The government used the Spring Budget 2023 to confirm three significant amendments to the UK Tonnage Tax regime:

  1. Opening an 18-month election window for re-entry to the UK Tonnage Tax regime;
  2. Permitting ship management companies to join the UK Tonnage Tax regime; and
  3. Increasing the limit on capital allowances for lessors who lease ships to companies, which are subject to the UK Tonnage Tax regime.

The government has now published the “Tonnage Tax (Further Opportunity for Election) Order 2023” which will implement these changes and which comes into force on 1 June 2023.

Set out below is more detail and content on these measures as well as our views of their impact and the policy behind them.

Continue Reading The reform of the UK Tonnage Tax regime and its implications

The question of whether demurrage liquidates all or just some of the damages arising from a charterer’s breach in failing to complete cargo operations within the laytime will no longer be decided by the UK Supreme Court following a commercial settlement. The parties have therefore consented to the appeal not proceeding.

Continue Reading <em>The Eternal Bliss – </em>Court of Appeal has the final say

Supply chain transparency requires companies to investigate their own supply chains to ensure compliance with internal company procedures, especially in international operations, as well as relevant laws, and to then publish this data to stakeholders and customers or the general public.

This process assists companies in reducing the risk of damage to their reputation, ensures that every element of their operation is aligned with their culture and ethos and assists in attracting new customers who increasingly demand higher standards.

Customers often want to purchase products knowing how workers in the supply chain are treated, what working conditions are like, what ingredients or materials have been used in products and what their environmental impact is. Studies have shown that transparency in supply chains leads to increased customer satisfaction that enables business growth. In the shipping industry, transparency can also improve visibility on rates, location of cargo and compliance with sanctions – all of which can lead to large cost savings. For example, knowing where certain types of cargoes are shipped from at a specific time of the year and by whom, can assist carriers in planning their routes efficiently.

Continue Reading Transparency in shipping supply chains

The President of the United Nations (“UN”) intergovernmental conference (“IGC”) on biodiversity beyond national jurisdiction (“BBNJ”), Rena Lee, proposed on March 27, 2023 that the IGC reconvene on June 19, 2023 to adopt the BBNJ treaty. The IGC interrupted its work late on March 4, 2023 after states had reached an agreement on the text of the new treaty, following years of negotiation. The private sector should follow this process closely: the BBNJ treaty may soon result in new binding obligations with which companies will need to comply when operating in areas beyond national jurisdiction (“ABNJ”), which comprise about 95% of the world’s oceans.

Continue Reading How the new “BBNJ” or “high seas” treaty may soon result in new obligations for the private sector

Introduction

In Perusahaan Perseroan (Persero) Pt Pertamina v Trevaskis Ltd and Others [2023] HKCFA 5, the Appeal Committee of the Court of Final Appeal (“CFA”), upon hearing submissions from both parties on 16 February 2023, granted leave to Perusahaan Perseroan (Persero) Pt Pertamina (“Plaintiff”) to appeal to the full court of the CFA on the following question of great general or public importance (“GGPI”) relating to the Convention on Limitation of Liability for Maritime Claims 1976 (“LLMC”):

Where a Contracting State has enacted LLMC Article 2(1) in full into local law but has, by a provision of local law (pursuant to Article 18), disapplied (permanently or temporarily) head (d), is a shipowner nonetheless entitled to limit its liability for a Private Recourse Claim under head (a), or does the existence and/or suspension of head (d) exclude the shipowner’s reliance upon head (a) for such claims?

(the “Question”)

In broad and practical terms, the issue in dispute is whether the Wreck Removal Claim was subject to limitation under LLMC article 2(1)(a) (“Head (a)”) in Hong Kong notwithstanding that LLMC article 2(1)(d) (“Head (d)”) has been suspended by way of local Hong Kong legislation as permitted by the LLMC.  The two heads are quoted below:-

Head (a): “claims in respect of … loss of or damage to property … occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;

Head (d): “claims in respect of the raising, removal, … of a ship which is sunk, wrecked …;

Continue Reading Hong Kong team takes novel LLMC case to Court of Final Appeal

A historic agreement was reached at the United Nations (“UN”) in New York on Saturday, March 4th, 2023 on the text of a new treaty for the conservation and sustainable use of biodiversity beyond national jurisdiction (“BBNJ”)—or to use the exact terms, on the conservation and sustainable use of the marine biological diversity of areas beyond national jurisdiction (“ABNJ”), which include the high seas and the Area (as defined in the UN Convention on the Law of the Sea (“UNCLOS”)). 

This agreement is the culmination of talks that have spanned two decades, under the auspices of an ad hoc working group, followed by a preparatory committee, and then an intergovernmental conference, each established by the UN General Assembly to study and try to find global solutions to BBNJ issues. The issues at stake stem from the lack of environmental safeguards, under UNCLOS, with respect to the growing number of human activities conducted in international waters, and the related degrading health of the deep oceans. The new BBNJ treaty reflects an attempt by the international community to address these issues through the adoption of a set of new tools, including (i) a regime for the exploitation of marine genetic resources and the sharing of benefits derived therefrom, (ii) a requirement to conduct environmental impact assessments on planned activities that may lead to substantial pollution or harmful changes to the marine environment, (iii) a framework for the establishment of a network of area-based management tools and marine protected areas, and (iv) mechanisms for capacity-building and the transfer of marine technologies from developed to developing states. Each of these tools will be introduced in ABNJ after the BBNJ treaty is officially adopted and ratified by enough states—60—to enter into force. The treaty also creates new international bodies that will be in charge of overseeing its implementation, including a conference of parties, a secretariat, a scientific and technical body and an implementation and compliance committee.

