Key Players in Shipping

Organizing shipping

Who are the industry players?

Strathclyde Jan/Feb 2013 By: Cathrine Bjune

This presentation will cover:

• The players in the industry – who are they and what

characterizes them?

• The organisation and functions of the shipping

companies

• The legal framework of shipping – laws vs contracts

• Next presentation covers ship management and players

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The core of the shipping industry

• Ships and cargoes

• Key players: The Owners and the Charterers

• Additional:

• Yards, ship managers and operators, agents, ports, insurers, banks, suppliers , manufacturers of engines and parts, ship designers, international organizations, brokers and many others…

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Owners

The ”Owner” is the (commercial) vessel`s controller. It can be a company, a physical person,investment company or other

• Head Owner

• Disponent Owner/Operator

• Commercial Manager

• (Cargo Owners)

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Characteristics of shipowners

• The core business is owning tonnage - for the purpose of earning money, and they have more or less competence in shipping.

• Owners can be:

– Traditional ”Ship Owners”

– Pools

– Operators

– Management Companies

– Cargo Owners

– Financial Institutions

– Yards

– Others

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How are owners organised?

• Can be done in a number of different ways.

• Company law is a key word.

• Companies can be national or ”international” or globalised

• Can be personally owned, share holding companies, joint

ventures, partnerships, pooling arrangements etc

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Common ownership structure:

• Limited companies

• Single purpose limited companies

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What are the duties of a shipowner?

• Taking care of the ship’s management, crew, maintenance,

stores, registration, classification, compliance with national

and international rules etc…..

• In short: Technical and commercial management

• Companies can be fully integrated or functions can be wholly

or partly outsourced

• See separate handout on this aspect

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Owners duties continued:

• Companies can be fully integrated or functions can be wholly

or partly outsourced

• Why?

Example:

Frontline

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Where are companies located?

• Shipowning companies are often placed where it enjoys tax

privileges

Registration of vessels: Flags of convenience

– Most countries’ ship registers require a ’genuine link’

between the State and the shipowner

– more than half of the world’s merchant ships (tonnage)

are registered under flags of convenience, more

commonly referred to as "open registries”

– Purpose: minimize income tax, wage scales, other

regulations, confidentiality, hidden ownership

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Brokering

International

law Ship

registration

Marine

insurance

Classificatio

n societies

Company

law

Ship repair

& ship

building

Maritime

Law

Ship

finance

Crew

Managemen

t

Safety &

environment

Tax law

Port

managemen

t

Chartering

Offshore

International

organisation

s

Politics

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The evolution of ships…What

impact have these changes had?

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Seafarers

• The worldwide population of seafarers serving on

internationally trading merchant ships is estimated

to be in the order of 466,000 officers and 721,000

ratings.

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Availability – the latest crisis

It has been suggested that there are

not enough officers and crew to man

all the new vessels due to be

delivered over the next 2-3 years and

that some vessels may even have to

go into lay-up because of that.

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Charterers

• Contracts to be used:

• 1) Time C/P

• 2) Voyage C/P

• 3) Bare Boat C/P

• Long term contracts of affreightment (COA)

• Volume and requirement contracts

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Charterers

• Buying Transport Capacity

– Cargo Owners

• Selling CIF or C&F

• Buying FOB

– Traders

– Operators

– Shipowners

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Brokers – involved in most

operations

• Exchange of information

– Positions/Cargoes/Fixtures/Analyses

• Extensive contact network

– Owners/Cargo Owners/Traders/Brokers etc

– Brokers involved in insurance, bunkers, financing,

newbuilding, demolition etc

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Agents

The AGENT is the Representative of the vessel’s OWNER

(unless specifically appointed by another PRINCIPAL).

The Agent must act in the best interests of the Owner or

Principal to ensure fast and safe turnaround but always within

the limits of authority given.

A legally binding contract is deemed to exist

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Yards

• Shipyards and dockyards are places which repair and build

ships

• Countries with large shipbuilding industries include South

Korea, Australia, Japan, China, Germany, Turkey Poland etc.

