The Maritime Advocate–Issue 840

Posted:

1. Avoidance strategy
2.  LOIs and good drafting
3.  Cyber safety
4.  Order enforcement
5. EU ETS debate
6. Lube rules
7.  Cooperation agreement
8.  Demurrage risks
9.  IUMI view
10. Be prepared

Readers’ responses to our articles are very welcome and, where suitable, will be reproduced. Write to: contactus@themaritimeadvocate.com

 


1. Avoidance strategy

By Michael Grey

Our nearest city – I may as well name it as Brighton – has made itself such a miserable ordeal for visitors, that we, along with many others, just don’t bother to go there and seek other more pleasant alternatives. Perhaps they just do not want our custom, but perhaps somebody in their benighted authority ought to think about the logical, long-term consequence, if more and more people adopt a policy of positive avoidance and divert to attractive places like Horsham.

I wandered down this train of thought this week after reading about ET. That is not Extra-terrestrials (they probably have taken over Brighton), but Emissions Trading. This is a wheeze that has been cooked up in Brussels to encourage shipowners to save the planet, or depending on your point of view, to fleece them. A new term for what the IMO used to term “market-based measures” and it is due to inflict itself upon sea carriers in the coming months.

Like most of the schemes that have been devised by the European Commission, ETS is being introduced with a lot of unanswered questions and it has been suggested that it will benefit traders and legal experts far more than it will ever assist maritime sustainability. Just working out whether such a scheme will be the responsibility of owners, charterers or the wretched ship-managers, will surely exercise the minds of bureaucrats, lawyers and arbitrators for many lucrative years. Who collects the money and what is done with it? How does it assist in persuading shipowners to go greener? It largely depends upon who you ask, while the mechanism for passing this on to the user of sea transport, without endless litigation by enraged shippers, is yet to be devised. Indeed shippers are probably already well advanced in ensuring that any bucks don’t stop with them.

It is interesting to note that what I have called the “Brighton question” alluded to above, has occurred to the perceptive management of the Port of Valencia. They have asked whether making the ports of Europe less attractive, or too much trouble, by the imposition of ETS might just make devious ship operators …deviate.

It is a very relevant question. You might say that such is the magnificence of the major European ports that there are no feasible alternatives, but it has been pointed out that there are ports with considerable ambitions within reasonable feeder-ship proximity to the coasts of Europe. Some thrusting executives in the ports of Morocco, Egypt, Israel and Turkey could well be seeing that there is an opportunity for business, selling a way into Europe with less trouble for long-haul shipping companies, which could turn around their ships without the nuisance of ETS.

Indeed, staying well clear of Europe might produce other benefits such as the avoidance of the increasingly demanding prescriptions on recycling, along with all the onerous reporting and other bureaucratic burdens which only ever seem to increase.  It would obviously be good business for feeder operators, which, because of their short hauls, would be less affected by the new impost.

In reality, it would only be a minority of ports which could move fast enough to cream off some of the traffic into Europe from the East or West. But the fact that the question has been asked by the deep thinkers of Valencia perhaps ought to trigger alarm bells about what is being inflicted by the European authorities, impatient with the international regime of the IMO, upon shipping.

Cancelling the Pathfinder

If as a navigator, you have chased ocean currents around looking for some free assistance on an ocean passage, you probably have appreciated the sterling work done in the 19th Century by Lieutenant Matthew Fontaine Maury USN 1806-73. Recognising the value of wind and current data found in ships’ logbooks, he was one of the fathers of oceanography and produced sailing charts that revolutionised the tracks followed by mariners, showing the relationship between prevailing winds and the great ocean currents.

Nicknamed the “Pathfinder of the Sea” for his valuable work and a friend of that other   meteorological hero Admiral FitzRoy RN, Maury established America as a leader in this field and was the guiding light for the first international maritime conference held in Brussels in 1853. But sadly, Maury elected to fight on the Confederate, and ultimately losing side, in the American Civil War. This might have been a long time ago but is surely not unconnected to the recent decision by a department in the United States Navy to rename the oceanographic ship named after this maritime pioneer USS Marie Tharp, a distinguished geologist of more modern times. Poor Maury, it seems; the wrong sex and on the wrong side, has been a victim of the revisionists and finally cancelled.

