Tag: Maritime Law

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”

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”

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. 

Continue reading “What If the Ever Given Grounding Had Occurred Here?”

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, III, Lauren B. Wilgus, Jeremy A. Herschaft, Zachary 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

    • Lauren B. Wilgus, Partner, Maritime Practice Group
    • Jeremy A. Herschaft, Partner, Maritime Practice Group
    • Zachary J. Wyatte, Associate, Maritime Practice Group
    • Noe S. Hamra, Associate, Maritime Practice Group

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

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.

Analyzing Maritime (or Non-Maritime) Contracts and Practical Considerations for Litigation Strategy

William R. Bennett, III, Charles S. Marion, and Anthony Yanez

In many civil disputes, the application of choice of law principles as well as the jurisdiction in which the lawsuit is filed can have a significant impact on the outcome of a case. This is especially true where one of the parties conducts business in the maritime industry and the other does not. Some parties may prefer that state law be applied to the dispute because of a favorable state statute (such as a statute of limitations) or because the state’s courts have rendered decisions that support the parties’ position on a substantive issue. Others may prefer that federal law apply where it is more advantageous to a party given the facts of the case. Of course, some parties prefer to litigate in federal court rather than state court, or vice versa, for cost or other reasons.

There is a small subset of cases in which the question of whether maritime or admiralty law should be applied arises. One of the most significant decisions addressing that question is Norfolk Southern R. Co. v. James N. Kirby Pty, Ltd., 543 U.S. 14 (2004). In Kirby, the U.S. Supreme Court held that the liability of a rail carrier that transported over land cargo that was brought to the United States from Australia on board ships, through bills of lading calling for carriage from Australia to Huntsville, Alabama, via the Port of Savannah, Georgia, for damage to the cargo that occurred during that leg of the journey should be determined by applying maritime law, because the entire contract of carriage, and not just the ocean segment of it, constituted a maritime contract. More specifically, the court in Kirby determined that the default liability rule in the Carriage of Goods by Sea Act (“COGSA”) ($500 per package) applied to a train wreck that allegedly caused $1.5 million in damages. Continue reading “Analyzing Maritime (or Non-Maritime) Contracts and Practical Considerations for Litigation Strategy”

U.S. Supreme Court Issues Safe Berth Warranty Decision

Jeffrey S. Moller

The final decision in the ATHOS I saga has recently been issued by the U.S. Supreme Court, upholding the decision of the U. S. Court of Appeals for the Third Circuit to the effect that a plain reading of the language found in the ASBATANKVOY charter form creates a warranty of safety rather than merely a duty of due diligence.

OPERATIVE FACTS

The facts were these: the voyage charterer of the fully laden tanker ATHOS I was also the owner of the refining complex in Paulsboro, New Jersey, which the vessel was approaching when its (single skin) hull was torn open by an anchor that had been lost/abandoned by some unknown vessel. The anchor was lying on the bottom of a federally-maintained anchorage ground through which the ship had to transit on its way to the berth from the federally-maintained ship channel. The anchor, which had not been previously discovered or removed by the U.S. Army Corps of Engineers, had evidently laid on the bottom with its flukes down for at least three years, during which time many ships had passed over it without incident. But, at some time prior to the ATHOS’ arrival, the anchor was somehow flipped over so that its flukes could be in position to rake the ATHOS I’s hull and tear open a number of its cargo tanks. ATHOS I’s cargo was Venezuelan heavy crude oil, which the charterer/wharfinger was importing to use in making asphalt. Because the anchorage was maintained by the federal government, the charterer/wharfinger had never expected that the anchorage would have obstructions within it so, although passage through the anchorage en route the berth commonly involved passage through the anchorage, the charterer/wharfinger never took steps on its own to conduct sonar surveys. An estimated 263,000 gallons of Venezuelan crude oil was released into the Delaware River when ATHOS I was punctured, giving rise to enormous (U.S. $180 million+) cleanup and business interruption expenses.

The vessel was the subject of two charter parties. The first was a time charter between the vessel’s owner and a fleet operating entity under which the latter agreed to exercise “due diligence” to ensure that the vessel was only sent to “safe places.” The time charterer then subchartered the vessel under a voyage charter to the operator of the Paulsboro refinery on the ASBATANKVOY form, which contained a “safe berth” or “safe berth” warranty that was not expressly limited to the exercise of due diligence. The owner of the ship was not a direct party to this subcharter. The owner of the ship remained its operator and was therefore the responsible party for the consequences of the oil spill under the Oil Pollution Act of 1990.

The origin of the anchor being unknown, the shipowner sued the charterer/wharfinger for breaches of both the contractual “warranty of safe berth” (Charterer “shall select . . .always safely afloat”) found in the ASBATANKVOY charter party and of the maritime law duty of care to properly maintain its berth and the approach(es) thereto. The United States was a party to the suit both for recovery of funds from the national Oil Spill Liability Trust Fund, which had made partial reimbursement payments to the innocent ATHOS I and her underwriters, and as the subject of a counterclaim for having failed to properly maintain the anchorage.

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.”

Please click here for the full client alert. 

Jeffrey Moller Elected to the Maritime Law Association’s Board of Directors

Blank Rome Partner Jeffrey S. Moller has been elected to the board of directors of the Maritime Law Association of the United States (“MLA”) for a three-year term. A member since 1988, Jeffrey has also served as chairman of MLA’s Committee on Regulation of Vessel Operations.

Founded in 1899, the MLA is the primary maritime law organization in the United States with over 3,600 members. The objectives of the MLA are to advance reforms in U.S. maritime law; furnish a forum for discussion of problems affecting maritime law and its administration; participate as a constituent member of the Comité Maritime International and affiliated organization of the American Bar Association; and act with other associations in efforts to bring about a greater harmony in the shipping laws, regulations, and practices of different nations.

For more information, please visit mlaus.org.

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