So Update 1 In 2006

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Class Society Liability. The New Norwegian Ship Safety Act

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So Update 1 In 2006

  1. 1. Wikborg Rein’s Shipping Offshore: Update The new NorwegianSHIPPING LAW UPDATE FROM WIKBORG REIN Ship Safety Act - The seaworthiness concept to be replaced by safety management systemUPDATE 1 / 2006 Managing offshore project risk | The new Competition Act in Singapore How to make sure your closing goes right | Right to lien on cargo under Chinese law | Classification society liability
  2. 2. UPDATE 1/2006 Contents An exciting time to be a shipping lawyer 3 Top ten reasons closings go wrong – and how to make sure yours goes right 4 The new Norwegian Ship Safety Act 6 Norwegian Accident Investigation Board to investigate accidents at sea 8 Classification society liability 9 Safety at sea and marine insurers’ duty of confidentiality 10 The shipboker’s right to commission - change of broker channel 11 Managing offshore project risk 12 Right to lien on cargo under Chinese law 14 International conventions ratified by China 16 Voice recording using voyage data recorders 17 Notice of readiness under voyage charters 18 The impact of the new Competition Act in Singapore on international shipping 20 Wikborg Rein’s Shipping Competition Law Team 22EU Commission moving forward on the repeal of exemption for the shipping industry 23 The Maritime Trainee Programme 24 Personnel news 25 Wikborg Rein’s Shipping Offshore Group in Bergen 26PUBLISHER: Wikborg Rein EDITORIAL STAFF: Gaute Gjelsten, Herman Steen, Stephen N. Lamb DESIGN: Lise Røed PRINT: HBO
  3. 3. AN ExCITING TIME TO BE A ShIPPING LAWyERIt is an exciting time to be a shipping lawyer at Wikborg Rein. 2005 was one of our busiest years ever inthe firm’s Shipping Offshore department and 2006 holds great promise to be equally challenging.I have always believed that being a good lawyer was as much about preventing problems as it was aboutresolving them after they occur. The article on page 4 is a good example of that principle. Every day --somewhere in the world -- a Wikborg Rein lawyer is working to make sure that an upcoming closing for aship sale and purchase or lease-back goes smoothly. It is a mainstay of our work and the article draws onour collective experience to outline the most common snags and shoals and how best to avoid them.While recent years have seen the shipping industry benefit from good economic times, this success hasalso, and not surprisingly, more keenly focused the attention of regulators and others on the business. Thisissue contains two articles on the competition law efforts of regulators in Asia and Europe. The article onpage 23 examines the EU’s new regulations impacting the shipping industry, and the article on page 20looks at the effects of the new Competition Act in Singapore on international firms doing business there.Long the financial capital of Southeast Asia, Singapore has established itself in recent years as the hometo many of the world’s top building yards for offshore rigs. Wikborg Rein partner Finn Bjørnstad, who recently returnedfrom three years in our Singapore office, writes with partner Kelly Malone, on page 12 about this firm’s body of experienceand expertise with the offshore industry.Though the economic times may be good, our lawyers are not content to simply accept traditional assumptions about theliability of those whose negligence causes harm to shipowners and their insurers. This issue contains a thought-provokingarticle about the liability of classification societies on page 9. Long assumed to be effectively beyond the reach of tortand contract liability by many legal observers, our lawyers have been involved in challenging this notion. Negligence bya classification society, or even a government agency, is no longer something that shipowners must necessarily acceptwithout recourse.As our practice has continued to grow, so too has our staff. In addition to six new associates, Anders W. Færden joinedour Oslo office in September as partner. As the article on page 25 explains in more detail, Anders is highly regarded inmaritime law circles, admitted to practice before the Norwegian Supreme Court, and a lawyer who genuinely enjoystackling the most difficult and complex of legal questions. We are extremely pleased with his decision to join our firm.We hope you enjoy this issue of the Update along with our very best wishes for a happy and successful 2006!Yours truly,WIKBORG REINTrond EilertsenLeader of Wikborg Rein’sShipping and Offshore group WIKBORG REIN JANUARY 2006 3
  4. 4. SUBJECT Closings WHy CLOSINGS GO WRONG - AND HOW TO MAKE SURE yOURS GOES RIGHT Imagine sitting in the London conference room of one of the How to make sure yours goes right world’s largest ship registries. The room is crowded with The good news is that an overwhelming majority of closings are com- representatives from the buyer and seller of the vessel that is pleted without any major problems. And those problems most com- about to change hands, and the nervous small talk has run out monly encountered can almost always be avoided through proper as everyone waits for confirmation that the funds have arrived preparation and communication. Specifically, this means having deter- in the seller’s bank account. The phone rings, but it is not the mined all of the buyer’s and seller’s main obligations and then nego- bank. Instead it’s the buyer’s representatives on board the ves- tiating and finalizing a tailored memorandum of agreement (“MoA”), sel calling to remind the meeting that the vessel is due to be de- closing memo and document checklist. livered under a charterparty in less than 30 minutes. No funds – no delivery. The importance of being well prepared and how to prepare In a perfect world, a closing would not take place until all details are It turns out the bank has the wrong account number on the SWIFT thoroughly planned. But in reality, not all closings take place with the interbank payment message. The correct account number is quickly for- luxury of a schedule that allows for such thorough preparation. The warded to the bank and everyone around the table laughs nervously in usual schedule requires all participants to prioritize by distinguishing relief. Then the registrar enters the room and asks: “Which one of you those matters of importance that must absolutely be dealt with before has the original bill of sale....?” No one answers. the closing and those less important, which can be dealt with later. When a new sale and purchase transaction arises it can be helpful to Most such scenarios end happily with a last-minute solution and only draw up a chart and check-list showing: (1) buyer’s and seller’s name, a minor delay. But on rare occasions, a once-willing buyer or seller has corporate status and jurisdiction; (2) vessel name, type, flag state and become decidedly reluctant and practical difficulties with the closing any encumbrances (to be discharged or registered); (3) any change of are exploited to cancel the transaction altogether. flag information; and (4) whether the parties have agreed upon a pay- ment procedure. As the check-list is filled in with information, the next Common reasons why closings go wrong steps are easily put in their proper order for the day of closing (e.g. What is a “closing”? MoA, mortgage discharge, vessel deletion, vessel registration and “Closing” is a shorthand term for the completion of a transaction. mortgage registration). The term closing can be defined as the conclusion of an object’s sale, whereby: (1) payment is made; (2) any previous mortgages discharged; Tailor the MoA for a smooth closing (3) the title to the asset is transferred; and (4) any new mortgages se- The best way to avoid last minute discussions is to ensure that the cured. discussions are closed at an early stage with a tightly worded MoA between the seller and the buyer in which they agree upon all material The list aspects of the deal. The below list – although not complete – identifies the most common reasons why closings go wrong: A large number of sales are based on MoAs on the “Norwegian Sale- form” which in its original form does not include many guidelines as 1 Failure to agree in advance on closing and payment to how the closing should be completed. It merely lists a suggested procedures set of documents to be delivered to the buyer “in exchange for the 2 Documents not prepared in advance or not present at purchase price” pursuant to clause 8. Failing to discuss or agree on closing the closing procedure and the documents to be presented may lead 3 Failure to agree on delivery documents to unpleasant surprises later. Consequently; the parties should ideally 4 Vessel not physically ready prepare an addendum to the agreement listing the main documents 5 Documents lost or delayed to be delivered by both parties. Just as important – at least for seller 6 Documents contain mistakes and / or are not properly – is to clearly state that the free and clear certificate of ownership and notarised or legalised encumbrances will not be presented to buyer until after the purchase 7 Payment is inadequate or delayed price (and payment for bunkers and lubes) are well received in order for 8 Registries / banks not open or unwilling to open early or stay the mortgage, if any, to be discharged. late 9 Registry does not produce the documents when expected Prepare and finalise a closing memo and a document list 10 Buyer trying to renegotiate at the last minute or new issues The next step after finalising the MoA should be to start drafting a arising at closing closing memo and a document checklist (if not included in the MoA as 4 WIKBORG REIN JANUARY 2006
