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IN THIS ISSUE
1. A day we forget
2. Day of the Seafarer
3. Speed control
4. Mission partnership
5. Labour convention enforcement
6. Seafarers’ health
7. Broker error
8. Hong Kong rules
9. Pilot transfer
10.LPG use
11. Methane emissions
12. Hedging risks
13. New power systems
14. Workplace safety
15. LOF update
Notices & Miscellany
Readers’ responses to our articles are very welcome and, where suitable, will be reproduced. Write to: contactus@themaritimeadvocate.com
1. A day we forget
By Michael Grey
Last Tuesday, the 25th June, was the “Day of the Seafarer”, just in case you forgot to put out the bunting and crack open something non-alcoholic to drink a toast to this invisible and silent global workforce. It scarcely helps that such days of so-called celebration in some cause or another have become so prevalent, that one which might actually mean something, has had any impact long leached away from it. Every damned day has been captured by some group of activists, so most sensible people have long given up, with a yawn, thinking of something rather more relevant.
It used to vaguely annoy me in church services that prayers are regularly said for the “doctors and nurses and caring professions” as if they had some special requirement of such intercessions, when the rest of us just had to get on with life. It was not just me either, as I recall overhearing one of our parishioners complaining to the vicar about this prayerful exclusiveness; she was a lawyer and felt that her profession was being wilfully neglected. I think the vicar said that he would try and widen his ambit in the future. If I had not been less of a coward I should have put in a strong word for seafarers, except that these days it is so rare to meet a seafarer, that one would have to spend half an hour explaining what such professionals did. In the UK these days, seafarers, like people who work in sewage treatment or supply drinking water, would only ever be noticed if their services suddenly stop. Or in the case of seafarers, when a ship sinks, oil is liberally spread, or a bridge knocked down.
One can hardly say that the twelve months since the last Day of the Seafarer have seen any great improvement in their lot, or any signs that the essential service which seafarers perform for society is better recognised. The day will be no cause for celebration for the families of the 21 crew members of the car carrier Galaxy Leader, who have now spent more than six months as hostages of the Houthi pirates who captured them with their ship in the Red Sea. There will be no celebration for anyone whose loved ones are bound through these waters and have seen the sinking of the bulk carriers Tutor and Rubymar, the five deaths which have occurred to date, and the 100 plus attacks that have taken place since these dangerous rebels began their horrible campaign.
There might be a small amount of jubilation in the case of the crew of the containership Dali, with the authorities, three months after they had survived the trauma of their allision with the Baltimore bridge, permitting them to set foot ashore on dry land. Eight of them may just possibly be able to return home, but the ship’s officers, naturally, must stay in the US, while legal processes run their tortuous course. That is unlikely to be a speedy matter. My American friends will be angered if one suggests that they might also be considered hostages, but that is probably what it feels like, no matter what sort of accommodation is provided ashore for them.
Then we should perhaps use the Day to remember all the other hazards which seafarers face in their passages through the Black Sea, the Gulf of Guinea, off the Horn of Africa and other places, where the hazards are other than those natural to their profession. If we only knew about them, we might sympathise with the impoverished crews of the record number of abandoned ships that have cropped up around the world this year.
But would the man or woman on the proverbial Clapham omnibus even know about the lives lived by the unseen people who crew the ships upon which they unknowingly depend? They might complain about the fact that their Chinese made furniture has not been delivered as it must take the long route around the Cape of Good Hope, being shipped aboard a vessel operated by one of the more responsible companies, that will not subject their crews to dangers of death from Houthi hazards. We could have celebrated their decency, if nothing else, on a day few will have remembered
Michael Grey is former editor of Lloyd’s List
2. Day of the seafarer
On the On the International Day of the Seafarer, IMO Secretary-General Arsenio Dominguez paid tribute to the 2 million seafarers who keep global markets functioning and supply chains going.
In a video message to seafarers, Dominguez said: “Seafarers have been sorely tested in recent years – facing hostile acts from piracy or in conflict zones. I humbly acknowledge seafarers’ resilience and sacrifice in the name of work.”
Without seafarers there would be no shipping. And shipping is a lifeline for global trade.
