LNG does not guarantee compliance with 2020 sulphur cap

Creating LNG infrastructure for shipping in Europe would cost $22 billion and deliver a 6% reduction in ship GHG emissions by 2050 compared to the replaced diesel, a new study for Transport & Environment (T&E) by the UMAS consultancy found. Until today, Europe has spent half a billion US dollars on LNG infrastructure.

 

These emissions savings would likely be cancelled out by the growth of maritime trade, even before higher rates of methane slip. Namely, methane slipping - i.e unburnt LNG escapes through a ship’s exhaust into the atmosphere - could wipe out any emission reduction gains.

The EU’s 2014 Alternative Fuels Infrastructure Directive requires member states to build LNG infrastructure across European ports. This will make the decarbonisation of shipping even more challenging, the study says.

Europe should back future-proof technologies that would deliver the much greater emissions reductions that will be needed, including port-side charging or liquid hydrogen infrastructure. This means the EU needs to stop mandating LNG infrastructure in European ports.

Top of FormBottom of FormIn addition, according to the study, if current investments in LNG infrastructure require a large LNG market, but the sector turns to zero-emission technologies like hydrogen, ammonia and electric propulsion, then many LNG assets will likely become stranded by 2050.

Domagoj Baresic, consultant, UMAS and PhD researcher, UCL Energy Institute, said that there is uncertainty regarding LNG. He noted that the fuel may be an option for complying with the 2020 sulphur cap, but it cannot enable the GHG reductions that have been committed to in the IMO’s initial strategy for GHG reduction.

For more information click in the link below.

https://www.transportenvironment.org/sites/te/files/LNG_as_a_marine_fuel_in_the_EU_UMAS_2018.pdf

 

Don’t discharge cargo without bills of lading/LOIs

Discharge of cargo without original bills of lading and letters of indemnity (LOI) is one of the biggest risks a ship owner or charterer can take, warned law firm HFW, formerly Holman Fenwick Willan.

LOI is an essential document to help world trade run smoothly.

 

They are given by cargo interests and parties above them in the contractual chain to obtain cargo at a discharge port without delay in circumstances where the original bills of lading are not immediately available.

However, LOIs are fraught with danger and have lead to much recent litigation – the latest reported case being the 2009-built 19,954 dwt chemical tanker ‘Songa Winds’ discussed below.

If delivery is not made in compliance with bills of lading then an owner may face a claim from the lawful holder of the bills for conversion. The owner may then have a liability for the full value of the cargo, with no applicable defenses or standard P&I insurance cover (although the International Group have recommended LOI wording there is still no club cover).

The LOI will effectively be the owner’s only ‘insurance’ and if the LOI provider does not arrange security the owner may be unable to release the vessel and could face a forced sale. In the liquid or dry bulk trades, the value of cargoes could be tens of millions of dollars. If the LOI cannot be enforced an owner may become insolvent.

Quick action is needed to pursue recourse against all parties in the charter and LOI chain if issues arise and to defend or delay the claim from the bill of lading holder to the extent possible.

The following English Court cases, including the ‘Songa Winds’ published last month, all consider situations where an owner has agreed to release cargo without production of original bills of lading only for a third party (usually the bank financing the purchase of the cargo) to later arrest the owner’s vessel claiming to be the lawful holder of the bills and that the cargo has been mis-delivered.

The third party’s motive for pursuing the owner is usually that they are an easier (and more solvent) target than the cargo interest who defaulted under a financing or sale agreement. This means the owner and parties below them then have to rely on their LOIs.

Relevant cases -

• THE SONGA WINDS (Songa Chemicals AS v Navig8 Chemical Pool Inc [2018] EWHC 397).

• THE ZAGORA [2017] 1 Lloyd’s Rep.194.

• JAG RAVI [2012] EWCA Civ 180.

• THE BREMEN MAX [2009] 1 Lloyd’s Rep. 81.

• THE LAEMTHONG GLORY [2005] 1 Lloyd’s Rep. 632.

In addition, an owner needs to consider if the issuance of an LOI is being used to defraud the original consignee of the cargo.

The owner should be particularly alert if the party named in the LOI does not match, or is not related to, the original consignee.

If an LOI is found to assist in defrauding the original consignee then it may not be enforceable.

