The Russian-Ukrainian War’s Impact on Maritime Commerce

Keith B. Letourneau

Russia’s unprovoked invasion of Ukraine has triggered significant reactions in the world of maritime commerce. In a matter of days since the beginning of Russia’s main offensive, the price of bunker fuel used for vessel propulsion systems has skyrocketed as have tanker charter-hire rates and war-risk premiums for vessels transiting to or from regions impacted by the conflict, including the Baltic and Black Seas, which have been designated as “listed areas” by the insurance industry’s War Risk Council. The Russian Navy has closed access to the Sea of Azov (the body of water guarded by the Crimean Peninsula that affords maritime access by Ukraine to the Black Sea, along with the port of Odessa farther to the east), and blocked the movement of numerous merchant ships therein and in the Black Sea, stranding their crews who are running low on provisions, and bringing to a halt the export of Ukrainian grain, which will severely impact the world’s grain supply. 

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Carriage of Cargo on Deck: Carriers Be Aware

Noe S. Hamra

Carriage of cargo on deck has always been problematic for vessel owners and operators. In addition to the typical risks associated with carrying cargo on deck, such as exposure to the elements and lashing and stability issues, carriers are also exposed to uncertainties regarding their potential liability for damages to such cargo. In fact, many carriers believe that cargo carried on deck is carried at the shipper’s risk and that the carrier is not liable for damage to deck cargo, as long as cargo owners agreed to on deck carriage and the bill of lading states this on the front.

Complicating Legal Factors

A complicating factor is that neither the Hague Rules nor the United States Carriage of Goods by Sea Act (hereinafter referred to as “COGSA” or the “Statute”) apply to deck cargo. As for the latter, COGSA expressly defines “goods” as to exclude “cargo which by the contract of carriage is stated as being carried on deck and is so carried.”

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What Is the Insured’s Duty under a Marine Insurance Policy? It Depends…

Thomas H. Belknap, Jr.

The law governing marine insurance in the United States has long been a source of considerable confusion. And if there was once a clear set of principles applicable in such cases, the Supreme Court long ago muddied the waters with their infamous ruling in Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (1955). That case, involving a fire on a houseboat on an inland man-made lake on the Texas-Oklahoma border, established the “litmus test” for when maritime law should govern and when the courts should instead look to state law in interpreting marine insurance contracts.

Faced with the question of whether an insured’s policy should be voided for breach of policy warranties when the insured has made misrepresentations in the application that bear no relationship to the actual risk or claimed loss, the Supreme Court in Wilburn Boat concluded that “[w]hatever the origin of the ‘literal performance’ rule may be, we think it plain that it has not been judicially established as part of the body of federal admiralty law in this country.” Because there was no “established federal admiralty rule” governing such warranties, the Supreme Court ruled that it should instead look to state law, which, as it happens, contained a provision that protected the insured from such “immaterial” breaches of warranty.

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What If the Ever Given Grounding Had Occurred Here?

Jeffrey S. Moller

The timing of the Ever Given’s grounding in the Suez Canal could not have been better, at least as far as my admiralty law students at Drexel University and I were concerned. The incident occurred right after we covered the subject areas of casualties, cargo losses, and the potential liability of pilots. And just in time for me to add this extra-credit question to the final exam: “If the maritime law of the United States were applicable to the Ever Given incident, who would be liable for what, why, or why not?”

Background

As readers will no doubt remember, Ever Given became hard aground by both its bow and stern across a single-lane portion of the Suez Canal in March. The pilots, who were employees of the Suez Canal Authority (“SCA”) lost control of the ship in a severe wind/sand storm, partly because of the enormous sail area created by the multi-tier deckload of containers. 

While costly salvors worked to free the ship, one of the most important shipping shortcuts in the world was completely impassable. Hundreds of ships at each end had to either wait or take the long route around the Cape of Good Hope. These ships were loaded with livestock, agricultural products subject to spoiling, and parts inventories for the world’s “just in time” manufacturing economy. The SCA claims to have lost millions in passage fees. The ship was at least slightly damaged both bow and stern; owners of its cargo suffered delays and/or damage. 

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Carriage of Goods by Sea Act Fundamentals

Vanessa C. DiDomenico

The Carriage of Goods by Sea Act (“COGSA”) defines the basic relationship—duties, liabilities, rights, and immunities—between ocean carrier and cargo owner. COGSA was passed in the United States in 1936 and its enactment was the result of various concerns by Congress. In the early nineteenth century, carriers were strictly liable for cargo damage, with only few limited exceptions to liability for an act of God, public enemies, and inherent vices. By the second half of the nineteenth century, carriers began issuing bills of lading containing exculpatory clauses that sought to reduce or eliminate a carrier’s liability altogether. Therefore, a compromise occurred in 1893 when Congress enacted the Harter Act, which sought to achieve uniformity in the rules of liability applied in international shipping and to strike a balance between carriers’ efforts to reduce liability and cargo owners’ efforts to impose liability regardless of fault. The Harter Act allowed carriers who furnished a seaworthy vessel and exercised due care with the cargo to be exempt from most liability. Currently, the Harter Act has not been repealed and does govern certain transactions where COGSA does not. Below is a detailed exploration of the key differences between the Harter Act and COGSA.

