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Category: Mainbrace | March 2023
Note from the Editor
William R. Bennett III, Editor
This is my first publication as editor of Mainbrace. Truth be told, when I was asked to be editor, I thought it was a joke, laughed and asked “seriously?” In short, I was concerned I was not up to the task. Well, “why” you may ask, “seems like a simple and ordinary note for a law firm to pump out.” Not so my friends, not so.
It is important to note that Mainbrace is not merely another “publication” generated by a law firm’s marketing team. Mainbrace is much more. Mainbrace has a long history of providing the maritime legal and business community with articles that are relevant to the then present-day industry concerns. It is a collaboration among skilled and talented lawyers who somehow find the time to author enlightening articles. Is Mainbrace the “Gray Lady”? No, but she is our lady and we hold her dearly.
Believe it or not, Mainbrace has been in publication since 1990! In fact, the first publication—Vol. 1 No. I—was issued in March 1990 by the law firm of Healy & Baillie, which joined Blank Rome in 2006. “How did it last so long?” you ask. Simply put, the sustainability of Mainbrace is directly related to the efforts of Tom Belknap, who spearheaded the publication of Mainbrace for nearly 15 years. And should any of our readers desire to read ANY issue of Mainbrace since its first publication in March 1990, Tom can supply you with a copy—all of which are safely tucked away in a binder in his office.
To Tom Belknap, our partner and friend: Bravo Zulu, Bravo Zulu!
I do not take lightly taking over the conn of Mainbrace from Tom and having to safely navigate her publication in the future. Admittedly, I won’t do so alone, for I am surrounded by a crew of brilliant legal minds who will supply me with articles to publish. And to them, I am grateful.
Lastly, to our readers, we take pride in every issue of Mainbrace we publish and will continue to author and publish meaningful and informative articles that meet your expectations.
Will Jones Act Waivers Be a Viable Option in the Future?
Dana S. Merkel, Jonathan K. Waldron, and Jeanne M. Grasso
Companies often ask if it is possible to obtain a Jones Act waiver in emergency circumstances or otherwise when they know that there may not be domestic Jones Act vessels available to perform the transportation or installation of cargo. Historically, waivers have been very difficult to obtain and recent Congressional developments will make them even more difficult to obtain.
Background
The Jones Act prohibits the “transportation of merchandise by water, or by land and water, between points in the United States . . . either directly or via a foreign port” unless the vessel is U.S. built, U.S.-flag, and 75 percent U.S. owned. Jones Act requirements can only be waived if “necessary in the interest of national defense.” 46 U.S.C. § 501 (the “Waiver Provision”).
It is extremely difficult and rare to obtain a waiver of the Jones Act. The Waiver Provision has always limited waivers to situations where such waiver is needed for national defense purposes.
Continue reading “Will Jones Act Waivers Be a Viable Option in the Future?”A Practical Approach to Reduce MARPOL Enforcement Risks in the United States
Kierstan L. Carlson and Jeanne M. Grasso
Readers of Mainbrace know well that the United States has been aggressively enforcing compliance with MARPOL for decades. Often referred to as “magic pipe” cases, the U.S. Department of Justice (“DOJ”) has brought criminal MARPOL prosecutions against owners and operators of ships running the gamut from fishing vessels to bulkers, tankers, container ships, and cruise ships. These prosecutions have involved underlying violations of MARPOL Annex I (oil), but also Annex V (garbage) and more recently Annex VI (air emissions).
Criminal MARPOL cases are extraordinarily costly and disruptive to vessel owners/operators. Not only are significant fines levied against violators, but companies convicted of MARPOL violations suffer attendant reputational damage that can impact charter hire prospects and incur significant costs for paying wages, housing, and per diem to the crew members whom the government requires to remain in the United States for the duration of the criminal case. On top of that are the costs associated with a comprehensive Environmental Compliance Plan for the fleet, along with costs associated with a Third-Party Auditor and a Court-Appointed Monitor.
Unlike other areas of U.S. criminal enforcement, MARPOL prosecutions have continued at a steady pace, across administrations led by different political parties. This is due, in part, to the fact that the Act to Prevent Pollution from Ships (“APPS”), the U.S. statute that implemented MARPOL, is enforced by the U.S. Coast Guard (“USCG”), which is typically less affected by political change than other executive agencies responsible for criminal enforcement. Perhaps more importantly, APPS includes a whistleblower provision pursuant to which anyone who provides information to the USCG that leads to a conviction may be awarded up to 50 percent of the criminal penalty imposed under APPS. Potential awards incentivize seafarers to report misconduct to the USCG instead of to the company, even in cases where there is an open-reporting program. It also gives the USCG and DOJ a significant advantage, as they often receive photos and videos of the alleged improper conduct before their investigation even begins.
