Category: Admiralty Law

General Average and Congenbill 1994 form. An old chestnut of interpretation resolved.

In The Star Antares, Star Axe I LLC v Royal and Sun Alliance Luxembourg SA – Belgian Branch & Ors [2023] EWHC 2784 (Comm) (10 November 2023) Butcher J was faced with resolving an old chestnut of interpretation as to which version of the York-Antwerp Rules (‘YAR’) is applicable pursuant to clause (3) of the standard Congenbill 1994 form, which provides:

‘General average shall be adjusted, stated and settled according to York-Antwerp Rules 1994, or any subsequent modification thereof, in London unless another place is agreed in the Charter Party’. The Claimant argued for the York-Antwerp Rules 1994 (‘the YAR 1994’), the Defendants for the York-Antwerp Rules 2016 (‘the YAR 2016’).

Butcher J started with the undisputed factual matrix submitted by the Defendants at [14].

 “(1) That shipowners and charterers are in the habit of using contract wordings for many years, even after newer wordings have been published. There could have been no assurance, when drafting a wording such as Congenbill 1994, that the market would only use it until such time as an updated wording became available.

(2) The YAR constitute a code for regulating the adjustment of general average. The first version of the Rules appeared in 1877, their aim being to harmonize the treatment of general average by the principal seafaring nations.

(3) The YAR have been periodically revised, with further versions being published in 1890, 1924, 1950, 1974, 1994, 2004 and 2016. At least since 1950, the revisions have been overseen by CMI. Following a consultation process, the new version will be approved at a CMI meeting and published in the CMI yearbook.

(4) In addition to these further versions, an amended version of the 1974 Rules was issued in 1990, on order to take account of the Salvage Convention 1989.

(5) Apart from that specific instance, the periodic updating of the YAR is, in general terms, to be explained by a desire for the adjustment of general average to march in step with developments in shipborne commerce and to suit the changing expectations of ship and cargo interests.”

The Claimant relied on opinions in a variety of learned academic texts and commentary to the effect that the words ‘[YAR 1994], or any subsequent modification thereof’ did not embrace either the York-Antwerp Rules 2004 (‘YAR 2004’) or YAR 2016, which were new sets of Rules and not ‘modifications’ of YAR 1994.

Butcher J found that, against the undisputed factual matrix, the words in question were reasonably to be understood as capable of applying to a new version of the Rules. A reasonable person possessed of that background knowledge, and without regard to the academic materials relied on by the Claimant, would understand the parties to have meant only amendments to the 1994 version of the Rules which were identified as such, rather than a new version of the Rules which included some changed provisions. The word ‘modification’ ordinarily signifies a change which does not alter the essential nature or character of the thing modified. When used in the context of a written instrument or set of Rules it ordinarily has, if anything, a rather wider connotation than ‘amendment’, extending to changes in approach, and being less focused than is the word ‘amendment’ on textual change. Additionally, the clause here referred to ‘any subsequent modification’ and the use of ‘any’ emphasised that all ‘modifications’ to the YAR 1994 were to be incorporated. This would apply equally to YAR 2004 as to YAR 2016. This conclusion was consistent with the way in which courts have construed clauses incorporating the Brussels International Convention of 1924 ‘and any subsequent amendment thereto’ in The ‘Vechscroon’ [1982] 1 Lloyd’s Rep 301, or national legislation enacting the Hague Rules ‘as amended’ in The ‘Marinor’ [1996] 1 Lloyd’s Rep 301. In each the conclusion was that the Hague-Visby Rules applied.

As regards the academic opinions on the wording in question, even assuming that this material could be regarded as being known to the parties at the time of contracting, it did not point to the conclusion that the relevant words would have been reasonably understood to have the meaning for which the Claimant contended. The reasonable person considering what the parties meant, would have regarded these expressions of opinion as just that.

Accordingly, Butcher J found that the clause referred to YAR 2016.

Twenty one years on and still fighting over the ‘Prestige’. Registering a foreign judgment in England and the Brussels Regulation.