An owner can run into problems when attempting to call on the LOI they have accepted to protect themselves from this very scenario. It is now very clear (the ‘Bremen Max’ case) that if the cargo is not delivered to the party stated in the LOI then the LOI will not normally respond.

This principle has been tested and upheld in more recent cases (the ‘Zagora’ and the ‘Songa Winds’), which found that delivery to an agent of the consignee complied with the usual wording in an International Group LOI permitting delivery to the consignee ‘or to such party as you believe to be or to represent [the consignee] or to be acting on behalf of [the consignee]’.

Whether a party is an authorised agent of a consignee at the discharge port is a matter of fact, but this is rarely an easy task for a Master particularly if parties at the discharge port have ulterior motives.

Good evidence retention concerning what happened at the discharge port, including who the cargo was released to, is essential.

There is generally no P&I Club cover for LOIs and so the recipient must carry out due diligence checks on the financial standing of the issuer before acceptance. However, as the diagram on page 21 shows, frequently there is a chain of LOIs that mirrors the charter chain.

Even if the issuer of the immediate LOI to the owner is not ‘good for their money’, HFW’s Rory Butler and William Gidman have recently acted in two cases where owners/ charterers have successfully relied on the Contracts (Rights of Third Parties) Act 1999 and the principle in the ‘Laemthong Glory’ to secure the release of the vessel and avoid all liabilities by directly enforcing an LOI issued by a more financially sound party further down the LOI chain.

This approach is possible if an LOI not immediately issued to the owner is nevertheless addressed to ‘The Owners/Disponent Owners/Charterers of the [vessel]’. This wording has been found to confer a benefit on an owner permitting third party enforcement.

The flip side is that a party further down the LOI chain who does not want to have any direct liability to an owner should consider excluding the Contracts (Rights of Third Parties) Act and restricting the beneficiaries of the LOI.

Electronic bills

It has been suggested that e-bills of lading will solve this problem once and for all. While this may ultimately prove to be correct, some technical solutions present their own problems.

On a related note, the recently published judgment in ‘MSC Eugenia’ [2017] EWCA Civ 365, highlights the danger of cyber fraud, which is also not usually covered by P&I insurance, and of releasing cargo against pin codes rather than bills of lading.

 

Full details of the case Songa Chemicals AS v Navig8 Chemical Pool Inc (2018) may be read at,

 

https://www.clydeco.com/insight/article/the-songa-winds-latest-ruling-on-pi-club-letters-of-indemnity

 

Intertanko Guidance for Ballast Water contingency measures

Since the Ballast Water Management Convention came into force last September, port-states have not been homogeneous in dealing with contingencies where ship operators were unable to carry out ballast water exchange.

 

In light of the entry into force of the IMO’s Ballast Water Management Convention (BWMC) as well as the step change in enforcement of the United States Coast Guard (USCG) regulations on ballast water, Ship owners are now more frequently using their BWMS to manage ballast water to meet the necessary discharge standards. However, while the BWMS installed have been type approved in accordance with either or both the IMO and USCG requirements, it is estimated that up to 60% of BWMS installed are not operating correctly.

As such, and when vessels are delivered with BWMS or retrofitted to comply with BWMC or USCG Regulations, it is important to also amend the Ballast Water Management Plans (BWMP) to ensure a practical and realistic set of contingency measures is included. With Port States, Flag Administrations and Class Societies still considering the most appropriate options in the event of a BWMS failure, it is hoped that the contingency measures identified in this document, together with the procedures recommended, will provide a clear indication of what to expect from the vessel under such circumstances.

 

The guide may be downloaded at

 

https://maritimecyprus.files.wordpress.com/2018/05/intertanko-ballast-water-contingency-measures-for-tankers.pdf

Supreme Court confirms jurisdiction to determine claims arising in exclusive economic zone

On May 2 2018 the Supreme Court of Cyprus found that the Cyprus courts have jurisdiction to adjudicate cases relating to claims arising in the Cyprus exclusive economic zone (EEZ). The judgment was issued in Andrew Burness v Saipem SpA, which was filed in the admiralty jurisdiction of the Supreme Court.

Facts

Andrew Burness filed an action in personam against Saipem SpA, claiming general and special damages for the personal injuries and harm that he had suffered following an accident on board the vessel Saipem 1000 in the Cyprus EEZ. The defendants filed an application to set aside the plaintiff's writ of summons alleging that the court did not have jurisdiction to hear the case.