Michael Grey is former editor of Lloyd’s List


2. LOIs

In this piece, Brian Perrott and Colin Chen of HFW (see brian.perrott@hfw.com take a look at Letters of Indemnity.

The International Group of P&I Clubs (the IG) has published updated wordings in respect of recommended proforma Letters of Indemnity (LOIs). The wordings relate to the delivery of cargo without production of the original bill of lading and/or the delivery of cargo at a port other than the port stated in the bill of lading.

The material differences, as compared to the previous wordings, include that:

  • A note has been attached to remind recipients of LOIs that: (i) accepting an LOI in the relevant circumstances will prejudice P&I cover; (ii) the value of an LOI can potentially be very high; and (iii) counterparties’ creditworthiness should therefore be a critical consideration
  • The law and jurisdiction clause has been slightly updated to refer any dispute or enforcement of the LOI to the exclusive jurisdiction of the English courts. The reference to English law remains unchanged. A note advises that this choice of law and jurisdiction may be beneficial.
  • An express obligation has been inserted to the effect that where the recipient of the LOI has already put up security to release a vessel, the issuer of the LOI is obliged to provide replacement or counter security. This applies even if the security exceeds the value of the arrested vessel
  • Amendments have been made to clearly provide that where, broadly speaking, bulk cargoes (whether liquid or dry) are intermingled with other cargoes, discharge or delivery shall be deemed to have occurred.

The proforma wordings for LOIs to be counter-signed by banks have been retained without substantial amendments.

Comments

The updated LOI wordings represent an evolution of the previous wordings. We anticipate that those who rely on LOIs will not need to radically re-assess their use, at least for the moment.

From a UK perspective, the Electronic Trade Documents Act 2023 came into force on 20 September 2023. Broadly speaking, electronic documents (such as e-bills of lading) will, in certain circumstances, have the same status as their paper equivalents under English law. We anticipate that it is only a matter of time before this separate development results in a significant impact on the use of LOIs.

The importance of careful drafting

In a second story, Brian Perrott and Lee Forsyth look at drafting issues.

EE was required to provide Virgin Mobile (VM) with access to its network to enable VM’s customers to be provided with 2G, 3G and 4G services. VM agreed that it would use EE’s network exclusively. Regarding 5G services, VM was entitled to use different networks.

EE alleged that VM migrated/added new non-5G customers onto other networks, even though those customers were only provided with 2G-4G mobile services. EE estimated this “loss of revenue” at c. £25m.

VM denied that “loss of revenue” represented the correct measure of damage, contending that the correct measure would be EE’s loss of profit, which was excluded under a provision of the contract which excluded claims by either party in respect of “anticipated profits”.

Decision

The court held that any liability on the part of VM for damages for the unlawful diversion of its customers to alternative networks fell within the terms of the exclusion clause. The following points were of central importance to the court’s decision:

The language of the clause, which generally excluded liability for anticipated profits, was clear and unambiguous. The court found that the parties were trying to cast the net as widely as possible.

Whilst the starting presumption is that neither party intends to abandon any remedies arising by operation of law, giving the phrase “anticipated profits” its natural meaning in the context of the clause, it was seeking to exclude damages claims for loss of profits of any kind which it was foreseeable would be made by either party.

The contract was detailed and negotiated by sophisticated parties.

The construction of the clause advanced by VM did not relieve VM of all liability for breach of any of its obligations. EE had remedies if VM breached other provisions.  

EE’s c. £25m claim for damages was excluded under the contract.

Comment

If EE had specifically considered the point, it is unlikely that EE would have agreed an exclusion which deprived them of any damages in the event that VM breached the exclusivity provision. However, this was the effect of the exclusion clause which had been negotiated by the parties.

Parties should pay careful attention when drafting exclusion clauses to ensure that they do not exclude key remedies in the event of a breach.

EE Limited v Virgin Mobile Telecoms Limited [2023] EWHC 1989 (TCC)


3.  IACS moves

IACS has enhanced its Unified Requirements (URs) on Cyber Safety to reflect new survey requirements, industry feedback and applicability.
 
In an increasingly digitalised and interconnected world, where the maritime industry continues to adopt, at pace, new digital technologies, it remains imperative to focus on cyber threats and attacks that could compromise operations, safety and data integrity.
 
To address the need to enhance the cyber resilience of ships, last year IACS published UR E26 “Cyber Resilience of Ships”, and UR E27, “Cyber Resilience of On-Board Systems and Equipment”, which will be applied to new ships from 1 January 2024.
 