  5. 5. SUBJECT Closingsmentioned above). While most closings will involve the buyer also hav- tion from the registry that all is ready for discharge of the existinging to comply with a condition precedent (“CP”) list related to a loan mortgage and deletion of the vessel (if relevant). If the vessel is bare-agreement, this article does not deal with that particular aspect. The boat registered, make sure that deletion is facilitated and documentedmain purposes of a closing memo is to outline the closing procedure pursuant to the requirements of the main register as they may refuseand to complete the list of documents and serves the important pur- the delete otherwise.pose of identifying any obstacles to the closing procedure as all parties - Ensure that the current mortgagee has facilitated the mortgage dis-will consider whether they will be able to comply with the obligations charge and agree on the trigger for the actual discharge. Be preparedlisted. A good closing memo will: that the mortgagee will not normally discharge the mortgage until they(i) include names and contact details for everyone involved, including have received the funds outstanding under the relevant loan(s). Makethe ship registries. If a time difference is involved then each party’s sure the buyer understand the same.local time should be specified. Buyer’s obligations(ii) reflect on an accurate payment and closing procedure. Particular From a strict closing perspective, a buyer’s task is normally easy: de-attention should be paid to ensuring agreement on these steps, as they liver a few corporate documents, sign the deposit release, accept theinvolve the cooperation of players other than the seller and buyer. 90 delivery documents and the vessel and pay the purchase price, bunkers% of the world’s fleet is mortgaged, and one should bear in mind that and lubes and any extras. Nonetheless, the buyers should ensure thein the event of a mortgage registered against the vessel, the mortga- following:gee will not normally discharge the mortgage until repayment of theloan is made. The wording of the standard clause 8 of the MoA how- - Prepare the corporate documents in due course, have them pre-ap-ever, states that delivery of the delivery documents shall take place proved by the seller, both as drafts and in completed form (notarised“in exchange for payment”, stating that the payment and delivery ob- and legalised/apostilled). Bring originals as agreed.ligations should be performed simultaneously. In practice, this is not - Agree on the deposit release letter and make sure to bring a power ofpossible and it is normally assumed as an obligation of both parties attorney (pre-approved) or proof of identity empowering a representa-to ensure that the risks involved are minimized. One procedure used, tive of the buyer to sign the release letter.which also ensures a high level of simultaneous performance, is to - Request to pre sight all seller delivery documents if possible in drafttable all delivery documents and for the buyer (through buyer’s bank) and completed form.to present an unconditional and irrevocable payment letter. Delivering - Agree on the payment procedure also for the balance and bunkersthe payment letter to the seller or seller’s bank (mortgagee) will be and lubes. Ensure that the financing bank agrees to the payment proce-regarded as equivalent to payment, and the mortgagee will discharge dure between the seller and buyer as early as possible. Double checkthe mortgage without having to wait for the funds to actually arrive at the payment details.sellers account prior to proceeding with the discharge of mortgage andthe release of the other delivery documents. If however a procedure Even if this is a matter for the buyer; the vessel will either be chang-is agreed where the buyers will pay the funds to seller (seller’s banks) ing ownership within the same registry or change flag. In both cir-account, the mortgagee is often asked to issue an undertaking stat- cumstances buyer should ensure as early as possible if any of theseing that they will discharge the mortgage upon receipt of the funds at procedures requires documents from the seller (in addition to the origi-the relevant account, also often accompanied by a statement from the nal/copy of a bill of sale). If so, these documents should be identifiedsellers that at the same time the bill of sale will be released and the and pre-cleared by the registry as early as possible, and if not includedprotocol of delivery and acceptance signed. This procedure ensure that in the document checklist, the buyer will have to rely on the seller’sboth seller and buyer can feel confident they will receive payment and discretion as to whether they will assist.a free and clear vessel, respectively. In the likely event that a new mortgage is being registered against theSeller’s obligations vessel, this should also be pre-cleared with the registry in advance.Seller have the most extensive obligations in the closing. In addition When a second mortgage is to be recorded in favour of a mortgageeto physically preparing the vessel for delivery, all delivery documents other than the first priority mortgage, a letter of consent from the firstincluding the ones representing title to the vessel must be prepared mortgagee must be presented.and brought to closing, as well as making the necessary arrangementswith the vessel’s current ship registry. The heading could also have Final preparations and on the closing dayincluded “seller’s bank or current mortgagee” as the mortgagee and If possible, a final check should be made the day before closing; and ifbank are playing important roles in the closing. The main focus of the possible a final message should be distributed to all parties confirmingseller should be the following: relevant details for the closing. All that is left is to ensure that cell phone batteries are charged, original bill of sales are in hand, and of- Prepare the delivery documents pursuant to the MoA and request that course the correct account number on the SWIFT message.the same are pre-cleared by the buyer in advance both as drafts andin completed form.- Make arrangements with the current ship registry and have all docu- FOR MORE INFORMATION, CONTACT:ments required for deletion of the vessel pre-cleared. Obtain confirma- Linn Hertwig Eidsheim (lhe@wr.no) or Bernhard Haukali (bha@wr.no) WIKBORG REIN JANUARY 2006 5
