captains of merchant vessels, means that it is difficult to assess whether ‘risk exposure’ is sufficiently taken into account. Nevertheless, different considerations can be made regarding their ‘risk appetite’, awareness and perception of risks. Firstly, it is important to underline that a minority of merchant vessels employ private security on board. A non-official estimate160 says
155 Onuoha, Freedom C. "Piracy and Maritime security in the Gulf of Guinea: Nigeria as a
Microcosm."Report for Al Jazeera Centre for studies(2012). Pp.3-8
156 Interview with Daan Brink, Proximities Risk Consultancy.
157Interview with Hugo Blom, Proximities Risk Consultancy.
158 Interview with Daan Brink, Proximities Risk Consultancy.
159 The Strait of Malacca is surrounded by territorial waters where PMSCs might incur in problems related to
the management of weapons in contrast to Somalia.
that there are approximately 40% PCASP employed on board vessels. A further important difference is the background of the shipping company as ‘Western’ or Asian based. This point raises the question of “is it a duty to care for my people, or is a duty to care for my cargo, or is it my duty to care for both”.161 Asian based maritime shipping companies have a
poor record of care regarding the rights of their crew.162 There are instances of Chinese (and
Filipino) crew members being held captive for many years in the coastal areas of Somalia.163
For these companies, providing a level of security for their crew is certainly not a priority, and this may be due to being unaware of the risks involved, an ignorance to the risk exposure or due to priorities heavily weighing on costs of transit. Another issue is that in some circumstances, small shipping companies have difficulties in discerning risks and might not take adequate counter-measures.164 Consequently, if the risk exposure is not sufficiently taken
into account or understood, the risk appetite of a shipping company might be misled.
“The difficulty is: what are the chances of being attacked? If the chances are very low, and the chances are very low165, will you just gamble and say - “we do not have the money, so we
are not willing to pay the bill for it. Let’s see what happens”. In contrast, they [shipping companies] might say- “No, it is unacceptable. Even if the chances are very low, we are still
going to pay [for PCASPs].”166
In addition, many Captains of vessels feel uneasy having PCASPs on board, considering them a burden rather than a benefit and this could be due to the other risks involved with having weapons on board of shipping vessels etc. 167
161Interview with Hugo Blom, Proximities Risk Consultancy.
162World Maritime News, “Tanker crew’s basic human rights breached”. July 14, 2017.
Available at: https://worldmaritimenews.com/archives/225170/hras-tanker-crews-basic-human-rights- breached/
163 Interview with Daan Brink, Proximities Risk Consultancy.
164 Interview with Hugo Blom, Proximities Risk Consultancy.
165 Considering the number of transits in the high risk areas compared to the number of attacks.
http://www.imo.org/en/OurWork/Security/PiracyArmedRobbery/Reports/Pages/Default.aspx This consideration should not be intended as claiming a transit through HRA is safe.
166Interview with an independent consultant of G4S. 167 Ibid.
Handling the costs
Cost is the most important factor that affects the security on board of a merchant vessel. This fact does not come as a surprise for many, since ‘costs’ are certainly one of the main factors in every business, shipping companies and private security are no exceptions. But when it comes to security, more specifically PMSCs, costs become a very sensitive topic to discuss, as it goes beyond the mere ability of managers to handle the efficient trading of goods and becomes a more complicated matter of responsibility and reputation for the company and the industry as a whole. The first consideration to make is, ‘what type of shipping company’? There are all sorts of shipping companies and there are all sorts of maritime security providers. In order to understand the economic factors that influence these actors when hiring MPSCs, it is essential to make some distinction. ‘Big oil’, the most important oil companies in the world, have their own fleet of oil tankers and not only carry the most lucrative cargo but the sheer volume poses a vast health, safety and environmental (HSE) risk. In addition, there are other shipping companies that deal with merchant vessels, such as Maersk and MSC, that are world leader in logistics and operate all over the world. These companies form the higher ‘strata’ of the market.168 In contrast, there are other shipping companies that are far
smaller, and their transits are more limited, both in numbers and locations. Handling the costs related to security is much easier for ‘high-end’ shipping companies, although they might be much more exposed to security threats, due to the number of transits and multiple locations. Smaller companies are much more likely to face difficulties in weighing the costs and benefits involved with ensuring the effective transit of goods and services.169
“What you will find in ‘Oil and Gas Industry’ and oil and gas tanker is that these companies make a lot of money, so they are not really concerned about the costs.