Continue reading “A Practical Approach to Reduce MARPOL Enforcement Risks in the United States”Offshore Wind Development Is Coming to the Gulf of Mexico
Joan M. Bondareff and Keith B. Letourneau
The U.S. Department of the Interior’s Bureau of Ocean Energy Management (“BOEM”) has identified two Wind Energy Areas (“WEAs”) in the Gulf of Mexico (“GoM”) to develop offshore wind farms. A lease sale is expected later this summer. One 546,000-acre WEA is located south of Galveston, Texas; the other is a 188,000-acre tract off the coast of Lake Charles, Louisiana. According to BOEM, the two WEAs have the potential to power 2.3 million and 799,000 homes, respectively, with clean energy generated by continuously renewable offshore wind.
Offshore wind promises various advantages over onshore wind farms, including stronger, more consistent, and less turbulent winds, and the use of substantially bigger towers and blades than onshore farms, resulting in more efficient and greater power generation; out-of-sight-and-sound facilities; the capacity to service large U.S. coastal populations; and the ability to avoid ecologically sensitive sites ashore. (See Onshore vs offshore wind energy: what’s the difference?) Moreover, according to some estimates, the GoM possesses the potential to generate almost 510 giga watts (“GW”) of offshore wind (“OSW”) annually. (See The Gulf of Mexico is poised for a wind energy boom. ‘The only question is when.’) Additionally, given the mature oil and gas offshore infrastructure along and off the Gulf Coast states, that infrastructure arguably can and would adapt to build and maintain OSW farms in the GoM.
This article reviews the next steps in the development of wind farms in the GoM, comparing the environments in other parts of the country with those in the Gulf region and describing the obstacles to actual production of offshore wind in the GoM.
Continue reading “Offshore Wind Development Is Coming to the Gulf of Mexico”Transfer of Offshore Wind Safety and Environmental Responsibilities
Dana S. Merkel and Jonathan K. Waldron
The Department of the Interior (“DOI”) transferred safety and environmental oversight for the Outer Continental Shelf (“OCS”) renewable energy program from the Bureau of Ocean Energy Management (“BOEM”) to the Bureau of Safety and Environmental Enforcement (“BSEE”) on January 31, 2023. Importantly, the transfer does not affect current regulatory requirements for offshore wind development, but merely the agency responsible for oversight and enforcement.
Background
A number of reorganizations have occurred over the years since the Energy Policy Act of 2005 authorized the Secretary of Interior to grant OCS leases for renewable energy activities. When the Minerals Management Service was divided in 2011 following the Deepwater Horizon incident, the Secretary of Interior highlighted the importance of separating the lease planning and management functions and safety and environmental enforcement functions into two separate entities, creating BOEM and BSEE, respectively. A third entity was also created to manage the royalty and revenue management functions.
The renewable energy program, however, remained with BOEM entirely as the program was still in early development. It was noted that the renewable energy program would be split between the entities when it is determined that “an increase in activity justifies transferring the inspection and enforcement functions” to BSEE.
Continue reading “Transfer of Offshore Wind Safety and Environmental Responsibilities”Compliance, Enforcement Risks, and Emerging Issues Regarding EPA’s Vessel General Permit
Jeanne M. Grasso and Dana S. Merkel
About a year ago, we wrote about a rise in enforcement of the U.S. Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”). In the words of one EPA attorney, that was “just the beginning” and we have continued to see more aggressive reviews of VGP compliance and penalty demands, particularly on the U.S. West Coast. Since then, EPA has continued demanding significant penalties for alleged violations, sometimes citing interpretations of the VGP that are not outlined in any guidance documents. Additionally, in January 2023, EPA published an Enforcement Alert, EPA Reminder About Clean Water Act Vessel General Permit Requirements, reminding the maritime industry of the VGP requirements and impacts of non-compliance, and citing recent enforcement examples.
The VGP and VIDA Implementation
The VGP was issued under the Clean Water Act’s (“CWA”) National Pollutant Discharge Elimination System (“NPDES”) program and provides permit coverage nationwide for discharges incidental to the normal operation of commercial vessels more than 79 feet in length. EPA issued the first version of the VGP in 2008 and then another, more stringent version in 2013. The VGP set effluent limits and mandated Best Management Practices to control certain types of incidental discharges. It also required vessels to conduct routine and annual inspections and imposed numerous recordkeeping obligations, as well as monitoring and reporting requirements.