  6. 6. SUBJECT Ship Safety Act THE NEW NORWEGIAN SHIP SAFETy ACT PURPOSE, SCOPE AND SAFETy MANAGEMENT The existing Norwegian Seaworthiness Act was originally The concept of “safety management” is well known from the ISM issued in 1903. While it has been amended frequently since Code. The committee states that for those already complying with that time in an attempt to reflect the enormous technical, the ISM Code, the new Act’s strong emphasis on safety management environmental, political, national, international and legal will not necessarily mean any substantial changes. However, it is changes regarding ship safety it is today considered important to note that unlike the ISM Code, the new Act introduces unsatisfactory in many respects. Consequently, on its 100th safety management requirements not only for vessel operations, but anniversary, a committee was appointed to revise the existing also vessel engineering and building. Act. The committee submitted its unanimous report on 29 June 2005 (NOU 2005:14) proposing a new Act – the Ship Safety Act. The new Act prescribes a general duty for the shipowners (in The report was sent out for comments until 21 November 2005. Norwegian: “reder”) to provide for, ensure and develop the Based on the few objections received during the comment establishment of a sufficient safety management system that can period, it is expected that the proposal will most likely be be verified and documented in order to survey and control the risk adopted in its present form. The new Act is expected to enter as well as to assure that applicable rules are followed. The master into force prior to 2007. and the crew on board the vessel have certain duties to contribute to the establishment of the vessel’s safety management. The concept Mandate and purpose of safety management is generally flexible and comprises the vessel, The mandate of the committee focused on drafting of a set of her management and the qualifications of the crew. Whereas the rules which would be in line with international and EU regulations new Act sets out the concept in more general terms, its details will regarding vessel safety management. The committee was charged be contained in regulations laid down pursuant to the new Act and with developing a more uniform regulation and the reduction of the shall i.a. take into account the particular need of the shipowners and level of details in the existing Act by i.a. delegation to the competent the activity and business they run. Ministries. As part of this process the committee evaluated modernizing supervision and control, available sanctions against infringements of the rules, and the incorporation of other Norwegian Acts. The purpose of the new Act is to safeguard life, health, property and the environment by promoting a high level of ship safety, ensuring a safe working environment, preventing pollution from vessels, incorporating requirements and responsibilities for vessel’s safety management system, establishing and developing appropriate supervision and control and arranging for the development of regulations in compliance with international law, in particular IMO (e.g. SOLAS, MARPOL, the ISM and ISPS Code), ILO and EU rules. Material and geographic scope The new Act will apply to Norwegian and foreign vessels, except for non-commercial vessels with an overall length of less than 24 meters. The new Act will apply to Norwegian flagged vessels throughout the world while foreign vessels will only be subject to the new Act while in Norwegian waters . The government may decide whether and to what extent the new Act and regulations laid down pursuant to its provisions shall apply to other units and/or vessels like e.g. offshore drilling units. “Safety Management” versus “Seaworthiness” Under the existing Act, safety at sea is linked to the concept of “seaworthiness”, which has also been adopted in the Norwegian Maritime Code and the Norwegian Marine Insurance Plan. In the new Act, this concept is phased out and replaced by the new concept of “internal control methodology” which is defined in the new Act as “safety management” (in Norwegian: “sikkerhetsstyring”).6 WIKBORG REIN JANUARY 2006
  7. 7. SUBJECT Ship Safety Act RESPONSIBILITIES, SUPERVISION AND LEGAL CONSEQUENCES Part of the mandate of the committee for the revision of the accordance with the latest EU developments as expressed in the existing Norwegian Seaworthiness Act was to stipulate the third Maritime Safety Package. shipowner’s and master’s responsibilities for the vessel’s safety management system. Moreover, the committee had Legal consequences to evaluate a modernization of the scope and extent of the The only administrative sanction for infringement provided for in vessel’s safety management control and legal consequences the current Seaworthiness Act (except for infringement of rules on of an infringement of stipulated rules. The existing Act is today pollution prevention) is detention of the vessel. Detention is only seen as too inflexible and ineffective in these respects. allowed if the vessel is not seaworthy or the certificates are invalid. Less serious infringements of the rules are only subject to criminal Responsibilities liability, if any. The new Act de-emphasizes criminal liability as legal Following the grounding and subsequent loss of the high speed consequences for infringement and instead introduces alternative passenger catamaran “SLEIPNER” in 1999, it was concluded that measures: (1) administrative acts (in Norwegian: “forvaltningstiltak”); the Norwegian Maritime Directorate was not subject to liability and (2) administrative sanctions (in Norwegian: “administrative under the existing Act. The new Act clarifies that the operation of sanksjoner”). Administrative acts are – in ascending order according the vessel does not lie within the responsibilities of the Directorate to the degree of seriousness – requests to carry out certain measures, but is primarily the responsibility of the shipowner and that the fines and withdrawal of statutory certificates. Administrative latter is liable in case of an infringement of applicable rules. The sanctions are administrative fines that are implemented in case of master is liable in connection with the operation of the vessel, such an infringement of applicable rules. The current possibility for the as navigation and watchkeeping; and the crew may be liable where vessel’s detention has been upheld in the new Act. Administrative they have distinct duties. acts and sanctions apply to Norwegian and foreign vessels; and foreign vessels may also be denied future access to Norwegian Supervision waters. Pursuant to the existing Act, vessels of 50 gross ton or more are subject to supervision by the Norwegian Maritime Since administrative fines may be implemented fast and without Directorate, which has authorized five classifications the involvement of the prosecuting authorities and courts, they are societies (GL, DNV, ABS, LR, BV) to carry out parts of the an immediate reaction to an infringement of the vessel’s safety necessary surveys. The committee finds this cooperation management. Administrative fines may amount to approximately fit and suitable and it is therefore maintained in the new the same amounts as criminal penalties under the current system. Act. Further, the new Act opens for an authorization of It is therefore the committee’s view that administrative fines may, approved undertakings and authorities, be they private, in particular in relation to foreign vessels, be more efficient than foreign (e.g. according to the Paris MOU) or international criminal penalties and consequently replace the latter in many (such as e.g. the European Maritime Safety Agency cases. (EMSA)). Provisions on criminal liability previously set out in the Norwegian The committee emphasises that even though the focus Criminal Act have been incorporated into the new Act, giving on the shipowner’s responsibilities has increased over statutory basis for penalties and imprisonment of up to six months the years, e.g. as a result of the ISM Code, it has thus in case of substantial infringements of certain rules – under far not been sufficient to avoid major discrepancies from aggravating circumstances up to two years. Criminal liability applies applicable rules. Therefore, safety management without to the shipowners personally, the shipowning company, the master supervision is not considered satisfactory, and the new and the crew. Act is based on a “double-track” system: (1) primary supervision of the safety management system, i.e. primarily an inspection and verification of the shipowner’s FOR MORE INFORMATION, CONTACT: written documentation and implementation of necessary Simone Trondal (sit@wr.no), measures, along with interviews and evaluations with the Gry Bratvold (gba@wr.no) or shipowner’s management and personnel; and (2) direct Gaute Gjelsten (ggj@wr.no) control by way of inspection of the vessel. The new Act leaves open the possibility that primary supervision may in the future gradually replace direct control. Even though the latter possibility is in accordance with the purpose of the ISM Code, it is questionable whether it is also inPHOTO: © Scanpix WIKBORG REIN JANUARY 2006