United Nations Secretary-General, António Guterres marked the day, saying: “Seafarers are vital in ensuring a seamless flow of essential goods that eventually make it into markets, homes, and onto our tables… But their own lives have been put on the line in the face of grave threats. Let us together salute them for their essential work and support their safety.” (Read UNSG’s full statement)
Since November 2023, innocent seafarers have been targeted in ongoing attacks on ships traveling through the Red Sea, stemming from geopolitical tensions. Too many attacks have been launched, damaging or sinking vessels, and resulting in at least four deaths, with many others injured.
IMO called for the immediate and unconditional release of the Galaxy Leader and its crew, held for more than eight months.
IMO Secretary-General Dominguez said: “On this Day of the Seafarer, let us remember those who have lost their lives while simply doing their jobs, serving on these ships. Their dedication and sacrifice must not be overlooked. Attacks on the innocent can never be justified, and I will continue to advocate incessantly for the safety and well-being of seafarers.”
To raise awareness about the safety of seafarers, an IMO social media campaign has been launched, focusing on safety at sea.
Seafarers are invited to share photos and top tips for safety at sea, using the hashtag, #SafetyTipsAtSea on Facebook, LinkedIn, X or Instagram.
KC Abigail Chin-Sood, a seafarer from the Philippines, shared her tips for women in the sector: “Safety at sea involves not only adhering to the highest standards of work safety but also, for women, establishing and maintaining clear boundaries with male colleagues. Preserving your dignity on board is crucial for ensuring your personal safety. By maintaining professionalism and setting boundaries, you can protect yourself from potential scandals and preserve your mental well-being, contributing to a safer and more positive experience on the ship.”
Yrhen Bernard Sabanal Balinis, also from the Philippines, added: “Communication is key on board ships. Whether it be anchoring, pilot boarding, or mooring, the officers need keen situational awareness to ensure that things are running safely… But effective shipboard communication is not only limited to those. Is a crewmate feeling down, homesick, or anxious? Is abruptly agitated or constantly isolated? Has their performance drastically plummeted? Tactful communication plays an instrumental role in seafarers’ psychological safety.”
Organizations, shipping companies and anyone in the wider maritime community and public are also invited to show support for seafarers by joining the conversation with the hashtag.
Follow the conversation using #SafetyTipsAtSea or #DayOfTheSeafarer.
3. Speed control
DeepSea Technologies has received type approval from classification society DNV for its latest product. DeepSea HyperPilot automatically and precisely controls the change of speeds across a voyage to achieve fuel savings and empower captains and crews.
An easily retro-fitted control device, HyperPilot streamlines adherence to officers’ voyage-level route and speed plans by dynamically retrieving the speed command corresponding to the vessel’s current location and automatically feeding it to the propulsion control system. It eliminates the manual process of dynamically adjusting the RPM of the main engine, while enabling speeds to be planned more precisely for optimal opearational efficiency. Use of HyperPilot increases the value vessels can draw from route and speed optimisation solutions, such as DeepSea’s flagship Pythia product, by enabling officers to more closely maintain optimised speeds. Fuel and emissions savings will be boosted, while the user experience will be simplified through automation. Full-scale trials of the product are expected to commence in Q3 2024, with plans to go to market later in the year.
Konstantinos Kyriakopoulos, CEO of DeepSea Technologies said: “The success of speed optimisation for fuel efficiency depends on the precision with which optimal speeds can be followed. With the implementation of HyperPilot, officers will have more precise and convenient control of their vessels’ routes and speeds, achieving greater efficiency for their owners and charterers. Receiving type approval from DNV prepares the way for our ongoing development of innovative solutions to deliver efficient and sustainable autonomous vessels.”
Jarle Blomhoff, Head of the Digital Ship Systems section at DNV said: “We are very pleased to have worked with DeepSea on this new system and congratulate them for their commitment to demonstrating that their systems rest on a sound technical foundation. Boosting energy efficiency is an essential part of the maritime transition to a more sustainable future and leveraging the potential of autonomous systems to assist the crew on board is an exciting development for the industry. The complexity introduced by autonomous systems makes it vital to have a framework that can assess the safety performance of these systems – which is why at DNV we are constantly developing rules and guidelines like the Class guideline for autonomous ships that enable our customers to innovate on a basis of well-established trust.”
4. Mission partnership
Seafarers’ charity the Mission to Seafarers has entered into a three-year partnership with IKEA Supply.
Through this initiative, unveiled on the IMO Day of the Seafarer, IKEA will work with the Mission to build knowledge and awareness of the integral role of seafarers within the IKEA supply chain, with the goal of enhancing the wellbeing of seafarers.