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Classification societies

• The purpose of a Classification Society is to provide classification and statutory services and assistance to the maritime industry and regulatory bodies as regards maritime safety and pollution prevention.

• More than 90% of the world's cargo carrying tonnage is covered by the classification design, construction and through-life compliance Rules and standards set by the Member Societies of IACS.

• There are members and Non Members

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Class societies continued

• The vast majority of commercial ships are built to and surveyed for compliance with the standards laid down by Classification Societies. These standards are issued by the Society as published Rules

• A vessel that has been designed and built to the appropriate Rules of a Society may apply for a certificate of classification from that Society.

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Suppliers and other parties

• Banks, brokers, insurance companies and clubs

• International organisations (BIMCO, IMO, INTERTANKO, AIACS etc)

• Stevedores and port workers

• Engines and parts, fuel (bunkers), lub oil, stores and provisions

• Navigation systems, radars and radios, tracking systems, navigational charts

• Paint, anti corrosion systems, ballast water management,

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Ports

• Ports form the interface

between the ship and the

shore. They vary in their

degree of development and

sophistication. Some are

simply a sheltered inlet, creek

or river mouth where a ship

may lie at anchor and load or

discharge into barges which

ply between ship and shore.

• Others are technologically

advanced and vast

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Shipping – the most legally regulated

industry in the world

- And perhaps the most international one.

Laws in place for most activities

Regulation of the marine industry

• Shipping is a global industry with a need for global rules

• However, rules can only be national

• Key areas of global attention on shipping is safety and

environmental considerations

• Other aspects: Shipping is international – therefore a focus on tax

policy, including subsidies and competition law

• Some areas regulated by freedom of contract (chartering, S&P etc)

New rules are often created after

disasters ..

Which rules apply to shipping? • Flag state laws, port state laws and contract law

• International rules are largely based on Conventions

• Important organizations:

• IMO

• CMI

• UNCTAD

• ITF and ILU

Regulation of the marine

industry

• Shipping is a global industry with a need for global rules

• However, rules can only be national

• Key areas of global attention on shipping is safety and

environmental considerations

• Other aspects: Shipping is international – therefore a focus on tax

policy, including subsidies and competition law

• UK law, flag state law, port state law, European regulations and

international conventions

Examples of International

Conventions:

Navigation

Limitation of Liability Convention 1957 / 1976

Liability under Maritime Contracts – examples: Hague Rules 1924 Visby Rules 1968

Health International Health Regs 1969. Inspection by Port Health Authority for Deratting Exemption (6 mths)

Examples continued • Safety Management

– International Safety Management Code (ISM Code)

– External audits by Flag State / Class. Internal by owners/managers

– 1, 2.5, 5 years

• Safety of Life at Sea – SOLAS 1974

– IMO Convention covering: Safety Construction, Equipment, Manning, Radio etc

– Revalidation required annually by flag state.

• Pollution

– MARPOL

– Bunkers Convention, Ballast Water Convention

• Security

– International Ship and Port Security Code (ISPS)

• 1st Audit: immediate, valid for 2.5 years

• Thereafter renewable for 5 years

• Issued by Flag State, “Recognised Security Organisation”, Class

UK legislation

• Regulations which govern the maritime industry come from:

• UK legislation

• EU legislation

• agreements, resolutions and conventions made by various

UN agencies, including the International Maritime

Organization (IMO) and International Labour Organization

(ILO)

• Largely similar to other legislations

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UK legislation continued

• The majority of UK maritime SIs are supported by Marine

notices (referred to as M-notices) and codes of practice.

These documents expand on the technical detail of the

shipping and fishing legislation they support. They may be

mandatory or non-mandatory, depending on whether they are

given force of law by an SI.

