Kevin Cooper’s core expertise is in shipping [including yachting) and marine insurance law. For commercial shipping, his main focus is on casualty cases, complemented by his dry shipping expertise in charterparty and cargo claims and ship and boatbuilding. A keen sailor, he also handles contentious yacht and superyacht cases and regulatory and compliance matters. His clients include major international shipowners and their insurers, charterers, cargo owners, salvors, shipyards and boat builders.
After leaving the Navy in the rank of Lieutenant Commander, he worked for the United States Department of Justice before joining a leading shipping and insurance law firm in 2000, working in its London, Shanghai and Monaco offices. He has been with MFB since 2018.
Kevin’s casualty response practice includes collisions, groundings, ship fires, cargo damage, pollution and salvage cases. He regularly handles high-value multi-jurisdictional matters and has been ‘noted for large-scale casualty cases’ in a leading directory. Such cases include the grounding and subsequent collision of the Khalijia 3, the container fire on board the Amsterdam Bridge, the sinking of the Atlantik Confidence (one of The Lawyer magazine’s top 10 cases of 2016), the Norman Atlantic ferry fire, the collision between the racing yachts Svea and Topaz, the collision between Afina I and Kiveli and the grounding of the Ever Given in the Suez Canal. Kevin also has significant experience of handling casualties in the offshore oil and gas and yachting sectors and has acted as an advocate in court, arbitration and mediation proceedings in the United Kingdom and China.
1 What is the current state of the shipping industry in your country?
The UK is one of the leading maritime centres in the world. Its shipping industry contributes approximately £7.7 billion to the UK GDP and directly supports about 240,000 jobs.
The UK maritime industry facilitates 95 per cent of all UK trade and is larger than both the automotive and aerospace transport industries. It extends beyond the pure shipping sector to include ports, marine equipment and business services (eg, brokers, financiers, insurers, lawyers and consultants). In all, the UK maritime industry contributes about £57 billion to the UK’s economy and supports around a million workers.
The UK ports industry is the second largest in Europe, handling almost 500 million tonnes of freight each year, as well as over 65 million international and domestic passenger journeys. There are about 120 commercial ports in the UK, including major all-purpose ports, ferry ports, specialised container ports and ports catering to specialised bulk traffic, such as coal or oil. There are also a large number of smaller ports catering for local traffic or specialising in particular sectors, such as fishing and leisure boating. The UK ports industry handles over 95 per cent of UK import and export, including 25 per cent of the UK’s energy supply and almost half of the country’s food supplies by volume, and directly employs about 118,000 people.
The UK marine industry’s key market sectors include leisure, military, commercial and offshore renewable energy. Marine systems and equipment form an important element of the UK’s exports.
While the military equipment sector is important, the global merchant shipping industry provides a massive market for commercial systems and equipment. The UK also has a thriving superyacht industry, with a turnover of around £700 million a year and over 4,500 employees. The superyacht industry has more than doubled in the past 10 years. Many leading international yacht designers are based in the UK. The leisure marine sector mixes service and manufacturing, from surveyors and charterers to specialist equipment manufacturers.
The UK leads the world in respect of marine insurance, writing about a third of global marine insurance premiums and 60 per cent of professional and indemnity insurance. Twenty-six per cent of global shipbroking is undertaken in the UK.
The UK government is committed to the training of seafarers. The UK’s maritime education and training infrastructure are important in producing the next generation of maritime professionals. It is estimated that just over 22,510 UK seafarers were active at sea during 2022, with around half working as officers.
The UK is home to leading maritime regulatory bodies, such as the International Maritime Organization (IMO) and the International Association of Classification Societies.
The Baltic Exchange, an independent source of maritime market information for the trading and settlement of physical and derivative contracts, is also based in the UK. Other influential maritime business service provider bodies are also located in the UK: the UK Chamber of Shipping, Maritime London, UK Major Ports Group, British Ports Association, British Marine, the Society of Maritime Industries, the Admiralty Solicitors Group and the Shipbuilders and Shiprepairers’ Association. These all help to support and promote the UK marine industry.