The BBNJ treaty will significantly qualify and limit the principle of the freedom of the high seas, which dates back to 1609, when Hugo Grotius published Mare Liberum. The principle of the freedom of the high seas is currently firmly established under UNCLOS, and it has supported the growth of the maritime industry. The BBNJ treaty will have implications for all areas of the private sector that are active in international waters, including (among others) the shipping, fishing, deep-seabed mining and submarine cable sectors. It will also have implications for all areas of the private sector that use the marine genetic resources found in ABNJ, including (among others) the pharmaceutical and cosmetic sectors. These industries will need to work with the public sector, and the international bodies that will be created under the BBNJ treaty, to follow the new procedures and substantive requirements that will become applicable to their activities in international waters.

The stakes are high, and the treaty text reflects compromises that were negotiated at length, and often not reached until the final hours of the negotiations—in particular on marine genetic resources and decision-making questions. The BBNJ conference concluded with a 36-hour session of uninterrupted talks, from early on Friday to late on Saturday, during which all remaining issues were finally resolved under the leadership of its president Rena Lee, from Singapore. Despite some delegations’ complaints of sleep deprivation and physical and psychological impossibility to continue negotiating, Rena Lee pushed the conference to bring its work to completion. During consultations held behind closed doors, she helped states finally bridge longstanding differences, which often reflected the North-South divide. The conference ended with tears and a standing ovation as states realized the historic nature of the milestone.

Can Charterers withhold hire without Owners’ consent, even if the vessel was off hire on the hire due date and where they had agreed deductions from hire would not be allowed without Owners’ written agreement?

Key facts

Under a charterparty dated 13 April 2021 on a heavily amended NYPE 1993 form, Bulk Trident Shipping Ltd (”Owners”) trip time chartered the “Anna Dorothea” (the “Vessel”) to Fastfreight Pte Ltd (“Charterers”) for the carriage of a bulk cargo from East Coast, India to China (the “Charterparty”).

Continue Reading To have and to (with)hold – Fastfreight Pte Ltd v Bulk Trident Shipping Ltd [2023] EWHC 105 (Comm) The “Anna Dorothea”

What is the EU ETS and how is it changing?

The EU Emissions Trading Scheme (“EU ETS”) is a legislative scheme by which the EU caps emissions of greenhouse gases from certain industries by requiring emitters to surrender emission allowances to offset the gases they emit. A limited number of emitters are granted some free emission allowances, but most allowances must be purchased in auctions arranged by the European Energy Exchange (the “EEX”), which allowances may then be traded, before being surrendered to a competent authority by the emitters. Hence, the EU ETS is a “cap and trade” emissions scheme.

Change is underway to include certain emissions from shipping within the EU ETS, by phasing in requirements to report emissions and to purchase and surrender allowances for increasing proportions of carbon dioxide (CO2), nitrous oxides (N2O) and methane (CH4) emissions from shipping activity within the EU, between now and 2026.

Continue Reading EU formalises its plans for the expansion of the EU ETS into shipping in 2024

Just as there is no easy route to decarbonisation, there is no straightforward way of balancing a shipowner’s obligation to comply with the MARPOL Carbon Intensity Indicator (“CII”) Regulations with a time charterer’s right to direct the employment of a vessel.

That much is clear from the long-awaited BIMCO CII Operations Clause for Time Charters 2022 and, more tellingly, from the industry reaction.

Now that the dust is settling: what does the clause actually say? What are the key sticking points? And how are owners and charterers positioning themselves before the CII Regulations come into force on 1 January 2023? In this briefing, we take a closer look at some of the emerging themes.

Continue Reading BIMCO CII Clause for Time Charters – The dust begins to settle

There have been several decisions in 2022 about carrier’s defences to misdelivery claims under bills of lading.

Carriers face misdelivery claims when they deliver cargo without production of original bills of lading, but then someone else claiming to be the ‘lawful holder’ of the bills complains the cargo should have been delivered to them instead. A common scenario is where a bank has financed the import of a cargo, but the finance has not been repaid. The bank then looks to the bills of lading it holds as a form of security. Unfortunately, the bank often finds the financed cargo has already been discharged from the ship (usually under a letter of indemnity) and cannot be traced. The bank finds it has no security for its claim against its defaulting customer, and brings a claim against the carrier for misdelivery under the bills of lading, arguing the carrier should not have discharged the cargo without the production of the original bills of lading. The carrier in turn looks to the letter of indemnity under which it agreed to discharge the cargo without the original bills.

Continue Reading Misdelivery claims: not an open goal for financing banks