MarIus

3.2.1 Obligations under general administrative law

In view of the extensive competence of classification societies under the Maritime Safety Act and the RO Agreement, it is natural to ask whether the companies should respect general principles of public governance principles, including (the principles of) the Public Administration Act. According to § 1(1) of the Public Administration Act, the act is intended to apply to “public administration”, so the areas of activity are thus defined at an institutional level. Bønsig concluded, with regards to the possible obligation of private parties under the same legislation that:

"... it must be considered a very firm point of departure, that private entities are not bound by the rules of administration, be it written terms or implied. This point of departure is most clear within the scopes of application of the Public Administration Act and the Publicity Act. It is clearly defined that these laws are as a starting point limited to administrative authorities in formal terms and thus do not cover private entities, even if they do perform administrative tasks." [My translation, Bønsig's own emphasis].(1) Bønsig, Lovbestemt delegation af forvaltningsvirksomhed til private, Juristen no. 6, 2013, p. 263 ff., at p. 264, column 2. At this point, Bønsig is referring to the two acts in general, and not to the specific rule on application of the Publicity Act to non-public entities under the Publicity Act § 5. See further e.g. fx Fenger, Forvaltningsloven med kommentarer, DJØF 2013, s. 70.

Classification societies are clearly established on the basis of private law and thus cannot formally be considered part of the public administration. The question is, however, whether they are subject to the restrictions and obligations applicable to public entities for other reasons.

Looking firstly at the Public Administration Act, the Act provides in § 1(2)(2), that its scope of application also extends to “self-governing institutions, associations, foundations, etc. established under private law, which engage in public activities of a more comprehensive nature and are subject to intensive public regulation, intensive public scrutiny and intensive public control .” The classification societies are subject to official control under the RO agreement, so the wording itself could indicate that they are potentially covered by the Public Administration Act, at least within the boundaries of the authorisation. Nevertheless, it may be held with quite some certainty that this is not the case. The type of public control which, in literature and case law, is found to be relevant under the Public Administration Act, is, for example, public funding of activities, State audits, public appointment of leadership positions, public approval of statutes or accounts, as well as public guidelines for the general running of the entity.(2) Fenger, Forvaltningsloven med kommentarer, DJØF 2013, p. 72.The RO Agreement, and consequently the cooperation between the classification societies and the Danish Maritime Authority, do not meet any of these criteria. The basic principle that the Public Administration Act and the general administrative principles cannot apply to the activities of classification societies, must therefore be maintained. If the RO client appeals against the classification society’s decision, then (clear) breaches of the principles of administrative law will of course be considered by the appeals authority, even though classification societies are not formally required to comply with these principles in the first place, so the classification societies do not exist totally outside the (indirect) scope of application of the principles of public governance. It does, however, give raise to legal concerns when a managing authority, such as the DMA, is able to delegate so much of its management under the Maritime Safety Act, without the private entity to which it delegates having to comply directly with the principles of administrative law. This is especially the case when one considers the extent to which the classification societies, in their role as recognised organisations, may affect the shipping company with their interventions. This will be discussed further below.

Turning to the Publicity Act, the act has a wider scope of application than the Public Administration Act, and provides in § 5(1) that it also “applies to companies, institutions, privately owned companies, associations, etc. to the extent that they have been authorised by law to take decisions on behalf of the State, a region or a municipality”. The provision is two fold. First of all, there must be the issuance of decisions, and not just the performance of tasks. Secondly, the decision must be issued on behalf of the State and not on behalf on the non-public entity itself. To the extent that the classification society makes decisions regarding the statutory certificates that are within the RO Agreement, both of these criteria have been met. Therefore, the refusal to issue a statutory certificate, or, for example, to instruct the ship owner to make a certain improvement or repair in order to maintain the certificate, clearly falls within the traditional understanding of the term ‘decision-making authority’, as certificates issued under the RO Agreement have been issued on behalf of the Danish Maritime Authority.(3) It is assumed that it is the normal definition of what is a ”decision”, which is relevant under the provision, see Ashan, Offentlighedsloven med kommentarer, DJØF 2014, p. 149f. The classification society, in this respect, would therefore be clearly covered by the Publicity Act.(4) Ashan, ibid., p. 151f; Fenger, ibid., p. 84.