  8. 8. SUBJECT Accident investigationNORWEGIAN ACCIDENT INVESTIGATION BOARD TOINVESTIGATE ACCIDENTS AT SEADuring 2006/2007 the Norwegian ConfidentialityAccident Investigation Board will The Investigation Board has an extensive duty of confidentiality in conducting its business, with some important exceptions. The dutybe granted authority to investigate of confidentiality is outweighed by “weighty public interest” or “ifaccidents at sea in addition to necessary to properly explain the cause of the accident”.accidents within the aviation, railway New prohibition against removal of wreckageand road sectors. Under the new rules removal of wreckage or other material without the prior consent of the Investigation Board or police authorities isThe new legislation to govern these investigations of accidents at sea prohibited. The only exception from this prohibition is if the object willhas already been passed although they have not yet entered into force. be lost unless removed immediately.The new rules focuses on the establishment of the course of events inorder to promote the safety at sea and the purpose of the investigations About the Investigation Boardcarried out shall not be to apportion blame and liability. Included in The Investigation Board is an independent investigation body with thethe new rules are generally duties to inform the proper authorities of authority to hand over entire or parts of investigations to foreign statesany accidents at sea, extensive duties to offer testimony or deliver authorities, to co-operate with foreign authorities, to allow participationdocuments to the Investigation Board combined with restrictions on the of foreign authorities in investigations and further the InvestigationInvestigation Board not to use such information for unrelated purposes. Board can request assistance from local police, courts of justice andThis article will summarize some of the more important of these new other authorities as well as external expertise necessary to carry out anrules. investigation.Duty to notifyThe new legislation introduces a general duty for “anyone”who witnesses an accident at sea, wreckage or otherconditions that gives reason to believe an accident at seahas occurred, to notify the authorities. There rests a heavierburden on the master of ships and ship-owners to fulfil sucha duty of notification.Testimony and other evidenceThe new rules further impose an extensive general duty tooffer testimony and share documents with the authorities.“Anyone” has a duty to contribute with all relevantinformation, “regardless of duties of confidentiality”. Aparty offering such information is entitled to be representedby an attorney or other representative through the course of PHOTO: © Scanpixthe proceedings.Limited use of testimonies ReportThe Investigation Board can only use testimonies in order to promote An investigation shall conclude with a report that outlines the course ofthe safety at sea. Testimonies offered can thus not be used as evidence events, causal relations, recommendations related to improved safetyin a possible criminal case against the person offering the testimony. at sea. A draft report will be prepared and sent for consultation toTestimonies can however be used as evidence in criminal cases against interested parties before a final report is prepared and published.other individuals than the one offering the testimony. A testimony givenby an officer can therefore not be used in a possible criminal caseagainst that officer, but can be used as evidence in a possible criminal FOR MORE INFORMATION, CONTACT:case against the captain. Siri Birgitte Bang (sbb@wr.no) or Geir Ove Røberg (gor@wr.no)8 WIKBORG REIN JANUARY 2006
  9. 9. SUBJECT Class societiesCLASS SOCIETy LIABILITyAs important as they are at times controversial, classificationsocieties occupy a unique place in the field of maritime law In Norway, the authorities have delegated certain control functionsand commerce. through the Agreement of 1 July 198 with annexes between the Ministry of Trade and Det Norske Veritas (“DNV”). This delegationClass enforce statutory requirements on behalf of flag and port has lead to some questions regarding the role DNV holds. The tasksstates yet the societies are not government agencies themselves. DnV performs on behalf of the authorities are considered to be moreClassification societies have the power to impose sanctions yet they of a service than business nature. Activities of a service nature havealso compete for the business of those who come under their scrutiny. traditionally held a protected position in Norwegian tort law, andClass make and enforce the rules but also offer consulting services on there might be reason to ask if this protection has influenced thehow best to comply. Classification societies require the shipowners discussion on classification societies’ liability for those tasks that arethey scrutinise to have systems of accountability, yet the societies not performed on behalf of the authorities.themselves remain largely a stranger to the concept of legal liability [ ]for their own negligence. Classification societies derive nearly all of The claim that classification societies are public spirited servicetheir maritime revenue – directly or indirectly institutions deserving of– from shipowners yet resist liability when an special treatment withowner is wronged through class negligence. In today’s world, class regards to liability dates backIncreasingly, this mix of roles and attitudes is hardly unique among many years. Today, it musthas struck many observers as problematic in be examined in light of thethe context of the discussion over whether professionals who charge fact that hospitals, healthclassification societies should be legally liable relatively small amounts for professionals, accountingfor their negligence. their services, yet still risk firms, and even government agencies are all now heldThe three most frequently heard arguments a considerable economic legally liable for theiragainst liability are that the relatively small size liability for losses caused by negligence. While certainlyof classification fees cannot justify the potential true that classificationliability exposure; the shipowner has ultimate their negligence. societies perform importantresponsibility for vessel seaworthiness; and and valuable research onthe “special character” of a public service institution should provide improving safety at sea, commentators have questioned whether itrelief from legal liability. is still appropriate for that research to be carried out by each society individually. If classification societies are deserving of special treatmentIn today’s world, class is hardly unique among professionals who with regards to liability because of their public mission, then manycharge relatively small amounts for their services, yet still risk a believe the public mission would be more efficiently and effectivelyconsiderable economic liability for losses caused by their negligence. pursued by combining resources through one set of standards ratherOther professionals customarily minimise the risk through different than the societies competing amongst themselves.forms of insurance arrangements and increasingly class has donethe same. And with earnings sheets that are more comparable to The long simmering debate over classification society liability wassuccessful businesses than service institutions, today’s classification raised a notch in 2003 when the Spanish government sued thesocieties have a more reasonable ratio of fees to exposure than a classification society responsible for classing the Prestige. And therewhole host of organisations and industries. are no signs of it cooling anytime in the near future. As shipowners are increasingly held accountable by class for their performance andWhile the shipowner always remains responsible for his vessel’s actions they are expecting nothing less than the same of class. On theseaworthiness, he or she should be able to rely on the class certificate. legal front, the trend in Norway is in favour of increased liability forBut if the classification society is unwilling to accept legal responsibility government bodies dealing with typically “service nature” and classfor its judgments then how much credibility can an owner or insurer seems unlikely to escape the same fate in the long run.be reasonably expected to place in the certificate? In the case ofnewbuildings, the class representative (customarily paid by the yard)has not just performed one survey but rather been a regular presenceon site throughout the vessel’s construction. Under such circumstances, FOR MORE INFORMATION, CONTACT:is it appropriate for a new owner to bear the risk for loss caused by the Gry Bratvold (gba@wr.no),classification society’s negligence if the vessel is designed, built and Stephen Lamb (stl@wr.no) ortested in accordance with the classification society’s own rules, and Gaute Gjelsten (ggj@wr.no)where this control has led to a classification certificate and deliveryof the vessel? WIKBORG REIN JANUARY 2006 9
