U.S. to terminate vast majority of economic sanctions on Sudan

Following a 16-month diplomatic effort, on October 6, 2017, the U.S. government announced that it will terminate the vast majority of economic sanctions against Sudan. The revocation will be effective on October 12, 2017. Sanctions against South Sudan will remain in place as will sanctions in response to the situation in Darfur.

The EU position regarding Sudan and South Sudan remains the same as it has been since 2014 and 2015 respectively.

As a result, it remains necessary to keep in mind the differences between the U.S. and EU regimes when assessing the propriety of transactions involving both Sudan and South Sudan.

You can read more about the changes in our client alert here.


Be Prepared: Advice for the Shipping Industry on the cyber threat

“Take the time to prepare and focus on prevention” was the message from the panellists in our webinar on cyber attacks in the shipping industry last week. Mark Johnson, Counsel in our shipping group, led a discussion with John Boles, Director of Navigant, Griff James, Director of DAMROD and Philip Thomas, Counsel in our IP, Tech & Data team.

John Boles emphasised the importance of “identifying your crown jewels” to ensure that resources are allocated to protecting your most essential assets. Once you have identified the ‘crown jewels’ it is equally important to identify the flow of data to and from these systems, according to Griff James, as it is these access points in and out of the system that are the weak points which could enable someone with malicious intent to enter the system.

The maritime industry is well versed in running drills and providing training:  the addition of cyber training should be a key focus of shipping companies and their insurers going forward. “Embed cyber awareness into your company”, advises Philip Thomas:  you need to ensure not only that the right policies are in place, but also that there is sufficient ‘buy-in’ for them at all levels of the company and a proper governance framework to ensure they are followed.

It is clear that, as the industry continues to embrace technology and with the data protection landscape about to become a lot more punitive, cyber security will remain a vital aspect of any risk management plan.

For more tips you can listen to the webinar here.


Trump issues new executive order expanding sanctions on North Korea

On the heels of United Nations Security Council Resolution 2375 released on September 11, 2017, President Trump issued a new executive order on September 21 (the EO) that greatly expands U.S. sanctions against North Korea, particularly so-called secondary sanctions, which apply to non-U.S. individuals and corporations. The EO establishes the following:

  • Broad new criteria for designating non-U.S. persons for sanctions, including blocking their assets in the United States
  • A “180 Day Rule” under which vessels and aircraft are barred from entering the U.S. for a period of 180 days after any port call or landing in North Korea
  • Authority for the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) to block any funds transiting accounts linked to North Korea that come within the U.S. or possession of a U.S. Person
  • Authority for OFAC to impose sanctions on foreign financial institutions that knowingly conducted or facilitated, on or after the date of the EO: (i) any significant transaction on behalf of certain blocked persons; or (ii) any significant transaction in connection with trade with North Korea

To read more about the EO, click here.

Financing risks of vessel modification outside the United States

Recent developments

Whilst there is much in the news at the moment about the relaxing of the Jones Act in the aftermath of the recent (and on-going) hurricanes, we consider the financing risks of vessel modification outside the United States:

The United States Jones Act limits the transportation of merchandise by water between points in the United States in vessels built in the United States, documented under the U.S. laws, and owned by the U.S. citizens. Any vessel which is later rebuilt outside the United States will lose its coastwise trade endorsement.

A vessel is deemed to be built in the U.S. only if all major components of the hull and superstructure are fabricated in the U.S. and the vessel is entirely assembled in the U.S. (46 CFR 67.97). Prior to any work being performed on a U.S. flag vessel eligible for coastwise trading, a vessel owner must submit an application to the U.S. Coast Guard National Vessel Documentation Center (the “NVDC”) seeking determination whether the proposed work would jeopardize the vessel’s coastwise trade eligibility.  NVDC regulations at 46 C.F.R. § 67.177 set out a comprehensive scheme for determining whether work done abroad constitutes foreign rebuilding, namely, the two-pronged test – the “major component test” (46 C.F.R. § 67.177(a)) and the “considerable part test” (46 C.F.R. § 67.177(b)).  Under a recent Foreign Rebuild Determination Letter by the NVDC, a third element – the “cumulative effect test” – has been added to the other two tests. Continue Reading

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