Butcher J’s judgment of October 6, [2023] EWHC 2473 (Comm), provides us with the latest chapter in the long-running saga between Spain and the London P&I Club regarding the former’s attempts to register its Supreme Court Judgment of 2016 in England. The Club had a declaratory award of non-liability against Spain from Mr Schaff which it successfully converted into a judgment in a decision of Hamblen J, which was upheld by the Court of Appeal (The Prestige (No. 2) [2015] EWCA Civ 333, [2015] 2 Lloyd’s Rep 33). Subsequently, Henshaw J and the Court of Appeal The Prestige (Nos. 3 & 4) [2021] EWCA Civ 1589, [2022] 1 WLR 3434. found that damages would not result from Spain’s failure to comply with an award that was purely declaratory, but the Club obtained permission from the Court to appoint an arbitrator under s.18 of the Arbitration Act 1996 in a second arbitration claiming either damages or equitable compensation.

At the end of 2020 just prior to the ending of the Brexit transition period, Butcher J, who had been hearing the Club’s appeal against Spain’s obtaining a Registration Order for its 2016 Judgment, referred three questions to the CJEU. Shortly after the Court of Appeal found that he was wrong to make the reference but only he could withdraw the reference. Before that could be done, the CJEU gave their judgment, which did not bode well for the Club. In paras 54-73 the CJEU had found that, while a judgment on an arbitration award might fall within Article 34(3), this was only when a judgment on the same terms could have been entered by the enforcing court, and then to provide ‘guidance as to how that test should be applied to the facts presented to the CJEU in this case.’ This ‘guidance’ was that ‘the content of the arbitral award at issue in the main proceedings could not have been the subject of a judicial decision falling within the scope of Regulation No. 44/2001 without infringing two fundamental rules of that regulation concerning, first, the relative effect of an arbitration clause included in an insurance contract and, secondly, lis pendens.’ Further, it was not simply for the court seised with the enforcement application under the Regulation to consider and apply these principles, but the court seised with the application to enter the judgment in the terms of the arbitral award.’

Permission to appeal the Court of Appeal’s Judgment to the Supreme Court had been granted to Spain and a hearing scheduled, which was suspended with the agreement of the parties after the CJEU Judgment appeared. Later in 2022 Spain’s application for permission to appeal to the Supreme Court against the Court of Appeal’s Judgment in the Prestige 3 & 4 was turned down.

Since then, the Club has continued its appeal against Registration of the Spanish Judgment and in January and March 2023 it obtained two partial awards in its favour from Sir Peter Gross, appointed as sole arbitrator for the second arbitration. The awards were to the effect that Sir Peter Gross had jurisdiction as arbitrator, the arbitration exclusion in Brussels I meant that the CJEU erred in its findings at paragraphs of its judgment, equitable compensation could be awarded against Spain, potentially injunctive relief too, although the arbitrator exercised his discretion not to award such relief, and damages could also be awarded in lieu of an injunction.

The Club’s appeal came before Butcher J, along with Spain’s challenges to the awards of Sir Peter Gross under ss 67, 68 and 69 of the Arbitration Act 1966. Butcher J has essentially agreed with the findings of Sir Peter Gross, except as regards the availability of injunctive relief, due to s.13(2) of the Sovereign Immunity Act 1978, and the availability of damages in lieu of an injunction. He deferred a decision on the availability of injunctive relief against a State till after the decision of the Court of Appeal in UK P&I Club N.V. v Republica Bolivariana de Venezuela (The ‘Resolute’) [2022] 1 WLR 4856which is scheduled to be heard this December. On the key question of the effect of the CJEU’s judgment he noted that CJEU had considered questions beyond the three he had referred, and concluded, as had Sir Peter Gross, there was an issue estoppel to the effect that the jurisdiction-allocation provisions of the Regulation, and in particular its lis pendens and insurance provisions, were no good reason for the English s. 66 Judgments not to have been entered because the Regulation is not applicable to arbitration. Specifically, the CJEU did not take into account that, because of the issues which had been raised and decided in the earlier proceedings, there might be res judicatae relevant to the line of reasoning which it adopted. The Court could and should give effect to that issue estoppel, notwithstanding what may have been suggested in paragraphs [54]-[73] of the CJEU Judgment, and  the decision in the relevant part of the CJEU Judgment could not be binding.

Butcher J found that the Club’s Appeal against the Registration Order succeeded because the Spanish Judgment was irreconcilable with the English s. 66 Judgments, and, if that were wrong, recognition of the Spanish Judgment would be contrary to principles of English public policy relating to res judicata by reason of the prior Award of Mr Schaff.