Since the publication of these requirements, and as experience of cyber security oversight in the maritime sector grows, the need for a standardized approach to survey requirements has been identified along with further enhancements resulting from industry feedback.
 
Additionally, and to address the challenges regarding the implementation of new cyber requirements in smaller and non-conventional vessels, the scope of applicability of these URs have been categorised as mandatory and non-mandatory compliance depending on vessel types and sizes.
 
These improvements have resulted in extensive changes to the two URs and so they will now supersede the originals and will be applied to new ships contracted for construction on and after 1 July 2024.  To avoid confusion, the original versions, along with their previous application date of 1 Jan 2024, have been withdrawn. The revised version of URE27 is available on the IACS website (https://iacs.org.uk/resolutions/unified-requirements/ur-e).  The revised version of URE26 is still being finalized and will be published before the end of the year.
 
IACS Secretary General, Robert Ashdown, said ‘Incorporating industry feedback to ensure IACS requirements are clear in their applicability and are capable of being consistently applied in ship surveys, is important in ensuring that measures to enhance cyber resilience have the desired impact.  As a result, and given that the original requirements had not yet entered into force, IACS has decided to apply only the revised requirements from 1 July 2024.  It is believed that industry will welcome the clarity that this decision brings.’


 

4. Order enforcement

In an article to be found on the law firm’s website, Mike Philipps and Sylvie Allen of Watson Farley Williams say they have previously discussed the English courts’ supportive powers in LMAA arbitrations through the use of anti-suit injunctions to enforce arbitration agreements and its powers to preserve evidence and property and order the attendance of witnesses. In this article, they consider the courts’ powers under the Arbitration Act 1996 (“AA 1996”) to enforce peremptory orders and awards issued by a tribunal see https://www.wfw.com/articles.


5. EU ETS debate

Shipping must manage new financial risks with the transition to EU ETC says OceanScore. The concept of trading is about to take on a whole new meaning for shipping companies with the implementation of the EU Emissions Trading System (EU ETS) for maritime from next year. As well as monitoring their emissions to meet reporting requirements, companies must now grapple with the complexities of carbon credit trading to manage and mitigate financial exposure to the EU ETS.

The new regulatory regime will require the ship owner or manager, as Document of Compliance (DoC) holder, to surrender to the authorities so-called EU Allowances (EUAs), or carbon credits, corresponding to fleet emissions based on reported MRV data for the previous year.

This means that shipping companies will have to start purchasing EUAs on an ongoing basis from 1 January 2024 in the run-up to an initial deadline of September 2025 to surrender EUAs. The industry will initially be liable for 40% of emissions in 2024, rising to 70% and 100% of emissions in 2025 and 2026, respectively, under the three-year phase-in of the EU ETS.

All emissions on voyages and port calls within the EU/EEA, and 50% of emissions on voyages into or out of the EU/EEA, will be subject to the EU ETS once fully implemented. It will initially apply to CO2 emissions from cargo and passenger ships over 5000grt, with methane and nitrous oxide emissions to be covered from 2026 and offshore vessels set to be included from 2027.

There are hefty penalties for non-compliance, with an inflation-linked fine of €100 per tonne of CO2 equivalent for emissions not covered by EUAs, as well as the requirement to make up any shortfall of allowances. There is also the risk of an entire fleet being expelled from trading in EU waters if a company fails to surrender sufficient allowances for a single vessel over two consecutive years or more.

However, there are wider financial implications for shipping companies from the need to buy and sell EUAs as this introduces a new element of balance sheet risk with exposure to potentially huge liabilities, according to Hamburg-based maritime data and technology firm OceanScore.

It is estimated the EU ETS could amount to an additional cost for shipping of anywhere between €8 billion and €10 billion annually once fully implemented in 2026 after a three-year phase-in period, dependent on a fluctuating market price that is currently around €90 for an EUA covering emissions of 1 tonne of CO2 equivalent.

“This can translate into millions of euros in liabilities for the party responsible for buying and surrendering allowances, especially when managing (or owning) a large fleet. It may also be difficult to pass on these costs to the charterer, as the ‘polluter pays’ principle dictates, due to possible disputes over EUA volumes or pricing,” explains OceanScore co-Managing Director Albrecht Grell.