  10. 10. SUBJECT Marine insurance Proposed new legislation: [ Pursuant to the proposal, the marine insur- ance companies will be entitled to exchange information on vessels. ] SAFETy AT SEA AND PROFESSIONAL SECRECy OF MARINE INSURANCE The Norwegian Ministry of Commerce recently The proposal will not affect marine insurance companies` possible proposed new legislation concerning the duty of criminal and/or tort liability by e.g. issuing incorrect information. confidentiality (aka “professional secrecy”) for The proposal was issued by the Ministry on 1 November 2005 with marine insurance companies. a comment period closing on 9 December 2005. The new legislation is expected to be implemented into the Norwegian Shipping Act or The proposal would provide a limited exemption for insurance com- the new Norwegian Ship Safety Act. It is expected that the propos- panies from the current regulation in Norwegian Insurance Com- al will be adopted by the Norwegian parliament and subsequently panies Act section 1-3. Pursuant to the new legislation, marine come into force during the second half of 2006. insurance companies would be allowed to exchange certain information about vessel safety and also to forward such information to the relevant public au- thorities and classification societies without the prior consent of their customer. The purpose of the proposal is to increase the marine insurers’ involvement in the shipping industry’s efforts in limiting so-called sub- standard shipping. Pursuant to the proposal, the marine insurance com- panies will be entitled to exchange information on vessels and will be obliged to forward certain informa- tion for vessels flying the Norwegian flag to relevant public authorities. The pro- posal defines the relevant information as “information regarding ship safety”, with reference to the proposed new Norwegian Ship Safety Act. The new professional secrecy rules apply both to vessels insured by the insurance company at the relevant time and to vessels previously insured by the insurance FOR MORE INFORMATION, CONTACT: company, provided such vessels were insured by the insurance com- Birgitte Karlsen (bka@wr.no) or pany during the last three years before the information is given. Trond Eilertsen (tei@wr.no)10 WIKBORG REIN JANUARY 2006
  11. 11. SUBJECT Shipbroking THE SHIPBROKER’S RIGHT TO COMMISSION - CHANGE OF BROKER CHANNELUnder Norwegian law there are four conditions that all must be This was discussed in the “Fearncoast” case (ND 191 p 233). Infulfilled in order for a broker to be entitled to commission: his award Sjur Brækhus, as sole arbitrator, held that a principal can stop the negotiations through one established broker chan-1 the broker must have been engaged to act as an nel when he has a substantial and justifiable reason to do so. intermediary, This would for instance be the situation where it is impossible to2 a binding contract must have been concluded between the continue through this channel. Furthermore he held that change buyer and the seller, of broker channel could be accepted “… where the possibility3 the conclusion of the contract must be a result of the to come to a positive result through the existing channel is far broker’s activities, and worse than the possibilities through other channels.” This test4 the contract must be the one, or equivalent to the one, the was later also applied by Brækhus in another arbitration, the broker was engaged to negotiate. As under Norwegian law “Knock Adoon” case (ND 1994 p 202). in general, there is no need for the concluded contract to be in writing. The same applies to the contractual The underlying principle that a principal has a clear duty towards relationship between the principal and the broker. the broker first engaged can also be seen in a recent judgment by Borgarting Court of Appeal in March 2005 (LB-2003-1495) Recently we have seen several cases where the court held that the principal in question had no valid where parties have concluded binding reason to change the broker channel. [ ] contracts either with the assistance of other brokers than To summarise, it can be stated that under Norwegian law a the broker originally en- principal, whether gaged, or without bro- Only in special circumstances seller, buyer, owner, charterer or others, kers at all. The broker will the principal be entitled to can only change the originally engaged may thus be prevented from change the broker channel with- broker channel if he fulfilling all conditions out being liable towards the bro- has a substantial and justifiable reason for for earning commission. ker originally engaged. doing so. Otherwise Although brokers often hesitate to bite the hand the original broker that feeds them, such may have a claim, cases frequently give rise to disputes either as a claim for commission or as a claim for damages for on whether the original broker is enti- breach of contract, and the principal may end up paying double tled to commission. commission. Consequently, parties that have engaged brokers to assist in any deal should think twice before changing the existing It is a general principle under Norwe- broker channel. gian brokerage law that a principal has a duty to see to it that the bro- ker is given the opportunity to earn his commission. This implies that the FOR MORE INFORMATION, CONTACT: principal has a duty of loyalty towards Martin Nes (mne@wr.no) or the broker that has been engaged Anders W. Færden (awf@wr.no) and that he normally must continue through this channel. Only in special circumstances will the principal be entitled to change the broker channel without being liable towards the bro- PHOTO: © O.Kobayashi ker originally engaged. WIKBORG REIN JANUARY 2006 11
  12. 12. SUBJECT Offshore managementMANAGING OFFSHORE PROJECT RISK- A CHECKLIST FOR NORWEGIAN DRILLING COMPANIES OPERATING ABROADWikborg Rein lawyers participate in a wide range change and profit repatriation issues that affect contractor’s ability toof activities related to the offshore sector, which in- take out operating revenue from the host country (to the extent contrac- tor receives payment in local currency, and/or through local banks);creasingly involves drilling and production projects Overlapping claim to same territorial waters by neighboring countrylocated in the developing world. (e.g. dispute between East Timor and Australia in East Timor Sea); Nationalization programs and their risk of interrupting operations (e.g.These projects require a special understanding and ability of risk as- Venezuala);sessment, and very often involve operations in a country with an unsta- Applicable requirements under any unitization treaty or other form ofble political situation and unclear legal framework. Our lawyers have joint development arrangement between host country and other neigh-experience from many such countries not only with respect to offshore boring countries (e.g.projects, but also through our work in the shipping sector generally as joint develop-well as gas pipelines, hydropower facilities, oil and gas terminals and ment ofother infrastructure projects. We have on the map indicated some coun- Turtries where lawyers from Wikborg Rein have gained experience frominternational projects over the last few years.Our offshore lawyers typically get involved in the representation Jordanof the owner of a drilling unit, floating production unit (FPSO) Egyptor a floating storage unit (FSO) during negotiations of acontract with a petroleum producer. Upon contract finali- Morocco Dominican Republiczation, the owner then mobilizes the vessel and support Antigua Mexicooperations for relocation to the relevant offshore loca- Belize Benintion. The producer commonly holds a license to explore Guatemala Venezuelafor and produce petroleum in an offshore block located Sierra Leone hondurasin the territorial waters of countries with challenging Costa Rica Cote d’Ivorebusiness environments such as Iran, Indonesia, India, Panama NigerMexico, Vietnam, Brazil, countries in West Africa, and Colombia Equatorial Guineseveral