Spain were given permission to appeal under s.69 on all of its four grounds of challenge, save that part of ground 1 which raised the issue of the effect of the CJEU Judgment on the jurisdiction of Sir Peter Gross as arbitrator. The appeal under s. 69 AA 1996 on grounds (1) and (2) (relating to the CJEU Judgment) and (4) (relating to equitable compensation) was dismissed. On ground (3) regarding injunctive relief against Spain and damages in lieu of an injunction, Butcher J concluded that Sire Peter Gross had no jurisdiction to grant either relief, but deferred his decision until after the decision of the Court of Appeal in The Resolute.

On the same day Butcher J gave a similar decision  [2023] EWHC 2474 (Comm) in relation to France’s applications in connection with two partial awards from the Arbitrator appointed by the Club, Dame Elizabeth Gloster, in which it sought declarations that the French State was in breach of its obligations not to pursue the non-CLC claims other than by way of London arbitration, injunctive relief, and an order that the French State pay to the Club such sums as the Club is ordered to pay to the French State in any jurisdiction in which the Spanish Judgment is recognised or enforced, as well as compensation for its costs of defending the non-CLC claims in Spain.

France did not seek to register the Spanish Supreme Court Judgment in England. It sought leave to appeal four questions of law arising out of the Awards, pursuant to s. 69 AA 1996 and an extension of time to appeal the first partial award.

Ground 1: whether the arbitral tribunal had the power to grant an injunction against the French State under s. 48(5) AA 1996;

Ground 2: whether the arbitral tribunal had the power to award equitable compensation for breach of an equitable obligation to arbitrate arising by application of the conditional benefit principle, or whether equitable compensation is otherwise available in these circumstances; Ground 3: whether an anti-enforcement injunction can be granted where its effect is to restrain enforcement of a foreign judgment which is granted recognition under English law; and

Ground 4: whether equitable compensation can be granted where its effect is to neutralise the effect of a foreign judgment which is granted recognition under English law.

Butcher J found that France required an extension of time to bring its s.69 AA 1996 application in respect of matters decided in the First Partial Award and one should be granted on Grounds 1 and 2, but not on Grounds 3 and 4. There should be permission to appeal on Grounds 1 and 2, but there would not have been such permission on Grounds 3 and 4. The appeal on ground 2 was dismissed. In relation to Ground 1 he concluded that the arbitrator had no jurisdiction to grant and injunction against the French state but his decision was deferred until after the Court of Appeal had come to a decision in the ‘Resolute’.

Weather report. GHG litigation update.

1. The US

Montana

Held v Montana is an action by sixteen young people in Montana challenging the constitutionality of the State’s fossil-fuel based energy system, alleging that this breached their rights, including the right to a ‘clean and healthful environment’ as set out in the Montana Constitution. The action specifically targeted a provision in The Montana Environmental Policy Act (“MEPA”) which contains a limitation (the “MEPA Limitation”) that prevents the State from considering the impacts of greenhouse gas (“GHG”) emissions or climate change in environmental reviews of its energy economy. Since the claim was commenced, clarifications to the MEPA Limitation were signed into law in April 2023, further explicitly prohibiting “an evaluation of greenhouse gas emissions and corresponding impacts to the climate in the state or beyond the state’s borders” for MEPA reviews of new energy projects.

On 14 August 2023 District Court Judge Seeley held that the plaintiffs had standing to bring the action, as they have a “fundamental constitutional right to a clean and healthful environment, which includes climate as a part of the environmental life-support system.” Montana’s GHG emissions and climate change were found to be proven factors in causing climate impacts to Montana’s environment and harm and injury to the Plaintiffs. Montana’s GHG emissions could be fairly traceable to the MEPA Limitation. The MEPA limitation was held to have violated the plaintiff’s right to a clean and healthy environment by prohibiting analysis of GHG emissions and corresponding impacts to the climate of energy projects, as well as how additional emissions will contribute to climate change or be consistent with the Montana Constitution, and was unconstitutional. An injunction was granted prohibiting the state government and public bodies in accordance with the unconstitutional statutes. Montana has sixty days within which to appeal.

California

On 17 September 2023 a suit was filed by the State of California in the San Francisco which alleges that various oil and gas misled the public for decades about climate change and the dangers of fossil fuels and seeks compensation from those companies to help fund recovery efforts related to California’s extreme weather events, from rising sea levels to drought and wildfires, that have been exacerbated by human-caused climate change.