 “Therefore, shipping companies need to have administrative systems in place both to track fleet emissions and continually assess the volume of allowances required, as well as allocate these allowances or the related costs to relevant stakeholders as part of the EUA accounting process. Quality and timely availability of data become crucial, especially in voyage charter environments.

“Critically, companies will have to determine the best strategy for acquiring EUAs, which will entail complex considerations related to price, volume, timing of EUA transactions and other issues.”

EUAs can be purchased at a fixed price in the primary market through auctions arranged several times a year by the European Energy Exchange (EEX) on behalf of the EU. They can also be bought and sold on the secondary market ‘over the counter’ through brokers or online trading platforms.

While EUAs can be banked for use in future years, there is no risk of the market running dry. Shipping participates in the broader EUA market, contributing only around 5% of total demand.

Moving forward, though, the EU has announced it will reduce the number of available EUAs by 4.3% annually. While many expect this to lead to higher EUA prices, that doesn’t have to be the case, at least in the short term. EUA prices are highly volatile, having swung between €80 and over €100 in 2023 alone after falling to below €60 last year after the outbreak of war in Ukraine.

 Grell points out that achieving the optimal price for EUAs is clearly an important factor, especially if large volumes are being traded, though this is probably less of a priority if allowances are only being acquired for offhires or unemployed vessels, where volumes should be significantly lower.

To determine the best price, it is necessary to establish the difference between the buying and selling price being quoted by the trader – the so-called bid-ask spread – that should not exceed a margin of 0.15% to minimise trading losses, he says.

“The ability to buy and sell EUAs via the same trading platform is essential so the shipping company can dispose of surplus EUAs if, for example, a voyage ended up requiring fewer allowances than expected. This means it can cash in these EUAs or take advantage of price fluctuations by buying when prices are low and selling when they are high,” Grell explains.

“EUAs being a commodity though, buyers should not expect to gain much from shopping around. The markets are transparent and prices will differ only in the cents range. Price differences for EUAs will most certainly be way more significant from week to week than between different traders. Shipping companies should therefore focus on their trading strategy – on the timing of when to buy a certain volume of EUAs.”

The challenge will be “commercial alignment”, as Grell calls it. For a heavy-lift operator, for example, this would require to be clear – when fixing cargo – on when to expect the payment for this cargo and how many EUAs will be required to cover this voyage.

This is where forward trading comes into the picture, or the ability to fix the price of EUAs for delivery at some future date. The heavy-lift operator could buy a forward contract for the delivery (and payment) of the EUAs needed for a particular voyage just after the date of the expected payment by his customer and then include this EUA forward price in his calculation, effectively hedging himself against the risk of price changes.

Similar forward strategies can be used to cover for redeployments and budgeted periods of unemployment.

Grell states that quantities of EUAs to be acquired by or on behalf of the owner to cover for offhires and periods of unemployment tend to be small and that it is therefore important to be able trade odd volumes rather than the standard batches of 500 and 1000 allowances. Typically, there should not be a price penalty for these smaller volumes.

This ability to buy non-standard volumes also means the costs of these EUAs can be directly charged by a manager to a third party (owner or even charterer if the charterer provides funds rather than EUAs for his emissions) to avoid unnecessary price disputes, in addition to avoiding the risk of price changes and constrained liquidity if large volumes are saved for later use.

OceanScore is working with long-established trader RWE Supply & Trading to develop the automated solution EUA Trader that is also integrated into its recently launched online application ETS Manager geared to helping shipping companies navigate a path to EU ETS compliance.

OceanScore’s co-Managing Director Rolf Garrn says: “EUA trading for shipping entails added complexity compared with land-based industry as there are multiple stakeholders involved. This demands a differentiated approach as shipping companies make the difficult transition to a new carbon trading regime.”


6. Lube rules

Nippon Kaiji Kyokai (ClassNK) has joined the major classification societies to amend its rules relating to the inspection of seawater-lubricated propeller shaft systems.

The amendment means that ships with open seawater-lubricated propeller shafts that are built to ClassNK rules are subject to the same 15-year shaft withdrawal inspection periods as oil-lubricated shafts and sterntubes, subject to monitoring criteria.

The announcement brings ClassNK’s requirements in line with those of other large class societies, including Lloyds Register (LR), the American Bureau of Shipping (ABS), Det Norske Veritas (DNV), Bureau Veritas (BV) and the China Classification Society (CCS), which have already stipulated 15-year or longer intervals between inspections, some of them since 2016.