former Soviet Union countries. In many cases, Peru Gabothe host country strongly depends on revenue from the Congooil and gas sector for its income. Bolivia BrazzeWe have on the basis of our experience developed the Brazilchecklist of issues below that our clients would typically con-sider before they commit to a project in any such country. Most Chile Argentinaof these issues also apply in developed countries, but the out-come of the risk assessment may in these countries be more predict-able. Depending on the country in question, the client may also obtaina “Country Risk Assessment” from one of the international consultancyfirms focusing more on the non-legal aspects, such as political, corrup- off-tion, crime and other risks and threats that the project may face. shore blocks in the Gulf ofHost country issues Thailand between Thailand and Malaysia); Project structure and the need for operating (in part or in full) through Limitation on operation in sanction countries imposed by outsidea local entity established in the host country, local partner requirements, jurisdictions (e.g. Norwegian sanction laws related to Burma, US sanc-local flag requirement and possibility of dual registration etc.; tion laws related to Iran and other countries applicable to Norwegian Concessions and licenses needed for operation from central and/or corporates that have raised capital or debt financing in the US market);local governments; Reputation of local judicial system for enforcing contracts, foreign Import licence for mobilisation and export licence (and other formali- judgements and international arbitration awards against local partiesties and monetary obligations) for demobilisation; (applicable when operator contracts through local entity); Tax issues, including withholding tax and VAT on operation revenue, Local safety, environmental and labour regulations of stricter contenttax on profit and other local and central taxes and duties, claw back than applicable international regulations and those of the flag state ofregulations and personal income tax for expats; the offshore unit; Limitations on convertibility of local currency and other foreign ex- Local content requirements and actual ability to procure local labour12 WIKBORG REIN JANUARY 2006
  13. 13. SUBJECT Offshore management and supplies, including related to insurance cover through local insurance Services (scope, duration, option to extend, right to vary), and no companies; obligations of the operator under terms of PSA or a license should be Consequence of facilitation payments and other instances of petty cor- applicable to the contractor by reference to such terms without clear ruption (e.g. criminal liability under anti-corruption provisions in the Nor- specification in the contract; wegian Penal Code as well as applicable anti-corruption laws in the United Unit specification (equipment and personnel, performance stand- States); ards, certifications, surveys, audit rights and availability); Contracts with operation support suppliers; Well-related matters (e.g. operation program, location, completion, Work visas for expats and other immigration issues; drilling records, supply of sub-sea data etc.), and no well or produc- Applicability of relevant international treaties; and tion related risks to be accepted by contractor; Availability scope of cover and cost of political risk insurance, or cover of Compensation matters (e.g. operating rate, redrill rate, breakdown political risks under other insurances. rate, standby rate, force majeure rate, waiting on weather rate, mo- bilization, demobilization, accommodation and meals, level of per- Operator and contractual issues sonnel, rate conflicts), as well as applicability and amount of early Identification of contractual counter party (e.g. whether operator termination fee; contracts on its own Allowed time for maintenance programs with downtime risk; Pakistan behalf or on Materials, supplies and equipment (contractor-furnished and op- Afghanistan Bangladesh Ukraine Russiarkey behalf of erator-furnished); the Payment matters (invoice presentation, right to question invoices, audit rights, timing, place, currency, termination payments, set-off China rights, liens, etc.); Performance of services (performance standards, prevention of South Korea fires and blowouts, discipline, safety, authorized representa- tives, environment, unsatisfactory performance, operator’s take-over right, performance bond, etc.); Taiwan Local content requirements (e.g. employment of local hong Kong personnel, preference for local suppliers, preference for UAE local subcontractors, cooperation with local companies, Laos Philippines India accurancy of information); Vietnam Insurance matters (e.g. policy type, policy scope, in- Sri Lanka Thailandria Cambodia surance company non-performance, failure to provide, Malaysia New Guineaea certifications, notice of claims, consequential losses, Uganda Singaporeon Indonesia East Timor cognisance, etc.);o- Liability and indemnity matters, and applicability of Tanzaniaeville “knock for knock” principle between license group and Madagascar contractor group, and applicability of mandatory local Angola Congo Mosambique laws; Demurrage risks related to off-loading operations; South Africa Australia Responsibility for blowouts, pollution and damage to geologi- New Zealand cal formations; Taxes and customs duties (contractor’s scope of coverage, whether operator should take risk for changes/new taxes, indemnity for non- li- payment, operator’s set-off and withholding rights); cense Permits, laws and regulations (compliance with applicable laws, IMAGE: © gettyimages group? May evidence of required authorizations, compliance with operator in- the parties in the structions); license group change during Force majeure (e.g. definition scope with understanding of spe- the time of the contract, and thereby change credit risk position of the cial country-related risks, consequences of prolonged force majeure, contractor?); claim procedures, etc.); Contractor recourse against multiple operator parties on a several liabil- Termination (events of default, remedies, payment of demobiliza- ity basis in many different jurisdictions; tion fee, post-termination services, and other country-specific issues Need for credit enhancement mechanisms (e.g. payment guarantees from such as applicability and understanding of “mandatory termination banks or parent companies, letters of credit, etc.); rights” as in Mexico); and Validity of rights under production sharing, licensing or other concession Dispute resolution (international arbitration, jurisdiction of foreign arrangements; and local courts, possibility of enforcement etc.). Corporate authorizations for execution of contract and related agree- ments, local permits, government approvals, etc.; FOR MORE INFORMATION, CONTACT: Area of operation, and risks related to moving the unit between defined Finn Bjørnstad (fbj@wr.no) or areas; Kelly Malone (kma@wr.no) WIKBORG REIN JANUARY 2006 13
  14. 14. SUBJECT Maritime liens RIGHT TO LIEN ON CARGO UNDER CHINESE LAW - BLESSING OR CURSE? Under Chinese law complex questions outstanding freight or other fees incurred at the loading port is more arise regarding the carrier’s right to arguable. According to Article 69 and 8 of the Maritime Act, the consignee or holder of a bill of lading shall not be liable for freight lien on the cargo and the enforcement or other fees incurred at the loading port, unless his obligation for of such lien, often leaving the carrier payment for such is expressly stipulated in the bill of lading. In the judgment issued by the Shanghai High Court regarding China with a difficult dilemma of whether or Limber Huadong v. Milena Ship Management Co. Ltd. and Charter not to exercise a lien Harvest Shipping Ltd. 199, upholding the Right to lien original judgment from Article 8 of the People’s Republic of China (“PRC”) Maritime Shanghai Maritime Act provides that: “if the freight, contribution in general average, Court, the court further demurrage to be paid to the carrier and other necessary charges clarifies that even when paid by the carrier on behalf of the owner of the goods as well as a charterparty which other charges to be paid to the carrier have not been paid in full, nor terms are incorporated has appropriate security been given, the carrier may have a lien, to into a bill of lading a reasonable extent, on his goods”. makes the consignee or bill of lading holder There is one school of opinion