London is a leading centre for maritime financing. It also provides leading arbitration and mediation services to the global industry, from the London Maritime Arbitrators Association, the London Court of International Arbitration and the International Dispute Resolution Centre. During the covid-19 crisis, English courts and arbitral tribunals were quick to successfully adapt to remote hearings.
2 What are the prevailing shipping market trends affecting your country? What has been the impact of the covid-19 pandemic?
Since the World Health Organization declared covid-19 a pandemic in March 2020, the world has seen a huge amount of upheaval. Yet, despite unprecedented events posed by the past three years, the long-term challenges and opportunities for the sector remain similar. While the pandemic led to an initial lull in activity, this was followed by a boom in demand that has since levelled. It drove demand for shipping imports to levels that UK ports were not equipped to handle, causing a massive backup. A particular issue that UK ports (like ports in other countries) are also experiencing is the lack of available haulage that remains a long-term challenge post covid-19. This has meant that some freight is not being collected as rapidly as they would normally be from port terminals of all types, not just container ports. This has resulted in some further delays for a range of ports, and terminal operations are working with their customers to get these goods out of their ports to avoid further congestion. Most ports and terminals have since reported the peak to have passed, with only comparably smaller congestion occurring. The offshore sector has also been affected by the pandemic. Many offshore oil and gas companies had ceased extraction activity, meaning that some port cargo and support activities were falling substantially. However, it has been reported that the offshore industry, with the implication of international political events, has now returned to pre-pandemic activity levels, with record high gas and oil prices recorded. Renewable energy is also important for the country and ports; however, the pandemic exerted an unprecedented shock across the entire energy sector, impeding the progress of energy transition. Albeit the challenges facing the energy transition, the pandemic also opens the door to opportunities. Now is a critical window for energy transition and sustainable development, especially as the public is calling for a green stimulus plan. The UK government has since responded by beginning to invest in green maritime technology, including a 77-million-pound investment in Zero Emission Vessels and Infrastructure. The impact of covid-19 aside, global shipping has experienced difficult challenges since the 2008 financial crash. A slump in the shipping market, with initially deflated oil and commodity prices, together with overcapacity in some sectors, affected shipping worldwide, not just the UK. The container market was the most notable exception, with record demand and freight rates being experienced. Since then, political developments in Ukraine have caused a rapid increase in oil and commodity costs due to the larger implications of resource accessibility and route disruptions. Although the effects of covid-19 have been seen in the reduced amount of ship finance transactions and the amount of finance available to the shipping market, as well as in the amount of business being placed in the London insurance market, UK lawyers, courts, arbitrators and mediators have still been involved in a large number of disputes that have arisen as a result of adverse market conditions, either because UK-based parties are involved or because the relevant contracts are governed by English law or the parties have submitted to the jurisdiction of the English courts or arbitration in London, as the common jurisdiction of choice for companies in the shipping sector. Indeed, it has been reported that the dispute resolution sector has been busier than ever in the past year. Elevated levels of inflation experienced by the UK due to domestic policies and government decisions have also adversely posed operational cost limitations and a decline in demand for goods, limiting the overall demand for shipping.
3 Are there any recent domestic or international political or legislative developments that may have an impact on your country’s shipping market?
As part of its strategy to cut greenhouse gas emissions in shipping, the IMO has adopted amendments to MARPOL. These amendments can be found in Annex VI and will require all existing ships (that are over 400GT and fall within Annex VI) to calculate their ‘Energy Efficiency Design Index’ (EEXI) to establish their annual operational carbon intensity indicator (CII) and CII rating. Ships will then get a rating of their energy efficiency (A, B, C, D, E – with A being the best rating) and the aim will be to improve the energy efficiency of the vessel’s design.
The IMO states:
Administrations, port authorities and other stakeholders . . . are encouraged to provide incentives to ships rated as A or B also sending out a strong signal to the market and financial sector. Further, a ship rated D for three consecutive years, or E, is required to submit a corrective action plan, to show how the required index (C or above) would be achieved.
The requirements for EEXI and CII certification came into effect on 1 January 2023. The measures are part of IM’s commitment under its 2018 Initial Strategy on Reduction of GHG Emissions from Ships to reduce carbon intensity from all ships by 40 per cent by 2030, compared to 2008.