Usually, an armed transit through the Gulf of Aden would cost anything between six thousand and thirty thousand, oil companies will gladly pay thirty thousand because they make a hundred million on one transit. So, they really do not worry about thirty thousand”.170
168Interview with an independent consultant of G4S. 169 Ibid
The ‘high-end’ shipping companies involved in this research expressed the same opinions regarding the factors considered before hiring a PMSC. These companies completely reject ‘price’ as the main rationale for their selection. Instead, major factors are the standards that a certain PMSC can show and the reputation of the PMSC.171
These factors demonstrate that, for these companies, security is extremely important, they search for reliable partners who can give confidence and guarantees.172 As stated in the section
‘Participants of the questionnaire’, the shipping companies that participated in the questionnaire are some of the most important in the world and this fact has to be taken into account in terms of their commitment to maintain high-quality standards in their vessels. Other companies may not do the same. Nevertheless, the considerations of the shipping companies are in line with the one made by an independent consultant at G4S.
“[The selection of a PMSC] is a matter of reputation, being reliable and trustworthy, it is also about whether a deal can be made, one deal 10 years, all over the world… Shipping companies like those kinds of contracts because it takes down their handling costs. If you have to negotiate each escort every time, it takes a lot of time. Companies like MAERSK will
need 20 people just to negotiate this. The bigger the shipping companies are, the more attractive it is for them to work with private security like ours.”173
Handling the costs of security, for the most lucrative shipping companies is not complicated as it is just a minor proportion of their budget. There are factors that will influence their
171 Shipping company, questionnaire N. 13 and 15, Google forms
172 Interview with an independent consultant of G4S.
173Ibid. 0 0.5 1 1.5 2 2.5
Just price Price and standards Standards Reputation of the
PMSC
The factors considered before hiring a PMSC
Completely disagree Somewhat disagree Neutral
operations much more, for instance oil price per barrel. In addition, it is plausible that due to their higher exposure to both security and HSE174 risks, and consequently potential
reputational damages, hiring a top PMSC will be the most strategic choice. 175
On the other hand, PMSCs have a completely different opinion regarding what drive shipping companies to select a particular security provider. The overwhelming majority agree that low costs are the main concern of ship owners.176 This may indeed be the case if the ‘high-end’
players were looked at as a separate industry because they are generally so very different when considering their HSE requirements and profit margins. A further matter that scored high is the compliance with the industry regulations, which means that an important incentive for the choice of PMSCs is ‘external pressures’ on shipping companies, such those from insurers, in order take proactive measures to improve the security of a vessel.177 A different
scenario presented itself when PMSCs where asked whether standards and certificates where a motivation that would lead to a particular choice of PMSC being hired. Although the majority agreed (to a certain extent) that these certificates and standards where important, a minority was unsure or completely disregard the value of such documentation.178
PMSCs deal with all sort of merchant vessels in the market, and shipping companies might not act as diligently as is the perception from those who participated in this research. If the revenue of the cargos is not satisfactory, the security on board, especially if provided by reliable partners (with inevitable higher costs), could become a low priority. But as
174Health and Safety Executive
175 Interview with an independent consultant of G4S.
176 Google form results, PMSCs spreadsheet.
177 Ibid. 178 Ibid.
previously explained, costs and benefits have to be twinned with perceived risks assessed by the companies.
“An interesting point is to see what the shipping market is doing and what are the commercial margins they make, in order to measure them and compare them with the risks.
If the margins are high, maybe they are more prepared to cover these risks.”179
In summary, cost do affect the choice of PMSC hired by shipping companies, in different ways. While major shipping companies may be more prepared to ‘absorb’ the cost of ‘top- end’ PMSCs on their merchant vessels, minor companies are likely to be more reluctant to invest heavily in security services and balance the perceived risks with their specific budgets. An alternative for smaller shipping companies might be to rely on ‘unregulated PMSCs’, who can apply cheaper fares at the expense of the quality of service provided.
Results
There are different considerations that shipping companies take into account before hiring PMSCs. The three factors discussed in this chapter are the risk exposure, risk appetite and costs. Different locations represent different threat levels, and threat levels also change over time. Shipping companies are likely to deploy PMSCs on their merchant vessels, according to the perceived threat level and risk appetite. The risk assessment is therefore extremely important, and security should always be amongst the top priorities of the transiting company. The questionnaire shows that the Strait of Bab el Mandeb is a serious concern for shipping companies, even more than Somalia. Nevertheless, Somalian waters are still transited with caution, as shipping firms still deploy PCASPs. West Africa and the Strait of Malacca are also considered high risk areas for piracy and represent different security challenges.