2. Europe

Two cases are currently before the European Court of Human Rights, brought by claimants from different ends of the age spectrum.

First, Verein Klima Seniorinnen v Switzerland, involving the effect of climate change on elderly women in Switzerland, amounting to violation of their rights under Articles 2 (right to life) and 8 (right to respect for private and family life) of the Convention., and was heard on 29 March 2023. Second, 27 September 2023 the hearing began in Duarte Agostinho and others v Portugal and 32, involving claims brought by young people in Portugal, aged 11-24, alleging that signatories to the Paris Agreement have failed to comply with their commitments, amounting to a violation of their rights under Article 2 and 8 of the Convention.

3. The Oceans

The law of unintended consequences may be applying to the IMO’s 2020 Sulphur Cap. This change was made to preserve human health, due to the toxic nature of sulphur aerosols, but may also have contributed to global warming. Sulphur aerosols also reflect sunlight, and as a result have a cooling effect, and are believed to have masked some of the effects of global warming, especially in the regions of heavy maritime traffic such as the North Pacific and North Atlantic regions. An analysis in July 2023 by Carbon Brief https://www.carbonbrief.org/analysis-how-low-sulphur-shipping-rules-are-affecting-global-warming/ states,

“Carbon Brief’s analysis suggests that the additional warming due to the IMO regulations on marine fuel is approximately equivalent to two additional years of global greenhouse gas emissions from human activity at their current rate. While this does not fundamentally change where the world is headed in terms of warming by 2050, it does make it more difficult to limit warming to 1.5C over the next few decades. However, the change in radiative forcing due to a drop in SO2 emissions remains highly uncertain, especially over the oceans… Taking the high end of the range of estimates of radiative forcing could result in up to 0.18C additional warming by 2030 and 0.25C additional warming by 2050, though most studies have found lower forcing estimates than this.”

FuelEU Maritime and Alternative Fuel Infrastructure Regulations now live.

Two pieces of EU Legislation on GHG reduction and shipping have just been finalised with publication in the Official Journal on 22 September 2023, to come into effect 20 days thereafter.

1. FuelEU Maritime.

REGULATION (EU) 2023/1805 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 September 2023 on the use of renewable and low-carbon fuels in maritime transport, and amending Directive 2009/16/EC

The Regulation applies from 1 January 2025, with the exception of Articles 8 and 9 (on the submission and modification of the ship’s monitoring plan) which shall apply from 31 August 2024.

2. AFIR

REGULATION (EU) 2023/1804 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 September 2023 on the deployment of alternative fuels infrastructure, and repealing Directive 2014/94/EU

The Regulation applies from 13 April 2024.

Limitation for charterers — the Court of Appeal makes life a little easier

The Limitation Convention 1976 isn’t the best drafted of maritime conventions, but the Court of Appeal this morning in The MSC Flaminia (No 2) [2023] EWCA Civ 1007 made a very good stab at cutting through the verbal undergrowth to reach a clear and sensible result.

The background first, for those who don’t know it. In 2012 the MSC Flaminia, a 86,000 dwt container vessel owned by Conti and time chartered to MSC, suffered a disastrous fire while en route from the US to Antwerp when certain containerised chemicals ignited. She received salvage services and was towed dead to Wilhelmshaven, where most of her cargo was discharged and where necessary decontaminated or destroyed. Dirty firefighting water was also offloaded and sent to Denmark to be cleaned up. Further cleanup operations took place in Romania and Denmark; the vessel was then repaired in Romania, and finally returned to service in mid-2014.

All this cost big money. Her owners Conti, having been unsuccessfully pursued by cargo interests in the US, claimed against the time-charterers to recover the expenses of these operations on the basis that they were responsible for the shipment of the dangerous chemicals involved. Arbitrators awarded some $200 million, whereupon MSC sought to limit, the relevant limitation figure being about 25 million SDRs.

Some of Conti’s claims were indubitably outside the 1976 regime limitation, notably the direct cost of repairs (clear since The CMA Djakarta [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep. 460). But this left the offloading and cleanup costs: were they limitable or not? The Convention was not clear on this. Article 1(2) extended the shipowner’s right to limit to a “charterer, manager and operator of a seagoing ship.” Article 2(1) allowed limitation for personal injury and cargo claims (Article 2(1)(a)), passenger and cargo delay claims (Article 2(1)(b)), tort claims by third parties (Article 2(1)(c)). It then, in its English incarnation, went on to cover “claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship” (Article 2(1)(e)) and “claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures” (Article 2(1)(f)). How these all fitted together, however, was not very clear.

