London International Shipping Week panel: risk management is crucial to prepare the industry for tomorrow’s maritime world

On 12 September Reed Smith hosted a panel for London International Shipping Week to discuss ‘Tomorrow’s Maritime World, Today’. Representatives from a cross-section of the industry (ship managers, financiers, lawyers, insurance specialists and marine technical specialists) each brought their unique experience to the discussion, making for a lively debate on three pressing topics in the industry:

  1. Cyber risks and technical advancements, including crewless vessels;
  2. Current trends in financing; and
  3. The environmental impact of the industry.

While each topic might present a different challenge, the overwhelming advice from our panellists was that there are going to be disruptive changes ahead caused by ever more sophisticated technology and incremental regulation which will change the shipping world as we know it today.  There will also be an ever increasing focus on risk management.

You can read more about the discussion in our press release here.

Tokyo and Paris launch Concentrated Inspection Campaign on Safety of Navigation

The Maritime Authorities of the Tokyo and Paris Memoranda of Understanding (MOU) on Port State Control have launched a joint Concentrated Inspection Campaign (CIC) on Safety of Navigation. The CIC will commence on 1 September 2017 and run for three months until 30 November 2017.

The aim of the CIC is to check:

  1. compliance with the applicable requirements of the SOLAS Convention,
  2. the overall status of the vessel’s navigation safety, and
  3. the competency of crew involved in navigation operations.

Port State Control Officers will follow a questionnaire of 12 items which will be used to test the compliance of onboard navigation equipment, the qualification of officers and the proper maintenance and functionality of the equipment. A list of these questions can be found here.

The consequences of any deficiency range from a ‘record and rectify’ instruction, to detaining the ship.

Owners, managers and charterers should familiarise themselves with these requirements before the inspection period begins to ensure that they do not risk detention.

Each of the Port state authorities have announced particular emphases for their CICs:

  1. the Paris, Tokyo, Black Sea, Mediterranean, Indian Ocean, Abuja and Viña del Mar MoUs, which cover the seas in Europe, the Indian Ocean, West and Central Africa and Latin America,  will focus on safety of navigation and ships’ compliance with the applicable requirements of SOLAS Chapter V.
  2. the Caribbean MoU, which covers states and territories with coasts on the Caribbean Sea and the Gulf of Mexico, will focus on life-saving appliances and arrangements.
  3. the Riyadh MoU, which covers the six Gulf states of Oman, UAE, Qatar, Bahrain, Kuwait, and Saudi Arabia, will focus on crew familiarisation for enclosed space entry.

Power to order sale of cargo – when is cargo the subject of arbitral proceedings?

Earlier this month the Commercial Court handed down an interesting judgment which considered the question of when a cargo is the “subject of the [arbitral] proceedings”, so as to give rise to a power to order the sale of the cargo under Section 44(2)(d) Arbitration Act 1996 – Dainford Navigation Inc v PDVSA Petroleo SA (The “Moscow Stars”) [2017] EWHC 2150.

Whilst rejecting an argument that the phrase “the subject of the proceedings” requires no more than that the proceedings in question should relate to or concern the goods in question, it was held that there is sufficient nexus between the cargo and the arbitral proceedings in circumstances where a contractual lien is exercised over a defendant’s goods as security for a claim which is being advanced in arbitration.   Notably that does not depend on there being a claim in the arbitration for a declaration that the claimant is entitled to exercise such a lien, it being sufficient that the lien is being exercised in support of the arbitral claim.

In this particular case the defendant was also the owner of the cargo, and the Court made no finding as to what the position would be if the cargo was owned by a third party not a party to the arbitration.

The decision will be welcomed by owners who can otherwise face the difficulty of liened cargo remaining on board their vessels for many months, without payment of hire, whilst incurring operating costs.


Is the shipping industry ready for UK gender pay gap reporting?

It’s an acknowledged fact that women are significantly underrepresented in the shipping industry – accounting for just 2% of the workforce globally. As major companies begin to publish data about their gender pay gaps, following the introduction of new regulations for companies with 250 or more employees based in the UK, the issue is at the forefront of the public consciousness. The national average for the pay gap between male and female full-time employees stands at 9.4% and 18.1% for all employees. Many now accept that the time has come to address this problem.

Like many other sectors, the shipping industry is wrestling with how to tackle issues around gender, whether related to pay or female representation at senior levels. Continue Reading

Vitol SA v Beta Renowable SA

The High Court has handed down Judgment in Vitol SA v Beta Renowable SA [2017] EWHC 1734 (Comm) highlighting the importance of ensuring that communication and conduct for the purpose of accepting repudiatory breach is clear and unambiguous.

This concerned a contractual dispute between Vitol, a major oil trader, and Beta Renowable Group, a manufacturer of biofuel products. Vitol had agreed, in four contracts dated 20 July 2016, to buy, and Beta to sell, 4,500 metric tonnes of biofuel with the lifting period extending from 16 June 2016 to 30 June 2016. Each contract required that the buyer nominate a vessel at least three working days prior to the vessel’s arrival at the load port, and that the nominated vessel arrive by midnight on the last day of the lifting period. Vitol then hedged these contracts against the risk of price fluctuations by selling gasoil futures contracts.