Continue reading “Compliance, Enforcement Risks, and Emerging Issues Regarding EPA’s Vessel General Permit”U.S. Court Authorizes Service of Subpoena on U.S. Nationals through Social Media While Prohibiting the Issuance of a Subpoena on Foreign Nationals Abroad
Michael B. Schaedle and Evan Jason Zucker
Corrupt managerial behavior has been a driver in the collapse of the cryptocurrency market. Enforcing and defending claims against directors and officers, where the directors and officers are not living in the United States and may not be U.S. citizens, is a current judicial focus in the U.S. litigation system. In the Three Arrows Capital (“Three Arrows”) chapter 15 case, the U.S. Bankruptcy Court for the Southern District of New York (the “U.S. Bankruptcy Court”) addresses founder misconduct[1] and defines the limits of the United States’ broad discovery tools to aide a letterbox jurisdiction, like the British Virgin Islands (“BVI”), in corralling bad actors and subjecting them to forensic examination.
The Collapse of Three Arrows and the Obfuscations of its Founders’ Location
Three Arrows managed and invested digital assets. It was founded by Kyle Davies and Su Zhu. Davies was born in the United States, but he holds Italian and Singaporean passports. It is not known whether Davies renounced his U.S. citizenship but, as a matter of law, a person born in the United States is presumed to be a U.S. citizen.[2] Zhu was born in China and lived in San Francisco for some period of time in the last decade. Zhu, however, currently does not reside in the United States and his current residence is unknown. Zhu listed his nationality as Singaporean in company records.
On June 27, 2022, Three Arrows commenced an insolvency proceeding in the BVI. The BVI court appointed joint liquidators to investigate and recover assets for Three Arrows’ creditors. Prior to its liquidation, Three Arrows allegedly had over three billion dollars in assets under its management. At the direction of Davies and Zhu, these assets funded deals with cryptocurrency companies globally, including in the United States and Singapore. According to a Singaporean government agency, Three Arrows’ investment arm breached asset management protocols for a prolonged period, calling into question Three Arrows’ solvency and provided the agency with false and misleading information about its assets, liabilities, and value.
Continue reading “U.S. Court Authorizes Service of Subpoena on U.S. Nationals through Social Media While Prohibiting the Issuance of a Subpoena on Foreign Nationals Abroad”Maritime Ransomware
Vanessa C. DiDomenico, Sharon R. Klein, and Karen H. Shin
Cybersecurity concerns are certainly on the radar for shipowners and operators. Cybersecurity breaches can penetrate systems aboard and ashore and can jeopardize safety and adversely impact maritime operations, as well as disrupt the downstream distribution of the goods on board. In that light, it is imperative that shipowners and operators install tough mitigation, detection, and response plans.
As ships undergo digitalization and autonomous system upgrades, cyberattacks and ransomware attempts become more prevalent. Ransomware is defined as a type of malicious software designed to block access to a computer system until the attacked party pays a sum of money. Cybercriminals monetize their operations by extorting their victims and can further sell extracted data. Cyberattackers typically seek the highest payout possible and target companies and industries, including the maritime sector, that rely on time-sensitive data to function. Such attacks can have devastating contemporaneous consequences on multiple players.
In the 2017 NotPetya malware incident, attackers encrypted Maersk systems and demanded payment. “Without access to data held on its destroyed computer system, Maersk literally didn’t know what was in its containers. On-the-ground-staff had to check manually, with time sensitive medicines a particular supply chain concern.”[1] The attackers shut down systems in seven minutes, but the response and industry’s realization that protections were needed lasted much longer. “The key lesson Maersk learned from battling the NotPetya attack: protection is important—but it’s equally as important to ensure your recovery process is strong.”[2]
Continue reading “Maritime Ransomware”Blank Rome Named “Law Firm of the Year” in Admiralty & Maritime Law in U.S. News – Best Lawyers® 2023 “Best Law Firms”
November 3, 2022
Blank Rome LLP is pleased to announce that our firm has been named “Law Firm of the Year” in Admiralty & Maritime Law in the 2023 “Best Law Firms” survey by U.S. News & World Report – Best Lawyers.® Only one law firm per legal practice area received the “Best Law Firm” recognition.
Along with this recognition, our Maritime practice group was also ranked Tier 1 nationally and ranked Tier 1 regionally in Houston, New York City, and Washington, D.C., in Admiralty & Maritime Law. The rankings are based on a combination of “client feedback, information provided on the Law Firm Survey, the Law Firm Leaders Survey, and Best Lawyers peer review.”
Blank Rome was nationally ranked in 27 practice areas and regionally ranked in 83 practice areas in the 2023 “Best Law Firms” survey by U.S. News & World Report – Best Lawyers.®
To view Blank Rome’s full rankings, please click here.