Category: Maritime Updates

Potential Impacts of Offshore Legislation on Industry

Jonathan K. Waldron and Stefanos N. Roulakis

The U.S. House of Representatives has introduced legislation that could potentially greatly alter the landscape for oil, gas, and wind installation and decommissioning activities on the U.S. Outer Continental Shelf (“OCS”). Stakeholders should examine the legislation for impacts to their operations.

New Development

The House Committee on Transportation and Infrastructure marked up and approved H.R. 3409, the Coast Guard Authorization Act of 2019 (“2019 CGAA”) on June 26, 2019. This legislation, if enacted, could have significant impacts on how oil, gas, and wind vessel activities are conducted on the OCS. Of particular note, the legislation could have an outsized effect on offshore wind in the United States, which is at a nascent stage and requires installation activities of the type contemplated in the 2019 CGAA.

Background

In January 2017, U.S. Customs and Border Protection (“CBP”) proposed to overturn decades of precedent with regard to offshore operations potentially subject to the Jones Act in its “Proposed Modification and Revocation of Ruling Letters Relating to Customs Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points” (the “Notice”). The Notice, which was published in the CBP Customs Bulletin, proposed the modification of approximately 25 CBP rulings that delineated the difference between “equipment of the vessel,” the transportation of which does not implicate the Jones Act, and “merchandise,” which may only be transported by qualified vessels under the Jones Act.

Please click here for the full client alert. 

The Supreme Court Rejects Punitive Damages in Unseaworthiness Claims

Keith B. Letourneau, William R. Bennett III, John D. Kimball, and Zachary J. Wyatte

A recent United States Supreme Court ruling held that a plaintiff may not recover punitive damages on a maritime claim of unseaworthiness. This new ruling has resolved a split among the circuits and has essentially reinforced an otherwise long-standing precedent.

On June 24, 2019, the United States Supreme Court decided Dutra Group v. Batterton, holding 6-3, that a plaintiff may not recover punitive damages on a claim of unseaworthiness. Justice Alito delivered the opinion of the Court in which Justices Roberts, Thomas, Kagan, Gorsuch, and Kavanaugh joined. Justice Ginsburg filed a dissenting opinion in which Justices Breyer and Sotomayor joined.

This case arose from a personal injury incident aboard a vessel. Christopher Batterton was working as a deckhand on the vessel, which The Dutra Group owned and operated, when a hatch cover blew open and severely injured his hand. Batterton sued Dutra, asserting a variety of claims, including unseaworthiness, and sought general and punitive damages. Dutra moved to dismiss the punitive damages claim, arguing that such damages were not available on claims for unseaworthiness. The District Court denied Dutra’s motion, and the Ninth Circuit affirmed. But the Supreme Court reversed.

The Court noted that the overwhelming historical evidence suggests that punitive damages are not available for unseaworthiness claims and that the lack of punitive damages in traditional maritime law cases is “practically dispositive.” The Court said, “because there is no historical basis for allowing punitive damages in unseaworthiness actions, and in order to promote uniformity with the way courts have applied parallel statutory causes of action, we hold that punitive damages remain unavailable in unseaworthiness actions.”

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Considerations Following the Persian Gulf Attacks

Jonathan K. Waldron and Stefanos N. Roulakis

As attacks on vessels increase the risk of shipping in the Straits of Hormuz and throughout the Persian Gulf, vessel owners and operators, as well as shippers, should review their charter parties and assess risk management plans to ensure the safety of crews and vessels transiting the Persian Gulf.

New Development

U.S.-Iranian tensions recently came to a head when four tankers were attacked off Fujairah in May, a port in the United Arab Emirates in the Gulf of Oman. This was followed up by an attack on two Japanese vessels, the M/T Front Altair and M/T Kikuko Courageous, in the Gulf of Oman on June 13, 2019. U.S. government agencies have accused Iran of being behind the attacks. Tensions continue to rise, although President Trump has called the attacks “very minor.” In the meanwhile, shipping companies are taking steps to reduce their risks transiting in the Straits of Hormuz and Gulf of Oman.