Beta signalled in early to mid-June 2016 that it would be unable to provide the biofuel in accordance with the contracts’ terms. Vitol, in response, did not nominate a vessel to perform the contract by 27 June 2016 and sent notice of contractual termination via email on 7 July 2016.

Carr J considered three main issues:

  1. Vitol’s claim to have accepted the repudiatory/renunciatory breach by failing to nominate a vessel to perform the contract by 27 June 2016;
  2. Whether failure to nominate relieved Beta of its obligation to deliver under the contracts; and
  3. The quantum of damages.

Continue Reading

Application of the crossing rules when in proximity to a narrow channel or fairway, and the “Alexandra 1”

In March this year the Admiralty Court in London handed down its judgment in respect of a collision between “Alexandra 1” (“A1”) and “Ever Smart” (“ES”) (see: Nautical Challenge Ltd v Evergreen Marine (UK) Ltd [2017] EWHC 453 (Admlty)). This blog takes a look at the judgment, which serves to clarify the positon on the obligations on vessels arising under certain rules provided in the International Regulations for Preventing Collisions at Sea, 1972 (the ‘Collision Regulations’). Continue Reading

The “New Flamenco”

The Supreme Court has today handed down Judgment allowing Owners’ appeal in the “New Flamenco” (see our previous blog of 2 March 2016 and our Client Alerts of 25 February 2016 and 8 November 2016).

For those of you who are not familiar with the case, Charterers were in repudiatory breach of the Charterparty, which Owners accepted as terminating the Charterparty, and the vessel was redelivered in October 2007. At that time the Owners sold her for USD 23,765,000, whereas if the vessel had been redelivered at the end of the Charterparty term, in 2009, her sale value would have been only USD 7,000,000.  The question was whether that benefit, i.e. the increase in sale price in 2007 over and above that which could have been obtained in 2009, should be set-off against Owners’ claim for damages calculated by reference to the net loss of profits which they alleged they would have earned during the additional two year Charterparty period.  If the increase in sale value were allowed to be set-off, this would have caused Owners to have no recovery from Charterers.

We are preparing a Client Alert which will set out the background to the Supreme Court’s decision, but for now we can say that it held that:

  1. On the facts of this case the value of the vessel was irrelevant because the Owners’ interest in the capital value of the vessel had nothing to do with the interest injured by the Charterers’ repudiatory breach of the Charterparty.
  2. The essential question in such cases is whether there is a sufficiently close link between the benefit and the loss caused by the wrongdoer. The benefit to be brought into account must have been caused either by the breach of Charterparty or by a successful act of mitigation.
  3. Notably in this case the benefit was not caused by Charterers’ repudiatory breach but by Owners’ commercial decision to sell the vessel.
  4. Given the relevant measure of damages, the pertinent mitigation would be the acquisition of an income stream alternative to the income stream under the original Charterparty.
  5. It was therefore held that the Judge was correct to hold that the Arbitrator erred in principle and that the answer to the question put to the High Court, namely “When assessing shipowners’ damages for loss of profits on earnings of hire under a time charterparty which has been repudiated by the charterers and the repudiation accepted by the owners as terminating the contract, are the charterers entitled to have taken into account as diminishing the loss of earnings/hire sustained by the owner as a result of the accepted repudiation “a benefit” said to consist of avoidance of a drop in the capital value of the vessel because the vessel has been sold shortly after acceptance of the repudiation whereas, if the vessel had been retained until after performance of the charterparty, it would have had a lower capital value by reason of decline in the capital value of the vessel through market decline and ship sale values in that period?” is “no”.

If you have not already signed up to receive our Client Alerts, but would like to do so, please do let us know.

Qatar – Sanctions and Restrictions: Key Developments

Readers may be aware that a number of countries, including Saudi Arabia, Egypt and Bahrain, have recently severed diplomatic and economic ties with Qatar. For further information on the restrictions in play and how they might impact your business, please refer to the Reed Smith Client Alert, which can be found here.

Saudi Arabia has now, via Kuwait which is acting as a mediator, presented a list of requirements, with which Qatar must comply, in order for the sanctions in place to be lifted. These include calling on Qatar to bring its economic and political involvement with Iran in line with US and international sanctions, and the closure of Al-Jazeera.  It is understood that if the requirements are not complied with within 10 days the offer will cease to be valid. It is not yet clear whether, and if so how, Qatar may respond to this most recent development.


Sanctions and Restrictions in Qatar

Earlier this month several countries, including Saudi Arabia, the United Arab Emirates, Egypt and Bahrain, severed diplomatic and economic relations with Qatar. This is an important issue for the shipping industry to monitor. In our recent client alert we explained the position to date and looked at what shipping companies trading Qatar need to consider to limit and manage any potential impact on their business.

You can read the alert here