P&I Fixed Premium Renewals. Coronavirus exclusion clause to apply.

So far, P&I Insurance has operated continued to afford liability cover without any specific exclusions for incidents arising out of COVID-19. However, fixed premium and Charterers’ P&I covers are reinsured outside the International Group’s Pooling Agreement and with effect from 20.2.2021 and will be subject to the Coronavirus Exclusion Clause (LMA 5395) and The Cyber Endorsement (LMA 5403) in the Rules for Mobile Offshore Units (MOUs).

The coronavirus exclusion for marine and energy provides:

“This clause shall be paramount and shall override anything contained in this insurance inconsistent therewith.

This insurance excludes coverage for:

1) any loss, damage, liability, cost, or expense directly arising from the transmission or alleged transmission of:

a) Coronavirus disease (COVID-19);

b) Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2); or

c) any mutation or variation of SARS-CoV-2;

or from any fear or threat of a), b) or c) above;

2) any liability, cost or expense to identify, clean up, detoxify, remove, monitor, or test for

a), b) or c) above;

3) any liability for or loss, cost or expense arising out of any loss of revenue, loss of hire,

business interruption, loss of market, delay or any indirect financial loss, howsoever

described, as a result of any of a), b) or c) above or the fear or the threat thereof.

All other terms, conditions and limitations of the insurance remain the same.”

Gard have recently announced that they will offer Members and clients in respect of the categories of covers listed below a special extension of cover. The extension of cover (hereinafter referred to as the ‘Special Covid-19 Extension’) shall comprise liabilities, losses, costs and expenses falling within the scope of terms of entry agreed but for the Coronavirus Exclusion Clause (LMA 5395) and subject to a sub-limit of USD 10 million per ship or vessel per event. This extension does not apply to the Cyber Endorsement.

Environmental divergence starts now. EU gold plates the Basel Convention 2019 amendments.

The fourteenth meeting of the Conference of the Parties to the Basel Convention (COP-14, 29 April–10 May 2019) adopted amendments to Annexes II, VIII and IX to the Convention with the objectives of enhancing the control of the transboundary movements of plastic waste and clarifying the scope of the Convention as it applies to such waste. New entries relating to plastic waste were included.

The amendment to Annex VIII, with the insertion of a new entry A3210, clarifies the scope of plastic wastes presumed to be hazardous and therefore subject to the Prior informed consent procedure. The amendments came into force on 1 January 2021.

On 22 December the EU Commission decided to ban the export of plastic waste from the EU to non-OECD countries, except for clean plastic waste sent for recycling. By contrast UK exports of plastic waste will now be made under a new system of PIC, under which the importer has to agree to accept the waste, and has the opportunity to refuse it.

COVID 19. Lengthy delays for discharge of coal cargoes in two Chinese ports.

COVID 19 has caused numerous delays in loading and discharging at ports throughout the world. Sometimes we have seen total exclusion of ships from specified countries, as with the UK’s exclusion of all ships from Denmark for a time in November due to the ‘covid-mink’ scare, and with the brief exclusion by France of accompanied road freight from the UK shortly before Christmas.  

News has now come in of very serious delays in certain Chinese ports. Two Indian ships carrying coal from Australia are still waiting at anchorage for a very long time. The ‘Anastasia’ with 23 crew members on board arrived off Jingtang in Hebei Province on 13 June and the ‘Jag Anand’ with 16 crew members arrived off Caofeidian port on September 20. On New Year’s day India said it was looking at several options to repatriate the 39 Indian sailors on the two ships, including a crew change at sea or at a Chinese port. 

Last year’s New Year’s Day it was Sulphur – this year it’s Cyber

As from today, the IMO’s Resolution MSC.428(98) – Maritime Cyber Risk Management in Safety Management Systems – kicks in. The resolution encourages administrations to ensure that cyber risks are appropriately addressed in existing safety management systems (as defined in the ISM Code) no later than the first annual verification of the company’s Document of Compliance after 1 January 2021. The IMO’s Guidelines Present five functional elements that support effective cyber risk management, which are not sequential – all should be concurrent and continuous in practice and should be incorporated appropriately in a risk management framework:

1 Identify: Define personnel roles and responsibilities for cyber risk management and identify the systems, assets, data and capabilities that, when disrupted, pose risks to ship operations.

