JAPAN UNABLE TO ACT AGAINST MARITIME INSURER SEPIA

S E C R E T TOKYO 004559 SIPDIS SIPDIS E.O. 12958: DECL: 08/14/2016 TAGS: EFIN ETTC MNUC PARM PGOV PREL KN JA SUBJECT: JAPAN UNABLE TO ACT AGAINST MARITIME INSURER SEPIA REF: A. STATE 124127 ¶B. TOKYO 04306 ¶C. TOKYO 01446 ¶D. TOKYO 00800 ¶E. STATE 22855 ¶F. 05 TOKYO 06357 ¶G. 05 STATE 204250 Classified By: Ambassador J.Thomas Schieffer. Reasons 1.4 (B) (D) ¶1. (S) Summary. Further to reftels (A) and (B),MOFA NE Asia Division Deputy Director Yutaka Kashiwabara advised Embassy Tokyo Political Officer August 8 that Japan was unable to take further action against suspect maritime insurance company SEPIA. MOFA officials believe that Panama,s issuance of "Certificates of Insurance or Other Financial Guarantee Regarding Civil Liability for Oil Pollution Damage" containing SEPIA,s name means that Panama recognizes SEPIA as a legal company, thus satisfying Japanese regulations. Additionally, authorities would like to exploit a possible loophole in Japan's regulations relating to SEPIA,s legal status in Bermuda, but absent further information are unable to move forward. End Summary. Insurance Law & Regulations -------------- ¶2. (S) Embassy Tokyo Political Officer met August 8 with MOFA NE Asia Division Deputy Director Yutaka Kashiwabara. He explained that, as noted reftels, the 1975 Law on Liability for Oil Pollution Damage (LLOPD) (revised April 2004) (referred to in reftels as the Protection and Indemnity law) governs the manner in which vessels are insured. A 1976 Japanese executive ordinance (revised in April 2006),expands upon the LLOPD by specifying the other specific laws and regulations that insurance companies must comply with in order to be qualified to insure vessels that enter Japanese ports, Kashiwabara explained. ¶3. (S) According to the executive ordinance, to be legally insured, a vessel must: a) have a "Certificate of Insurance or Other Financial Guarantee Regarding Civil Liability for Oil Pollution Damage" (CLC) issued by a country that adheres to the International Convention on Civil Liability for Oil Pollution Damage, or; b) be covered by an insurance company that has been established under Japanese insurance law. Panama -------------- ¶4. (S) The CLC must contain the name of a legally recognized insurance company, Kashiwabara continued. Panama, a party to the International Convention on Civil Liability for Oil Pollution Damage, has issued the required certificates to several DPRK ships with SEPIA listed as the insurer. "The fact that Panama has issued the certificates means that Panama recognizes SEPIA as a legal company," he said. The DPRK ships with Panama-issued certificates (containing SEPIA's name) thus technically satisfy Japanese law. Bermuda Connection -------------- ¶5. (S) While the executive ordinance limits Japan's ability to respond to the U.S. request, Kashiwabara said that officials are looking for ways to be helpful. For example, even when an insurance company's name appears on a certificate issued by a country that adheres to the CLC (e.g., as SEPIA,s does in Panama),Japanese government officials would find it difficult to recognize that insurance company (i.e., SEPIA) if the company is not considered to be legitimate under the laws of another country, he said. ¶6. (S) Kashiwabara stated that SEPIA had been "established" in Bermuda. (Comment: He could not confirm whether SEPIA was actually "registered" there.) As long as SEPIA remains a legal insurance company based on Bermudan insurance law, Japan has "little room for maneuver." If Bermudan officials were to rescind SEPIA's legal status in Bermuda, Japanese authorities would find it "easier to move" against SEPIA, he said. Absent additional negative information about SEPIA's status in Bermuda, MOFA officials believe that "there is not much we can do" at the present time, he said. He hinted that Japan would welcome additional "negative information" so it could exploit this potential loophole. SCHIEFFER