The partnership will centre on a training programme for IKEA employees, called ‘All you need to know about Seafarers’. The inaugural session of this course took place in May 2024 and is designed to assist IKEA with due diligence when procuring ocean shipping services, helping to ensure that the seafarers on board are properly protected and supported.
The partnership originated from discussions during the pandemic when the shore leave crisis was at its peak. Since then, IKEA has proactively prioritised seafarer welfare, setting a commendable standard for other cargo owners to follow.
Ben Bailey, Director of Programme at The Mission to Seafarers, added: “We are thrilled to partner with IKEA in this ground-breaking initiative to enhance the welfare of seafarers. This collaboration reflects our shared commitment to ensuring that seafarers, who play a critical role in sustaining global trade, receive the recognition, support, and protection they deserve, and we applaud IKEA for taking this step. By helping to educate the IKEA team about the unique challenges faced by seafarers, we aim to foster a deeper understanding and drive meaningful change in the maritime industry. This partnership is a significant step towards fostering greater awareness for seafarers and sets a powerful example of corporate social responsibility, while highlighting the importance of seafarer welfare in sustaining the global economy.”
Elisabeth Munck af Rosenschöld, Global Sustainability Manager at IKEA Supply Chain Operations said:
“The wellbeing of seafarers is a priority to us in IKEA and they play an essential role in ensuring that our goods reach our customers. We are committed to improving working conditions and protecting their human rights at sea. Recently we introduced additional requirements on ocean shipping in the IKEA supplier code of conduct (IWAY) to put the spotlight on the wellbeing of seafarers. By collaborating with specialists who bring their deep knowledge of maritime welfare, we aim to positively impact seafarers’ everyday lives and contribute to a better industry standard.”
The bespoke training programme has been designed by the Mission for IKEA, and covers a wide range of topics, including the realities of life at sea, seafarers’ welfare needs, their family life, and the legal frameworks and regulations that protect and safeguard their rights in recruitment and employment. IKEA participants gain meaningful insights into the challenges faced by seafarers, which is invaluable for an organisation that relies heavily on seafarers within its supply chain but does not have direct interactions with them.
5. Labour convention enforcement
New research from SRI, the international pan-industry body researching maritime and seafarers’ law, concludes that the Maritime Labour Convention is not being strictly and evenly enforced on a global basis. The findings identify substantial achievements in the enforcement of the MLC, but also identify significant gaps. The research has adopted a unique approach by evaluating the involvement of a wide range of stakeholders and role players in the Convention. It also presents a table of indicators that assesses the enforcement of the MLC by individual states.
Taking the findings as a whole and aggregating all regions of the world, it is very approximately estimated that implementation and enforcement of the MLC is achieving a success rate of around 65%.
“These findings challenge any complacency about the MLC working efficiently and uniformly around the world,” says Deirdre Fitzpatrick, Executive Director of SRI. “The high level of ratifications and the high percentage of coverage of world tonnage could lead to the view that the MLC is widely effective around the world. But the research shows a different reality and points to where more efforts are needed to address the gaps in the effectiveness of the MLC. The MLC has not yet achieved a single international level playing field”.
When the MLC was unanimously adopted by the 94th (Maritime) Session of the ILC, Geneva in February 2006, it was variously described as ‘an extraordinary accomplishment’, ‘a truly historic event’, ‘epoch-making’ and ‘without precedent’. More than ten years after the MLC came into force, the industry is facing momentous change.
“The research found that the significance of the MLC as a living instrument must also be seen in the changing maritime environment and as intrinsically linked with other international conventions and the changes that are being seen with Maritime Autonomous Surface Ships (MASS); environmental, social and governance (ESG) in the shipping industry; and climate change”, adds Fitzpatrick.
“Some of the barriers to a level playing field appear to be lack of resources and expertise to implement and enforce the Convention strictly and evenly by all states around the world. States ratify the Convention but there are cases where the states then do not implement the provisions of the MLC into their national laws and practices, or they do not report their compliance to the ILO. It is an ongoing task to build capacity and awareness leading to compliance for a more effective MLC around the world.”
Please click here for more information about the research.
6. Seafarers’ health
A survey carried out by the International Seafarers’ Welfare and Assistance Network (ISWAN) and sponsored by The Shipowners’ Club indicates that the rapid changes brought about by decarbonisation technologies and regulatory regimes are having a substantial impact on workload, fatigue and stress levels at sea.
