Significant amendments in the pipeline to Singapore’s Merchant Shipping Act

The Merchant Shipping (Miscellaneous Amendments) Bill was read in the Singapore Parliament for the first time on 19 November 2018.

The Bill proposes to make a number of significant amendments to Singapore’s merchant shipping legislation. These include:

  1. enacting the International Convention on Salvage 1989 as part of Singapore law; and
  2. adopting the 1996 Protocol to amend the Convention on Limitation of Liability for Maritime Claims, 1976.

The Bill is expected to be debated in parliament over the coming weeks. A further update will follow if the Bill is passed.

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The 2020 Global Sulphur Cap: Whitepaper

On 1 January 2020 amendments to the International Maritime Organization’s (IMO’s) International Convention for the Prevention of Pollution from Ships (MARPOL) enters into force.

Read our Shipping Group’s latest whitepaper, by Ron Clark, on the 2020 Global Sulphur Cap here.

Including topics covering:

  • 2020 SOx issues
  • An introduction to marine fuels
  • Abatement technology
  • Scrubbers
  • Control and regulation
  • Industry response
  • Alternatives

ICA Incorporation Clauses: An update

Readers will recall from Reed Smith’s recent blog that concerns have been raised regarding common Inter-Club Agreement (ICA) incorporation clauses.

A London Tribunal, in a recent arbitral award in which Reed Smith acted, held in favour of Reed Smith’s client that a traditional ICA incorporation clause incorporated the entire ICA, including clause 9 (i.e. the entitlement to security).

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On 8 May 2018, President Trump announced that the United States would withdraw from the Joint Comprehensive Plan of Action (JCPOA). In conjunction with that announcement, the President issued a National Security Presidential Memorandum (NSPM) directing the re-imposition of certain secondary sanctions, being those that apply to non-U.S. persons even where there is no U.S. nexus (e.g. no U.S. persons, no U.S.-origin goods, or U.S. dollar payments). As discussed in our earlier blog post, the first batch of sanctions was reimposed on 6 August  and the second batch will become effective 5 November.

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The English High Court provides much needed guidance on the effectiveness of sanction exclusion language, following the USA’s withdrawal from the JCPOA

  1. After a tumultuous year in the Iranian sanctions landscape, much needed guidance is starting to trickle down through the English courts as to the scope and application of the US secondary sanctions and the EU Blocking Regulation regimes. On 12 October 2018, the English High Court handed down judgment in Mamancochet Mining Ltd v Aegis Managing Agency Ltd [2018] EWHC 2643 (Comm), in which Teare J was asked to consider contractual sanctions exclusion clause wording in the context of a marine cargo insurance policy.
  2. The Claimants sought to claim under the policy for the theft of steel billets from bonded storage in Iran. The Defendant underwriters resisted payment on the basis of the policy wording, which provided inter alia that no cover would be provided if it exposed the insurer to any US or EU sanctions. The case was heard on an expedited basis in light of the fact that the relevant US sanctions will be re-imposed on 4 November 2018.
  3. The Claimants succeeded. The court held that it was insufficient for the insurers to allege there was a risk that the US / EU authorities might conclude that payment was prohibited and so impose sanctions. The insurers were required to go further and establish that (on the balance of probabilities) the payment would be prohibited under either EU or US sanctions regimes and would, therefore, expose them to a sanction. This judgment may well see the insurance market re-visit its sanctions exclusion language, though the position will once again evolve come 4 November.
  4. Of equal, if not greater, interest however are the judge’s obiter comments on the interaction between a contractual exclusion clause and the EU Blocking Regulation. Though non-binding, the judge appeared to be of the view that insurers may be able to suspend payments to their assured that would otherwise contravene US secondary sanctions, without being in breach of the EU Blocking Regulation. The insurers’ answer to allegations of a breach of the Blocking Regulation would be that the decision not to pay was predicated on a contractual entitlement rather than in compliance with a third country’s prohibition. The judge was not required to reach a firm conclusion on this because, on the facts, no secondary sanctions were engaged (a finding that would have been different post 4 November). No doubt this important point will be developed in subsequent cases.

ICA Incorporation Clauses

Last week, the International Group of P & I Clubs published a recommended Inter-Club Agreement (ICA) incorporation clause.

It is commonplace for charterparties to incorporate the ICA as a contract term.  For decades, ICA incorporation clauses have been considered relatively uncontroversial. However, the recent London Arbitration 18/18 decision has thrown the cat amongst the pigeons; the Tribunal found the effect of the ICA incorporation clause in that charterparty was to incorporate, or contractually apply, those parts of the ICA dealing with apportionment but not clause 9 which deals with the provision of security.

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Singapore courts and PRC courts sign memorandum of guidance on the recognition and enforcement of money judgments in commercial cases

On 31 August 2018, the Supreme Court of Singapore and the Supreme People’s Court of the People’s Republic of China (PRC) signed a memorandum of guidance (MOG) on the recognition and enforcement of money judgments in commercial cases.

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Cyber Risk in Shipping

The following guest blog was written by William Egerton LVO, Cyber Advisor, Charles Taylor

The amount of concern articulated about new technology in the recent survey conducted by Reed Smith is both welcome and revealing.  It is a healthy sign that respondents are concerned about cyber security and the impact of new technology on their business, whether for emissions control or other areas of improved performance.  But the rise of automation and the prospect of greater autonomous capability raise the issue of asset protection too: how can owners and charterers be sure that a vessel laden with precious cargo will travel without incident from port A to port B?  Will the (reduced) number of people left on board be able to regain control if the autonomous capability somehow gets subverted?  I would, however, challenge shipowners and charterers to match their rhetoric and concern with the resources necessary to do what is required to secure their business.

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IMO 2020 and Liberia’s stance

Last week, the Liberian flag state called for the IMO to issue a resolution or circular requiring early reporting of low-sulphur fuel availability by member states.  From the flag state’s point of view, littoral states should be doing more to assist shipowners and, by extension, time charterers in planning for compliance with the 1 January 2020 deadline for the global reduction of sulphur content (down to 0.5 per cent m/m) in marine fuels.

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Sanctions on Iran – Fight for the survival of the JCPOA

As readers will be aware, following President Trump’s announcement on 8 May 2018, the USA has indicated its withdrawal from the Iran nuclear deal – the JCPOA – and that it will be reimposing secondary sanctions on Iran, being those which affect non-U.S. persons. The first tranche of secondary sanctions took effect in early August, with the second to follow in early November.

The remaining participants to the JCPOA, including the EU, have been looking for ways to signal their continued commitment to the agreement with a view to persuading Iran to fulfil its obligations. The EU, for example, has recently reactivated its so-called “blocking” Regulation, as we reported here.  This week, the JCPOA signatories met in New York and released a statement explaining they were exploring ways of providing a mechanism to facilitate payment for Iranian exports. The expectation is that such a mechanism would be designed to avoid the use of U.S. dollars and therefore limit the possibility for interference by the U.S. authorities. The full text of the statement can be found here.

It remains to be seen precisely how this mechanism might work in practice, and indeed whether it would be successful in providing a route for non-U.S. companies to continue to trade with Iran whilst avoiding U.S. sanctions. The statement serves as a reminder that the issue of Iranian sanctions remains a live, and complex, issue.