Background

The attacks and tankers in the Persian Gulf region are reminiscent of the incidents involving international shipping surrounding regional conflicts, including the “Tanker War” in the 1980s and the re-flagging of Kuwaiti vessels to the U.S. registry during the Gulf War in the 1990s. During the Tanker War period in 1984, and the eight-year Iraq-Iran conflict, both sides attacked tankers and merchant ships in the Persian Gulf. At that time, the U.S. military provided escorts to tankers, some of which carried the U.S. flag.

As regards recent tensions with Iran, since withdrawing from the Joint Comprehensive Plan of Action (“JCPOA”) on May 8, 2018, tensions between the United States and Iran have been ratcheting to their most tense level in years. These flames have been fanned by hardliners on both sides. Credible analyses have noted that the White House has been intensely working on a future strategy to address these developments. And, as a result, shipping companies operating in the Persian Gulf region have been taking additional steps to manage their risks.

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Note from the Editor

Thomas H. Belknap Jr.

Spring seems to be upon us, at last. Perhaps we have no right to complain about the weather, but that has never stopped us! It seems like our New York, Washington, D.C., and Philadelphia offices spend the winter months coveting our Houston office’s weather, and our Houston office in turn spends the summer being envious of their fellow East Coast colleagues. Spring, perhaps, is that narrow window of time when everyone has something to be happy about. Spring is also a particularly exciting time for our New York office this year, as we get ready to relocate from our current Chrysler Building address to the iconic 1271 Avenue of the Americas building near Rockefeller Center. We hope that you will all come visit us once we’ve settled in!

In the meantime, we have a great new issue of Mainbrace for your reference and enjoyment. As always, we cover a lot of ground in this edition, and I think the range of timely topics aptly mirrors the breadth of Blank Rome’s Maritime practice. Jeremy Herschaft and Michelle Gitlitz offer a terrific article that moves past the basics of “what is blockchain” and discusses several new and practical applications that we are starting to see emerge in the maritime industry, and Joan Bondareff provides timely updates and developments on offshore wind farms in the United States as well as collaborates with Genevieve Cowan to offer a helpful summary of the opening weeks of the 116th Congress. We have an excellent article from our white collar defense attorneys, Carlos Ortiz and Mayling Blanco, with the assistance of our own maritime attorney Alexandra Clark, about the application of the Foreign Corrupt Practices Act in shipping, as well as an article from our bankruptcy & restructuring colleagues, Rick Antonoff and Evan Zucker, concerning court-to-court communications in cross-border insolvency cases. Additionally, Jeanne Grasso provides updates on recently announced ballast water regulations from the U.S. Coast Guard as well as critical provisions and obligations under the Vessel Incidental Discharge Act of 2018. Last, but certainly not least, Greg Linsin and Dana Merkel discuss critical MARPOL compliance matters, notably involving APPS violations, and we provide some noteworthy news and recognitions that honor the significant work of our maritime attorneys and practice.

We hope that you enjoy this issue. We also remind you that the articles published in past issues of Mainbrace do not just disappear. We have created an online archive for these articles called Safe Passage that can be found at safepassageblankrome.com. Past articles are searchable by topic and by author, providing a helpful reference tool for your research.

As always, we welcome your feedback as well as any suggestions that you may have for articles for our next issue. Happy spring!

Heads or Tails? Making Sense of Crypto-Tokens Issued by Emerging Blockchain Companies

Jeremy A. Herschaft and Michelle Ann Gitlitz

Over the past 18 months, members of the international maritime community have expressed a keen interest in exploring how 21st century blockchain technology can modernize the ancient world of seaborne commerce. Blockchain has in turn spawned many novel business ideas from various startup companies throughout the marine industry. These new business ventures all generally seek to employ blockchain to streamline the logistics process and to provide greater security and transparency to the commercial endeavor. At the same time, these companies are setting a new course through uncharted waters with respect to how they 1) generate startup capital, and 2) propose to conduct day-to-day business in the electronic, digital asset (or crypto) realm.