Decarbonisation is a major driver of transformation in the maritime sector. Although the challenge of ensuring that seafarers have the training they need to meet the challenges of the zero-carbon transition is the subject of extensive debate, there has been comparatively little focus on the impact that the rapid pace of change is having on seafarers’ wellbeing and job satisfaction. For this reason, between July and September 2023, ISWAN conducted a survey to ask seafarers and others working in the maritime sector about the impact that the transformation brought about by decarbonisation is having on their work.
The survey received 400 valid responses from seafarers of 29 nationalities, as well as 55 responses from shore-based staff. The findings indicate that there is significant support for the principles of decarbonisation amongst seafarers and shore-based staff. In practice, however, the challenges of the journey to zero carbon are negatively impacting the wellbeing of many working in the maritime sector. Amongst seafarer respondents, over half (53.8%) stated that changes brought about by decarbonisation had had a negative impact on their workload. For 44% of seafarers, this was associated with an increase in levels of stress, whilst 40.1% reported increased levels of fatigue. Almost a third of seafarer respondents (32.8%), reported that changes brought about by decarbonisation had increased their fears about potential criminalisation, as the complexity of current reporting regimes led to greater risks of inadvertent error.
Engineers were more likely than deck officers to report negative impacts on their wellbeing, with 34.4% of engineer respondents stating that decarbonisation was having a negative impact on their mental health, in comparison with 25.3% of deck officers. Several engineers commented on the profound impact on their workload and stress levels of the requirements to switch frequently between different fuel types. The survey suggests that the negative effects on wellbeing and workload are felt most strongly by engineers without a fixed trading pattern.
The small sample size of shore-based staff means that the survey findings are less robust than those of the seafaring cohort. However, the findings were broadly in line with those of seafarers, with many shore-based staff expressing their support in principle for the journey to zero carbon, but mirroring the frequently negative impact on several aspects of their health and wellbeing.
The survey findings suggest that there is substantial willingness on behalf of seafarers and shore-based staff to be active contributors in the zero-carbon transition. However, in order to harness this potential maritime employers must be willing to take steps to better support the wellbeing of seafarers and shore-based staff through the rapid transformation, in order to prevent decarbonisation becoming an additional factor that drives skilled employees away from the sector.
Based on feedback from survey responses, the report sets out a number of steps that maritime companies should take to reduce the potential for the changes brought about by decarbonisation to negatively impact wellbeing.
These include:
- Acknowledge and address the impact of decarbonisation on workloads and factor this into crew sizes;
- Recognise the psychological impacts of rapid change and technostress and build these into health and wellbeing training;
- Foster a culture of both physical and psychological safety and ensure that seafarers have the confidence to voice any safety concerns;
- Ensure that seafarers’ contributions to decarbonisation are acknowledged and valorised, both in terms of renumeration and job security;
- Protect against technostress in system design, by ensuring that new technologies, systems and processes function in cohesive, joined-up and accessible ways;
- Foster strong communication channels to ensure that the rationale for new technologies and reporting requirements are understood by all;
- Harmonise as far as possible reporting requirements to reduce duplication and alleviate concerns about inadvertent mistakes.
Most crucially, the survey calls for the maritime sector to valorise seafarers and other maritime employees as crucial partners in the decarbonisation journey. The report concludes that many working in the shipping industry understand only too well the vital importance of taking rapid action to address the climate emergency and are strongly motivated to play their part. By proactively consulting with seafarers and shore-based staff in decision-making about the development and implementation of new technologies, maritime employers can benefit from their expertise and foster their commitment to remaining in the industry.
ISWAN and The Shipowners’ Club will continue to work together to support the maritime sector to turn the survey findings into practical actions. This includes developing a new guide for maritime employers and seafarers on addressing the impact of technostress, which will be published in the autumn.
Simon Grainge, the chief executive of ISWAN, said: “Only too often, seafarers tell us that they feel their wellbeing is overlooked in favour of commercial imperatives or regulatory requirements. By engaging with their concerns about decarbonisation, maritime employers have the opportunity to empower seafarers to be proponents and drivers of the journey towards zero carbon, rather than this becoming another factor that risks driving them out of the sector.”
