Sanctions – North Korea

Listeners to our webinar on Wednesday will recall the discussion of the sanctions in play against the Democratic People’s Republic of Korea (DPRK, also known as North Korea). Of particular interest to the global business community had been the forthcoming summit between President Trump of the United States and Kim Jong Un, Leader of the DPRK, set to take place on 12 June in Singapore.  The world was watching to see if, and how, this summit would affect North Korea’s position in the world and in particular whether it might herald any changes in the significant sanctions in place against it.

President Trump yesterday cancelled that meeting, stating that it is “inappropriate” in the current circumstances. This announcement comes the same day that the DPRK invited the world’s media to watch the apparent destruction of its nuclear weapons development site at Punggye-ri. Immediately after pulling out of the meeting with North Korea, President Trump said that the United States would continue its “maximum pressure campaign,” and noted that the military was “ready if necessary”.  He further stated that a meeting could still go forward if Kim Jong Un is willing to engage constructively.

We will report on this situation as it develops. For now, it seems that there is unlikely to be significant change in the U.S. sanctions regime against the DPRK.

Venezuelan drug smuggling – CTL and recovery for detention under Institute clauses

Navigators Insurance Company Limited v Atlasnavios-Navegacao LDA [2018] UKSC 26

In a decision handed down yesterday (22 May) the Supreme  Court  held that where a vessel was used by unknown third parties in an unsuccessful attempt to export cocaine from Venezuela (by strapping a parcel of drugs to the vessel underwater), leading to a detention of the vessel by Venezuelan authorities for more than 6 months, the Owners were not entitled to recover the vessel’s insured value from the vessel’s war risk insurers.

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Sanctions on Iran – The EU Response

Following President Trump’s announcement that the United States will withdraw from the Joint Comprehensive Plan of Action (“JCPOA”) and re-impose US sanctions (including secondary sanctions) against Iran, the European Union has chosen to signal its commitment to the continuation of the JCPOA. Readers will be aware that the US has indicated it will be re-imposing secondary sanctions on Iran over the course of the coming months, following two winding-down periods, the first of which ends in August this year, and the second of which ends in November.

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Sanctions and Iran: President Trump’s 8 May 2018 announcement and what this means for non-US shipping

On 8 May 2018, President Trump announced his decision to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA) and to reimpose on Iran a multitude of sanctions that were lifted in January 2016 under the JCPOA.

This means a significant change to non-U.S. companies’ ability to trade Iran, and has particular relevance to the shipping industry. We summarise below the potential implications of President Trump’s announcement on chartering business, but readers should be aware that the impact on individual spot fixtures and longer-term charterparties, as well as other forms of shipping-related contracts, including ship sale and purchase, contracts of affreightment and brokerage agreements, should be considered on a case-by-case basis.

Ultimately, when looking at your Iran-related trading it will be important to consider your business’ exposure to potential enforcement by the Office of Foreign Assets Control (OFAC) as well as your contractual position vis-à-vis any counterparties.

You can read more about this topic in our client alert here.

Settlement of claims

The Court of Appeal case Khanty-Mansiysk Recoveries Limited v Forsters LLP [2018] EWCA Civ 89 considers the ambit of settlement agreement wording and the extent to which this can cover future claims.

Background facts

Forsters LLP (“Forsters”) were solicitors who had been instructed by Rupert Galliers-Pratt (“RGP”) to assist with preparatory work required to incorporate Irtysh Petroleum plc (“Irtysh”).

Once Irtysh were incorporated, Forsters were also instructed on their behalf to acquire an oil exploration opportunity in Russia. In this respect, Irtysh agreed to buy shares in a company called YBI, which owned 49% of three companies each holding an oil field exploration licence.

Forsters issued an invoice to Irtysh for the sum of £129,853.22 inclusive of VAT. There was a dispute between the parties as to how much of the invoice was in respect of work carried out by Forsters for Irtysh and how much was in respect of work carried out by Fosters for RGP.

Forsters brought a claim against RGP for payment of the invoice pursuant to a guarantee that RGP had given.

The parties subsequently agreed to a settlement by which Irtysh and/or RGP would pay Forsters the sum of £90,000 in return for the action being discontinued, and a settlement agreement was drawn up between Irtysh, Forsters and RGP to this effect.

Clause 2.1 of that Settlement Agreement provided “This Agreement and the terms set out herein shall be in full and final settlement of all or any Claims which the Parties have, or could have had, against each other (whether in existence now or coming into existence at some time in the future, and whether or not in the contemplation of the Parties on the date hereof)”.

The term “Claims” was defined in Clause 1.1 as being “any claim, potential claim, counterclaim, potential counterclaim, right of set-off, or potential right of set off, right of contribution, potential right of contribution, right to indemnity, potential right to indemnity, cause of action, potential cause of action or right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, however and whenever arising in whatever capacity or jurisdiction, whether or not such claims are within the contemplation of the Parties at the time of this Agreement arising out of or in connection with the Action or the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters] and referred to in the Action”.

After the Settlement Agreement had been entered into, Irtysh discovered that it did not own YBI due to the fact that there had not been an actual transfer of shares to Irtysh.

Irtysh subsequently went into liquidation and its claims against Forsters were allegedly acquired by a company called KMR from the liquidators. KMR brought a claim against Forsters in negligence and sought damages in excess of £70 million in respect of the failure to transfer the shares in YBI (“KMR’s Claim”). Continue Reading

Safe berth: meaning of “always accessible”

In the Aconcagua Bay [2018] EWHC 654, the Commercial Court Judge differentiated “always accessible” from “reachable on arrival”, holding that the term berth “always accessible” refers not only to entry, but also to the departure of the vessel from berth.