Differences Between the COGSA and the Harter Act

COGSA applies by force of law to contracts for the carriage of goods by sea, to or from foreign ports and U.S. ports. The Harter Act applies to the carriage of goods to or from U.S. ports. COGSA preempts the Harter Act with respect to contracts of carriage pertaining to foreign trade. COGSA does allow for parties to incorporate its provisions for the contract of carriage for voyages between U.S. ports. In fact, it is not uncommon for parties to do so. The question may be asked why a carrier would agree or even want to expand coverage: one reason could be that COGSA provides carriers with a wide array of defenses, and where liability does exist it can be limited.

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Mainbrace Live: U.S. Maritime Regulatory Update

Blank Rome’s internationally recognized Maritime & International Trade practice group presents a new series of informative webinars covering hot topics in the shipping industry and key insights into 2021 and beyond. Sessions will cover:

    • Sanctions and international trade
    • Offshore wind developments
    • Shipping litigation
    • Maritime regulation
    • Ship finance
    • And more!

For the fourth webinar in our Mainbrace Live series, Blank Rome LLP attorneys Jeanne M. GrassoDana S. Merkel, and Stefanos N. Roulakis presented “U.S. Maritime Regulatory Update” on Tuesday, June 22, 2021.

Jeanne, Dana, and Stefanos discussed:

    • The conundrum in ballast water management: VIDA, VGP, and the IMO
    • Ongoing industry challenges as COVID-19 continues
    • Emerging greenhouse gas regulation and shipping

MODERATOR

    • Jeanne M. Grasso, Partner and Co-Chair, Maritime & International Trade Practice Group

PRESENTERS

To watch a recording of this webinar, please go to the webinar on-demand registration page here.

Risks Attendant to U.S. Rule B Alter-Ego Vessel Seizures

Keith B. Letourneau

A recent wave of vessel seizures premised on alter-ego theories has swept through various U.S. federal courts. These cases present significant risks for vessel owners and ship managers, even if the underlying claims are ultimately defensible. Plaintiffs employ Supplemental Admiralty Rule B as the procedural device to seize vessels as an asset of the target defendant. Rule B requires a prima facie showing that the defendant is not present within the district to satisfy the existence of general-personal jurisdiction. The Supreme Court’s general jurisdiction ruling in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), has made it much easier to meet Rule B’s requirement because such jurisdiction is now predicated upon proof that the defendant’s systematic and continuous contacts render it essentially at home within the district, effectively requiring its principal place of business to lie within the district. Given the peripatetic existence of merchant ships and their ownership—often by single ship-owning companies incorporated within flag-of-convenience countries—satisfying Rule B’s “presence within the district” standard now is nearly automatic.

Plaintiff Strategies

Plaintiffs couple Rule B’s easy compliance with alter-ego allegations that the ship manager or ship-owning group are dominated and controlled by a single individual or entity to the disadvantage of the plaintiffs and that the target defendant is but a corporate extension of the company with whom the plaintiffs’ real dispute exists (and that dispute may have absolutely no connection with the United States). Supplemental Admiralty Rule E(4)(f) permits a defendant whose property has been seized to an immediate post-seizure hearing. While the federal courts are not aligned as to the standard that applies at such a hearing, it is fair to say that plaintiffs are required, at minimum, to meet the probable-cause test, which equates to reasonable grounds for supposing the allegations are well founded.

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Mainbrace Live: U.S. Maritime Litigation Trends

Blank Rome’s internationally recognized Maritime & International Trade practice group presents a new series of informative webinars covering hot topics in the shipping industry and key insights into 2021 and beyond. Sessions will cover:

    • Sanctions and international trade
    • Offshore wind developments
    • Shipping litigation
    • Maritime regulation
    • Ship finance
    • And more!

For the third webinar in our Mainbrace Live series, Blank Rome LLP attorneys William R. Bennett, IIILauren B. WilgusJeremy A. HerschaftZachary J. Wyatte, and Noe S. Hamra presented “U.S. Maritime Litigation Trends” on Tuesday, May 18, 2021.

Bill, Lauren, Jeremy, Zach, and Noe discussed:

    • 1782: Purpose and criteria 
    • Judgment enforcement: Arrest, attachment, and more 
    • Timeline of a federal case: From complaint to trial, discovery, etc. 
    • Spill investigations: Practical “boots on the ground” information

MODERATOR

PRESENTERS

To watch a recording of this webinar, please go to the webinar on-demand registration page here.