In its amendments to the Rules and Guidance for the Survey and Construction of Steel Ships , published on 30 June 2023, ClassNK clarified its reasons for the change: “In recent years, the development of mechanical type sealing devices, and bearings with lower wear properties as well as improvements in corrosion prevention technology, have led to fewer wear and corrosion defects in both shafts and bearings. In addition, interest in seawater-lubricated bearings, which do not use lubricating oil, and their effectiveness has increased among relevant industry members due to concerns for the environment.”

ClassNK also noted that the amendment follows requests received from industry stakeholders relating to the developments made in advanced seawater-lubrication system technology.

Thordon Bearings is one of the companies that has supported calls for industry-wide standardization of extended shaft withdrawals for seawater-based lubrication solutions that are now comparable to sealed oil lubricated systems.

Craig Carter, Vice President of Business Development, Thordon Bearings, said: “We are delighted that ClassNK has now joined the other major classification societies in dispensing with the wholly unnecessary and costly need to withdraw a seawater-lubricated propeller shaft for inspection every five years. Technology has come a long way since the first-generation seawater-lubricated lignum vitae bearings of the 1950s.”

While the risk of shaft corrosion in open seawater-based systems was historically a concern with first-generation bearings, leading some classification societies to continue demanding enhanced inspection regimes, new materials and technologies mean seawater-based systems can exceed the performance and reliability of their oil-based counterparts.

Elena Corin, Senior Manager, Special Marine Projects, Thordon Bearings, explained: “Aside from our pioneering polymer bearing technology, Thordon has enabled the development of Thor-Coat – a toughened, modified epoxy coating, which is applied to exposed steel areas of the shaft between the liners to eliminate the need for shaft withdrawal. In the event of damage, seawater cannot wick under the coating along the shaft and the epoxy coating is spot repairable.”

“It is undeniable that the increasing number of ocean-going tankers, bulkers, dry cargo vessels, passenger ferries, cruise ships and containers that now routinely specify a Thordon propeller shaft bearing are significantly more environmentally and operationally efficient than their oil-based equivalents,” Corin said. “Thordon’s COMPAC open seawater-lubricated propeller shaft bearing system ensures zero environmental impact, improves fuel efficiency and eliminates the costs associated with managing oil discharges.”

In addition to the amendment regarding the inspection of seawater-based propulsion systems, Class NK has also updated several other requirements. These include new formulae for sloshing loads and new requirements for the maintenance and management of offshore wind turbine installations.

Other changes include clarification of scope for protection against fire when transferring cargo to other vessels on liquefied gas carriers, clarification of the NOx emission standards for biofuel, new requirements for cast and forged steel products, and amendments to safety requirements for reciprocating internal combustion engines.


 

7.  Cooperation agreement

HFW has entered into a cooperation agreement with the Emirates Shipping Association.HFW assisted in establishing and registering the Association at a federal level and has been providing it with continuous legal and strategic support, initially for two years.HFW’s team advising the Association includes Yaman Alhawamdeh and Marc Ghammachi.

Yaman Alhawamdeh, UAE Managing Partner, HFW said:”Our ongoing work with the Emirates Shipping Association gives us an opportunity to help promote and develop the UAE’s maritime sector, and we look forward to progressing this strategic collaboration.”This also goes towards HFW’s commitment in supporting the UAE’s In-Country Value programme in terms of increasing the private sector’s contribution to research and development in the maritime sector.”


8. Demurrage risks

Voyager, the operations and demurrage management platform for bulk commodity shipping, is urging shipping companies to take a proactive stance and adopt a number of Best Practices in order to reduce the costs and risks of demurrage.

A dramatic surge in port congestion and associated supply chain disruptions have led to longer waiting times and higher demurrage costs, said Voyager co-founder and CEO Matthew Costello. “This issue is particularly severe in the bulk shipping sector, where demurrage costs can exceed 20% of the total freight cost for a voyage,” he said.

“However, demurrage doesn’t have to be a substantial burden on a company’s resources. By implementing three key Best Practices, companies can significantly reduce the cost of demurrage and streamline their operations.”

Voyager says companies should estimate and analyse demurrage in real-time, automate their Statement of Fact (SoF) data processing and logically analyse their charterparties.