Brexit has been a key political development of recent years for the UK shipping market. The UK officially left the European Union on 31 January 2020. Under the terms of the EU-UK Withdrawal Agreement, the UK entered into a transition period during which EU law continued to apply to the UK. The transition period ended on 31 December 2020. The European Union (Withdrawal) Act 2018 created a new body of UK law, known as retained EU law, providing a new constitutional framework for the continuity of ‘retained EU law’ that applied to the UK at the end of the transition period. Thousands of amendments to that retained EU law also entered into force at the same time. This has seen the continuation in the UK of much of the body of rules and regulations from the EU legal framework.
For example, the Merchant Shipping (Recognised Organisations) (Amendment) (EU Exit) Regulations 2019 have been enacted to allow for EU Regulation (EC) 391/2009 on common rules and standards for ship inspection and survey organisations to continue to operate as retained EU law in the UK.
The UK’s withdrawal from the EU has also had an effect on sanctions. The UK’s sanctions regime has been derived from that of the EU but, as of 1 January 2021, the EU sanctions regime is no longer applicable to the UK. The UK now has its own autonomous sanctions and export control regime, which is principally regulated by the Sanctions and Anti-Monetary Laundering Act 2018 (the Sanctions Act). These UK sanctions apply to the conduct of all UK persons, wherever they are in the world, including branches of UK companies based overseas.
The UK’s current sanctions broadly mirror the existing EU sanctions but there are some key differences, with the UK sanctions being more detailed than their EU counterparts in some areas. For example, there are more comprehensive prohibitions that apply to Russia and Syria in relation to energy-related products and crude oil and petroleum-related products respectively. There are also more comprehensive sanctions that apply to Russia following Russia’s invasion of Ukraine, which fall under The Russia (Sanctions) (EU Exit) Regulations 2019 and its subsequent amendments.
It is expected that the sanctions regimes between the EU and the UK will diverge over time.
Bearing in mind that the EU is the UK’s largest trading partner and that, post-Brexit, the UK would no longer benefit from EU internal trade access without a bilateral agreement between the UK and the EU or the network of EU bilateral and multilateral external trade agreements with other countries. Freight statistics from the UK Department for Transport highlight the impact that Brexit has had on British ports. They state that ‘compared to January-March 2020, the total freight tonnage decreased by 9 per cent, while traffic fell by 13 per cent – with inward units hit the hardest with a 17 per cent fall.’ Despite this statistic, they state that ‘things for ports have changed, but not in the dramatic way it was predicted, as the large majority of UK ports are used to dealing with goods coming and going from all over the world.’
In the long term, Brexit is not expected to have a dramatic effect on total UK maritime volume, particularly as new trade agreements between the UK and other EU and non-EU countries are concluded.
London’s prominence as a major insurance, legal, broking and general shipping services hub means that many businesses that are currently based in the UK, or that do significant business with the UK, will not move or take their business elsewhere.
Indeed, some businesses that currently operate abroad may choose to move to the UK once EU laws cease to be applicable.
Irrespective of the outcome of the UK’s trade discussions with both EU and non-EU countries, English law is likely to continue to be chosen to govern international contracts and transactions. English court jurisdiction and arbitration in London are also likely to remain the preferred choices for dispute resolution among international contracting parties: there are more arbitration proceedings seated in London each year than in Singapore, Paris, Stockholm, Geneva, Dubai and Hong Kong combined. This is supported by a recent survey that concluded that, in the wake of Brexit and covid-19, maritime arbitration in London continues to thrive. The London Maritime Arbitrators Association continues to report high numbers of LMAA arbitrator appointments, with 3,193 arbitrator appointments in 2022.
The Department of Transport has developed a long-term strategy, Maritime 2050 – Navigating the Future, which aims to ensure that the UK remains one of the world’s leading maritime nations.
4 What are the key regulatory and compliance issues for your country’s shipping market? What’s coming up in the near future?
The UK is subject to a wide range of regulatory legislation under domestic, regional (to the extent that EU legislation, as it applied to the United Kingdom on 31 December 2020, is now retained EU legislation) and international law.
Sulphur cap
The regulatory landscape for sulphur emissions includes resolutions and conventions sponsored by various UN agencies, such as the International Maritime Organization (IMO) and the International Labour Organization (ILO).