Louise Hall, Director of Loss Prevention, Corporate Responsibility & Marketing at The Shipowners’ Club, said: “The maritime industry constantly evolves, and as the industry strives to achieve zero-carbon operations, the vessels’ crews must not be overlooked when ensuring an effective and safe implementation of any proposed measures. It is with this in mind the Club has collaborated with ISWAN and conducted this survey that investigates the impact of decarbonisation, and the resulting workload, on seafarers’ wellbeing and safety. We look forward to working with ISWAN and other industry stakeholders to take forward the recommendations of this report and ensure that seafarers have the support they need to meet the challenges of the zero-carbon transition.”
The impact of maritime decarbonisation on wellbeing: Findings of an ISWAN survey of seafarers and shore-based staff can be downloaded below.
7. Broker error
The need for clear lines of communication between ship brokers and owners has been highlighted by International Transport Intermediaries Club (ITIC) after a broker error regarding despatch terms led to a US$45,000 settlement of a claim.
The claim, discussed in their most recent Claims Review, came after a ship owner initially requested ‘free despatch’, which implies no compensation for quick operations. However, due to a critical communication error by the broker, the request was inaccurately recorded as ‘half despatch’ in the recap document.
The incident involved a shipbroker who typically represented charterers in trades where ‘half despatch’ agreements – where the ship owner compensates the charterer at half the demurrage rate for early completion of ship operations – were common.
Although the owners were quick to point out the mistake, a stand-in broker, who was substituting for the original broker, agreed that owners had asked for ‘free despatch’ terms but then also failed to update the charterers or amend the recap document accordingly.
This oversight led to a situation where, after the voyage, the charterers expected to be compensated under the terms of ‘half despatch’ while the owners adhered to the ‘free despatch’ condition. When the owners refused to pay the expected despatch, the charterers sought compensation from the broker. In reality, the owner should have paid the despatch and then they should have sought a recovery from the broker. However, as it was obvious they would be successful in such a claim it was deemed prudent just to settle the matter directly with the charterer for US$45,000 to avoid higher legal costs and potential litigation. This was reimbursed by ITIC.
Following the incident, Mark Brattman, Claims Director at ITIC, stressed the importance of accurate and clear communication in maritime contracts to prevent such costly disputes.
“This case serves as a critical reminder of the need for meticulous attention to detail during all phases of negotiation and agreement. It is critical to ensure that all parties – including temporary replacements – are fully aware of the terms the parties intend to agree, which is essential to avoid misunderstandings and expensive legal claims.
“We recommend that brokers receive regular training on contract terms specific to their trade operations and encourage the use of checklists and double-verification processes to avoid similar errors,” Brattman added.
8. Hong Kong Rules
The Hong Kong Government recently announced a proposal comprising the introduction of a new Merchant Shipping (Safety) (Ships Carrying Industrial Personnel) Regulation under the Merchant Shipping (Safety) Ordinance (Cap. 369) (the Safety Ordinance) and amendments to the Schedule to the Safety Ordinance to incorporate into local legislation the latest relevant requirements of the International Convention for the Safety of Life at Sea of the International Maritime Organization.
The proposed amendments aim to provide safety standards for ships that carry industrial personnel and for the personnel themselves, and to address specific risks of maritime operations within the offshore and energy sectors. A spokesman for the Transport and Logistics Bureau said, “As a major member of the international maritime community, Hong Kong has been a staunch supporter of maritime safety, sparing no effort in safeguarding the safety of industrial personnel engaged in maritime operations in line with the relevant international standards. The proposed legislative amendments demonstrate our continual commitment in this regard.”
The Panel on Economic Development of the Legislative Council, as well as the Hong Kong Fleet Operation Advisory Committee of the Marine Department, have been consulted on the legislative proposal. Members supported the proposal.
9. Pilot transfer
IMO’s Sub-Committee on Navigation, Communications and Search and Rescue (NCSR) has finalized draft regulations to improve the safety of maritime pilot transfer arrangements.
Meeting this month, the Sub-Committee agreed on draft amendments to regulation V/23 of the International Convention for the Safety of Life at Sea, 1974 (SOLAS regulation V/23) and draft performance standards for pilot transfer arrangements.
These will be submitted to the Maritime Safety Committee, with a view to approval, at its next session in December (MSC 109).