“These changes will give your company the necessary tools to stay ahead, making informed, data-driven decisions that result in savings and greater efficiency,” said Costello.

According to Voyager, many businesses make the mistake of calculating laytime and estimating demurrage claims only after they receive a claim from the shipowner – leaving no room for adjustment. Instead, companies should take a proactive stance; by estimating and analysing demurrage immediately after the first load port, they can gain a real-time assessment of their demurrage risk at every stage.

By taking into account historical factors such as waiting times, congestion and line ups, operators can gain a realistic estimate of the demurrage risk for the entire voyage; these costs can be allocated to profit-and loss-statements accurately and any claim can be anticipated in advance. This also offers dynamic opportunities for risk mitigation by coordinating with terminals and other vessels to expedite discharge and avoid unnecessary delays.

Secondly, Voyager recommends that companies digitise all their SoF events data, to provide granular insight throughout the loading and discharging process – invaluable in assessing the efficiency of the terminal, the berth and the discharge itself. By automating the processing of this data, companies can streamline their demurrage calculations and gain real-time insights, informing decisions related to seasonality, congestion and efficiency.

Finally, Voyage urges companies to connect charter party agreements to demurrage logic. This involves more than just transferring data fields into a database – logic should be assigned contracts and fields, so that it can be understood how specific clauses in a contract are impacting demurrage claims. For example, there may be particular clauses that incur more cost at a certain berth or port. Analysis of the charter party enables dynamic optimisation of contracts across the company, which can highlight areas of potential savings based on data-driven decisions.

Voyager Portal views demurrage as an opportunity for businesses to alleviate the impact of port congestion, improve tighten up contract weaknesses and drive overall business improvement, said Voyager co-founder and COO Bret Smart. “Demurrage costs due to inefficiencies eventually get passed on to the customers, creating a situation where no one wins. Proactive management and intelligent data utilisation are the keys to unlocking significant business improvement,” he said.

“Ultimately, automating document processing and laytime calculations can free up valuable time for demurrage teams, with up to 50% of time savings. The time freed up can be used by analysts to go back to contracts and review clauses to identify other savings opportunities.”


9. IUMI view

Shipping continues to innovate in terms of vessel capacities, greener technologies and more modern operating practices. At the same time, the way that goods are being carried, particularly unitized cargoes, are also changing. Innovation and change will inevitably bring about new risks which must be understood and mitigated with new or updated loss prevention methods.

At the recent International Union of Marine Insurance (IUMI) conference in Edinburgh, Chair of IUMI’s Loss Prevention Committee, Pascal Dubois highlighted this growing issue:

“The sheer number of containers being carried on ships of 24,000 TEU or more means that, statistically, there is a greater chance of an individual cargo combusting. Sadly, there have been many fire-related incidents on-board large containerships in recent years. Tackling fires on such large vessels is an ongoing concern and a significant body of research is underway to find workable solutions to both fire-fighting and fire prevention. IUMI has been one of the prime-movers at IMO to address this.”

Global vehicle transportation at sea has been in the limelight in recent years. High profile casualties, such as Grande Europa, Felicity Ace, and more recently Grande California, Grande Costa d’Avorio and Freemantle Highway, underline the reality where loss prevention methods need to be aligned and improved. Aside from the tragic loss of life, financial losses running to many hundreds of millions of dollars are often the result. However, Pascal Dubois urges caution when apportioning blame and wants the industry to rely on the science when it comes to preventative measures:

“Although we have witnessed a number of car carrier fires lately, none have been found, conclusively, to have been started by an electric vehicle (EV). We must take care to understand the cause and nature of any vehicle fire if we are to implement the required loss control measures to extinguish the fire and, as importantly, prevent them from happening.”
 
“Research shows that EV fires are no more dangerous than those caused by internal combustion engine (ICEV) vehicles – the growth rate, the peak heat release, and the total energy released is no different. That’s because most of the fire’s energy comes from sources within the vehicle, such as plastics, and not the battery. However, we must not ignore the potential for thermal runaway where the battery may self-heat and re-ignite. The risks are not necessarily greater but they are different and this is where we need a new and different approach”.
 
“Loss prevention is a virtuous circle including assureds, brokers, underwriters and regulators”, says Pascal Dubois. “We can’t innovate without recognizing new and different risks and then implementing adequate loss control measures. Insurance and loss prevention go hand-in-hand – you can’t have one without the other”.       
 