The Admiralty judge, Andrew Baker J, denied limitation to MSC (see here, noted here in this blog). True, he said, there was no absolute bar on limitation in respect of claims arising between charterers and owners other than for damage to the vessel: indeed there could not be, since clearly owners had to be able to limit if they found themselves at the sharp end of cargo claims from charterers. But limitation was still impossible in this case because, even if dressed up as a series of claims for offloading cargo, rendering it harmless and the like under Article 2(1)(e), Conti’s claim was in substance a single one for damage to the vessel and its consequences, which was exactly what The CMA Djakarta said was entirely outside the limitation regime.

MSC, or rather its P&I Club, fared no better in the Court of Appeal. But here the reasons, given in a pellucid judgment by Males LJ, were slightly different. The rule he advanced about charterer-owner claims was simple and elegant, and sufficed to dismiss the appeal. Charterers were in a special position, different from that of owners. They could not limit at all, he said, in respect of claims by owners (or anyone else in the charmed circle of those entitled to limit under Article 1) for losses originally suffered by the latter. But by way of exception, charterers could limit in recourse claims from owners, who having paid claims to third parties where limitation did apply, then sought indemnity from them. Here, however, that was beside the point: since there was no element of recourse in the present proceedings, it followed that MSC had to pay in full.

This sufficed to wrap up the case. If one may say so, Males LJ’s solution seems instinctively right. Presumably, it is worth adding, it equally applies to claims not from owners but from other charterers: so if there is (say) a series of time charters and subcharters and a claim – dangerous cargo, stowage damage, or whatever – to be passed down the line, each charterer in turn would be able to limit. Presumably also Males LJ’s reasoning applies to operators of vessels who find themselves in the firing line after a casualty and wish in turn to invoke the power to limit under Article 1(2).

Males LJ also said something about MSC’s other grounds of appeal, though these strictly did not arise. In particular, Andrew Baker’s holding that the claim from Conti had to be looked at as a whole he found unimpressive. It is suggested he was right to do so: there seems no reason to demand that a large and possibly disparate claim be pigeonholed as a whole into some category or another rather than looked at seriatim as regards its parts.

It seems to follow that had it been not been found that all the expenses had been incurred as part of the operation of repairing the vessel, and that some had been genuine recourse claims arising from Conti’s potential liabilities to cargo, limitation would have been allowed.

All in all, however, this is a decision that will make the lives of lawyers and P&I executives seeking to settle claims, not to mention academics, a great deal easier. Just what we want: a bit of good news as we all return from our holidays for the new term.

AI and Civil Liability. The EU Commission’s proposed AI Liability Directive.

 Over the past three years the EU has become involved in developing legislation to deal with the operation of Artificial Intelligence (AI) in the Union. There are three strands to this legislation: the overall regulatory AI Act; the updating of the 1986 Product Liability Directive; addressing civil liability arising out of the operation of AI systems.   On 22 October 2020 the European Parliament sent a draft regulation to the Commission for a new strict liability regime for operators of AI systems. The Parliament’s proposal was followed on 28 September 2022 by the European Commission’s proposal for the AI Liability Directive along with a proposed updating of the 1986 Product Liability Directive. This blog pointed out that the proposed Regulation could lead to a confusing overlap with maritime strict liability regimes in the context of vessels at MASS 3 and 4.

Unlike the Parliament’s proposal of October 2020, the Commission’s proposal is framed as a Directive, and contains no substantive rules regarding liability arising out of use of an AI system.   Instead, the proposed Directive applies to non-contractual fault-based civil law claims for damages, in cases where the damage caused by an AI system occurs after the end of the transposition period, but the Directive lays down two sets of common rules.

First, Article 3 deals with the disclosure of evidence on high-risk artificial intelligence (AI) systems to enable a claimant to substantiate a non-contractual fault-based civil law claim for damages. 