Risk assessments have the potential to be undervalued and overlooked, and this problem could be more prominent in Asian vessels due to the apparent lower standards of practice, a reputation for poor security, and a perceived disregard for the safety of the crew on board of vessels.
The other important factor considered is ‘cost’. For the larger shipping companies and ‘Big Oil’, security might be just a minor percentage of their handling costs. Consequently, they are more prone to hire reliable PMSCs that follow standards and regulations, prioritising the maximum reliability and effective security services.
Other smaller companies are likely to have more difficulties handling these costs and balancing the perceived value of security services. The result might be that they rely on unregulated PMSCs, that could be inadequately prepared for dealing with attacks, or not deploy PCASPs at all.
Nevertheless, the shipping companies that participated in this research (that are among the most important in the world) indicated that standards and reputation are among the quality that they look for in a PMSC, and in contrast security companies believe that price is the main factor considered by shipping companies to the detriment of the quality of the service provided. The disparity may be due to the type of shipping company the PMSC are considering, as well as the shipping companies desire to be seen as prioritising security. Hiring private security should be done very carefully by Shipping companies and there is no doubt that many of them are scrupulous in doing so, but more effort should be allocated to the awareness of the benefits of reliable PMSCs in the shipping business and the dangers involved with hiring untrained armed guards. This would benefit the security of the vessel, demonstrate that the wellbeing of the crew as a priority for the company and drive PMSCs to improve their standards.
Chapter 6
Insurance Companies - A silent but influential actor. Introduction
The last chapter illustrated some of the findings regarding how shipping companies select private security to deploy on their merchant vessels. There is another actor that plays an important role in shaping the security environment where shipping companies and PMSCs operate and this actor is the insurance provider. Insurance companies are in fact, fundamental ‘players’ that need to be taken into account when dealing with private security on board of shipping vessels, because it is the insurance company that must accurately estimate the risks and potential losses to enable a quotation for insurance. Transiting through high risk areas corresponds to different risks that ship owner need to insure in order to cope with potential losses posed by piracy. Whilst a ship owner relies on insurance to guarantee an acceptable level of security, insurance firms have a certain leverage over shipping companies. For example, the insurer can express this leverage with the capability to influence some procedures of a shipping company before they are able to make a transit, under threat of piracy, an ‘insurable risk’. Some of the procedures that the insurer can affect is the route, for instance forcing a merchant vessel to transit through the IRTC (Internationally Recommended Transit Corridor). In addition, another aspect that can be influenced is the security procedures. A common one, is the implementation of the ‘best managerial practices’ (BMP4). But even more relevant to this research, different insurers force or incentivise ship owners to deploy PCASP on their ships. Other scholars argue that insurance firms are able not only to influence ship owners, but other major actor in the security sphere such as NATO. While shipping companies play a key role in international trade, an insurance firm offers ‘indemnity’, NATO (and other coalitions) have the task of securing the waters (to an extent that it is still difficult to interpret) to allow these actors to operate in synergy.180
The first paragraph illustrates the role of insurance companies, as a key actor that influences how the shipping industry operate in a high-risk environment. The second paragraph illustrates the problem within the insurance industry with regards to their handling of private security in their client’s vessels. This section is based on interviews with risk consultancies and a private security contractor. The last section illustrates the findings of the questionnaire
180Lobo-Guerrero, Luis. "Lloyd's and the moral economy of insuring against piracy: towards a politicisation of marine war risks insurance." Journal of Cultural Economy 5, no. 1 (2012): 75.
that shows the perception of the PMSCs and shipping companies with regards to the influence of insurance firms in the deployment of PCASP.
Insurance companies, shaping the security environment.
The steady increase in incidents of piracy that characterised the first decade of 2000’s, was placed among the top security concern in the political agendas of many countries. The main concern was that this phenomenon, linked to the almost complete unruliness of Somalia and the presence of ‘pirate gangs’ in the Northern region ‘Puntland’, would undermine international trade and exponentially increase the costs of insurance.181 Considering that 77%
of the world trade (calculated in terms of volume) is carried by shipping companies, the problem would affect an enormous amount of goods, with the consequential price increase at the expense of the consumer.182
In the US, the Government expressed concern over the capabilities of the private-security industry to manage the risks. At that time, the US Government was even prepared to underwrite ‘marine war insurance’ itself, in an effort to sustain the international trade.183
Although the British Government was equally concerned about their ships, the debate was a different one. The House of Lords European Union Committee, in February 2010, concluded