that the right to lien arises from the the liable party for the provision of transportation and therefore the carrier shall have the freight or other fees right to lien regardless of the ownership of the cargo. The 1999 PRC incurred at the loading Contract Act adopted this view and stipulated in Article 315 under port, the consignee or the chapter of Contract of Carriage that “when the shipper or the bill of lading holder shall receiver fails to pay the freight and other relevant fees, the carrier not be bound by such has the right to lien on the corresponding goods carried, unless the provision unless it is parties agree otherwise.” expressly stipulated in the bill of lading. However, the prevailing opinion in practice is that a right to Exercise and lien arises only if the goods is owned by the party liable for the enforcement of lien outstanding freight, demurrage, general average contribution or The carrier is not required other relevant charges. Scholars and judges holding this opinion to resort to judicial argue that the wording “his goods” under Article 8 of the Maritime procedures in order to Act indicates that only goods owned by the debtor may be liened. In exercise his right to lien on cargo. However, the case of carriage of goods by sea, the Maritime Act applies in priority carrier is required under to the Contract Act. the PRC Guarantee Act to give the debtor a In sum, it is widely agreed that whether or not the carrier can period of no less than exercise a lien on the goods depends on whether or not the owner 2 months (the “Performance Period”) to pay off the debt when he of the goods in question has the contractual obligation for the announces the lien. outstanding fees. In order to maintain his right to lien, the carrier shall keep the cargo In the case of a bill of lading issued under a voyage charterparty, under his control and has the obligation to take care of the cargo therefore, the key to whether or not the carrier may exercise lien lies under custody. The right to lien will be lost if the cargo leaves the is whether the bill of lading holder is liable for the outstanding fees. custody of the carrier. In practice, the carrier can usually exert control The carrier may exercise lien on the cargo for demurrage occurring over the cargo via the help from its local agent. at the discharge port. However, exercise of lien on cargo for14 WIKBORG REIN JANUARY 2006
  15. 15. SUBJECT Maritime liens [ When the carrier intends to exercise the lien on the cargo for outstanding fees and expenses occurred at the loading, he could actually be facing considerable risk. ]The PRC Guarantee Act grants the carrier the right to enforce lien Dilemma faced by the carrierwhen the debtor fails to pay the outstanding fees by the end of the As can be seen from above, when the carrier intends to exercise thePerformance Period by sale or auction of the cargo or by agreeing lien on the cargo for outstanding fees and expenses occurred at thewith the debtor on the value of the cargo and offset the same with loading, he could actually be facing considerable risk that the lienthe outstanding claims. will be held illegal by a Chinese court at a later stage. Should the lien be held illegal, the Owners may face claims from the receiver rangingPRC Maritime Act does not clarify the ways to enforce a lien. The from storage fee, fines from customs office for late clearance, drop in price, to the court fees of the proceedings. In order to avoid providing the cargo receiver the grounds to claim for a wrongful lien, some Owners might consider choosing to lien the cargo “quietly”, i.e. withholding the cargo without formally announcing the lien. Assuming that the local agent is willing to convey its full cooperation in the custody of the cargo and in the refusal of delivery of cargo to the receivers, the frustrated receiver may still resort to the court for an injunction to enforce delivery. Without announcing the lien in the first place, the Owners will then probably be forced to release the cargo for lack of justifiable reason to withhold the cargo, in addition to facing claims for late delivery. It could indeed be a tough call for the Owners to decide whether or not to announce the lien on the cargo. Either way, the Owners will face considerable risks. A further question might be: when to officially announce the lien. Various factors should apparently be evaluated before the Owners make a decision, e.g. the pressure that the receiver could exert on the charterer to settle the outstanding fees to exchange for a timely release of the goods, the cost and fees for the storage, and the extent of cooperation the Owners may get from the local agent or port. Even if the legitimacy of the lien is not an issue, when the receiver is the same as the charterer, the PHOTO: © O. Kobayashi Owners may still face difficult situations, e.g. the storage of the cargo for a period up to two months,wording of Article 88 of the Act, however, leaves room for some the sale or auction of the cargo. The sale of cargo without the court’spractitioners to argue that the lien on cargo may be enforced only involvement may be held illegal at a later stage, while the auction ofthrough a forced auction held by a court. There are conflicting the cargo via judicial proceedings may turn out to be both time andopinions in this regard among scholars, practitioners and judges and cost consuming.unfortunately Chinese courts are not bound by previous judgementson same issues. Consequently, this is far from being a settled In any event, while the right to lien could be an effective way toissue and the safest approach to the enforcement of a lien remains secure the Owners’ claims, Owners are advised to be cautious whenapplying to the court for the auction. they exercise this right, because of the complexities involved. WIKBORG REIN JANUARY 2006 WIKBORG REIN JANUARY 2006 15 15
  16. 16. SUBJECT Conventions INTERNATIONAL CONVENTIONS RATIFIED By CHINA Important shipping related international Important shipping related international conventions conventions to which China has acceded: to which China has NOT acceded: Contract of carriage Contract of carriage • Athens Convention relating to the Carriage of Passengers • International Convention for the Unification of Certain Rules of Law and their Luggage by Sea, 194, as amended by its 196 Pro- relating to Bills of Lading, 1924 (”Hague Rules”) tocol (but not the 1990 and 2002 Protocols) • Protocol of 1968 to amend the International Convention for the Unifi- cation of Certain Rules of Law relating to Bills of Lading, 1924 (“Hague- Admiralty Visby Rules”) • International Convention for the Unification of Certain Rules • United Nations Convention on the Carriage of Goods by Sea, 198 of Law with respect to Collision between Vessels, 1910 (“Col- (“Hamburg Rules”) lision Convention”) • International Convention on Certain Rules Concerning Civil Pollution Jurisdiction in Matters of Collision, 1952 • International Convention on the Establishment of an International • International Convention on Salvage, 1989 (“Salvage Con- Fund for Compensation for Oil Pollution Damage, 191, as amended by vention”) (China has made reservations on Article 1 litra a, b the 1992 Protocol (“1992 Fund Convention”) and d) • International Convention for the Safety of Life at Sea, 194, Limitation of liability as amended by its 198 and 1988 Protocols (“SOLAS Conven- • Convention on Limitation of Liability for Maritime Claims, 196 tion”) (“LLMC”) or the 1996 Protocol • Convention on the International Regulations for Preventing Collisions at Sea, 192 (“COLREG”) Arrest of vessel • International Convention for the Unification of Certain Rules Relating Pollution to the Arrest of Sea-going Ships, 1952 (“Arrest Convention, 1952”) • International Convention for the Prevention of Pollution from • International Convention on Arrest of Ships, 1999 (“Arrest Conven- Ships, 193, as modified by the Protocol of 198 (“MARPOL tion, 1999”) 3/8”) (China has not acceded Annex IV or VI) • International Convention Relating to Intervention on the High Miscellaneous Seas in Cases of Oil Pollution Casualties, 1969, as amended • International Convention on Liability and Compensation for Damage by its 193 Protocol in Connection with the Carriage of Hazardous and Noxious Substances • International Convention on Civil Liability for Oil Pollution by Sea (“HNS Convention”), 1996 Damage, 1969, as amended by its 196, 1984 and 1992 Pro- tocols (“CLC 92”) Miscellaneous • International Convention on Maritime Liens and Mortgages, 1993 FOR MORE INFORMATION, CONTACT: Deborah yu (dyu@wr.no) or yafeng Sun (yfs@wr.no) This firm [Wikborg Rein] has traditionally had a stronghold in the shipping market in Norway according to commentators, and is still considered by many to have the best grip on the Norwe- gian clients. Chambers Global 2004-0516 WIKBORG REIN JANUARY 2006 WIKBORG REIN JANUARY 2006