Second, Article 4 deals with the burden of proof in establishing causality in non-contractual fault-based civil law claims brought before national courts for damages caused by an AI system. For the presumption of causality to apply, the fault of the defendant should be established as a human act or omission which does not meet a duty of care under Union law or national law that is directly intended to protect against the damage that occurred.  It should also be necessary to establish that it can be considered reasonably likely, based on the circumstances of the case, that the fault has influenced the output produced by the AI system or the failure of the AI system to produce an output and the claimant should still be required to prove that the output or failure to produce an output gave rise to the damage.

However, fault still has to be proved under the applicable Union or national laws, although fault can be established in respect of non-compliance with Union rules which specifically regulate high-risk AI systems. It is likely that in the future such rules will apply to vessels at MASS 3 and 4 for entry into ports and the territorial sea of Member States. The Directive does not affect rules of Union law regulating conditions of liability in the field of transport. With maritime transport the only such rules of Union law concerning fault based civil law claims would be Directive 2009/20/EC on the insurance of shipowners for maritime claims.  

Art 5  provides for the Commission to submit a report to the Parliament, the Council, and the Economic and Social Committee, assessing the Directive’s achievement five years after its transposition.  In particular, that review should examine whether there is a need to create no-fault liability rules for claims against the operator combined with a mandatory insurance for the operation of certain AI systems, as suggested by the European Parliament resolution of 20 October 2020 on a civil liability regime for artificial intelligence.  

The restriction to fault-based liability regimes means that, in relation to MASS 3 and 4 vessels operating with the territory of the Union, the proposed Directive will have no application to the two current strict liability pollution regimes, the CLC and the Bunkers Convention, and will have no application to the HNS regime when it eventually comes into force. It will, though, have application in the Member States to fault based tort claims such as general pollution claims and collision claims, as regards the rebuttable presumption of a causal link in the case of fault provided for in Art 4, and almost certainly as regards the evidential provisions in Art 3 if MASS 3 and 4 vessels are eventually classified as ‘high risk’.  

The proposed Directive now has to go back to the Parliament and the Council, and may well be subject to amendment. The European Economic and Social Committee (EESC) adopted an opinion on the proposal on 25 January 2023 broadly welcoming the proposal but insisting  upon clear legal definitions, calling upon the Commission to closely monitor the development of financial guarantees or insurance covering AI liability and recommending the Directive be reviewed three years after entry into force.

Greenhouse gas emissions and international shipping. IMO sets new reduction targets.

At MEPC 80 on Friday 7 July the IMO revised its 2018 GHG reduction targets for international shipping with a new target for international shipping reaching ‘net zero’ close to 2050 and indicative checkpoints of a cut in total greenhouse gas emissions of at least 20% by 2030, but ‘striving’ to reach cuts of 30% by then, and 70% in 2040 but ‘striving’ for 80%.  GHG emissions are now to be calculated on a ‘well to wake’ basis. There is also a target that at least 5% of the energy used for international shipping by 2030 should be zero carbon, or near zero carbon, but ‘striving’ to reach 10% by then. There is no change to the 2018 target of reducing the carbon intensity (emissions produced per cargo and distance travelled) of international shipping by 40% by 2030, compared with 2008 levels.   The IMO has set a deadline of 2025 for the development of mid-term measures to support its GHG strategy, with them to come into effect in 2027.

No decision was made on the proposed carbon levy, but the proposal lives on for future discussion. Discussion on the application of on-board carbon capture and storage or utilization, has been postponed to the next intersessional meeting of the Working Group on GHG reductions.

Shipping and Emissions Trading Schemes. Latest from the EU and the UK.

The EU’s inclusion of shipping in the ETS comes into effect on 1 January under DIRECTIVE (EU) 2023/959 of 10 May 2023. The amended directive will also affect the position of storage of captured emissions from a registered emitter. Previously, a registered emitter was under no obligation to surrender allowances in respect of emissions which are verified as captured and transported by pipeline to a storage facility, authorised in accordance with the CCS Directive. The amended ETS Directive now removes the previous requirement that CCS had to be transported by pipeline to a storage facility. The reference to CCS in the table to Annex I to Directive 2003/87/EC is amended so as to read “Transport of greenhouse gases for geological storage in a storage site permitted under Directive 2009/31/EC, with the exclusion of those emissions covered by another activity under this Directive.”

This is amplified by article 69 of the Preamble which states:

 “As CO2 is also expected to be transported by means other than pipelines, such as by ship and by truck, the current coverage in Annex I to Directive 2003/87/EC for transport of greenhouse gases for the purpose of storage should be extended to all means of transport for reasons of equal treatment and irrespective of whether the means of transport are covered by the EU ETS. Where the emissions from the transport are also covered by another activity under Directive 2003/87/EC, the emissions should be accounted for under that other activity to prevent double counting.”