In recent years, the IMO has been particularly active on environmental regulation, reflecting the global initiative to reduce ship emissions and pollution of the marine environment. From an international point of view, the IMO periodically proposes and adopts amendments to revise the key convention in this area – the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). The revised Annex VI to MARPOL (and the associated NOx Technical Code 2008) came into force on 1 July 2010 and imposed more stringent limits on sulphur content in fuel. In particular, the revisions provided for a reduction in the sulphur content of any fuel oil used on board ships outside the ECAs (the global sulphur cap) to 3.5 per cent (from the previous 4.5 per cent) from 1 January 2012, followed by a further reduction to 0.5 per cent from 1 January 2020. A further amendment adopted by the IMO entered into force on 1 March 2020 and prohibits the carriage of non-compliant fuel oil for combustion purposes for propulsion or operation on board a ship (unless it is fitted with a scrubber).
To bring sulphur limits within the EU in line with IMO-imposed levels, Directive (EU) 2016/802 came into force on 10 June 2016. The Directive was implemented into the UK’s domestic law by the Merchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008. Following the UK’s withdrawal from the EU, the UK enacted the Merchant Shipping and Other Transport (Environmental Protection) (Amendment) (EU Exit) Regulations 2019 to retain the existing requirements under the Directive.
From 1 May 2025, the Mediterranean will be designated as a Sulphur Emission Control Area (SECA) within MARPOL Annex VI. This means that ships within the area must use fuel with 0.1 per cent sulphur content. It is estimated that this reform will prevent 1,000 premature deaths per year and reduce new cases of child asthma by 2,000 every year in the Mediterranean basin.
Cyber-risk and cyber-risk management
Maritime cyber-crime is on the rise, over the years there has been a host of major attacks on shipping companies, necessitating greater cyber-risk management within the industry. The IMO has issued guidelines on maritime cyber-risk management that provide high-level recommendations and has also adopted Resolution MSC.428(98). Maritime Cyber Risk Management in Safety Management Systems, which encourages administrations to ensure that cyber-risks are appropriately addressed in existing safety management systems, no later than the first annual verification of the company’s Document of Compliance after 1 January 2021.
On 7 June 2022, the IMO released further Guidelines on Maritime Cyber Risk Management (MSC-FAL/Circ.3/Rev.2). These guidelines are expressed in broad terms to have a widespread application, recognising that no two organisations in the shipping industry are the same. Part of the guidelines outlines the functional elements to support an effective cyber management system, which are: Identify, Protect, Detect, Respond and Recover. Ensuring that provisions covering each of the above within the Safety Management Systems will go some way to limit the risk of cyber-crime.
Ship recycling
International standards on ship recycling are addressed in the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships 2009 (the HKC). Although the HKC is not yet in force, the EU incorporated elements of the HKC regime into EU law through Regulation [EU] No. 1257 /2013 (the 2013 Regulation) on 30 December 2013. The regulation remains applicable to the UK since 1 January 2021, following the end of the transitional period for the UK’s withdrawal from the EU, by the Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019 (the UK Ship Recycling Regulation).
As of 1 January 2021, UK ships of 500 gross tonnage and over can only be recycled at approved facilities set out in a list set out by the UK. The MCA has provided a list of 44 approved ship recycling facilities, including those on the EU list and some additional ones. It is expected that the lists between the EU and the UK will diverge further over time.
Seafarers
Following P&O Ferries’ firing 786 seafarers in March 2022, said to be with the aim of guaranteeing the company’s future viability, it was announced that new laws will be implemented to protect seafarers. It was announced that:
- the new laws will mean that all UK ferry operators will be compliant with the National Minimum Wage;
- the MCA will review their enforcement policies;
- the government will take actions to prevent employers who have not made reasonable efforts to reach agreement through consultations from using ‘fire and rehire tactics’;
- a new statutory code will allow a court or employment tribunal to take the manner of dismissal into account if an employer fails to comply with the code and to impose a 25 per cent uplift to a workers’ compensation;
- there will be renewed focus on the training and welfare elements of the UK flagship maritime strategy;
- UK reforms to Tonnage Tax will come into effect, making it easier for maritime businesses to set up in the UK;
- the UK’s international partners will be engaged to discuss how maritime workers on direct routes between countries should receive a minimum wage; and
- there is an intention to give British ports new statutory powers to refuse access to regular ferry services that do not pay their crew the National Minimum Wage.