This article explores these dual business components using two types of digital assets: the “security token” to attract capital, and the “utility token” to carry out business interactions. Both are well suited for the maritime area, though maritime blockchain startup companies should be mindful of the regulatory requirements for implementing tokens into their business in the United States. Continue reading “Heads or Tails? Making Sense of Crypto-Tokens Issued by Emerging Blockchain Companies”

The Vision Is Clearer—Offshore Wind Farms Are Appearing on the U.S. Horizon

Joan M. Bondareff

The United States is on the precipice of developing a robust offshore wind (“OSW”) industry. This article reviews recent developments on the federal and state level that have made it so.

The Trump administration, while demonstrating a clear preference for fossil fuels, has continued the past precedents of permitting offshore wind farms. To date, the Bureau of Ocean Energy Management (“BOEM”) at the Department of the Interior has approved 16 commercial wind leases, and more sales in wind energy areas (“WEAs”) along the Atlantic Coast are expected later this year. A major auction was conducted on December 14, 2018, for three leases off the coast of Massachusetts, resulting in a total auction price of $405 million. Even BOEM found this to be a “bonanza.” The winners were Equinor (former Statoil), Vineyard Wind (Copenhagen and Avangrid renewables), and Mayflower (Shell and EDP Renewables). The West Coast and Hawaii are considering floating wind platforms.

The first commercial OSW farm has been in operation for over one year in state waters without any hiccups in providing clean reliable energy to the residents of Block Island, Rhode Island. European developers are partnering with U.S. companies to share their expertise in OSW development, and the production tax credit was left intact in the 2017 tax reform legislation.

These are all positive signs for the U.S. OSW market. In addition, the price of both wind and solar is declining and becoming more competitive with natural gas. Continue reading “The Vision Is Clearer—Offshore Wind Farms Are Appearing on the U.S. Horizon”

Recent Blank Rome Maritime Rankings

Chambers Global 2019

Chambers Global 2019 recognized Blank Rome as a global leader in Shipping: Litigation – Global-wide, as well as Partner John D. Kimball as a leading shipping litigation attorney.

As published in Chambers Global 2019:

Shipping Litigation – Global-wide

WHAT THE TEAM IS KNOWN FOR: “Well-regarded shipping litigation practice, with considerable

expertise in dealing with high-profile disputes, as well as maritime arbitration. Handles a wide range of issues, including casualties, charter party disputes, bankruptcy and environmental matters.

Acts for a mix of owners, operators, charterers, financial institutions and shipyards. Respected both within the USA and internationally for its deep industry knowledge, and noted for its expertise in shipping issues as they intersect with environmental litigation.”

STRENGTHS: “One peer described the team as a ‘real quality outfit.’”

John D. Kimball – Shipping: Litigation, Global-wide

The “excellent” John Kimball offers clients a wealth of experience across a range of different matters, including collisions, Chapter 11 bankruptcies and high-value salvage. He is regularly instructed by both domestic and international P&I clubs and frequently sits as an arbitrator in shipping disputes. He is based in New York.

To view all of Blank Rome’s Chambers Global 2019 rankings, please click here.

U.S. News & World Report – Best Lawyers 2019®

Blank Rome’s Maritime practice was ranked in the top national and regional tiers for Admiralty & Maritime Law, as well as nationally ranked in 29 practice areas and regionally ranked in 77 practice areas in the 2019 “Best Law Firms” survey by U.S. News & World Report – Best Lawyers®.

To view all of Blank Rome’s U.S. News & World Report – Best Lawyers 2019® rankings, please click here.

Who’s Who Legal 2018

The following Blank Rome Maritime attorneys were recognized in Who’s Who Legal 2018 for their leading shipping industry knowledge and practices.