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legislations

• http://ec.europa.eu/transport/modes/maritime/index_en.htm

• http://www.dft.gov.uk/mca/mcga07-home/workingatsea/mcga-

healthandsafety/maritime_labour_convention_2006.htm

• http://www.legislation.gov.uk/ukpga/1995/21/contents

• (Merchant Shipping Act)

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The vessel must follow the laws and regulations of the Flag State

The vessel must also comply with Port State laws and regulations.

Each country has its own national laws with respect to ship registers.

Importance of the flag and registration

Flag and the UK

• http://www.dft.gov.uk/mca/mcga07-

home/shipsandcargoes/mcga-ukshipregister/mcga-

ukshipregister-merchantships.htm

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Contract law vs. statutory law

• Mandatory rules (eg cargo claims liability, liability for passengers, oil

spill prevention and liability for clean up)

• Non mandatory rules

• Shipping - the most regulated industry in the world!

• But large parts subject to “freedom of contract”, such as buying and

selling ships, building contracts, chartering agreements

• Many standard documents used – produced by BIMCO

Contracts used in shipping

• Finance and insurance contracts

• Management contracts

• Contracts used for salvage (Lloyds open form and scopic clause)

- Contracts used for employment of crew

- Contracts used for ship sale and purchase (NSF 93)

- Contracts used for shipbuilding and ship repair

- Chartering contracts and Bills of Lading

- Tickets

Finding the contracts:

• BIMCO (www.bimco.org)

• BIMCO is an independent international shipping association

founded in 1905, with a membership composed of ship

owners, managers, brokers, agents and many other

stakeholders with vested interests in the shipping industry.

• Located in Denmark, outside Copenhagen

Note…..

• The interface between laws and contracts..

• Mandatory and declaratoric laws

• Freedom of contract

Contracts subject freedom of contract:

• Ship sale and purchase

• Ship building and repair

• Chartering

Contracts regulated by law(s)

• Bills of Lading

• Passenger tickets (partly)

Who enforces maritime legislation?

• Enforcement will depend upon the nature of the legislation

(public, criminal or private).

• Flag State issues include crew matters, trading certificates, ship

registration, ship inspection etc. and apply only to own

registered vessels.

• Port State/Port Authority issues include pollution, wreck removal,

port state control, pilotage, COLREGS breach etc and apply to

both home flag and foreign vessels in port state waters.

Jurisdiction - and applicable law

The question of which country's law which has jurisdiction in the matter

May be the result of law or contract

Ex: standard C/P – BIMCO

”Forum shopping”

International challenges: a case to illustrate how

difficult jurisdiction can be:

Tricolor – collision with Kariba 14th December 2002 in English channel.

Some legal disputes that occurred:

• Collision

• Salvage

• Wreck removal

• C/P disputes

• Cargo liability

• Crew liability

• Arrest

Pollution

• Limitation of lliability

• Limitation fund (where?)

• Insurance (cargo, H&M, Loss of

hire, Freight interest, Hull interest,

P&I etc..)

• Venue(s)?

Third party liability

Dispute resolution in shipping

• Mediation (a form of settlement negotiation facilitated by a

neutral third party)

• Court process

• Arbitration a form of alternative dispute reolution (ADR), is a

legal technique for the resolution of disputes outside the

courts, wherein the parties to a dispute refer it to one or more

persons (the "arbitrators", "arbiters" or “arbitral tribunal"), by

whose decision (the “award") they agree to be bound.

Enforcement of judgments and

or awards: • Depends on jurisdiction applied.

• A judgment ca also be enforced in other jurisdictions (where

defendant has his assets)

• A ship can be arrested (ref ”in rem”

• The 1958 New York Convention on the Recognition and

Enforcement of Foreign Arbitral Awards

• The Lugano Convention of 1988 on jurisdiction and the

enforcement of judgments in civil and commercial matters

Legal issues and the future

• More laws

• More regulations

• More standards to meet

• The law affects every single aspect of shipping

• Get used to it!!!!

• Stay informed

Questions

Case

• Name some players and or functions

related to the shipping industry that

have emerged during the past 100

years

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