A year on, action has been taken to protect seafarers, with the Seafarers Wages Act 2023 receiving royal assent on 23 March 2023. Prior to this Act, vessels that frequently call at UK ports could avoid following UK minimum wage law (£10.42 per hour). This new legislation provides harbour authorities with the power to request a declaration that UK minimum wage law is being followed. This only applies to vessels that have entered a single UK harbour on at least 120 occasions during the year, or have reasonable grounds to believe they will enter 120+ times during the year. It applies irrespective of whether the vessels are UK-registered and even if the seafarers are not ordinarily resident in the UK.
Failure by the vessel to provide such a declaration will result in the imposition of surcharges and further regulations will outline the tariffs for these surcharges. Failure by vessels to pay surcharges grants UK ports or harbours the right to refuse entry to these vessels. The legislation is unlikely to impact ships operating internationally, as it is unlikely such a vessel would call at a single UK port 120 times a year. Further, despite receiving royal assent, the enforcement provisions within the Act have not come into force, meaning that, as of time of writing vessels can still avoid following UK minimum wage law. There are further caveats: the Act expressly excludes protection to seafarers working on leisure or recreation vessels. There is also uncertainty surrounding whether multiple ships can form a single ‘service’ for the purpose of visiting a single UK port 120 times per year – this will need to be clarified by future regulations.
Another development is that the Spring Budget 2023 confirmed that there would be an 18-month election window for re-entry to the UK Tonnage Tax regime, allowing for ship management companies to benefit from a lower tax burden under the Tonnage Tax regime. It is hoped this reform will reinvigorate the UK’s position as a leading shipping market by encouraging shipping companies to move to the UK.
Financial sanctions
On 27 July 2020, the UK Office of Financial Sanctions Implementation (OFSI) issued its Maritime Guidance, providing ‘financial sanctions guidance for entities and individuals operating within the maritime shipping sector’. The Maritime Guidance identifies a number of illicit and suspicious shipping practices, including ship-to-ship transfers used to facilitate the illicit transfer of coal, crude oil and petroleum products to evade sanctions, disabling or manipulating the automatic identification system on vessels, and other topics. The guidance further describes best practices for reducing sanctions risk exposure. The OFSI does not recommend any specific measures to mitigate deceptive shipping practices, only advising that each company should ‘assess its own risks and put due diligence measures in place to manage these risks’.
Following the attempted Russian invasion of Ukraine, the UK government introduced the Economic Crime (Transparency and Enforcement) Act 2022, which included important changes to the OFSl’s powers. These measures commenced on 15 June 2022. For breaches of financial sanctions committed after 15 June 2022, the OFSI can impose civil monetary penalties on a strict civil liability basis. The previous requirement for the OFSI to prove that a person had knowledge or reasonable cause to suspect that they were in breach of financial sanctions was removed, but they still bear the burden of proof to establish that there was a breach of financial sanctions prohibitions. This brings UK financial sanctions legislation more in line with the legal test used for the import and export of arms, and the model used for US financial sanctions. There is no equivalent change to the financial sanctions criminal legal test or threshold.
Effective from 5 December 2022, the UK, along with EU & US imposed a price cap on Russian Federation oil of US$60 per barrel. While the UK does not import Russian oil, it is a world leader in associated maritime services such as broking. Crucially, the price cap is linked to associated services ban precluding UK broking services involvement if the fuel is sold above the price cap.
On April 3 2023, the OFSI issued its Industry Guidance on UK Maritime Services Ban and Oil Price Cap. This included some much-needed clarity, such as where fuel is mixed. OFSI draws a distinction between blending and co-mingling, with blending referring to the process whereby two or more goods are combined with the intent to create either new specification of input goods or goods with a different HS code. Co-mingling, on the other hand, refers to the loading and/or storage, in the same cargo or storage space, of fungible goods from two or more sources.