The amendments to SOLAS aim to improve compliance and address inconsistencies and ambiguities in existing regulations. The Sub-Committee also finalised a draft MSC resolution on Performance standards for pilot transfer arrangements, including detailed requirements for design, manufacture, construction, rigging, installation of pilot ladder winch reels, operational readiness, onboard inspection and maintenance, familiarization and approval, in relation to pilot transfer arrangements required under SOLAS regulation V/23.
In addition, the Sub-Committee finalised a draft MSC circular encouraging voluntary early implementation of the amendments, to be submitted to the Maritime Safety Committee.
The Sub-Committee advanced work on a number of issues, including enhancing the information security of AIS (automatic identification system), progressing the digital navigational data system (NAVDAT), radio communication matters and ships’ routeing measures.
10. LPG use
Using LPG as a marine fuel could deliver a significant carbon reduction, particularly alongside other emissions reduction and energy saving technologies; helping shipowners comply with more stringent regulations into the next decade.
Fuel for Thought: LPG, a joint report from Lloyd’s Register (LR) and the World Liquid Gas Association (WLGA) has found that the market for dual-fuel LPG engines will continue to grow based on a healthy order book, with LPG offering a cleaner, lower carbon emission marine energy source than many alternatives currently available.
According to the report, the use of LPG as a marine fuel combined with technology such as Onboard Carbon Capture and Storage (OCCS) can reduce a vessel’s emissions profile, with the added benefit of reducing the required CO2 storage capacity, due to the lower CO2 emissions from LPG combustion. This allows the technology to work more effectively and offers shipowners a pathway towards future regulatory compliance.
The report, however, outlines that technology readiness will need to improve for LPG to become a viable choice for shipowners and operators looking to transition their fleet to low and zero-carbon vessels. Although well established, the range of available engine technologies will need to be expanded to enable widespread adoption of LPG on multiple vessel types. Currently there is no four-stroke marine engine capable of using LPG, meaning auxiliary engines on vessels would need to be decarbonised through an additional fuel.
A safe bunkering framework must be also developed to encourage uptake of LPG. Regulations remain in their early stages, with interim guidelines recently published by IMO.
Panos Mitrou, Global Gas Segment Director, Lloyd’s Register, said: “The pace and scale of renewable production for LPG remains a critical factor in initiating the wider adoption of LPG as a marine fuel. Supportive energy-saving technologies, as along with potentially maturing onboard carbon capture and storage, will further assist in making LPG a viable low-zero carbon fuel. By ensuring this, LPG could offer attractive operating and capital costs compared to other alternative fuels as shipowners look to decarbonise their fleets in line with more stringent regulations.”
Nikos Xydas, World Liquid Gas Association Technical Director said: “LPG stands as a unique and exceptional energy source, pivotal for decarbonising the shipping sector. Stored and transported as a liquid and consumed as a gas, it is well recognised for its lower emission benefits as a marine fuel. With a surge in orders for LPG-fuelled ships, it’s clear that LPG’s role in the shipping industry is expanding. As the world moves towards deep decarbonisation targets, LPG emerges as an ideal fuel for all vessel types, offering a cleaner alternative fuel today and a pathway for an even cleaner future tomorrow. Its flexibility, low emissions, and cost-effectiveness position LPG as the potential fuel of choice in the shipping sector, paving also the way for low-cost deep-sea decarbonisation with the advent of bio/renewable LPG.”
11. Methane emissions
The US Environmental Protection Agency (EPA) and US Department of Energy (DOE) have introduced an $850 million initiative to reduce methane emissions from oil and natural gas operations, available under the Inflation Reduction Act. The funding application deadline is Aug. 26, 2024.
The objective is to provide funding for methane reduction technologies across the highest emitting sectors in the oil and gas industry, prioritising monitoring and new technology deployment to achieve significant emissions reductions.
The US Environmental Protection Agency (EPA) and US Department of Energy (DOE) on June 21, 2024, released a $850 million Funding Opportunity Announcement (FOA) to reduce methane emissions from oil and natural gas production and associated facilities. This funding was made available under the Inflation Reduction Act, and applications are due by Aug. 26, 2024.
12. Hedging risks
Hill Dickinson has put together a briefing note on recovering hedging losses in commodities contracts.
Producers, sellers and buyers of commodities all live with price risk, where prices fluctuate between the time of sale and the time of delivery. Price fluctuation can be particularly dramatic when there are unforeseen market or world events.
To guard against these risks, traders regularly hedge their positions. Where a counter party defaults, how does the law treat hedging losses and which losses are legally recoverable? Firstly, let us try to simply define hedging.