This means that captured carbon from a registered emitter can now be transported a permitted storage facility by ship without the emitter being obliged to surrender allowances in respect of its captured emissions.

As for the UK and its ETS scheme, on Monday 3 July the UK government announced that: domestic shipping for vessels above 5000 grt will be required to participate in the UK’s Emissions Trading Scheme starting in 2026.

The government would also: expand the existing scope of the scheme to create a level playing field between operators who use pipeline and non-pipeline modes of transportation of CO2, working with key regulatory partners to establish how Non-Pipeline Transport (NPT) should best be integrated into the existing UK ETS framework; and  review its policy of expanding the UK ETS to methane emissions from upstream oil and gas and other traded sectors.

It’s now Official. Shipping and the ETS.

On 16 May 2023 the Official Journal published Directive 2023/959, amending the 2003 ETS Directive, and Regulation 2023/957 amending the 2015 MRV Regulation. Shipping will enter the ETS as from 1 January 2024 as regards CO2 emissions, and from 1 January 2026 as regards emissions from two other greenhouse gases, Methane and Nitrous Oxide. The reporting obligations under the MRV will be extended from CO2 to these other two greenhouses gases as from1 January 2024. The emissions in both measures will be calculated on a tank to wake basis rather than on a wake to wake basis.

The amended ETS Directive

Vessels over 5000 gross tonnage for transporting for commercial purposes cargo or passengers will come within the scope of the EU ETS as from 1 January 2024, with a phased introduction of obligations for the shipping company to surrender each year 100% of allowances for verified CO2 emissions for intra-EU voyages within the ETS and emissions occurring at berth in an EU port, and 50% of verified CO2 emissions for extra-EU voyages from and to a port within the jurisdiction of a Member State. The phase-in means that 40% (20% for extra-EU voyages) allowances will need to be surrendered for calendar year 2024, 70% for 2025 (35%) and 100% (50% for extra-EU voyages) for 2026 and onwards. There will be no free allocation of allowances to shipping companies, which are defined as the shipowner, or the bareboat charterer or ship manager, that has assumed the responsibility for the operation of the ship from the shipowner and that, on assuming such responsibility, has agreed to take over all the duties and responsibilities imposed by the IMO’s ISM Code.

 Emissions are calculated on a tank to wake basis as defined in amended Article 3 ‘(b)“emissions” means the release of greenhouse gases… from ships performing a maritime transport activity listed in Annex I of the gases specified in respect of that activity”. Offshore vessels of 5000 gross tonnage and above will be included in the ETS from 2027. There will be a review in 2026 of whether to included general cargo vessels and off-shore vessels between 400-5000 gross tonnage in the ETS.

The amended MRV Regulation

The 2015 MRV Regulation sees the following changes. As from 1 January 2024 the Regulation will apply to greenhouse gas emissions, CO2, Methane and Nitrous Oxide, from vessels of 5000 gross tonnage and above transporting for commercial purposes cargo or passengers on voyages from a port of call in the EU to their next port of call and from their last port of call to a port of call in a State in the EU as well as to intra EU voyages.

Three months from adoption on 5 June 2023, an updated ship monitoring plan which shall describe the method for monitoring and reporting of Methane and Nitrous Oxide must be verified by an accredited verifier and submitted to the administrating authority of the company. Greenhouse gas emissions are reported on a tank to wake basis. Offshore vessels of 5000 gross tonnage and above will be included in the ‘MRV’ Regulation from 1 January 2025, as will general cargo vessels and off-shore vessels between 400-5000 gross tonnage.

And then there is the FuelEU Maritime Regulation which is nearing the conclusion of its legislative journey. On 23 March  2023 the European Parliament and the Council agreed on the amendments to the Commissions 2021 proposed FuelEU Maritime Regulation and in the European Parliament, the Committee on transport and tourism (TRAN) approved the provisional agreement on 24 May 2023. The new rules will be published in the Official Journal of the European Union and enter into force 20 days after publication, with the Regulation to apply from 1 January 2025.