Where goods have been co-mingled, the Russian volume will be subject to the relevant price cap, whereas blended goods are considered to be substantially processed goods and as long as this occurs outside the Russian Federation they will no longer be considered to originate from the Russian Federation, thus the price cap no longer applies.
5 What are the shipping industry’s current sources of finance? How do you predict they will develop, and what are the advantages and challenges to financing a vessel in your country?
In the years since the 2008 financial crisis, ship financing has changed considerably, with long-standing conventional financiers reducing their exposure or withdrawing from the market altogether, and new alternative sources of finance emerging.
According to the Petrofin Global Index, global ship lending by the top 40 shipping banks has fallen by almost 35 per cent since 2011. For more than a century, traditional ship finance has been based on financiers (banks largely in Europe and the US) taking a first priority mortgage on the ship.
This proved to be an effective way of lending to the sector, providing security in case the shipowner could not repay. As successive financial crises struck, the banks that historically dominated the shipping market (particularly the European banks) began to withdraw from shipping, either closing their books to new business or, in some cases, running down their portfolios and exiting the industry altogether (eg, The Royal Bank of Scotland and Commerzbank). The Scandinavian bond market closed its doors, and the speculative short-term investors consisting of hedge funds and venture capitalist trusts found immediate losses to be at odds with their short-term investment strategies, and so they too began to extricate themselves from the industry. Although this has been triggered by the financial crisis, other factors include the increasing regulation and scrutiny faced by European banks, particularly as a result of the Basel Regulations and following the significant losses incurred by those banks in recent years as a result of financing the shipping industry.
As Western banks have struggled to meet capital ratio criteria and other banking regulatory requirements, some have been altering their departmental structures. For example, the likes of DNB, ABN Amro and BNP have incorporated their independent shipping departments into a larger internal corporate structure.
The continuing retreat of the Western banks has provided an opportunity for East Asian players, particularly the Chinese banks, with an abundance of capital, to step in and build new shipping portfolios or expand existing ones. Although there has been a small decline over the past few years, the Far East remains the new ship finance protagonist. At the time of the financial crisis in 2008, the top 15 global shipping lenders did not include a single East Asian bank. In 2018, the Export-Import Bank of China led the market, with the Bank of China and Sumitomo Mitsui Trust Bank Ltd occupying places in the top five. In 2020, Export-Import Bank of China dropped to second place, with BNP Paribas leading the market, but the previously mentioned East Asian banks still occupy places in the top five.
In 2023, shipping finds itself in a strange position. For the first time since the global financial crisis, the industry looks to be an attractive one to lend to. Owners are likely to use the income generated in 2021 to pay down debt and look to become debt-free. There is also likely to be a shift away from S&P-related loan transactions to newbuilding ones, but the higher newbuild prices may pose some difficulties for lenders and owners.
Environmental issues continue to play an important role in ship finance. This is due, among other things, to increased environmental regulation (notably climate change legislation), emerging green technologies and enhanced corporate commitments from lenders to reduce environmental impacts, such as carbon footprints.
As a result, lenders are becoming more committed to addressing environmental issues and increasingly selective as to whom and for what purpose they lend money.
The UK remains well placed in its continued service of the shipping industry, with a wealth of experience and advisers with established international offices headquartered in London. English law is particularly well-suited to ship finance, being one of the oldest and most stable of legal systems: it is predictable, being based upon precedent, much of which is rooted in the country’s maritime tradition and supported by specialist law firms that have grown with the industry. While traditional Western shipping banks are withdrawing from the sector, in light of the international nature of the service providers who have supported this industry, London remains a core hub for managing transactions, even though the source of the finance may originate from more easterly shores.
6 Have there been any recent significant domestic or foreign court decisions or arbitration awards that impact on your country’s shipping market?
Parties to international shipping contracts commonly choose English law to govern their contracts because it is predictable and commercial. Similarly, they often choose to have their disputes resolved in the English courts because English courts and judges have a reputation for offering quality and experience. As a result, many significant shipping decisions are heard in the English courts, and the past year has been no exception.
London also continues to be the most popular international arbitration centre in the world. While, in the UK, arbitration awards are confidential to the parties, any English arbitration award that goes to appeal will be heard by the English courts, and that judgment will be made public. There is, therefore, a sizeable body of English shipping case law to guide the market in its day-to-day commercial and contractual activities.
