Exclusive Q&A on Shipping and Maritime Law with Stephen Askins

What are the main regulators and legislations that apply to shipping & maritime in your jurisdiction?

The main regulator in the shipping world is the International Maritime Organisation (”IMO”). In the UK the regulations on safety etc are implemented by the Maritime Coastguard Agency (“MCA”) on behalf of the Department of Transport as one of its executive agencies. The MCA works with other national and international bodies and ensures the safe construction and operation of UK vessels and vessels in UK waters. It is the MCA which carries out consultation exercises with the public to test proposed changes to existing legislation.

The main legislative framework is provided by the Merchant Shipping Act 1995 which deals with a number of issues including registration; safety; crew issues like manning and wages and pollution.  Detailed regulations can also be issued through Statutory Instruments which in shipping take the form of Marine notices (“M-Notices”) of which Merchant Shipping Notices provide mandatory guidance and must be complied with.

What does Paris Agreement (COP21) mean for the future of the shipping & maritime industry?

COP 21 does not apply to shipping or aviation and one bone of contention is how much shipping is contributing to CO2 emissions with some predicting it will represent 17% by 2050 if left unregulated. However, COP21 if nothing else sent a strong signal to the industry that targets and reduction measures are needed. The IMO has been accused of not grasping the nettle on shipping’s growing contribution to green house gas emissions. However, on the other side the International Chamber of Shipping has said that he measures adopted by the IMO combined with aggressive fuel efficiency measures “…will proportionately deliver far more ambitious CO2 reductions than the pledges so far made by governments.“

Shipping is well aware of its responsibilities in this regard and is seeking to deliver meaningful reductions. The real challenge in this respect is coming up with technology that replaces carbon based propulsion systems.
October 2016 sees some key decisions to be made by the IMO on the implementation of a cap on low sulphur fuels and on the collection of CO2 data.

Can you outline the other main safety and environmental concerns currently facing the industry?
 
It is worth highlighting two. Environmentally there is the Ballast Water Convention which comes into force in 2017 and safety-wise there are still significant issues over migrants at sea.
 
Migrants
Merchant shipping has been at the forefront of the crisis as hundreds of thousands of migrants have attempted the dangerous crossing from North Africa in unseaworthy boats, largely facilitated by criminal gangs. Tragically, as many as 5,000 migrants are so far thought to have perished in the Mediterranean.

Since the crisis began to escalate in 2014, merchant ships have participated in hundreds of operations and rescued over 50,000 people. Many have been rescued in very difficult, large scale operations involving several hundred people at a time. The merchant seafarers involved are civilians, many of whom have been severely affected by the desperate situations they have had to face.

ICS has been careful to avoid becoming involved in the general political debate about the migrant crisis. That said, while shipping companies will always meet their humanitarian and legal responsibilities to come to the rescue of anyone in distress at sea, the obligations contained in the IMO SOLAS and SAR Conventions were never intended to address this unprecedented situation. In 
co-operation with ECSA, ICS has therefore continued to argue that EU Member States must provide adequate SAR resources. Some governments appear to be taking the current level of assistance provided by shipping companies for granted, with the situation becoming ‘institutionalised’.

Ballast Water
The IMO Ballast Water Management (BWM) Convention is intended to address the problem of unwanted marine organisms having damaging impacts on local ecosystems through their unwitting transportation in ships’ ballast tanks. But the Convention is now proving to be one of the most complex and controversial pieces of technical regulation ever agreed by IMO Member States.

The Convention was adopted under huge political pressure in 2004, especially from the United States, when the technology required for shipowners to comply did not yet exist outside of a laboratory, and the huge costs of installing unproven ballast water treatment systems across the entire world fleet (currently estimated at about US$ 100 billion) were entirely unknown. There are still real concerns as to whether the technology available will meet the satisfaction of the Port Authorities.

With dry shipping market at rock bottom there is some hope in the industry that this convention will do for bulkers what double hulls did for tankers. There will be an accelerated scrapping of ships for which an upgrade will be too expensive and this will lead to a decrease in tonnage and an increase in rates.

What is being done to tackle the high number of attacks on vessels by pirates?
 
Piracy off Somalia has fallen to levels comparable to 2004 before the huge increase in attacks and hijackings. That is down to three key factors: i) Use of armed guards ii) greater understanding in and the following of the industry drafted Best Management Practice guidelines iii) actions of coalition naval forces. At the outset it was difficult to determine what the primary motivating factor was for the pirates: the money or the lack of risk. We can now safely conclude that it was the latter. The rewards rose dramatically between 2008 – 2011 with the largest ransom in excess of US$10m and there was a fear that the Somalis would not be deterred even by the threat of lethal force. However, as the defences improved and armed guards in particular stopped boardings from taking place the risk to the pirates became too great. Their business model assumed a lengthy outward sea passage with limited food and water but a near certain guarantee that they would get back on a commercial ship to take them home. Once that certainty was removed pirates began to perish at sea.  The commercial industry backed by a naval force that identified the key strategic pinch points turned the tide.
 