FuelEU Maritime sets maximum limits on the yearly greenhouse gas intensity of the energy used by a ship, with targets will becoming increasingly ambitious over time to stimulate and reflect the expected developments in technology and the increased production of renewable and low-carbon fuels. The Regulation applies to commercial vessels of 5000 gross tonnes and above, regardless of flag, with exemptions for naval vessels, fishing vessels, ships using non-mechanical propulsion. It covers all energy used on board when the ship is at port in the EU or EEA , all energy used by the ship on voyages between EU or EEA ports and 50% of the energy used on voyages departing from or arriving at an EU or EEA port. The schedule of reduction from a 2020 baseline is: -2% from 2025; -6% from 2030; -14.5% from 2035;-31% from 2040; -62% from 2045; -80% from 2050.

Emissions are calculated on a wake to wake basis, rather than the tank to wake basis in the amended ETS Directive and the amend MRV Regulation. The targets cover not only CO2, but also Methane (CH4) and Nitrous Oxide (N2O).

A podcast on the implications for Shipping of the EU’s ‘Fit for 55’ agenda can be found at

https://podcasts.apple.com/gb/podcast/the-ship-energy-podcast/id1567271142

Accrual of claim for purposes of six year tort limitation period. Offshore oil spill not a conintuing nuisance.


The Supreme Court has recently given judgment in Jalla and another (Appellants) v Shell International Trading and Shipping Co Ltd and another (Respondents) [2023] UKSC 16.

The case involved two Nigerian citizens who sued two companies within the Shell group in private nuisance in respect of damage to their land alleged to have resulted from an oil leak on 20 December 2011 lasting six hours during a cargo operation in the Bonga oil field, approximately 120km off the coast of Nigeria. An estimated equivalent of at least 40,000 barrels of crude oil leaked into the ocean. The defendants are alleged to be liable for the operation behind the Bonga Spill.

The appeal concerned the application of the limitation period for torts, which is usually six year, in respect of the claims for private nuisance. The claimants issued their claim form on 13 December 2017, just under six years after the spill occurred on 20 December 2011. In April 2018, over six years after the spill, the claimants purported to amend their claim form including changing one of the parties being sued from Shell International Ltd (a company which they had initially sued) to STASCO. In April, June and October 2019, they issued a series of applications to amend their claim form and particulars of claim. The claimants argue that so long as undue interference with their land is continuing, because oil on their land has not been removed or cleaned up, there is a continuing cause of action for the tort of private nuisance that is accruing afresh from day to day.

At first instance it was declared that declared that the nuisance as alleged by the Claimants in their original Particulars of Claim and/or their draft Amended Particulars of Claim and on the evidence before the Court at the hearings in September and October 2019 could not constitute a continuing nuisance and that accordingly the limitation period should not be extended by reference to the concept of a continuing nuisance. This was upheld by the Court of Appeal who found that the judge had been correct to decide that the claimants’ cause of action accrued when the oil struck their land. The Supreme Court have now unanimously rejected the appeal on the issue of whether there was a continuing nuisance.

For the purposes of the appeal it was it was assumed that some quantity of oil reached the Nigerian Atlantic shoreline within weeks of 20 December 2011 and that the tort of private nuisance may be committed where the nuisance emanates from the sea or is a single one-off event. The tort of private nuisance is committed where the defendant’s activity, or a state of affairs for which the defendant is responsible, unduly interferes with (or, as it has commonly been expressed, causes a substantial and unreasonable interference with) the use and enjoyment of the claimant’s land and is actionable only on proof of damage which is satisfied by establishing the undue interference with the use and enjoyment of the land.

A continuing nuisance is in principle no different from any other continuing tort or civil wrong and is one where, outside the claimant’s land and usually on the defendant’s land, there is repeated activity by the defendant or an ongoing state of affairs for which the defendant is responsible which causes continuing undue interference with the use and enjoyment of the claimant’s land. The cause of action therefore accrues afresh on a continuing basis.

However on the assumed facts of this case, that oil is still present on their land and has not been removed or cleaned up, there was no continuing nuisance. This is because outside the claimant’s land, there was no repeated activity by the defendants or an ongoing state of affairs for which the defendants were responsible that was causing continuing undue interference with the use and enjoyment of the claimants’ land. The leak was a one-off event or an isolated escape. The cause of action accrued and was complete once the claimants’ land had been affected by the oil. Accepting the claimants’ submission would be to extend the running of the limitation period indefinitely until the land is restored.