It is not possible to do justice to all the significant case law that has been generated by the English courts recently, but it is worth highlighting the following:
FIMBank plc v KCH Shipping Co (The Giant Ace) [2023] EWCA Civ 569
This case started as an appeal under section 69 of the Arbitration Act 1996. The underlying claim was brought by FIMBank plc, as the holder of bills of lading, for the alleged misdelivery of cargo by the contractual carrier, KCH Shipping Co, Ltd. The bills were subject to the Hague-Visby Rules, including the time bar in article III Rule 6 of one year after delivery which applies to claims against carriers. FIMBank .lc served a Notice of Arbitration on KCH Shipping Co. after the time bar expired. The Court of Appeal confirmed that the time bar in article III Rule 6 of the Hague-Visby Rules will apply to claims in relation to misdelivery after discharge.
Unicredit Bank AG v Euronav N. [2023] EWCA Civ 471
This case addressed whether a shipowner, Euronav, was liable to the Bill of Lading holder, Unicredit, for delivering a cargo of oil from the vessel without production of the Bill of Lading. When determining whether a Bill of Lading contained or evidenced a contract, the relevant question to be answered was: what was the presumed intention of the parties at the time that the Bill of Lading was issued? The Court held that at the time of discharge there was a Bill of Lading contract that was breached by the shipowner discharging without production of the Bill of Lading, but that the breach of contract did not cause any loss because had Euronav performed its obligations by refusing to discharge without production of the Bill of Lading, Unicredit would have required Euronav to discharge without production of the Bill of Lading such that Unicredit’s security interest would have been lost in any event.
London Arbitration 2/23, (2023) 1129 LMLN 2
This London Arbitration decision addresses the unseaworthiness of a vessel based on a defective passage plan and allegations of unsafe port due to incompetence of a pilot or tug masters. With regard to the former, the Tribunal held that the vessel’s passage plan was defective and that the master was negligent in failing to obtain a copy of the appropriate harbour chart. It also held that that the vessel was unseaworthy at the beginning of her voyage because she lacked the appropriate chart to prepare a berth-to-berth passage plan that was compliant with IMO Resolution A893(21). There was no evidence that the owners exercised due diligence to ensure that the vessel had a compliant passage plan before she departed for Chaozhou. However, the unseaworthiness of the vessel was not causative. The cause of the grounding was the negligent navigation of the vessel during her inbound passage to her discharge berth. With regard to the latter, the arbitral tribunal concluded that this was a one-off mistake by an otherwise competent pilot, and not a defect in the set-up on the port and rejected the owners’ claim for breach of the safe port warranty in a time charter party.
Trafigura Pte LTD v TKK Shipping Pte Ltd (The ‘Thorco Lineage’) [2023] EWHC 26 (Comm)
This decision addressed article IV(5)(a) of the Hague-Visby Rules, which limit’s the carrier’s liability for ‘loss or damage to or in connection with the goods’ by reference to the higher of two alternative figures: 666.67 SDR per package or unit or 2 SDR per kilogram of gross weight of ‘the goods lost or damaged’. The Commercial Court has held that ‘goods lost or damaged’ means ‘goods lost or damaged physically or economically. That includes a diminution in market value, a liability to a third party such as salvors, or a requirement to tranship or incur other costs.
DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd (The ‘Newcastle Express’) [2022] EWCA Civ 1555; [2023] Lloyd’s Rep Plus 52
The Newcastle Express concerned a charter party that never came into existence. The shipowners purported to hold the Charterers in repudiatory breach and appointed an arbitrator pursuant to the London arbitration clause in the charter. The Court of Appeal held that the arbitrator had no authority as there was no contract agreeing to arbitration. The Court of Appeal also addressed the limits of the doctrine of separability. The doctrine applies to questions of contract validity only, but it does not apply to questions of contract formation.
7 What is the outlook for your country’s shipping market? Which sectors are likely to grow, and which not?
The UK government is highly committed to maintaining the UK as a leading maritime centre and promoting its growth. In recognition of the UK maritime industry’s significant contribution both to the UK economy and to the global shipping market, the UK Department of Transport has published a series of maritime reports and studies over recent years.