The law firm says “The English courts recognise that hedging occurs where sophisticated traders are involved and, as such, that it is foreseeable that a trader will hedge. The extent to which hedges are brought into account to increase or lessen recoverable losses will depend on the facts of the individual case and be subject to principles of causation, remoteness and mitigation. In the right circumstances, hedging losses are recoverable under English law and any profits arising from futures should also be brought into account to reduce physical losses. Internal hedges, such as that in Rhine Shipping -v- Vitol, do not however generate recoverable losses. “
Practical tips include:
Evidence is key to the Court’s assessment of whether hedging losses are recoverable. Ensure that you can properly evidence your loss and tie the hedging position to the physical contract.
In any disclosure exercise, consider whether to press for more evidence of your counterparty’s hedging position.
It is important that you can show the Court or the arbitrators your hedging loss and clearly explain it where hedging positions can be extremely complicated.
When a counter party defaults, it is important to ensure that you consider your duty to mitigate and take appropriate steps to roll or close out hedges. Whilst mitigation steps need only be reasonable, if no steps are taken, this might bar the right to recover part or all of your hedging losses.
For further details on see the Hill Dickinson website.
13. New power systems
New power systems dominated by variable renewables are set to become the new energy reality for nearly every country within the next three decades according to classification society DNV. DNV forecasts that by 2050, wind and solar will supply almost 70% of the world’s electricity. By then, global electricity consumption will have doubled compared to today. This significant increase in variable renewables will present many challenges and create new market dynamics for grids worldwide.
These are some of the key findings in a special report on New Power Systems, part of DNV’s Energy Transition Outlook series. The report helps readers understand the impact of this new power reality on national economies, energy security, and the pace of the energy transition. By 2050, it also finds that:
Global grid infrastructure is set to double to meet surging electricity demand
Electricity will be more than 90% decarbonized
Household energy expenditures will decline to 75% of 2021 levels in Europe and 50% in North America
Additionally, in this special report, DNV examines to what extent artificial intelligence is emerging as a transformative force, reshaping industry functions and processes. It provides a detailed analysis of the causes of gridlock and discusses solutions to address these immediate and critical issues.
Download your copy
14. Workplace safety
Associated British Ports is taking steps to enhance workplace safety and planning through the trial of a new workforce scheduling platform pioneered by UK-based startup, Ensemble Analytics.
As part of the trial, ABP will be using the ‘Athena’ platform at its Ports of Immingham, Hull and Ipswich to increase the resilience of operations and allow for longer-term resource planning and scheduling. The Athena deployment has been supported by the Department for Transport (DfT)’s Freight Innovation Fund.
Athena is a workforce scheduling tool tailored for ports which is designed to manage complex workforce structures, integrate with operational systems, and automate labour deployment according to skills and labour agreements. Athena enables planning teams to make data-driven decisions, delivering safe, fair, and efficient workforce schedules whilst simplifying administrative tasks.
Sam Jones, Head of Business Process Improvement at Associated British Ports (ABP), said: “At ABP, we are delighted to be trialling this new scheduling platform which can bring a host of benefits to the business, further supporting safe, compliant, and efficient operations for our customers and our employees.
“It’s also fantastic to be working with a UK start-up on an innovative solution and we look forward to assessing the results at the end of the trial to see if this truly is a good fit for us.”
As gateways to tomorrow, ABP’s 21 ports across England, Scotland and Wales are keeping Britain trading and provide strategic locations to future-proof businesses. ABP contributes £15 billion to the UK economy every year, directly employs over 2,500 people and supports over 200,000 jobs across wider supply chains.
Cato Davies, CEO and Co-founder of Ensemble Analytics, commented: “We’re thrilled to be working with ABP on this trial of our Athena solution. Using machine learning, Athena will help ABP to create fair, safe and efficient schedules for its workforce. It’s great to see ABP showing leadership in the industry by using our tailored technology solutions to address the industry-wide challenges with utilisation, upskilling and communication.
“Establishing the digital infrastructure is an important first step which will enable ABP to take data-driven decisions across the business, improving customer service, employee engagement and operational efficiency.”
15. LOF update
HFW recently published a analysis of changes being make to Lloyd’s Open Form this year.