2 Protect: Implement risk control processes and measures, and contingency planning to protect against a cyber-event and ensure continuity of shipping operations.

3 Detect: Develop and implement activities necessary to detect a cyber-event in a timely manner.

4 Respond: Develop and implement activities and plans to provide resilience and to restore systems necessary for shipping operations or services impaired due to a cyber-event.

5 Recover: Identify measures to back-up and restore cyber systems necessary for shipping operations impacted by a cyber-event.

Admiralty registrar refuses to unpick contractual incidents of bunker suppliers’ in rem claims.

In TRANS-TEC INTERNATIONAL SRL AND ANOTHER V OWNERS AND/OR DEMISE CHARTERERS OF THE VESSEL “COLUMBUS” [2020] EWHC 3443 (Admlty), Admiralty Registrar Mr Davison, on 17 December 2020, considered the meaning of “claim in respect of goods or materials supplied to a ship for her operation or maintenance” under the Senior Courts Act 1981, section 20(2)(m)

Various bunker suppliers claimed in rem against two vessels and also claimed additional sums sought for contractual interest, administrative fees and costs indemnity. The vessels had been sold and the actions were against the sale proceeds with a claim for default judgments. Other in rem claimants disputed the additional sums claimed and argued that these could only be brought in personam.

The additional sums were held to be recoverable under s.20 (m). The fees and interest were incidents of the contract and although the collection costs were further removed they too formed part of the contractual bargain.

All the UK wants for Christmas is….Lugano

As 2020 draws to its end, two bits of good news in December. The first roll out of COVID-19 vaccines in the UK, and yesterday’s announcement of a free trade deal between the UK and the EU. However, commercial lawyers will be scanning the news for any announcement that the EU will now consent to the UK’s application to join the Lugano Convention 2007. However, even if that were granted today there would still be a three month delay before the UK joined the Lugano Club.

Article 72 of the Convention provides

3.   Without prejudice to paragraph 4, the Depositary shall invite the State concerned to accede only if it has obtained the unanimous agreement of the Contracting Parties. The Contracting Parties shall endeavour to give their consent at the latest within one year after the invitation by the Depositary.

4.   The Convention shall enter into force only in relations between the acceding State and the Contracting Parties which have not made any objections to the accession before the first day of the third month following the deposit of the instrument of accession.

So in the interim, the UK on 1 Jan 2021 would revert to common law on civil jurisdiction and enforcement of judgments as between itself and the Lugano parties, subject to application of the Hague Convention 2005 which comes into force with the UK as an independent signatory, rather than by virtue of the EU’s accession, on 1 January 2021.

However in November the UK and Norway agreed to extend and update their 1961 Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters, so that it will apply to the extent that, and during any period that, the 2007 Lugano Convention does not apply to the UK.

The agreement between the two countries 

Hi Ho ‘Silver’. Salvage and Sovereign Immunity.

 

As 2020 draws to a close, we have the first case on the application of the 1978 Sovereign Immunity Act to a claim for salvage, in Argentum Exploration Ltd v The Silver [2020] EWHC 3434 (Admlty) (16 December 2020), heard by Sir Nigel Teare acting as a judge of the High Court.

A UK company formed in 2012 for the purpose of locating and salving valuable shipwrecks lying at depths which up until then had precluded salvage claimed to have salved in 2017 silver bars worth US$43m from the wreck of the SS Tilawa which Japanese torpedoes sunk in the Indian Ocean on 23 November 1942. The bars are the property of the South African government which was intending to use them in 1942 for minting South African coinage and some Egyptian coinage.

South Africa asserted sovereign immunity and claimed the Receiver of Wreck should deliver the cargo to it without any salvage being paid. Section 1 of the State Immunity Act 1978 (“the SIA”) provides that “a State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act.” This is subject to various exceptions, in particular that in s.10(4) .