Clause 8.1 (b) of the RO Agreement specifically mentions that the provisions regarding confidentiality in the Publicity Act apply to the activities of classification societies under the RO Agreement. One might consider whether, by specifically pointing out that the confidentiality provisions apply, it has been intended to indicate that the rest of the Publicity Act does not. This would in principle be possible, as § 5(2) of the Publicity Act opens the possibility for the administration to decide that the Publicity Act, despite §5(1), shall not apply to specific institutions, including private companies. In view of the essential considerations that § 5 intends to take, as stated by the Commission on Publicity in its report,(5) Finding of the Commission on Publicity (Offentlighedskommissionens betænkning) No. 1510/2009, vol.1, chap. 9, clause 6.8.3.2. See in particular p. 301. it may however be assumed that it will require very specific reasons as well as a precisely worded order by the Minister, to exclude the application of the Publicity Act. An agreement between the relevant authority and the private entity authorised by that authority, that a part of the Publicity Act should apply, can hardly be considered sufficient. Indeed, in other situations where § 5(2) has been used, the deviation from the main rule has been achieved by the issuing ofa specific executive order, with the sole purpose of exempting a named private entity from the scope of the Publicity Act.(6) See regarding examples of such wordings, Ashan, ibid., p. 150.

In conclusion, therefore, it seems that classification societies, in their work for the Danish Maritime Authority, are covered by the majority of the Publicity Act,(7) According to the Publicity Act § 5(1), the starting point of the act is that it also applies to private parties, apart from §§ 11-12 and 15-17. but not by the Public Administration Act, and in addition, that the general principles of administrative law do not apply directly. The question is however, whether, and if so to what extent, the societies have assumed a contractual obligation to undertake a similar level of consideration of those rules and principles to that expected of a public authority. This will be investigated immediately below.

3.2.2 Contractual obligations to act in accordancewith (certain) rules and principles of public administration

The RO Agreement contains certain provisions that impose specific obligations of administrative law on the recognised organisations. First, as mentioned in clause 8 of the RO Agreement, the authorised classification society in its work on behalf of the Danish Maritime Authority is subject to the obligations for the protection of private information and confidentiality arising from the Public Administration Act, the Publicity Act and the Personal Data Act. This is in accordance with the principles of the Penal Code § 152b regarding confidentiality for information obtained while carrying out public duties after public authorisation and, therefore, the obligation of confidentiality would already, according to the flag State principle, apply to some of the activities of the authorised classification societies. In addition, clause 4.7 of the RO Agreement stipulates that the classification society must seek to avoid situations where a conflict of interest may occur. Thus, the companies have a procedural obligation to ensure that situations where this type of misuse of their powers would be possible do not arise, which typically indicates that the classification society or the actual surveyor concerned, must not have an economic interest in the subject under certification or control. (It should be noted that as the classification society is paid by the RO client for its services, some level of financial interdependence is in theory always present. Therefore, the provision must be seen as directed at situations where the actual inspector has a more direct financial interest in the entity inspected than simply to get paid for his or her services.)

Apart from these two specific obligations, namely respecting confidentiality and the obligation to avoid any conflict of interest situations from occurring, the RO Agreement does not contain any specific governance rules or guiding principles regarding the classification societies. However, as mentioned earlier, the content of the RO Agreement must be read in conjuntion with the IMO RO Code and the classification society must also comply with principles contained therein. In this context, the RO code generally outlines that a recognised organisation must exhibit independence,(8) RO Code clause 2.3. impartiality,(9) RO Code clause 2.4. integrity(10) RO Code clause 2.5. and transparency(11) RO Code clause 2.8. in its work. Translated into the context of Danish administrative law, it can be assumed that the obligation to act as an independent party applies and that misuse of power must not occur. In this way, some of the most basic general principles of administrative law apply to the authorised classification societies on a contractual basis.

It has already been established above that the majority of the Publicity Act applies within the scope of authorisation to a private actor, but even if it did not, the private actor would to some extent be expected to follow the principles of transparency expected of a public entity under the requirements of the RO Code.

It must therefore be concluded that the classification society must, at a minimum, comply with certain basic administrative rules. It is an interesting to note, however, that these apply on a contractual basis regarding the delegation of authority, and are not based directly on a public law background.