IUMI has recently issued a comment and a position paper on the transport of EVs which are available here:

https://iumi.com/opinions/public-statements

https://iumi.com/opinions/position-papers


10.  Be prepared

A year from now, all vessels subject to the Ballast Water Management Convention must have an approved ballast water treatment system installed onboard. So the question is whether ships are ready for lighter regulations says P&I Club Gard in an online advisory.

Good management of ballast water is critical to prevent the spread of invasive aquatic species (see fact box below). To that end, the Ballast Water Management (BWM) Convention was adopted and eventually came into force in 2017. With it, came two primary regulations, both intended to improve ballast water management: The D-1 regulation covers ballast water exchange, that is flushing ballast water tanks in open seas, while the D-2 regulation covers ballast water treatment, that is the removal and destruction of biological organisms from the ballast water before it is discharged.

From 8 September 2024, all vessels subject to the BWM Convention (all ships over 400 GT, with some exceptions and additions) must meet the performance standards contained in regulation D-2, meaning that vessels without a ballast water treatment system must install an approved system before the deadline.

What do ship operators need to do?

Ship operators that have not made their decision on the installation of ballast water treatment systems are advised to start the preparatory work as soon as possible. The 8 September 2024 deadline is nearing and there are multiple decisions that should be made in order to ensure compliance. Below are some key elements of the preparatory work.

  • Ensure that the obligations under the BWM Convention, and under other national and local regulations, are fully understood, and develop a thorough strategy for complying with the applicable standards.
  • Pay particular attention to the position in the United States (US). The US is not a party to the BWM Convention. Vessels discharging ballast water into US territorial waters must comply with the US BWM Regulation regardless of a vessel’s status under the IMO BWM Convention. The US maintains a separate list of ballast water treatment systems approved by the US Coast Guard.
  • Evaluate the suitability of available ballast water treatment system solutions for each vessel based on its operating profile and design (see below for more information on the different treatment options).
  • Consider the “time factor”. Availability and delivery times for approved treatment systems will vary depending on demand, as will shipyard capacity.
  • Once a ballast water treatment system solution has been selected, make sure officers and crew are properly trained and are competent to carry out their assigned ballast water management duties and functions. Procedures for training and familiarization for the BWM Convention should be incorporated in the company’s safety management system (SMS) and should include, but not be limited to, the following:
    • introduction to ballast water management and all relevant rules and regulations;
    • familiarization with the vessel’s ballast water management plan and assigned duties;
    • operation and maintenance of the vessel’s ballast water management treatment system;
    • emergency procedures; and
    • making entries and recordkeeping in the vessel’s ballast water record book.
  • Ensure every vessel has onboard an approved Ballast Water Management Plan, a Ballast Water Record Book, and an International Ballast Water Management Certificate.
  • Prepare for Port State Control (PSC) inspections. In addition to verification of valid and approved onboard procedures, records and certificates, sampling of the vessel’s ballast water may be required carried out in accordance with the IMO Guidelines for ballast water sampling (G2). Compliance with national and local regulations will also be subject to inspection by PSC.

The vessel’s Class Society can advise on the IMO-approved systems most suitable for the vessel type and trading area. Advise the classification society if the vessel is likely to trade to the US to ensure the system also meets US Coast Guard approval.

Fact box – Ballast water and why it matters:

Ballast water is seawater that is carried in the ballast tanks and cargo holds of ships to improve stability and maneuverability during a ship’s voyage. Around the world, ships carry 3-5 billion tons of ballast water each year.

Ballast water is drawn into ballast tanks from the sea, generally at the start of a voyage at a port.  It will often contain a large variety of marine organisms, which are then transported and released at the next port-of-call. These “non-native species” can have a serious ecological, economic and public health impact on the receiving environment.

Elements of a Ballast Water Management Plan

A Ballast Water Management Plan (BWMP) is a shipboard document that details the procedure for the discharge of ballast water and the handling of sediment. This plan must be specific to the vessel and her equipment and approved for each vessel by the Flag Administration and/or Class Society. At the time of writing, the plan may include procedures for either or both D-1 and D-2. However, after 8 September 2024, procedures must reflect the D-2 requirements. Most classification societies have developed helpful templates for the BWMP, e.g. like the one from DNV which can be found here.