  17. 17. SUBJECT Voyage data recordersVOICE RECORDING USING VOyAGE DATA RECORDERS- REQUIRES NOTICE TO THE DATA INSPECTORATELike black boxes carried on aircrafts, voyage data on international voyages. The following vessels shall, according torecorders (“VDRs”) enable accident investigators the SOLAS regulation, be fitted with VDRs:to review procedures and instructions in the mo- - New passenger ships before they are put into servicements before an incident and helps to identify the - Existing ro-ro passenger ships not later than the first survey forcause of any accident by, inter alia, recording the safety equipment on or after 1 July 2002conversations on the vessel’s bridge. The SOLAS - Existing passenger ships other than ro-ro passenger ships notconvention chapter V regulation 20 requires that later than 1 January 2004 - Cargo ships of 3,000 gross tonnage and upwards construed on orcertain vessels on international voyages must be after 1 July 2002, before they are put into servicefitted with VDRs. Voice recordings conducted withVDRs fall within the scope of Norwegian legisla- Norwegian legislation has a broader scope requiring several othertion protecting the processing of personal data. vessels to be fitted with a VDR under sections 19 A to 19 C in aShipowners must therefore notify the Data In- regulation issued by the Norwegian Ministry of Trade and Industry of 15 September 1992 no. 01, as amended (“Forskrift om navigas-spectorate (in Norwegian: “Datatilsynet”) of such jonshjelpemidler m.m.”).systems and comply with other procedures as de-scribed in this article, to avoid fining. In addition to the duty to notify the proper authorities of the use of VDRs, shipowners must comply with the following procedures underVoice recording performed with electronic equipment fall within the the Data Protection Act:scope of the Norwegian Act of 14 April 2000 no. 31 relating to theProcessing of Personal Data (“Personal Data Act”), as such informa- Shipowners must inform the crew about the data collection, cf.tion may be linked to a physical person. section 19. Shipowners must not store personal data longer than necessary to carry out the purpose of the processing, cf. sectionConsequently, recordings through VDRs can only take place if the 28. Recordings by VDR equipment will normally be erased continu-shipowner (or appointed manager) comply with conditions set out in ously. Recordings are generally, while not yet erased, subject tothe Personal Data Act. Shipowners must therefore notify the Data satisfactory data security since access requires special technicalInspectorate of the use of VDRs. The notification is due 30 days be- knowledge.fore any instalment and/or commencement of use of the VDR. Uponreceipt of such notification the Data Inspectorate will give the con- Furthermore, shipowners must ensure that voice recordings aretroller a receipt of notification. used exclusively for stated purposes, such purposes being objec- tively justified by the activities of the shipowner. As an example, re-The provisions in the Personal Data Act applies to shipowners es- cordings cannot be used in a labour dispute with a current or formertablished in Norway, and to all shipowners established outside the employee. The recordings must further be adequate, relevant andEuropean Economic Area who make use of equipment in Norway for not excessive in relation to the understanding of accident causes.the purpose of processing personal data. Shipowners based else-where in the European Economic Area will normally be subject to The Data Protection Act does not limit the Marine Authorities’ ac-the data protection laws of the European Economic Area country in cess to recorded material in the course of an investigation. Otherwhich they are based. third party access must be evaluated on a case by case basis. Ac- cess to recordings should always be subject to reasonable controls,Anyone who wilfully or grossly negligently omits to send notification which might include passwords, compartmentalised access and ac-to the Data Inspectorate is liable to fines or/and imprisonment. The cess logs. Reasonable steps should be taken to detect and preventData Inspectorate has not yet issued any fines for infringement of unauthorised access. The relevant considerations are throughoutthe notification provisions in the Personal Data Act. any process confidentiality, integrity and accessibility.The relevant vessels subject to the duty of notification are vesselsunder regulation 20 of the revised SOLAS chapter V; ships engaged FOR MORE INFORMATION, CONTACT: Lars Tormodsgard (lto@wr.no) or Lars Inge Ørstavik (lio@wr.no) WIKBORG REIN JANUARY 2006 1
  18. 18. SUBJECT Voyage chartering Wikborg Rein remains (…) in the premier division of shipping law firms, and with offices in Oslo, Shang- hai, London, Singapore and Kobe, has a truly global dimension to its shipping practice. Legal 500 2005 NOTICE OF READINESS UNDER VOyAGE CHARTERS - The four “Ws” under Norwegian law In order to minimise the risk of waiting costs at busy ports, many place for vessels to wait for a berth. Still, many different factors may owners add one or more of the four ‘W’s to a standard form have to be considered in order to decide whether the vessel may be charterparty so that notice of readiness (“NOR”), may be tendered considered as arrived in port. Statutory, fiscal and geographical limits (1) whether in port or not; (2) whether in berth or not; (3) whether may be good starting points, but other factors may also be relevant. customs has been cleared or not, and; (4) whether free pratique has Moreover, the limits and boundaries for a customary waiting place been obtained or not. Normally used under charterparties governed may also be a source for doubts and discussions. By introducing a by English law, uncertainty may arise when the clauses are inserted “whether in port or not” clause owner will be given some leeway into contracts governed by different national law. This article examines the impact of the clause when used in charterparties, such as the Hydro Voyage Charter (“Hydrocharter”), which are governed by Norwegian law. “Whether in berth or not” Normally, the Hydrocharter is considered a port charter since NOR may be given when the vessel has arrived at the loading and/or discharging port(s). Invoking a clause saying that NOR may be tendered “whether in berth or not”, is thus of less value to the owner under the Hydrocharter. Without such a clause, the owner may also be entitled to tender a NOR before approaching nominated berth. However, when the nominated place is undoubtedly a berth or terminal, uncertainty may arise as to whether the owner has also agreed that an effective NOR may not be tendered until the vessel actually has arrived at this berth or terminal. In this event, a clause stating “whether in berth or not” would be to owner’s advantage and clarify that the charter should still be considered a port charter. A “whether in berth or not” clause is quite commonly used in order to make what otherwise would be a berth charter into a port charter. “Whether in port or not” It is more uncommon to add a “whether in port or not” clause, and when done the effects are less certain. As the question of what constitutes arrival at port may not always be easily determined, the PHOTO: © Tomas Pinås, shipspotting.com introduction of a “whether in port or not” clause can clarify the issue and hopefully avoid unnecessary discussion regarding the issues of arrival at port, tendering of valid in this respect and consequently rest easier that his NOR has been NOR and commencement of laytime. tendered effectively. Under a port charter, the owner may normally tender an effective Still, the question of when an effective NOR may be tendered NOR when the vessel arrive at a safe place within the jurisdiction cannot be up to the sole and full discretion of the owner. Even with a of the port and/or when the vessel is anchored at the customary “whether in port or not” clause, the vessel should still be somewhere18 WIKBORG REIN JANUARY 2006

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