On the facts of the case, a bridge and lock were damaged whilst the vessel was loading, meaning she could not use a channel and was therefore unable to leave the berth. Owners claimed damages for detention from the Charterers for the period of delay.

In a short decision, the Judge decided, having considered, inter alia, the Baltic Code and BIMCO laytime definitions, the need for the meaning to reflect the inclusion of the word “always” and the context, that he could “see no basis for a conclusion that” by using the phrase “always accessible” to address the question of accessibility, the parties “should be taken to have addressed entry only”.

Conclusion

Both Owners and Charterers may wish to consider their standard chartering terms in light of this decision.

Shipowners face risk of criminal liability for illegal demolition of end-of-life vessels

A Rotterdam court has found Dutch reefer operator Seatrade and two of its directors criminally liable last week for illegally selling vessels for demolition in South Asian yards in breach of the EU Waste Shipment Regulation.

The decision appears to be the first time an EU shipowner has been held criminally liable for the illegal export of vessels for demolition to South Asian yards.[1] The Dutch public prosecutor brought the cases against Seatrade over historic sales of vessels for demolition in India, Bangladesh and Turkey in 2012. The sales of the vessels took place via cash buyers. All vessels departed from Rotterdam and Hamburg on their last voyage to the South Asian yards.

Seatrade and its directors were fined up to 750,000 euros and the directors have been banned from working in the shipping industry for a year. The public prosecutor also sought prison sentences for the directors, but the court did not impose these.

The decision sets a precedent in the Netherlands. It makes it clear that shipowners who sell vessels for demolition in South Asian scrap yards in breach of the EU Waste Shipment Regulation risk facing criminal liability. It is the first successful prosecution of a shipowner for non-compliance with the EU Waste Shipment Regulation, which prohibits the export of hazardous waste to non-OECD countries, and bans the export of waste for disposal.

Importantly, the case reflects the political climate and the greater interest shown by European countries in environmental issues and may be followed by other European countries.  Cases of illegal demolition of vessels are currently being investigated by national authorities, such as the UK and Norway. In Norway for example, the vessel the MV “Tide Carrier” was arrested by the Norwegian environmental authorities, and these have been investigating its owners for illegally selling the vessel to a South Asian yard for demolition.

Shipowners should therefore take greater notice of the regulations when considering demolition. Continue Reading

Update – what is the requisite experience for an arbitrator?

On 13 March 2018, the Court of Appeal reversed the Commercial Court decision in Tonicstar Limited v (1) Allianz Insurance PLC; (2) Sirius International Insurance Corporation. Legatt LJ gave the leading judgment in which it was held that a QC with more than ten years’ experience in insurance legal practice is eligible for the appointment as arbitrator for the purposes of a clause requiring arbitrators to have “not less than ten year’s experience of insurance or reinsurance”. Therefore, the term is not restricted only to experience obtained in the insurance or reinsurance industry “itself” which the Commercial Judge considered to be separate and distinct from the experience of insurance or reinsurance law (although it should be noted that the judge at first instance said that, uninhibited by authority, he may well have decided that the QC satisfied the requirements of the clause, but he considered himself bound by the decision of the Commercial Court in Company X v Company Y (17 June 2000)).

The Court of Appeal highlighted that reasonable parties incorporating the clause in question would give the term a wider meaning, i.e. covering both industry and law practice experience, given the close relationship between insurance and reinsurance and the law relating to the same. Further, the Court overruled the decision in Company X v Company Y, by which the Commercial Court felt bound, noting that it doubted most people incorporating the clause were aware of that decision.

The Court of Appeal adopted a more sensible and industry-orientated approach on the interpretation. However, this dispute is a kind reminder for the need of clarity in commercial contracts, absence of which might fuel litigation. Interestingly, the wording of JELC clause, which was in dispute here, has been recently amended as follows:

The Arbitrators shall be persons…. with not less than ten years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisors serving the industry” .

You can read our blog on the previous decision here.

Is the shipping industry embracing the digital age?

How ready is the shipping industry for data and digital technologies?

We are conducting a short anonymous survey to discover whether the shipping industry is embracing the digital age. Through collecting responses from companies representing the industry across different sectors and geographies, we’ll be looking to analyse how prepared different segments of the market are for the digital age.

We want your insight – take part in our short survey. This will only take a few minutes to complete and we greatly appreciate your participation.  

Singapore launches an ambitious blueprint to drive Singapore Port as the future global maritime hub

On 12 January 2018, Singapore’s Minister of State for Transport, Lam Pin Min, launched Singapore’s new “Sea Transport Industry Transformation Map.”

Considering the maritime industry’s pivotal role in Singapore’s economy, and the fierce competition between global ports, Singapore’s government is determined to ensure the country remains a leading maritime trading hub. The strategic blueprint aims to create over 5,000 new jobs in the maritime sector and grow its “value-add” by S$4.5bn (US$3.50bn) by 2025, by developing technological innovation, workforce talent, and connectivity between maritime industry actors.

The strategic blueprint will be implemented by the Maritime and Port Authority of Singapore with close support from industry stakeholders and Singapore research centres, and will operate through a collaborative effort of public and private initiatives and the promotion of tech start-ups. Continue Reading

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