A State is not immune as respects—

(a) an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes; “

The key question was whether the bars of silver and the vessel carrying them were, at the time the cause of action arose, in use or intended for use for commercial purposes.

South Africa argued that cargo was not in use during the voyage, but this did not determine the question of state immunity because it remained to consider whether the cargo was intended for use for commercial purposes. Sir Nigel Teare had difficulty in accepting that there is a principled reason for state immunity from the court’s adjudicative jurisdiction in an action in rem claiming salvage where the state has chosen to have its cargo carried by sea pursuant to a contract of carriage just like any private owner of cargo and has therefore exposed itself to claims for salvage like any private owner of cargo. The cargo of silver was intended to be used for commercial purposes, because it had been bought from the Bombay Mint and shipped commercially, and its intended us as part of a sovereign activity of producing South African cargo did not affect its status as commercial cargo.

The character or status of the cargo in 1942 was relevant to the character or status of the cargo in 2017, and there was no reason to conclude that the character or status of the cargo in 1942 as a cargo used for the commercial purposes of a contract of carriage had changed by then. For the character or status of the cargo in 1942 to have changed by 2017 there must have been some decision by the South Africa to change it. There was none on the facts of this case.

Accordingly, Sir Nigel Teare found that the matter fell within the ‘commercial purposes’ exception in the SIA. This conclusion was consistent with the obiter approach of Gross J., in the Altair that the cargo in that case was a commercial cargo (in use for commercial purposes) because it had been bought and shipped commercially, notwithstanding that it was to be used as part of the Public Distribution System.

It was therefore unnecessary to consider whether, if, contrary to this conclusion, the cargo was not in use for commercial purposes it was intended to be used for commercial purposes. On the facts it was intended to be used substantially for the government or sovereign purpose of producing South African Union coinage which was a sovereign or governmental activity.

Heathrow Third Runway. 2018 Airports National Policy Statement not unlawful

Heathrow Third Runway. 2018 Airports National Policy Statement not unlawful

In February the Court of Appeal held that the Secretary of State had acted unlawfully in failing to take the Paris Agreement into account when designating the Airports National Policy Statement (the “ANPS”) and its accompanying environmental report in relation to the proposed  third runway at Heathrow airport. Accordingly, the ANPS was of no legal effect. Last week the Supreme Court overruled that decision on an appeal by the company which owns Heathrow Airport, Heathrow Airport Ltd (“HAL”).

The Secretary of State designated the Secretary of State designated the ANPS as national policy on 26 June 2018 under section 5(1) of the Planning Act 2008 (the “PA 2008”). Section 5(8) states that these reasons must include an explanation of how that policy takes account of existing “Government policy” relating to the mitigation of and adaptation to climate change. The March 2016 statements of Andrea Leadsom MP and Amber Rudd MP and the formal ratification of the Paris Agreement did not mean that the Government’s commitment to the Paris Agreement constituted “Government policy” in the sense in which that term is used in the statute. At the point the ANPS was designated in June 2018, there was no established “Government policy” on climate change beyond that already reflected in the Climate Change Act 2008 which sets a national carbon target. International treaties are binding only as a matter of international law and do not have an effect in domestic and do not constitute a statement of “Government policy” for the purposes of domestic law

The evidence shows that the Secretary of State took the Paris Agreement into account and, to the extent that its obligations were already covered by the measures in the CCA 2008, ensured that these were incorporated into the ANPS framework Insofar as the Paris Agreement might in future require steps going beyond the current measures in the CCA 2008, the Secretary of State took it into account but decided that it was not necessary to give it further weight in the ANPS.

Further, the Secretary of State had not separately breached his section 10 duty by failing to have regard to, firstly, the effect of greenhouse gas emissions created by the NWR scheme after 2050 and, secondly, the effect of non-CO2 emissions. The UK’s policy in respect of the Paris Agreement’s global goals, including the post-2050 goal for greenhouse gas emissions to reach net zero, was in the course of development in June 2018. The Secretary of State did not act irrationally in deciding not to assess post-2050 emissions by reference to future policies which had yet to be formulated and The Secretary of State’s department was also still considering how to address the effect of non-CO2 emissions in June 2018.