On 1 June 2024, the Lloyd’s Salvage Arbitration Branch launched an updated edition of the Lloyd’s Standard Form of Salvage Agreement, or Lloyd’s Open Form (LOF 2024). The format remains unchanged with a simple set of boxes to be completed on page one, clauses A to L and a notices section that incorporate the Lloyd’s Salvage Arbitration Clauses (LSAC) and the Special Compensation P&I Clause (SCOPIC) into the agreement.
The Lloyd’s Standard Form of Salvage Agreement has been in use in one form or another for over 130 years and this latest iteration (the thirteenth) includes a number of amendments which simplify and modernise this well-known contract taking into account feedback from the market and stakeholders who use the contract. These changes include the adoption of gender-neutral terms, the shortening of sentences, removing references to faxes and the simplification of some of the language used.
However, by far the most significant changes relate to (i) the sharing of previously confidential settlement data with Lloyd’s; and (ii) the introduction of the new Fast-Track Documents Only (FTDO) procedure. Whilst this new procedure is analogous to the old Fixed Costs Arbitration Procedure (FCAP), the FTDO now applies to much larger claims (i.e. those with a security demand of up to US$10 million compared to US$2 million under LOF 2020). Whilst the cap on recoverable costs is higher than under FCAP, it is expected that the introduction of this new procedure will speed up the time taken to obtain an award and limit the costs incurred by the parties.
In the rest of the article, to be found on the HFW website (www.hfw.com), the law firm explores some of the more important amendments and their potential implications for both property owners and the wider salvage industry.
Notices & Miscellany
Shipping transition
A recent report has been produced by UMAS and Arup, entitled “Opportunities for the UK to Kick-start Shipping’s Transition to Zero Emission Fuel.”
The report, (found here) explores the potential impact and infrastructure needed to decarbonise the operations of six large ferries operating regular routes from ports in the Northeast of England, or seven container vessels operating from ports in the Solent, on the South Coast. The findings are promising, indicating significant potential carbon savings that could help align with ambitious global decarbonisation pathways.
New board members
TT Club has announced three new members drawn from its membership of insured organisations to its controlling Board.
Nosiphesihle Mbongwa is based in Durban, South Africa and has been CFO of Bidvest Freight for the last six years having previously served the freight management and logistics group for 10 years as its Commercial Director and prior to that a financial director role at one of its subsidiary companies. Her career in the freight industry spans over 20 years with both distribution operations and a container terminal operator. She joined the TTB Board as of 20 June.
Wendy Chien’s appointment dates from March of this year. As Managing Director of Contract Logistics at the Dimerco Express Group in Taipei, Taiwan, she brings experience of a pan Asia-Pacific complete logistics, warehousing and distribution operation which employs multi-modal transport options.
Frans Caljé is CEO of PD Ports centred in Teesside in the Northeast of England. Prior to his appointment as CEO seven years ago, he was MD of Unitised & Port Centric Logistics at the same organisation. He also has experience at container terminal operator APM. His appointment to the Board was effective 20 June.
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And finally,
(With thanks to Paul Dixon)
SIGNS YOU’VE BEEN DRINKING TOO MUCH
You lose arguments with inanimate objects.
You have to hold onto the lawn to keep from falling off the earth.
Your job is interfering with your drinking.
Your doctor finds traces of blood in your alcohol stream.
The back of your head keeps getting hit by the toilet seat.
You can focus better with one eye closed.
The parking lot kept moving while you were in the bar.
Mosquitoes catch a buzz after biting you.
The whole bar says ‘Hi’ when you come in.
You fall off the floor.
At AA meetings you begin, “Hi, my name is…uh…”
You wake up in the bedroom, your underwear is in the bathroom, and you fell asleep with your clothes on.
You think the Four Basic Food Groups are Caffeine, Nicotine, Alcohol, and Peanuts.
You’re as jober as a sudge.
You don’t recognize your wife unless you see her through the bottom of a glass.
That damned pink elephant keeps following you home.
Two hands and just one mouth… now THAT’S a drinking problem!
Thanks for Reading the Maritime Advocate online
Maritime Advocate Online is a fortnightly digest of news and views on the maritime industries, with particular reference to legal issues and dispute resolution. It is published to over 20,000 individual subscribers each week and republished within firms and organisations all over the maritime world. It is the largest publication of its kind. We estimate it goes to around 60,000 readers in over 120 countries.
Editor: Sandra Speares | Email: contactus@themaritimeadvocate.com
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