CBP Modifies First Offshore Wind Ruling

Jonathan K. Waldron, Matthew J. Thomas, Jeanne M. Grasso, and Stefanos N. Roulakis

Stakeholders in offshore wind construction projects, including vessel owners and operators, project developers, and equipment manufacturers, should ensure that their plans for offshore wind development take into consideration the implications of U.S. Customs and Border Protection’s (“CBP”) most recent Jones Act ruling. While a previous ruling issued by CBP in January 2021 changed course by ruling that “pristine sites” were subject to the Coastwise Merchandise Statute (commonly referred to as the Jones Act), CBP has modified this ruling generally in line with past precedent. Nonetheless, CBP’s modification creates some changes for Jones Act compliance in the offshore wind sector.

On January 27, 2021, CBP ignited controversy in its first Jones Act ruling on offshore wind since the passage of the 2021 National Defense Authorization Act (“NDAA”). The NDAA, through an amendment to the Outer Continental Shelf Lands Act (“OCSLA”), clarified that the Jones Act applied to renewable energy projects on the U.S. Outer Continental Shelf (“OCS”), and stakeholders expected that the same cabotage rules which have applied to mineral energy development projects would equally apply to offshore wind. Nonetheless, in HQ H309186, CBP deviated from decades of precedent by ruling that the lading of “scour protection” materials by a non-coastwise qualified vessel at a U.S. coastwise point (i.e., a port or place in the United States), and unlading of these materials at a pristine site on the OCS, would violate the Jones Act. Reversing course after comments from industry stakeholders, CBP issued a modification, which held that the “Jones Act does not apply to activity occurring at the pristine seabed on the OCS, which has been CBP’s longstanding position on the issue.” HQ H317289 (March 25, 2021). While CBP’s reversal appears to be consistent with “longstanding” precedent on pristine sites, the modification itself raises questions about the applicability of the Jones Act in certain contexts as discussed further below.

BACKGROUND

Decades after extending federal law (including the Jones Act) to the OCS for mineral-related energy development projects, Congress enacted the 2021 NDAA, which included a provision confirming that the Jones Act applies to all offshore energy development on the Outer Continental Shelf, including wind energy. While most offshore wind projects were planned with Jones Act compliance in mind, this has generally been a welcome development for all stakeholders, with the hope that it would bring needed clarity and certainty to renewable energy development projects offshore.

However, CBP’s first shot out of the gate in January missed the mark, although the agency should be lauded for issuing a correction in short order last month. In the initial ruling, Great Lakes Dredge and Dock (“Great Lakes”) proposed to transport and unlade “scour protection” materials (i.e., rocks) to protect wind turbine generator (“WTG”) foundations in conjunction with the construction of the Vineyard Wind Project located on the OCS off the southeast shore of Martha’s Vineyard. Great Lakes proposed unlading the materials at the WTG sites on the OCS in layers and at different phases of the WTG installation process using both coastwise and non-coastwise vessels under various scenarios.

Please click here for the full client alert.

BIMCO Adopts New Clauses and Contracts

Keith B. Letourneau, Matthew J. Thomas, and Zachary J. Wyatte






New Development

The Baltic and International Maritime Council’s (“BIMCO”) Documentary Committee adopted several new clauses and contracts at its recent meeting held on January 25, 2021. Included were: (1) a new charter sanctions clause, (2) a clause promoting transparency and dialogue between owners and charterers, and (3) tug, barge, and floating hotel contracts. Given the prevalence of U.S. sanctions against myriad governmental and private-party actors worldwide, the scourge of the COVID-19 pandemic, and the construction advent of new offshore wind farm structures, each of these clauses and contracts warrant consideration by maritime law practitioners and commercial operators alike.

Sanctions Clause for Container Vessel Time Charter Parties 2021

In recognizing the complexity of international sanctions regimes, coupled with the fact that they consistently change as the number of new restrictions continues to increase, BIMCO issued a sanctions clause for charter parties in the container trade in an effort to assist interested parties in complying with the worldwide sanctions regulations. This new clause was designed as part of an initiative to create a library of sanctions clauses that reflect the individual needs and characteristics of different trades and operations, as well as provide greater understanding of the responsibilities assumed by owners. It is the last step in a triad of sanctions clause updates, which comes more than a year after BIMCO’s revised standard sanctions clauses for time and voyage charters. As the various shipping subsectors possess separate risks associated with different market realities, BIMCO tailored this clause to address the characteristics of the container industry, specifically to address: (1) transactions with a “Sanctioned Party,” and (2) voyages involving a “Sanctioned Cargo.”

Please click here for the full client alert.

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