Future applications for development consent for the third runway will be assessed against the emissions targets and environmental policies in force at that later date rather than those set out in the ANPS in June 2018.

In June 2018 the CCA target was for a reduction in carbon emissions by 80% by 2050 which was Parliament’s response to the international commitment to keep the global temperature rise to 2ºC above pre-industrial levels in 2050. The figure of 100% was substituted for 80% in section 1 of the CCA 2008 by the Climate Change Act 2008 (2050 Target Amendment) Order 2019/1056. In its letter of 24 September 2019 to the Secretary of State recommending that international aviation and shipping emissions be included in a net-zero CO₂ emissions target, the CCC stated:

“Aviation is likely to be the largest emitting sector in the UK by 2050, even with strong progress on technology and limiting demand. Aviation also has climate warming effects beyond CO₂, which it will be important to monitor and consider within future policies.”

The Government in its response to consultations on the ANPS stated that it will address how policy might make provision for the effects of non-CO₂ aviation emissions in its Aviation Strategy. That strategy is due to be published shortly.

Non signatory third parties, the New York Convention and enforcement of arbitration agreements in the US. SCOTUS says ‘Yes, they can’.

In 2007, ThyssenKrupp Stainless USA, LLC, entered into three contracts with F. L. Industries, Inc., for the construction of cold rolling mills at ThyssenKrupp’s steel manufacturing plant in Alabama. Each of the contracts contained an identical arbitration clause.  F. L. Industries, Inc., then entered into a subcontractor agreement with GE Energy Power Conversion France SAS, Corp. (GE Energy), under which  GE Energy agreed to design, manufacture, and supply motors for the cold rolling mills. Between 2011 and 2012, GE Energy delivered nine motors to the Alabama plant for installation. Soon thereafter, respondent Outokumpu Stainless USA, LLC, acquired ownership of the plant from ThyssenKrupp.

According to Outokumpu, GE Energy’s motors failed by the summer of 2015, resulting in substantial damages. Outokumpu and its insurers filed suit against GE Energy in Alabama state court in 2016 and GE Energy removed the case to federal court under 9 U. S. C. §205, which authorizes the removal of an action from state to federal court if the action “relates to an arbitration agreement . . . falling under the Convention [on the Recognition and Enforcement of Foreign Arbitral Awards].” GE Energy then moved to dismiss and compel arbitration, relying on the arbitration clauses in the contracts between F. L. Industries, Inc., and ThyssenKrupp which defined the terms “Seller” and “Parties” to include subcontractors. 

The District Court granted GE Energy’s motion to dismiss and compel arbitration with Outokumpu and Sompo Japan Insurance Company of America. 

The Eleventh Circuit reversed the District as including a “requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration.” This requirement was not satisfied because “GE Energy is undeniably not a signatory to the Contracts.” It further held  that GE Energy could not rely on state-law equitable estoppel doctrines to enforce the arbitration agreement as a non signatory because, in the court’s view, equitable estoppel conflicts with the Convention’s signatory requirement. The equitable estoppel doctrine permits a non-signatory to a contract which contains an arbitration clause to rely on that arbitration clause when the signatory asserts claims that implicate the contract.

The Supreme Court first found that in cases which fall under Chapter 1 of the U.S. Federal Arbitration Act (FAA), which governs domestic and other arbitrations seated in the U.S., non-signatories may enforce arbitration clauses against signatories.

The Supreme Court then held that the only provision of the New York Convention that addresses the enforcement of arbitration agreements was Article II(3) and the nonexclusive language of that provision did not set a ceiling that tacitly precludes the use of domestic law to enforce arbitration agreements. This states that “[t]he court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Nothing in the text of the Convention “conflict[s] with” the application of domestic equitable estoppel doctrines permitted under Chapter 1 of the FAA. 9 U. S. C. §208.

The Court subsequently remanded the case to the Eleventh Circuit to decide whether applicable domestic-law equitable estoppel doctrines would permit GE Energy to compel arbitration.