The court considered two main issues in order to decide on the matter of jurisdiction:

·         Do accidents which take place in the Cyprus EEZ give jurisdiction to the Cyprus courts?

·         Was Cyprus the most appropriate court to hear the present case based on the principle of forum conveniens?

Decision

As regards the first issue, the court considered that when the accident had occurred:

·         the plaintiff had been working on the vessel, conducting research on the natural resources of the subsoil of the Cyprus Continental Shelf; and

·         the vessel had been located within the Cyprus EEZ.

According to the United Nations Convention on the Law of the Sea 1982, which applies in Cyprus, the continental shelf of a coastal state (in this case, Cyprus) constitutes the natural prolongation of its land territory. The Law on the Exclusive Economic Zone and Continental Shelf of 2004(2) provides that the outer edge of the Cyprus Continental Shelf is also the boundary of the Cyprus EEZ. Article 56 of the convention provides that:

"1. In the exclusive economic zone, the coastal State has: (a) sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources, whether living or non-living, of the waters superjacent to the seabed and of the seabed and its subsoil, and with regard to other activities for the economic exploitation and exploration of the zone, such as the production of energy from the water, currents and winds; (b) jurisdiction as provided for in the relevant provisions of this Convention with regard to: (i) the establishment and use of artificial islands, installations and structures; (ii) marine scientific research; (iii) the protection and preservation of the marine environment; (c) other rights and duties provided for in this Convention.

2. In exercising its rights and performing its duties under this Convention in the exclusive economic zone, the coastal State shall have due regard to the rights and duties of other States and shall act in a manner compatible with the provisions of this Convention".

Article 60 of the convention provides that:

"1. In the exclusive economic zone, the coastal State shall have the exclusive right to construct and to authorize and regulate the construction, operation and use of: (a) artificial islands; (b) installations and structures for the purposes provided for in article 56 and other economic purposes; (c) installations and structures which may interfere with the exercise of the rights of the coastal State in the zone.

2. The coastal State shall have exclusive jurisdiction over such artificial islands, installations and structures, including jurisdiction with regard to customs, fiscal, health, safety and immigration laws and regulations."

The court also considered Herbert Weber v Universal Ogden Services Ltd,(3) in which the European Court of Justice decided that activities conducted by an employee on the continental shelf of a member state in the course of prospection or exploitation of its natural resources must be considered as having occurred within the member state concerned. Based on these principles – and by determining that there was a connection between the accident and the research and exploitation of natural resources on the Cyprus Continental Shelf, which constitutes part of Cyprus – the court concluded that it had jurisdiction to adjudicate on the dispute between the parties.

The second issue raised by the defendant to contest the court's jurisdiction was the forum conveniens. It contended that, as neither of the parties nor any of the witnesses were Cypriot nationals, the claim had no connection with Cyprus. The court disagreed with this argument on the grounds that, as stated above, the civil wrong from which most of the evidence had arisen had occurred in Cyprus. Further, the court stated that none of the courts of the countries of which the witnesses were citizens, or in which the companies and insurers involved in the claim were based, had a closer or more substantial connection with the action than the Cyprus courts.

The court decided that it has jurisdiction to hear disputes regarding accidents which occur within its territory, including the Cyprus EEZ, provided that the accident concerns the prospection or exploitation of Cyprus's natural resources.

 

Is the ships register or ship registry liable for containers falling off a ship.

Recent news reports of 83 containers falling off a ship off the coast of Australia in heavy seas seems to have triggered a question in the minds of some people. “Is the ship register or ship registry liable for containers falling off a ship”.

The article from several sources which are part of the shipping fraternity reported “A Yang Ming container ship has lost more than 80 containers overboard while battling heavy swells off the east coast of Australia.“

Whereas the second article from a local news channel in Australia reported “Heavy seas hit the fully-loaded Liberian freight ship, YM Efficiency, when the containers fell like dominoes into the water 30 kilometres off the coast of Port Stephens.“

All sources, refer to the ship as a Yang Ming container ship obviously in reference to the operator of the ship “YANG MING” emblazoned on the side of the ship and the funnel, whereas others local news channels refer to it as a Liberian freight ship based on the port of registration “Monrovia” visible on the stern of the ship.

While this was just an observation it is natural for people to assume that the ship register may have some liability for the containers falling off a ship.

