1. Impact
• Marine insurers will
aggressively monitor Polar
shipping and may threaten to
cancel coverage of non-
compliant ships and cargo.
• As Polar routes become more
lucrative, the global shipping
community may need to
revise how it views flags of
convenience.
• Amid oversupply of
conventional commercial
shipping, specialised Arctic
vessels may offer
opportunities to shipbuilders.
Polar Code leaves enforcement gap for Arctic shipping
Wednesday, March 9 2016
The International Maritime Organisation's (IMO) Polar Code for commercial shipping in
Arctic and Antarctic waters will come into effect in less than ten months, on January 1,
2017. Shipping lines, insurers and Polar states have less than a year to come into
compliance with stricter international regulations governing maritime activity. However, the
agreement leaves unaddressed certain environmental, coverage and enforcement concerns
that could threaten the near-term success of the agreement.
What next
The combined clout of port states and maritime insurers will ensure acceptance of the
Polar Code in states beyond those with Polar territory, especially those seeking to operate
in the Arctic region. However, certain gaps in the Code's coverage, as well as the
increased possibility of complete transits of Polar ocean routes by ships flagged in non-
polar states, raises the possibility that Polar states may need to actively enforce the Code
in the Arctic, and possibly strengthen its provisions in the near future.
Analysis
After many years of debate, the provisions of the IMO Polar Code have now been enacted
and are less than a year away from entering into force. Its implementation comes at a
critical time for Polar regions, as climate change opens previously inaccessible areas to
commercial shipping and economic activity in the Arctic expands (see ARCTIC: Russia
tensions may hinder governance - February 12, 2016).
Polar Code
The Polar Code establishes rules for commercial shipping activities within the Arctic and
Antarctic circles. It sets minimum standards for ship design and construction, ensuring
not only that hulls are ice strengthened, but also that designated areas of Polar-class
ships are insulated against cold and ice.
The Code establishes different categories of Polar-class ships depending on the strength of
the hull construction, accounting for the vagaries of Polar ice and weather conditions.
It requires that crews on Polar-class ships have specialised cold-weather training, both for
ordinary navigation and for emergencies, given the increased dangers associated with ship
evacuations in cold and remote climates.
It also requires that ships not discharge any oil or liquid contaminants during their
navigation through Polar waters as an environmental measure, as the Polar regions are
among the most sensitive ecosystems in the world.
Finally, it requires that all new ships intending to operate in the Polar regions come into
compliance by January 1, 2017, while existing ships have until January 1, 2018 to come
into full compliance.
Enforcement questions
Although the Polar Code adds a degree of regulatory stability to the development of
commercial shipping in the Arctic and Antarctic, the Code leaves some issues
unanswered.
Fuel standards
The Coast Guard Cutter Healy breaks
ice during an Arctic expedition
(Reuters/Patrick Kelley)
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2. Arctic shipping's dependence
on heavy fuel oil poses
environmental risks
25%
Estimated increase in
shipbuilding costs for LNG-
fuelled vessels versus heavy
fuel oil
Increased Arctic accessibility
decreases the longer-term
enforcement clout of
proximate port states
The most significant concerns the kind of fuel ships using Polar routes would use. The first
involves inescapable ship pollution. Heavy fuel oil -- a common maritime bunker fuel --
produces significant amounts of greenhouse gas, sulphur dioxide and particulate matter
known as black carbon, which accelerates the pace of ice melting.
The Polar regions are highly environmentally sensitive, with global climatic reach, and as
human activity expands in them, the effects of any kind of emissions may be magnified
compared to more temperate climes.
The Arctic Council -- the common-interest council of eight states with Arctic territory -- is
pursuing possible means of minimising the effects of black carbon. Other fuel solutions
such as liquefied natural gas (LNG), while cleaner to use than heavy fuel oil, require
expensive retrofits of existing ships.
Verband Deutscher Reeder (VDR), the German shipowners' association, estimated in 2015
that a shift to LNG would increase the costs of shipbuilding by 25% and argued in favour of
increased state aid to meet environmental standards.
As LNG already requires special handling just to transport, its use as a cost-effective
maritime fuel may be years in the future, by which time the effect of black carbon
emissions may become significant.
Who enforces?
In addition to the shipboard concerns about emissions is a larger concern about the scope
of the Polar Code's enforcement.
At the moment, most commercial shipping in the Polar regions either begins or ends in the
Polar regions, especially in the Arctic, where economic activity has been steadily
expanding in the past few years.
As such, the Arctic states can enforce the Code through consistent port state
enforcement, preventing non-compliant ships from docking in their ports.
However, as climate change expands the possibility for more transits through the Arctic
and Antarctic circles without calling at a port, port state enforcement may lose some of its
effectiveness as an enforcement mechanism for the Polar Code.
Non-compliance
As the duration of navigable Polar summers increases, shipping lines may be tempted to
run more ships through the Polar regions, particularly the Northern Sea Route between
Norway and the Bering Strait.
Since a transit from Rotterdam to Yokohama by the Northern Sea Route is up to 4,500
nautical miles shorter than by the Suez Canal, and not subject to attacks by pirates (as
has been the case in the Red Sea and off Somalia), the cost savings for ships may make
the routes more profitable in the medium term, particularly as governance strengthens in
the region (see ARCTIC: Polar route will not rival Suez or Panama soon - October 16,
2013).
Yet, if enforcement of the Polar Code is confined to ports, some ships making transits may
never be subject to inspection, opening up the possibility of non-compliance with a code
specifically designed to protect the Polar regions from significant human harm.
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Polar Code leaves enforcement gap for Arctic shipping

3. Commercial fishing vessel
exemptions and limited
policing prospects of non-
compliant shipping pose risks
Even with the threat that marine insurers would not cover a ship transiting the Polar regions
that did not meet Code-set standards, some shipowners may evade compliance to cut
costs.
There is a real risk that an ill-equipped ship could encounter trouble in the remote Polar
regions and cause an environmental catastrophe akin to the Exxon Valdez in 1989.
Further, the intentional exclusion of certain commercial fishing vessels from compliance
with the Polar Code keeps the Polar regions -- especially the more heavily populated
Arctic -- exposed to pollution and shipwreck risks that slip through the Code without more
active enforcement regimes.
Outlook
After 2017, states with Polar waters may opt for more active naval and coast guard
enforcement of the Polar Code, including spot checks.
A possible mutual compact of enforcement of the Polar Code between Arctic Council
states, structured along similar lines to the Arctic Search and Rescue Agreement, which
allows for sharing of information and resources, may enhance the Polar Code's
effectiveness.
The Arctic Council states may, in the near future, need to engage in a search and rescue
operation on a ship that was not Polar Code-compliant, opening up many possible
practical and legal problems that could have been avoided had they engaged in more
cooperation earlier.
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No duplication or transmission is permitted without the written consent of Oxford Analytica
Contact us: T +44 1865 261600 (North America 1 800 965 7666) or oxan.to/contact
Oxford Analytica Daily Brief®
Polar Code leaves enforcement gap for Arctic shipping