Happy fall! As the seasons change, so do the issues confronting the maritime industry…or not. Over the past few years, several topics have consistently remained in the headlines and as a thorn in the side of many shipowners. In the environmental arena, these issues have generally involved MARPOL enforcement, ballast water management, the Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”), and air emissions in light of the upcoming International Maritime Organization’s (“IMO”) 0.5-percent sulfur cap.
The MARPOL Annex I oily water separator cases have continued apace, with at least half a dozen guilty pleas in 2018 to date, and several more pending. These cases have been going on since the mid-1990s and not a lot has changed— engineers are still bypassing the oily water separator, albeit in more creative ways (e.g., discharging through the sewage or graywater systems), and finding creative ways to trick the oil content meter. Most cases still arise as a result of whistleblowers reporting misconduct to the U.S. Coast Guard (“USCG”), owners still must enter into burdensome security agreements to get their ship out of port, crewmembers are commonly “voluntarily” held in the United States for upwards of a year or more, and guilty pleas with fines and stringent environmental compliance plans are the outcome. To help owners avoid this fate, we have developed a Maritime Compliance Audit Program that tests the effectiveness of a company’s environmental management system to prevent MARPOL violations, a summary of which can be found here and which we are happy to discuss with you.
The ever-changing ballast water management regime continues to pose challenges as well as owners trying to navigate compliance with the IMO Convention and the USCG regulations. The USCG’s policy on compliance date extensions is ever-evolving and we, along with industry partners, continue to work with the USCG to find practical compliance-focused solutions for owners endeavoring to comply with both the USCG’s and IMO’s requirements in an efficient manner and effective manner.
As many of you know, the EPA’s 2013 Vessel General Permit, which regulates incidental discharges from vessels, is set to expire in December 2018. The expectation was that the EPA would publish a new draft for comment sometime last year or early this year, but that did not happen. That said, the Chamber of Shipping of America reports that the EPA expects the new proposed 2018 VGP to be published in March 2019, with at least a 30-day comment period. To this end, the current 2013 VGP is expected to be administratively continued until the final 2018 VGP is issued; vessels currently covered under the 2013 VGP will automatically be covered by the administrative continuance without further action; and new vessels whose keel is laid prior to December 18, 2018, must file a Notice of Intent (“NOI”) to be covered by the 2013 VGP prior to December 18, 2018, otherwise they will not be covered until the 2018 VGP is finalized (and hence cannot discharge in the United States, which basically prohibits them from operating in the United States).
And, IMO’s 2020 sulfur cap is looming on the horizon and investors, charterers, and owners are contemplating compliance options, as well as studying the risks and rewards of exhaust gas cleaning systems (i.e., scrubbers), which will be a topic addressed in the next issue of Mainbrace.
So, finally, we are proud that we have another issue Mainbrace to share with you, full of interesting information, ranging from what is (or is not) happening in the U.S. Congress to tariffs and trade, arbitral awards, and, importantly, celebrating diversity, and much, much more.
We hope you enjoy Mainbrace and we would welcome any feedback you might have. Cheers!
President Trump, from his campaign through his time in office, has been a vocal supporter of U.S. manufacturing jobs and a critic of what he characterizes as unfair trade practices from traditional U.S. trading partners. This is one reason he withdrew from the Trans-Pacific Partnership, and currently is renegotiating the North American Free Trade Agreement (“NAFTA”). As we are putting this issue of Mainbrace to bed, the administration has announced the successful completion of a new trade agreement with Mexico and Canada, which is now called the U.S.-Mexico-Canada Agreement (“USMCA”). At a later date we will provide insights into the “new” NAFTA and its potential impact on the maritime industry. Keep in mind that Congress will ultimately have to approve the USMCA before it goes into effect.
When we speak of maritime arbitral awards in the United States, we could mean one of three kinds: 1) “domestic” awards, 2) “nondomestic” awards, or 3) “foreign” awards. This distinction is important, because it controls what law applies to matters of recognition and enforcement. To understand the source and importance of these distinctions, we must start with the Federal Arbitration Act (“FAA”).
A proactive creditor often ends up in a better legal position, and has more negotiating power, than a reactive one. While that may seem obvious, it is a lesson driven home by a 2017 decision in the SunEdison bankruptcy case, which involves issues of international comity, choice of law provisions, and ultimately, the tactics employed by a Korean debtor in connection with its contractual relationship with SunEdison. In SMP Ltd. v. SunEdison, Inc. and GCL-Poly Energy Holdings Limited, 577 B.R. 120 (Bankr. S.D.N.Y. 2017), the SunEdison bankruptcy court refused to apply Korean insolvency law in a contract termination dispute, and enforced a contractual New York choice-of-law provision. Notwithstanding the chapter 15 recognition of the Korean debtor’s rehabilitation, applying New York law, the court upheld the enforcement of an ipso facto (“by the fact itself”) clause against the Korean debtor, thereby allowing termination of a license with SunEdison that was essential to the debtor’s business. 
In the United States, state and federal courts operate on a dual track, with the difference that state courts are courts of “general jurisdiction” (i.e., hearing all cases not specifically reserved to federal courts), while federal courts are courts of “limited jurisdiction” (i.e., hearing cases involving “diversity of citizenship” or raising a “federal question”). In some cases, however, a defendant found in state court can transfer the case to federal court (also known as “removal”).
Welcome to our latest edition of Perspectives, Blank Rome’s diversity and inclusion newsletter that keeps you informed on our latest diversity news and provides insight on current diversity issues in the legal industry and beyond.