Why this question may be important? Well, the flag state or the state registering the ship (ship register) has a duty among other things to take such measures for ships flying its flag as are necessary to ensure safety at sea with regard, inter alia, to:

Ø  the construction, equipment and seaworthiness of ships;

Ø  the manning of ships, labour conditions and the training of crews, taking into account the applicable international instruments;

Ø  the use of signals, the maintenance of communications and the prevention of collisions

Ø  that each ship, before registration and thereafter at appropriate intervals, is surveyed by a qualified surveyor of ships, and has on board such charts, nautical publications and navigational equipment and instruments as are appropriate for the safe navigation of the ship

Ø  that each ship is in the charge of a master and officers who possess appropriate qualifications, in particular in seamanship, navigation, communications and marine engineering, and that the crew is appropriate in qualification and numbers for the type, size, machinery and equipment of the ship

Ø  that the master, officers and, to the extent appropriate, the crew are fully conversant with and required to observe the applicable international regulations concerning the safety of life at sea, the prevention of collisions, the prevention, reduction and control of marine pollution, and the maintenance of communications by radio.

So, is the ship register or ship registry liable for containers falling off a ship? If we examine the question a bit deeper, particularly in relation to this ship, Liberia is the 2nd largest ship registry in the world in terms of tonnage and it is an Open ship register which is also referred to as a Flag of Convenience in certain quarters.
These FOCs have certainly had some bad press due to alleged flexible to loose maritime safety policies and registration conditions, unfair competition with the traditional registers by avoiding the expenditures needed to maintain safety and labor standards, substantially lower administrative fees which result in lower costs for the ship owners..

In the case of bareboat charters (which is one of the common type of charters for container ships), it is common that the operator of the container ship who is responsible for both technical and commercial management of the ship, can
choose the register that they want to flag the ship under.

In such cases, the operator may naturally go for the ship register that offers the best trading advantages, cost benefit and ease of operation. The ship register is in no way connected to or responsible for the commercial or technical operation of the ship.

The port of registration of the ship has no bearing or liability on the containers falling off a ship unless it is proven otherwise in terms of the ship certifications or lack of maintenance thereof.

Here are some highlighted points from Rogers, Rhea, “Ship registration : a critical analysis” (2010). World Maritime University Dissertations. 447 in relation to open registers and their responsibilities when it comes to following the international conventions.

Open registries, like other registers, contain a wide variety of tonnage, of different ages and construction; some vessels are operated by large multinational corporations, like the major oil companies. Some of the most modern ships are being operated under open registers and the more responsible open register States have taken steps to exclude old and aging tonnage from their register.

Panama requires vessels over 20 years of age to undergo a special inspection before the Permanent Certificate of Registry can be issued. Liberia generally requires that vessels seeking registration (or re-registration) are not more than 20 years old and Bahamas generally applies a 12 year age limit.

All the major open registers are parties to the generally accepted international maritime safety conventions and the more responsible registries have a network of worldwide inspectors to ensure compliance. Liberia and Panama even make annual levies on ships in their registers, based on net tonnage, for casualty investigation and international participation.

In the December 2007 UNCTAD annual statistical entitled “Review of Maritime Transport”, there were no generally distinguishing conclusions that could be drawn with regards to the comparison of the safety of foreign flagged versus nationally flagged vessels. In other words, there were no significantly distinguishing differences between the safety records of national and open register ships. So, couldn’t it just simply be another case of the weather wreaking havoc on a container ship?

Well at the risk of repeating the issue containers do not just fall off a ship. While a lot of containers may be lost at sea or fall off a ship due to weather conditions, several instances are manmade, such as negligence, container weight misdeclaration, cutting corners to save costs, improper packing of cargo inside the containers, improper stowage planning etc.
Stack collapse on board a ship may happen due to the failure to comply with limits for stack or tier weights or stack heights stipulated in the ship’s CSM or due to the misdeclaration of container weights. All it takes is just one container to start a stack collapse if not properly lashed. Gard also notes that the CSM itself may not have catered for different stability conditions or the use of non-standard containers, such as high cubes.

Added to this, the sheer scale of the lashing arrangements required on Panamax or larger container ships poses quite a challenge for the ship’s crew to check against the CSM to ensure compliance. The larger the ship, naturally the more lashing equipment is required and in some cases in the hope of reducing costs, some ships may cut corners with this.

But also be aware that such maintenance is not an easy task and incidents may also occur due to defective equipment.