Ballast Water Management and Treatment Systems

Ballast Water Management Systems treat ballast water to remove or inactivate waterborne organisms, bacteria, and sediments.  Generally, BWM systems treat the ballast water as it flows into the ship from the sea. Regulation D-3 of the BWM Convention requires that ballast water management systems must be ‘type-approved.’ In order to be type-approved by an Administration, ballast water management systems need to be tested in a land-based facility and onboard ships to prove that they meet the performance standard contained in regulation D-2 of the BWM Convention. While the date by which individual vessels must have a ballast water treatment system installed depends on its IOPP renewal date, the IMO Implementation Schedule for BWMS’s also ensures full global implementation by 8 September 2024.

A number of ballast water treatment systems are available on the open market.  Generally, most type-approved systems fall into one of the following four categories: Filter & UV systems, Filter & Electrolysis systems, Ozone systems, and Chemical Injection systems. The vessel’s Class Society will be able to advise on which system is suitable for the vessel and type of trade.

The insurance position

Gard has issued two Member Circulars on BWM, No. 4/2017 in July 2017 and No. 17/2016 in January 2017, advising Members that liabilities, including fines for inadvertently introducing untreated ballast into the environment, are capable of cover, subject always to the Rules and any terms and conditions of cover. Cover for other fines relating to a breach of the BWM requirements are only available on a discretionary basis.


Notices & Miscellany

NI courses

The Nautical Institute, with input from The Seafarers’ Charity, has developed a portfolio of Leadership and Management courses that meet the need for a common learning journey for all seagoing and shore-based staff in a maritime organisation.  The first courses will run from 16th October 2023.
 
In addition to incorporating all mandated and proposed STCW requirements, the ILM courses include training specifically created to overcome shortcomings that have been highlighted within the industry.  The courses range from undergraduate to Masters’ degree levels of study and require the students to apply theory to practice in their work environment using reflective practice. 
 
Stephen Window, Head of The Nautical Institute Academy, said: “The operational performance of a maritime organisation can be improved markedly through investing in the development of skills across both seagoing and shore-based staff. These new courses, which have been developed to improve the leadership skills of everyone working in maritime, are open to all personnel in the industry, whether ship or shore based, and are delivered online.”
 
The Nautical Institute can  offer the Level 3 pathway at an introductory rate of £750.00 (usually £1500.00). The offer will be valid until 31 December 2023. The level 5 pathway commences in January 2024 and will be available at an introductory rate of £850.00 (usually £1600.00), offer valid until 31 March 2024.  Both offers additionally include 12 months free membership of The NI and the ILM.
 
Furthermore, the courses are accredited by the Institute of Leadership and Management with internationally recognised vocational qualifications (level 3 to level 7).
 
Further information is available on the NI Academy’s dedicated Leadership Programmes page.

Arbitration

The London Shipping Law Centre invites members and other commercial professionals to attend this 2nd hybrid event in its autumn 2023 programme on 10th October at 6pm in London at the Zeiler Floyd Zadkovich office.

The topic is the Final Report on proposed Reform of the Arbitration Act –   Are there any non-apparent weaknesses in the proposed reform?

E-mail: shipping@shippinglbc.com, tel: 020 7936 3417

Please notify the Editor of your appointments, promotions, new office openings and other important happenings: contactus@themaritimeadvocate.com


And finally,

(With thanks to Paul Dixon)

Really Important Stuff My Kids Have Taught Me

1. It’s more fun to colour outside the lines.

2. If you’re going to draw on the wall, do it behind the couch.

3. Ask why until you understand.

4. Hang on tight.

5. Even if you’ve been fishing for 3 hours and haven’t got anything except poison ivy and a sunburn, you’re still better off than the worm.

6. Make up the rules as you go along.

7. It doesn’t matter who started it.

8. Ask for sweets.

9. If the horse you’re drawing looks more like a dog, make it a dog.

10. Save a place in line for your friends.

11. Sometimes you have to take the test before you’ve finished studying.

12. If you want a kitten, start out asking for a horse.
 


Thanks for Reading the Maritime Advocate online

Maritime Advocate Online is a fortnightly digest of news and views on the maritime industries, with particular reference to legal issues and dispute resolution. It is published to over 20,000 individual subscribers each week and republished within firms and organisations all over the maritime world. It is the largest publication of its kind. We estimate it goes to around 60,000 readers in over 120 countries.

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