To view all of Blank Rome’s Who’s Who Legal 2018 rankings, please click here.

The Maritime Industry: The DOJ FCPA Unit’s Next Port of Call

Carlos F. Ortiz, Mayling C. Blanco, and Alexandra Clark

The maritime industry, by its nature, involves the movement of goods and vessels across international borders, and requires routine interaction with government officials. Historically, many in the industry viewed bribery of these officials in many parts of the world as a “cost of doing business.” Increased cooperation between the U.S. government and foreign governments has led to intensive efforts to investigate and fight corruption across the globe. Recent actions by the U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) in the maritime-related oil and gas industry make it clear that Foreign Corrupt Practices Act (“FCPA”) enforcement may soon take a closer look at the maritime industry.

As a preliminary matter, for over a decade, the oil and gas industry has been the focus of investigation and has seen more FCPA enforcement actions than any other industry.1 Continue reading “The Maritime Industry: The DOJ FCPA Unit’s Next Port of Call”

Ballast Water Management—Latest Developments

Jeanne M. Grasso

Much has changed over the past year regarding compliance with the U.S. Coast Guard’s (“USCG”) ballast water management requirements, and the horizon has gotten a bit clearer. There are now 16 ballast water management systems (“BWMS”) with USCG type-approval and 10 more in the pipeline. As such, many companies have kicked their compliance efforts into high gear, yet ballast water management still remains challenging, largely because the United States is not party to the International Maritime Organization’s (“IMO”) Ballast Water Management Convention and regulates ballast water unilaterally under the National Invasive Species Act and the Clean Water Act. And, a new regime is on the horizon, the Vessel Incidental Discharge Act of 2018, which is discussed further on page 21 of Mainbrace.

Some shipowners have struggled to manage compliance in an efficient and effective way with both IMO and U.S. requirements because the compliance dates and type-approval regimes differ, which sometimes has resulted in the need for compliance date extensions. The USCG’s extension policy has evolved as more type-approved systems become available, and the USCG just recently came out with a new policy via Maritime Commons. This new policy addresses and clarifies what the “next scheduled drydock” means, which triggers the compliance date.

The USCG’s new interpretation sets forth a more practical approach for owners to plan for compliance. In short, it ties the anticipated compliance date to the vessel’s statutory out-of-water survey date under SOLAS rather than triggering a new date as a result of drydock slips, installation of scrubbers, or emergency drydocks, which shortened the time to comply. This new policy is a welcome change that will lead to more certainty as it maintains the vessel’s anticipated compliance date. Also, for those owners who have endeavored to comply, but ran into some challenges getting equipment on time or experienced installation hiccups or emergency drydocks, extensions are still available, but on a much more limited basis than in the past. What is imperative is a good faith, detailed plan to come into compliance, generally within a year.

Finally, to avoid problems in the United States regarding operational issues, it is important to have a contingency plan in place, which is incorporated into each vessel’s ballast water management plan. Initially, an inoperable BWMS should be reported to the USCG Captain of the Port (“COTP”) well in advance of arriving, to allow time to work through the compliance options. In making a decision, the COTP will examine how well you have prepared for operations and what steps you have taken to develop a contingency plan, such as training, maintenance, spares, and efforts to repair. Answers to these questions, as well as the vessel/company’s compliance history, will guide the COTP’s decision in terms of what he/she may allow if a BWMS is inoperable.

The Maritime Outlook for the 116th Congress

Joan M. Bondareff and Genevieve Cowan*

When we last wrote about the 115th Congress, it had just completed work on the Coast Guard Authorization Act of 2019 and Save Our Seas legislation. These bills were summarized in our Mainbrace (October 2018) article, Congress Passes Major Maritime Safety Legislation but Fails to Fund a New Icebreaker or Pass Authorization for Most Coast Guard Programs. Of notable significance since our last article, the 2019 spending deal finally provided funding for a new polar icebreaker, which is discussed in detail further below. Continue reading “The Maritime Outlook for the 116th Congress”