The most recent, and prominent, is the Maritime 2050 strategy report, launched in January 2019 by the UK government in close partnership with Maritime UK, a body representing the UK maritime sector. Since then, a total of five reports have been published, with the latest one released in March 2023, reflecting the ongoing commitment to monitor and shape the future of the UK’s maritime industry. This long-term strategy details the UK’s long-term ambitions for developing its core strengths across seven sectors in the maritime industry, as follows:
- UK competitive advantage: The UK has maximised its strengths in maritime professional services, law, finance, insurance, and management. The establishment of the UK Shipping Concierge Service, simplification of tonnage tax, and initiatives like Regional Clusters have successfully fostered growth and improved collaboration, enhancing industry competitiveness.
- Environment: The industry’s most significant challenge lies in addressing emissions. The UK is determined to become a global frontrunner in zero-emission shipping, which involves not only revitalising ports but also rejuvenating surrounding communities.
- People: The government has successfully implemented the Seafarers’ Wages Bill, showcasing progress in addressing the issue. By prioritising the growth of the UK’s maritime workforce and enhancing diversity, the country has solidified its reputation as a global leader in providing maritime education and training.
- Trade: The maritime sector’s positive performance in upholding robust supply chains during the covid-19 pandemic has been duly recognised. Recent global events have underscored the necessity for a lasting resilience plan that extends beyond the pandemic, which the UK is actively pursuing.
- Infrastructure and ports: support the continued multi-billion pound commercial investment in maritime infrastructure that makes the UK a globally attractive destination for all maritime business.
- Cross-government working: The UK government recognises the importance of collaboration among its departments for the success of Maritime 2050. Additionally, the government places great emphasis on ensuring that relevant departments and agencies have a clear understanding of the roles and expertise of ports. This understanding is crucial for enhancing the effectiveness and competitiveness of the ports sector.
- Technology: strengthen the UK’s reputation for maritime innovation and safety standards, maximising benefits to the UK from new maritime technology through its world leading universities, maritime small and medium-sized enterprises, and global companies.
The retention of seafarers has been a challenge in the maritime industry, with the decline in the number of the UK workforce at sea attributed to various factors. The wider historical trend of larger ships requiring fewer crew members, coupled with the suppression of wages by an international labour supply, has resulted in a shortage of British seafarers. While the UK has implemented initiatives to increase training numbers, the latest figures still fall short of historical levels. Moreover, as the UK embraces emerging technologies, it is likely that seafaring will undergo a transformation, with a shift toward shore-based roles due to the growing demand for digital talent. The ongoing Ukraine war further compounds these difficulties, disrupting trade routes, increasing security risks, and causing uncertainty for seafarers and their retention.
In June 2021, Maritime UK published a new report assessing progress by government and industry in delivering the recommendations set out within the Maritime 2050 report. Maritime UK chair Sarah Kenny said she was pleased, in spite of the global upheavals, ‘that the sector was able to keep its eye on Maritime 2050 and make real progress in delivering its recommendation’s.
Such is the value that the sector attaches to the first long-term national government strategy for the maritime industries.
The Inside Track
What are the particular skills that clients are looking for in an effective shipping lawyer?
An effective shipping lawyer needs to combine solid knowledge of the law with a grasp of technical issues and sound commercial judgement. Commercial acumen is particularly important in the challenging market conditions that we have witnessed in recent years, because a value judgement often has to be made as to whether a case is worth pursuing. A shipping lawyer must be fully aware of global market and other relevant developments.
What are the key considerations for clients and their lawyers when arranging finance for a shipping transaction?
One key consideration for the borrower and the lender is flexibility, but their respective approaches will likely be opposing. The parties and their advisers must strike a balance between robust protection for a lender and freedom to operate in a commercially viable manner for the borrower. This requires industry experts, familiar with the nature of the assets and the industry, and a spirit of cooperative, relationship-driven transaction management.
What are the most interesting and challenging cases you have dealt with in the past year?
The grounding of the Ever Given in the Suez Canal has been one of the most interesting cases that I have handled during the past year. More recently, the political developments in Ukraine have resulted in numerous requests for advice on sanctions and the effect on existing charter commitments.