Off Nigeria the matter is left to local navies and there is no appetite for an international naval response as was seen in the Indian Ocean. On top of that the use of armed guards in the EZ of the littoral states is prohibited. It has meant that Nigerian pirates in particular continue to attack and kidnap crew off the Niger Delta.  We have learned that of pirates are not discouraged quickly then they will get a foot hold and others will join their ranks.      

What are the key types of insurance and what aspects of insurance do firms frequently neglect?

Ships go to sea with a basket of different insurance policies. These include Hull and Protection and Indemnity (“P & I”)  which is compulsory for ships in EU waters. P & I covers third party liabilities such as crew claims; cargo claims etc. P & I Clubs also provide cover for some of the insurance policies provided for in international conventions such as to cover pollution liabilities for tankers or wreck removal obligations.

Owners will also have war risk cover which is becoming more and more relevant in a increasingly troubled world where ships still have to trade to complex environments such as Yemen, Libya as well as those areas affected by piracy.  Many owners will also have kidnap and ransom cover the cost of which Several experts have suggested that in times of economic crisis the number of ship arrests tends to increase worldwide.

Has this been the case given the current economic difficulties caused by the oversupply of vessels and falling commodity and oil and gas prices?
 
Certainly the recent events surrounding the collapse of Hanjin has highlighted the fickle nature of the business and brings home the fact that many operators are losing significant amounts of money. That collapse has affected over 500,000 containers that are in limbo as ships are stopped outside ports to avoid their immediate arrest by creditors. Clearly the amount of goods being transported has fallen and there is an over supply of vessels in certain sectors. Often the arrests are triggered by banks foreclosing on loans and not willing to restructure the financial lines in place.
 
However, it is not always about the ships themselves and we have seen the collapse of one of the biggest bunker suppliers (OW Bunkers) which also saw wholesale arrests of ships as owners found themselves facing the prospect of paying twice for the same fuel.       
 
What are the laws and procedures for ship arrests in your jurisdiction?
 
The UK is a signatory of the Arrest Convention 1952 incorporated in to English Law. An arrest can also be affected under S. 20 of the Supreme Act 1981. The Act at S 21(2) sets out a number of maritime claims which allow the vessel concerned or indeed a “sister ship” to be arrested by way of an in rem claim assuming the defendant owner was the owner at the time the claim arose.  

Arrests can also be affected for maritime liens which “attach” to the ship and which survive a change of ownership.

The procedure for arranging the arrest of a ship is laid down in Part 61 of the Civil Procedure Rules and inter alia requires that a party making an application for arrest must request a search to be made in the Register to determine whether there is a caution against arrest. The solicitor who signs the relevant form must undertake personally to pay on demand the fees of the Marshal in London and all other expenses and he must declare that he has been informed that the claimant’s claim has not been satisfied, indicating the name of the ship to be arrested and the amount of security for the claim sought by the claimant and identify the person who would be liable on the claim in an action in personam. Once obtained the order is sent to the local port to be served on the ship and historically it was nailed if necessary to the mast!

How can you overcome conflict of laws and conflict of jurisdictions in shipping litigation?
 
We are fortunate in London that historically it has been the natural dispute resolution forum for maritime matters with a wealth of legal expertise and a highly developed set of precedents and case law. The jurisdiction clauses usually provide for Arbitration with the right of appeal to the Commercial Court where the judges are experienced practitioners of maritime law. The right to litigate in London was fiercely protected with anti suit injunctions being sought and given by the English Courts.
 
The situation was complicated by membership of the EU and the underlying principle that all Courts of the member states are to be regarded as having equal standing. That meant that the Court first seized had the right to determine its own jurisdiction. Further Arbitrations fall outside the relevant Regulations governing jurisdiction which has meant that sometimes Courts have been seized of matters where the underlying contracts provide for London Arbitration.  This has led to disputes on jurisdiction. In England the Court has the right to determine its jurisdiction as a preliminary issue rather than as part of the substantive claim. Further the Arbitration Act 1996 also give arbitrators the right to determine their own jurisdiction.
 
With Brexit now a reality we are likely to see a return to the days of forum shopping and the race to start proceedings in the correct jurisdiction supported by anti suit injunctions against claimants in other EU countries.              

Stephen Askins who left the Royal Marines in 1990, joined Tatham Macinnes in April 2015 after twenty five years at Ince & Co during which time he spent ten years in Piraeus. Stephen has been listed in the Lloyd’s List Top 10 Law Personalities in the recent years which lists the most influential people in shipping. Stephen’s primary area of expertise and experience is wet and dry shipping acting for owners and their insurers in the aftermath of maritime incidents including salvage, wreck removal, collisions and piracy. He advises on all areas of Admiralty law, contractual issues arising out of charterparties and bills of lading. Stephen has developed a strong following in crisis management in both the marine and non-marine sectors providing training, guidance and advice. His past military training combines well with a strong commercial and legal understanding of contractual and liability issues. He regularly lectures on this and writes extensively on the legal issues arising from piracy and hijackings. 

Stephen can be contacted on +44 (0)20 7929 4830 or by email at stephen.askins@tatham-macinnes.com